Ford 2005 Annual Report Download - page 33

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Ford Motor Company Annual Report 2005 30 Ford Motor Company Annual Report 2005 31
Managementʼs Discussion and Analysis of Financial
Condition and Results of Operations
Ford South America. The improvement in earnings primarily reflected positive net pricing and higher vehicle unit sales, offset
partially by higher commodity costs.
Ford Europe and PAG Segment
Ford Europe. The improvement in earnings primarily reflected favorable cost performance, lower charges related to the Ford
Europe Improvement Plan (primarily employee separation charges) and higher profits at our Ford Otosan joint venture in Turkey.
PAG. The increased loss primarily reflected unfavorable changes in currency exchange rates, as well as vehicle production
reductions and employee separation charges at Jaguar related to the implementation of the PAG Improvement Plan and higher costs
for launching new vehicles, offset partially by positive net pricing.
Ford Asia Pacific and Africa/Mazda Segment
Ford Asia Pacific and Africa. The decline in earnings reflected a charge related to the disposition of certain dealerships, offset
partially by favorable changes in exchange rates and higher vehicle unit sales.
Mazda and Associated Operations. The change primarily reflected improvements in our Mazda-related investments.
Other Automotive
The improvement in results primarily reflected higher tax-related interest on refund claims and the favorable effect on interest
expense of the settlements in 2004 of prior-year federal and state tax audits and 2004 debt repurchases. This was offset partially by
the reclassification of interest expense on our 6.50% Junior Subordinated Debentures due 2032 held by a subsidiary trust, Ford Motor
Company Capital Trust II.
FINANCIAL SERVICES SECTOR RESULTS OF OPERATIONS
2005 Compared with 2004
Details of the full year Financial Services sector Income/(loss) before income taxes for 2005 and 2004 are shown below (in
millions):
Income/(Loss)
Before Income Taxes
2005 2004
2005
Over/(Under)
2004
Ford Credit................................................................................................................................................................................... $ 3,861 $ 4,431 $ (570)
Hertz operating results (a) ........................................................................................................................................................... 974 493 481
Other Financial Services operating results.................................................................................................................................. (39) 84 (123)
Gain on sale of Hertz (b) ............................................................................................................................................................... 1,095 — 1,095
Total Financial Services sector............................................................................................................................................. $ 5,891 $ 5,008 $ 883
__________
(a) Includes amortization expense related to intangibles recognized upon consolidation of Hertz.
(b) The segment presentation of the gain on sale of Hertz in Note 24 of the Notes to the Financial Statements is $1,006 million in the Hertz segment and $89 million in
Other Financial Services.
Ford Credit
Ford Credit's income before income taxes was down $570 million. The decrease in earnings primarily reflected higher borrowing
costs and the impact of lower retail receivable levels, offset partially by improved credit loss performance.
Ford Credit reviews its business performance from several perspectives, including:
•On-balance sheet basis. Includes the receivables Ford Credit owns and receivables sold for legal purposes that remain on Ford
Creditʼs balance sheet;