Ford 2003 Annual Report Download - page 102

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100 FORD MOTOR COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 23. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
We lease land, buildings and equipment under agreements that expire in various years. Minimum rental commitments under non-
cancelable operating leases were as follows (in millions):
2004 2005 2006 2007 2008 Thereafter
Automotive $ 446 $ 346 $ 259 $ 248 $ 169 $ 341
Financial Services 400 330 265 198 139 503
Rental expense was $1.3 billion in 2003, $1.1 billion in 2002 and $1.0 billion in 2001.
GUARANTEES
On November 26, 2002, FASB issued Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others. For certain guarantees issued after December 31, 2002,
FIN 45 requires a guarantor to recognize, upon issuance of a guarantee, a liability for the fair value of the guarantee. The fair
values of guarantees and indemnifications issued during 2003 are recorded in the financial statements and are de minimis. At
December 31, 2003, the following guarantees were issued and outstanding:
Guarantees related to affiliates and third parties — We guarantee debt and lease obligations of certain joint ventures as well as
certain financial obligations of outside third parties to support business and economic growth. Expiration dates vary, and guaran-
tees will terminate on payment and/or cancellation of the obligation. A payment would be triggered by failure of the guaranteed
party to fulfill its obligation covered by the guarantee. In some circumstances, we are entitled to recover from the third party
amounts paid by us under the guarantee. However, our ability to enforce these rights is sometimes stayed until the guaranteed
party is paid in full. The maximum potential payments under these guarantees total approximately $465 million, the majority of
which relates to the Automotive sector.
In 1992, we issued $500 million of 7.25% Notes due October 1, 2008 (“Notes”). In 1999, the bondholders agreed to relieve us as
the primary obligor with respect to the principal of these Notes. As part of this transaction, Ford placed certain financial assets
into an escrow trust for the benefit of the bondholders, and the trust became the primary obligor with respect to the principal
(Ford became secondarily liable for the entire principal amount). Approximately $150 million is recorded in the financial state-
ments as Senior debt related to this transaction, which is being amortized over the life of the Notes.
We also have guarantees outstanding associated with two subsidiary trusts, Trust I and Trust II. For further discussions of Trust I
and Trust II, see Notes 12 and 14.
Sales to third parties of Automotive receivables, with recourse — From time to time, the Automotive sector sells receivables to
third parties with recourse. Receivables are sold on a rolling basis and individual sales liquidate at different times. A payment
would be triggered by failure of the obligor to fulfill its obligations covered by the contract. The maximum potential amount of
future payments is approximately $14 million.
Indemnifications — In the ordinary course of business, we execute contracts involving indemnifications standard in the industry
and indemnifications specific to a transaction such as the sale of a business. These indemnifications might include claims
against any of the following: environmental, tax and shareholder matters; intellectual property rights; governmental regulations
and employment-related matters; dealer, supplier, and other commercial contractual relationships; and financial matters, such as
securitizations. Performance under these indemnities would generally be triggered by a breach of terms of the contract or by a
third party claim. We regularly evaluate the probability of having to incur costs associated with these indemnifications and have
accrued for expected losses that are probable. We are party to numerous indemnifications and many of these indemnities do not
limit potential payment; therefore, we are unable to estimate a maximum amount of potential future payments that could result
from claims made under these indemnities.
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