Ford 2003 Annual Report Download - page 103

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Product Performance, Warranty — Estimated warranty costs and additional service actions are accrued for at the time the
vehicle is sold to a dealer. Included in the warranty cost accruals are costs for basic warranty coverages on vehicles sold.
Product recalls and other customer service actions are not included in the warranty reconciliation below but are also accrued for
at the time of sale. Estimates for warranty costs are made based primarily on historical warranty claim experience. The following
is a tabular reconciliation of the product warranty accrual (in millions):
2003 2002
Beginning balance $ 5,401 $ 4,739
Payments made during the year (3,524) (3,508)
Changes in accrual related to warranties issued during the year 3,562 3,489
Changes in accrual related to pre-existing warranties (266) 595
Foreign currency translation and other* 270 86
Ending balance $ 5,443 $ 5,401
* Other includes newly consolidated VIEs (see Note 13).
LITIGATION AND CLAIMS
Various legal actions, governmental investigations and proceedings and claims are pending or may be instituted or asserted in
the future against us, including those arising out of alleged defects in our products; governmental regulations relating to safety,
emissions and fuel economy; financial services; employment-related matters; dealer, supplier and other contractual relationships;
intellectual property rights; product warranties; environmental matters; and shareholder matters. Certain of the pending legal
actions are, or purport to be, class actions. Some of the foregoing matters involve or may involve compensatory, punitive, or
antitrust or other treble damage claims in very large amounts, or demands for recall campaigns, environmental remediation
programs, sanctions, or other relief, which, if granted, would require very large expenditures.
Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not predictable with assurance.
We have established accruals for certain of the matters discussed in the foregoing paragraph where losses are deemed prob-
able. It is reasonably possible, however, that some of the matters discussed in the foregoing paragraph for which accruals have
not been established could be decided unfavorably to us and could require us to pay damages or make other expenditures in
amounts or a range of amounts that cannot be estimated at December 31, 2003. We do not reasonably expect, based on our
analysis, that such matters would have a material effect on future financial statements for a particular year, although such an
outcome is possible.
2003 ANNUAL REPORT 101
NOTES TO FINANCIAL STATEMENTS
FIN73_104 3/21/04 1:07 AM Page 101