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47
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
performance of receivables sold in previous transactions, general demand for the type of receivables Ford Credit offers, market
capacity for Ford Credit-sponsored investments, market disruption and Ford Credit’s debt ratings. 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, its liquidity would be adversely impacted.
VARIABLE INTEREST ENTITIES (SEE NOTE 13 OF THE NOTES TO OUR FINANCIAL STATEMENTS)
Automotive
Our Automotive sector has invested in several joint ventures that are reported as equity investments. In many cases, we have
contracted with these joint ventures to manufacture and/or assemble vehicles or components. We have invested and contracted
with these entities to obtain low cost, high quality parts and vehicles, world-class niche product development capabilities and
the ability to leverage the technical expertise of our joint venture partners. These investments may involve a transfer of assets in
exchange for an equity interest. In some cases, we have agreed to guarantee the debt of the entity; in others we have uncondi-
tional supply arrangements that are used by the entity to secure financing. In many cases, labor used by the joint ventures are
Ford employees, the cost of which we are reimbursed; however, failing reimbursement we are ultimately responsible for the
costs of these employees. The terms of these supply arrangements are a result of arms-length negotiation. For a discussion of
the impact of FIN 46 on our accounting for these joint ventures, see Note 13 of the Notes to our Financial Statements.
Financial Services
It is reasonably possible that FCAR, in its existing structure, may be consolidated in our financial results in compliance with
FIN 46. Our equity investment and retained beneficial interest related to FCAR is approximately $1.7 billion, which is reflected
on our consolidated balance sheet. At December 31, 2002, FCAR had gross assets of $12.2 billion and gross liabilities of $11.8
billion. We continue to assess structures that would maintain FCAR as an unconsolidated entity under FIN 46. We are continuing
to analyze the impact on our financial statements of FIN 46 and its impact on FCAR. In addition, Ford Credit also sells receiv-
ables to bank-sponsored asset-backed commercial paper issuers that are SPEs of the sponsor bank. FIN 46 might also require
the sponsor banks to consolidate the assets and liabilities of the SPEs into their financial results. If this occurs, the sponsor
banks may increase the program fees for Ford Credit’s use of these SPEs or fail to renew their commitment to purchase addi-
tional receivables from Ford Credit. At December 31, 2002, about $6 billion of retail installment sale contracts Ford Credit origi-
nated were held by these SPEs. We believe we would not be required to consolidate any portion of these SPEs in our financial
results. We are continuing to evaluate the impact of FIN 46 on the bank sponsors of these SPEs and on the continued availability
and costs of this program. We believe bank sponsors will not terminate their SPEs or reduce their purchase of receivables.
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. Many of these obligations are recorded; others are disclosed in various notes to the financial
statements. Some obligations are executory contracts and therefore are not recognized as liabilities until the occurrence
of a future event.
In order to provide information about our short- and long- term liquidity needs, a disclosure of selected obligations is
displayed below (in millions):
Payments Due by Period
Less than 1 More than
Total year 1–3 years 3 –5 years 5 years
Debt obligations $ 162,222 $ 42,086 $ 56,655 $ 23,858 $ 39,623
Capital lease obligations 284 45 48 37 154
Operating lease obligations 3,294 856 1,125 603 710
Total $ 165,800 $ 42,987 $ 57,828 $ 24,498 $ 40,487
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.