Ford Mtr Co del · NYSE:F
Ford Mtr Co del — Ford Motor Company — Investor Presentation (March 2014)
55 slides from Ford Mtr Co del's investor presentation, Mar 17, 2014
Slide 1: Ford University
FORD UNIVERSITY Stuart Rowley Vice President and Controller March 17, 2014
Slide 2: Agenda for today's discussion
FORD UNIVERSITY Agenda for today’s discussion • Automotive Segment Reporting • Production compared with Wholesales • Automotive Segment and Joint Venture Profits • Fixed Asset Depreciation and Impairment Policy • Taxes • Pension Sensitivities • Annual Incentive Compensation Plan (AICP) ----- Topics
Slide 3: Agenda
AGENDA • Automotive Segment Reporting • Production compared with Wholesales • Automotive Segment and Joint Venture Profits • Fixed Asset Depreciation and Impairment Policy • Taxes • Pension Sensitivities • Annual Incentive Compensation Plan (AICP) SLIDE 3
Slide 4: Automotive Segment Reporting Structure Change
AUTOMOTIVE SEGMENT REPORTING Impact STRUCTURE CHANGE • Beginning January 1, 2014 we have restructured our Automotive Segment reporting structure • We now have five Automotive segments that report on a “where sold” basis Prior Structure (2013) New Structure (2014) North America North America South Am
Slide 5: Automotive Segment Reporting Prior Structure (2013)
AUTOMOTIVE SEGMENT REPORTING PRIOR STRUCTURE (2013) North America South America Europe Asia Pacific Africa Direct Export Markets Segments Not Aligned Geographically; Multiple Regions Servicing Direct Export Markets SLIDE 5
Slide 6: Automotive Segment Reporting New Structure (2014)
AUTOMOTIVE SEGMENT REPORTING Impact NEW STRUCTURE (2014) We have reorganized our segments to increase focus on growth markets and to ensure clear responsibility and accountability for all markets within each geographic region Beginning January 1, 2014, we: • Established a fifth Automotive Segment, M
Slide 7: Automotive Segment Reporting New Structure (2014)
AUTOMOTIVE SEGMENT REPORTING NEW STRUCTURE (2014) North America South America Europe Middle East & Africa Asia Pacific Reduces Complexity And Enhances Regional Focus For Profitable Growth SLIDE 7
Slide 8: Middle East & Africa Segment
AUTOMOTIVE SEGMENT REPORTING MIDDLE EAST & AFRICA SEGMENT • Population -- 1.3 billion • Average age -- 23 in Middle East; 19 in Africa • 67 countries and currencies • 1,000+ languages • Three closed markets -- Iran, Syria, and Sudan • Industry size -- about 4 million units, about 22% of which is clo
Slide 9: Segment Results Impact
AUTOMOTIVE SEGMENT REPORTING Impact SEGMENT RESULTS IMPACT • Based on 2013 results, the estimated directional impact of establishing Middle East & Africa would have resulted in the following profit impacts (none of the effects are considered material) − North America -- about unchanged − South Ameri
Slide 10: Industry and Market Share Reporting
AUTOMOTIVE SEGMENT REPORTING Impact INDUSTRY AND MARKET SHARE REPORTING Industry and Market Share 2013 (Prior) 2014 (New) North America Total Segment U.S. U.S. U.S. (Retail) U.S. (Retail) South America SA6* Total Segment Brazil Europe Total Segment EU19* EU20* EU5 (Retail)** EU5 (Retail)** Middle Ea
Slide 11: Agenda
AGENDA • Automotive Segment Reporting • Production compared with Wholesales • Automotive Segment and Joint Venture Profits • Fixed Asset Depreciation and Impairment Policy • Taxes • Pension Sensitivities • Annual Incentive Compensation Plan (AICP) SLIDE 11
Slide 12: Production Compared with Wholesales
PRODUCTION COMPARED WITH WHOLESALES Overall Company 1Q 2Q 3Q 4Q FY Production Base Base Base Base Base +/- Net Imports / Exports ~0 ~0 ~0 ~0 ~0 +/- Changes in Company Stocks - +/- +/- + ~0 Wholesales Lower +/- +/- Higher Similar North America Production Base Base Base Base Base +/- Net Imports / Exp
Slide 13: Agenda
AGENDA • Automotive Segment Reporting • Production compared with Wholesales • Automotive Segment and Joint Venture Profits • Fixed Asset Depreciation and Impairment Policy • Taxes • Pension Sensitivities • Annual Incentive Compensation Plan (AICP) SLIDE 13
Slide 14: Automotive Segment and Joint Venture Profits
AUTOMOTIVE SEGMENT AND JOINT VENTURE Impact PROFITS • Ford’s operations include investments in major unconsolidated joint ventures • Ford’s equity share of after-tax profit of the joint ventures is included in the respective Automotive segment results • Engineering and other costs for Ford’s global
Slide 15: Agenda
AGENDA • Automotive Segment Reporting • Production compared with Wholesales • Automotive Segment and Joint Venture Profits • Fixed Asset Depreciation and Impairment Policy • Taxes • Pension Sensitivities • Annual Incentive Compensation Plan (AICP) SLIDE 15
Slide 16: Fixed Asset Depreciation & Impairment Policy
FIXED ASSET DEPRECIATION & IMPAIRMENT POLICY Depreciation • A systematic and rational manner to allocate costs of investments with the benefits of their use • Included in operating expense, even in situations where we accelerate depreciation (Europe, Australia) Impairment • A write-off of a fixed as
Slide 17: Agenda
AGENDA • Automotive Segment Reporting • Production compared with Wholesales • Automotive Segment and Joint Venture Profits • Fixed Asset Depreciation and Impairment Policy • Taxes • Pension Sensitivities • Annual Incentive Compensation Plan (AICP) SLIDE 17
Slide 18: Taxes: Operating Effective Tax Rate
TAXES OPERATING EFFECTIVE TAX RATE 2013 Actual 1Q 2Q 3Q 4Q FY Reference (Mils.) (Mils.) (Mils.) (Mils.) (Mils.) Operating results* Pre-tax results $ 2,146 $ 2,555 $ 2,589 $ 1,279 $ 8,569 A Less: Equity in net income of affiliated companies** 214 273 293 289 1,069 B Adjusted pre-tax results $ 1,932 $
Slide 19: Taxes: Cash Taxes
TAXES CASH TAXES • Worldwide cash taxes to remain low for a number of years • Worldwide tax assets generated in prior periods reduce current period cash tax liabilities Cash Taxes Remain Low SLIDE 19
Slide 20: Agenda
AGENDA • Automotive Segment Reporting • Production compared with Wholesales • Automotive Segment and Joint Venture Profits • Fixed Asset Depreciation and Impairment Policy • Taxes • Pension Sensitivities • Annual Incentive Compensation Plan (AICP) SLIDE 20
Slide 21: Pension Sensitivities: Funded Status Sensitivity to Interest Rates
PENSION SENSITIVITIES GLOBAL PENSION FUNDED STATUS SENSITIVITY TO INTEREST RATES • Our strategy is to fully fund and de-risk global funded pension plans • As plans de-risk, asset allocation will migrate to a higher percentage of fixed income assets that better match plan liabilities • At year-end 20
Slide 22: Pension Sensitivities: Funded Status Sensitivity to Interest Rates
PENSION SENSITIVITIES GLOBAL PENSION FUNDED STATUS SENSITIVITY TO INTEREST RATES Increase / (Decrease) in Funded Status 2013 Year End 2012 Year End + 100 bps - 100 bps + 100 bps - 100 bps (Bils.) (Bils.) (Bils.) (Bils.) U.S. Plans Liabilities $ 4.3 $ (5.3) $ 5.2 $ (6.4) Assets* (3.5) 4.3 (2.9) 3.6 N
Slide 23: Agenda
AGENDA • Automotive Segment Reporting • Production compared with Wholesales • Automotive Segment and Joint Venture Profits • Fixed Asset Depreciation and Impairment Policy • Taxes • Pension Sensitivities • Annual Incentive Compensation Plan (AICP) SLIDE 23
Slide 24: AICP Metrics and Linkage to TSR
AICP METRICS AND LINKAGE TO TSR 2013 METRICS TSR DRIVERS 2014 METRICS Automotive Market Share Revenue 10% 20% Revenue Growth Automotive Operating Corporate PBT* 35% 30% Margin* Corporate Cost Performance Operating Margin Ford Credit PBT 10% 10% Shareholder Automotive Operating-Related Automotive Ope
Slide 25: Reference Material
REFERENCE MATERIAL Subjects from prior Ford University Presentations • Auto University Major Markets Defined Automotive Operating Margin Special Items Reporting on a “Where Sold” Basis Treatment of Chinese Joint Ventures Production / Wholesales / Retail Sales Profit Variance Analysis
Slide 26: 2013 Major Markets Defined
REFERENCE <p> BUSINESS UNIT REPORTING -- VARKET SHARE 2013 MAJOR MARKETS DEFINED ¢ North America -- U.S. ¢ South America 6 -- Argentina, Brazil, Chile, Colombia, Ecuador, and Venezuela ¢ Europe 19 -- Austria, Belgium, Britain, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Irela
Slide 27: Automotive Operating Margin
• Automotive operating margin is calculated by dividing Automotive EBIT, excluding special items, by Automotive revenue, for each segment and for Ford total Automotive. • Automotive EBIT is equal to pre-tax results excluding Special Items and Other Automotive, which is comprised of net interest expe
Slide 28: Key Elements Affecting Automotive Operating Margins
• Key elements that affect our Automotive operating margins. • Volume and Mix is directly impacted by Wholesale Volumes, Component Sales, Product Mix, and Series Mix and Option Rates within a product line. • Net Pricing is affected by wholesale pricing, which may include pricing for new design featu
Slide 29: Structural Costs Components and Drivers
• Key components and cost drivers for structural costs: • Manufacturing consists primarily of hourly and salaried personnel, plant overhead such as utilities, scrap and taxes, and launch expense. Volume and sourcing changes, as well as vehicle content are the key drivers of changes in these costs. •
Slide 30: Special Items
• Special items are reported as a separate reconciling item as opposed to being allocated back to the operating segments. This approach is consistent with how management reviews the operating segments internally. • There are two groupings for special items: − Personnel and Dealer-related -- these ar
Slide 31: Operating Segment Reporting - Where Sold Basis
REFERENCE <> OPERATING SEGMENT REPORTING -- “WHERE SOLD” BASIS * Segment results generally are reported on a “where sold” basis — Segment results include total corporate profit on all vehicles sold in its markets no matter where the vehicle or its components are produced — For example, the revenue a
Slide 32: Treatment of Unconsolidated Joint Ventures
• Consistent with the treatment of unconsolidated joint ventures under the accounting rules, vehicles sold by joint ventures are included in the “Wholesales” category, but revenue from vehicles produced and distributed by unconsolidated affiliates is not included in consolidated revenue. Automotive
Slide 33: Production, Wholesale and Retail
• Production compared with Wholesale − Within a specific Automotive segment, the difference between production and wholesale volumes is primarily explained by the net imports and exports with other Automotive business segments and changes in Company-owned finished vehicle inventories. • Wholesale co
Slide 34: Profit Variance Analysis
• Ford measures year-over-year and sequential quarter-over-quarter changes in Automotive pre- tax operating profit for total Automotive sector (excluding special items) and for the individual segments using the causal factors defined on the next several slides, with revenue and cost variances calcul
Slide 35: Volume and Mix Variance
• Volume and mix measures the profit variance from changes in wholesale volumes (at prior-year average margin per unit) driven by changes in industry volume, market share, and dealer stocks, as well as the profit variance resulting from changes in product mix, including mix among vehicle lines and m
Slide 36: Net Pricing Variance
• Net pricing: Primarily measures the profit variance driven by changes in wholesale prices to dealers and marketing incentive programs such as rebate programs, low-rate financing offers, and special lease offers. • Wholesale price changes include both pricing for new design features added to a vehi
Slide 37: Contribution Costs Variance
• The contribution costs variance measures the profit variance driven by per unit changes in cost categories that typically vary with volume, such as material costs, freight including duty, and warranty expense. - 37 -
Slide 38: Other Costs Variance
• Other costs: Primarily measures the profit variance driven by the absolute change in cost categories that typically do not have a directly proportionate relationship to production volume -- mainly structural costs, such as Manufacturing, Engineering, Depreciation and Amortization (“spending-relate
Slide 39: Exchange Variance
• Exchange primarily measures the profit variance driven by one or more of the following: − The impact of gains or losses arising from transactions denominated in currencies other than the functional currency of the locations including currency transactions. − The effect of remeasuring income, asset
Slide 40: Net Interest / Other Variance
• Net interest / other measures the profit variance driven by changes in the Automotive sector's centrally-managed net interest expense and related fair value market adjustments in Ford’s investment portfolio and marketable securities as well as other factors not included above. - 40 -
Slide 41: Automotive Cost Details - Financial Statements
REFERENCE <= AUTOMOTIVE COST DETAILS -- FINANCIAL STATEMENTS Ford’s financial statements break costs into two categories: * Cost of Sales -- costs related to the development, manufacture and distribution of our vehicles, parts, and accessories — Material (including commodities) — Freight — Warranty
Slide 42: Automotive Cost Details - Variance Analysis
REFERENCE <> AUTOMOTIVE COST DETAILS -- VARIANCE ANALYSIS* Our variance analysis breaks costs into two major buckets: * Contribution costs (variances reflect changes in cost per unit) — Material » Commodities » Material excluding commodities (includes design changes and cost reductions) — Freight —
Slide 43: Structural Costs and Production Volume
• While material (including commodities), freight and warranty costs generally vary directly with production, elements within the structural costs category are impacted to different degrees by changes in production volume. • Ford also has varying degrees of discretion when it comes to controlling di
Slide 44: Automotive Cost Details - Where to Find Them
REFERENCE Go Further AUTOMOTIVE COST DETAILS -- WHERE TO FIND THEM Income Statement Published Statement Contribution Costs Material (including Cost of Sales 2013 10-K P.33 Commodity / Material are warranty coverages and field service actions) commodity costs) about 2/3 of Total Automotive Freight Co
Slide 45: Automotive Details - Where to Find Them
ED Go Further REFERENCE AUTOMOTIVE DETAILS -- WHERE TO FIND THEM Income Statement Published Statement Special Items Separation-related actions Mixed 2013 10-K P. 40 $(856) Mils. in 2013. (primarily related to Reduction actions separation costs for attributable to hourly labor personnel at the Genk a
Slide 46: Automotive Gross Cash and Operating-Related Cash Flows
• In managing the business, changes in Automotive gross cash are classified into three categories -- Automotive Operating-related cash flows; other cash flows; and cash flows of a financing nature: • Operating-related cash flows best represent the ability of the Automotive business to generate cash.
Slide 47: Working Capital Balances
• Included within Automotive cash flows are changes in working capital balances -- trade receivables, trade payables and inventories. • In general Ford has relatively low trade receivables as the majority of the Automotive wholesales are financed through Ford Credit. • In addition, Ford’s inventorie
Slide 48: Seasonality of Structural Costs
• Production seasonality leads to some structural cost elements having a seasonal pattern. • As the Company stops its production for the holiday break in late December, the break results in a reduction in Company finished goods inventory as of the end of the Fourth Quarter. Inventory increases again
Slide 49: Working Capital Seasonality
• Working capital also is subject to seasonal timing differences. − Inventories -- due to the annual Company-wide December shut-down, finished vehicle and work-in-process inventories are typically at their lowest point at the end of the Fourth Quarter each year, resulting in improved cash flow from
Slide 50: Items Varying Quarter to Quarter
• Listed here are some of the items that can vary greatly from quarter to quarter and could not be easily modeled without significant knowledge of the internal processes at Ford. For example: − Some activities are tied to launches of the new vehicles and may cause some uneven spending through the ca
Slide 51: Total Company 2013 Income from Continuing Operations
REFERENCE -- APPENDIX ie TOTAL COMPANY 2013 INCOME FROM CONTINUING OPERATIONS Fourth Quarter Full Year 2012 2013 2012 2013 (Mils.) (Mils.) (Mils.) (Mils.) Automotive North America $ 1,872 $ 1,702 $ 8,343 $ 8,781 South America 145 (126) 213 (34) Europe (732) (871) (1,753) (1,609) Asia Pacific Africa
Slide 52: Automotive Sector Net Interest Reconciliation to GAAP
REFERENCE -- APPENDIX AUTOMOTIVE SECTOR NET INTEREST RECONCILIATION TO GAAP Interest expense (GAAP) Interest income (GAAP) Subtotal Adjusted for items included / excluded from net interest Include: Gains / (Losses) on cash equiv. and marketable securities* Change in amortized value of debt included
Slide 53: Automotive Sector Gross Cash Reconciliation to GAAP
REFERENCE -- APPENDIX Go Further AUTOMOTIVE SECTOR GROSS CASH RECONCILIATION TO GAAP 2012 Dec. 31 Sep. 30 Dec. 31 (Bils.) (Bils.) (Bils.) Cash and cash equivalents $ 6.2 $ 5.7 $ 5.0 Marketable securities 18.2 20.4 20.1 Total cash and marketable securities (GAAP) $ 24.4 $ 26.1 $25.1 Securities in tra
Slide 54: Operating-Related Cash Flows
REFERENCE -- APPENDIX OPERATING-RELATED CASH FLOWS Go Further Fourth Quarter Full Year 2012 2013 2012 2013 (Bils.) (Bils.) (Bils.) —(Bils.) Net cash provided by / (used in) operating activities (GAAP) $ 2.2 $ 1.3 $ 63 $ 7.7 Items included in operating-related cash flows Capital spending (1.9) (2.0)
Slide 55: Risk Factors
RISK FACTORS <> included or inco! by herein may constitute " Hooking " within the \g of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on iions, for , and assumptions by our and involve a of risks, ‘ies, and other factors that could cause actual results to
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