Ford 2003 Annual Report Download - page 95

2003 ANNUAL REPORT 93
NOTES TO FINANCIAL STATEMENTS
2002
Sale of Kwik-Fit Holdings Ltd. and Other — In November 2002, we completed the sale of our interest in Kwik-Fit Holdings Ltd.,
our European all-makes vehicle repair business, to an acquisition company formed by CVC Capital Partners. The sales price of
£330 million (equivalent to about $500 million) consisted of a combination of approximately $300 million in cash and
a note with a face value of approximately $200 million. We recognized a pre-tax loss of $519 million in cost of sales in 2002.
Additionally, in 2002, we acquired a 19% equity stake in the acquisition company. Our disposal of our interest in Kwik-Fit was
not reflected as a discontinued operation due to our continued involvement as an equity investor in the acquisition company.
In 2003, we recognized pre-tax income of $49 million related to the acceleration of payments received on the note.
Other pre-tax charges during the year totaled $143 million which represented primarily impairments and dispositions of our interest
in e-commerce ventures.
European Charges — With respect to our Ford Europe business unit of our International Automotive segment, we recorded
a pre-tax charge in Automotive cost of sales of $173 million in the fourth quarter of 2002. These actions and the approximate
reduction in personnel are as follows:
Number of Employees
Planned transfer of the Transit vehicle production to
the Ford Otosan (Turkey) joint venture, die-casting
rationalization and other manufacturing actions
(1,740 hourly and 60 salary) 1,800
Premier Automotive Group Charges — We recorded a restructuring pre-tax charge in Automotive cost of sales of $157 million in
the fourth quarter 2002 related to workforce reductions in our Premier Automotive Group. These actions and the approximate
reduction in personnel are as follows:
Number of Employees
Line speed reduction at our Halewood (England) plant
and efficiency actions (voluntary redundancy)
(225 hourly and 715 salary) 940
2001
Asset Impairment Charges — In response to significantly deteriorating business conditions resulting in operating losses, we
conducted extensive business reviews of our Automotive operations in North America and South America during the fourth
quarter. As part of these reviews, we determined that projected undiscounted cash flows were not sufficient to justify the carrying
values of the related long-lived assets. Asset impairment charges of $3,084 million in North America and $744 million in South
America were recorded in Automotive cost of sales, reflecting a write-down to estimated fair value, as determined by independent
valuations. The impairment increased depreciation, special tool amortization, and goodwill amortization by $2,688 million,
$867 million, and $273 million, respectively.
Precious Metals Related Charges — Precious metals (primarily palladium) are used in catalytic converters, which are used in
vehicles to meet required automotive emission standards. Our business objective has been to ensure adequate supply of these
critical commodities. In 2000 and early 2001, we acquired precious metals and entered into forward purchase contracts at then-
prevailing market prices in an environment of uncertain supply and outlook. In the fourth quarter of 2001, our engineers validated a
breakthrough catalyst design, which will help reduce our usage of palladium. For the precious metals physically held, we substan-
tially reduced our holdings in excess of those stocking requirements. Beginning in the fourth quarter of 2001, we wrote down the
value of the excess metal to its estimated realizable value. In addition, precious metal forward contracts were settled
in lieu of taking physical delivery of the related metal. Therefore, as required by SFAS No. 133, precious metal forward purchase
contracts were marked-to-market. The total pre-tax charge for precious metals in the fourth quarter of 2001 was $953 million.
Other Charges — Other charges during the during the fourth quarter of 2001 included personnel charges of $565 million before
taxes primarily reflected voluntary salaried employee separations in North America.
Purchase of Remainder of Hertz Corporation — In March 2001, we acquired (for $735 million) the common stock of Hertz that
we did not own, which represented about 18% of the economic interest in Hertz. The excess of the purchase price over the fair
market value of net assets acquired was approximately $390 million and was accounted for under the purchase method.
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