Ford 2005 Annual Report Download - page 38

Managementʼs Discussion and Analysis of Financial
Condition and Results of Operations
Shown in the table below is a reconciliation between financial statement Net cash flows from operating activities and operating-
related cash flows (calculated as shown in the table above), for the last three years (in billions):
2005 2004 2003
Net cash flows from operating activities ................................................................................................................................................ $ 5.4 $ 7.0 $ 2.9
Items included in operating-related cash flow
Capital expenditures.............................................................................................................................................................................. (7.1) (6.3) (7.3)
Net transactions between Automotive and Financial Services sectors (a)........................................................................................... (0.4) 1.3 1.2
Net sales/(purchases) of trading securities............................................................................................................................................ 0.6 (5.6) (1.6)
Other (b) ................................................................................................................................................................................................ (2.6) (0.1) 1.8
Items not included in operating-related cash flow
Pension and long-term VEBA contributions ........................................................................................................................................ 2.7 5.0 4.8
Tax refunds............................................................................................................................................................................................ (0.3) (0.3) (1.7)
Operating-related cash flows................................................................................................................................................................... $ (1.7) $ 1.0 $ 0.1
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(a) Primarily payables and receivables between the sectors in the normal course of business, as shown in our Condensed Sector Statement of Cash Flows for the
Automotive sector.
(b) Primarily the exclusion of cash flow from short-term VEBA contribution/(drawdown).
Debt and Net Cash. At December 31, 2005, our Automotive sector had total debt of $17.9 billion, compared with $18.4 billion a
year ago. Total senior debt at December 31, 2005 was $12.7 billion, compared with $13.1 billion at December 31, 2004. The
decrease in senior debt primarily reflected repurchases of debt securities in the open market. Ford Motor Company Capital Trust II
had outstanding $5.0 billion of trust preferred securities at December 31, 2005 and 2004.
At December 31, 2005, our Automotive sector had net cash (defined as gross cash less total senior and subordinated debt) of
$7.2 billion, compared with $5.2 billion at the end of 2004.
The weighted-average maturity of our total long-term debt (including subordinated debt), substantially all of which is fixed-rate
debt, is approximately 25 years with $4.3 billion maturing by December 31, 2025. The weighted-average maturity of total debt (long-
term and short-term including subordinated debt) is approximately 25 years. For additional information on debt, see Note 16 of the
Notes to the Financial Statements.
Seasonal Working Capital Funding. In July 2005, we raised $2.0 billion of seasonal working capital funding to reduce the cash
volatility that results from our summer plant shutdown period. The funding was in the form of 60-day bank loans which were repaid
in early September.
Credit Facilities. At December 31, 2005, the Automotive sector had $7.1 billion of contractually committed credit facilities with
financial institutions, of which $6.9 billion were available for use. For further discussion of our committed credit facilities, see Note
16 of the Notes to the Financial Statements.
Pension Plan Contributions. In 2005, U.S. pension funding reform proposals were passed in both the House of Representatives
and the Senate. Although a final bill has not yet been completed, it is likely that a final bill will be passed and signed into law in 2006.
It is anticipated that this law would institute more stringent funding requirements for U.S. defined benefit pension plans beginning in
2007. U.K. pension reform was passed in November 2004, and could affect funding requirements beginning in 2007. For a
discussion of pension plan contributions we have made in 2005 and expect to make in 2006, see Note 23 of the Notes to the Financial
Statements.
Financial Services Sector
Ford Credit
Ford Credit's funding strategy is to maintain liquidity and access to diverse funding sources that are cost effective. As a result of
lower credit ratings, Ford Credit's unsecured borrowing costs have increased, its access to the unsecured debt market has become more
restricted, and its outstanding short- and long-term unsecured debt balances have declined. In response, Ford Credit has increased its
use of securitization and other asset-related sources of liquidity, and will continue to expand and diversify its asset-backed funding by
asset class, region and channel. In addition, Ford Credit will continue to participate in the whole-loan market and access the
unsecured term-debt market opportunistically. Over time, Ford Credit may also need to reduce further the amount of receivables it
purchases. A significant reduction in the amount of purchased receivables would significantly reduce Ford Credit's ongoing profits,
and could adversely affect its ability to support the sale of our vehicles.
Debt and Cash. Ford Creditʼs total debt was $134.5 billion at December 31, 2005, down $9.8 billion compared with a year ago,
primarily reflecting repayment of maturing debt and lower funding requirements due to lower asset levels. Ford Creditʼs outstanding
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