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Management’s Discussion and Analysis of Financial Condition and Results of Operations
28 Ford Motor Company | 2007 Annual Report
LIQUIDITY AND CAPITAL RESOURCES
Automotive Sector
Our strategy is to ensure that we have sufficient funding available with a high degree of certainty throughout the
business cycle. Our long-term goal is to improve our core Automotive operations so that we have a high degree of
certainty about our capability to generate cash from our operations. In addition, our strategy includes maintaining large
gross cash balances, having a long-dated debt maturity profile, maintaining committed credit facilities, and funding long-
term liabilities over time.
Gross Cash. Automotive gross cash includes cash and cash equivalents, net marketable securities, loaned securities
and certain assets contained in a Voluntary Employee Beneficiary Association trust ("VEBA"), a trust which may be used
to pre-fund certain types of company-paid benefits for U.S. employees and retirees. We have included in Automotive
gross cash those VEBA assets that are invested in shorter-duration fixed income investments and can be used within
18 months to pay for benefits ("short-term VEBA assets"). As a result of our agreement with the UAW regarding retiree
health care obligations (discussed in "Overview"), we do not expect to have significant short-term VEBA assets in 2008
and beyond. Gross cash as of December 31, 2007, 2006, and 2005 is detailed below (in billions):
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______ ____
(a) The purchase or sale of marketable securities for which the cash settlement was not made by period-end and for which there was a payable or
receivable recorded on the balance sheet at period-end.
(b) Pursuant to the MOU with the UAW (discussed in "Overview" above), in January 2008 we contributed $2.73 billion to a temporary asset account
and invested $1.8 billion of short-term VEBA assets in longer-term instruments. These actions reduced Automotive gross cash by $4.5 billion.
In managing our business, we classify changes in Automotive gross cash into two categories: operating-related, and
other (which includes the impact of certain special items, contributions to funded pension plans, the net effect of the
change in our VEBA on gross cash, tax-related transactions, acquisitions and divestitures, capital transactions with the
Financial Services sector, dividends paid to shareholders, and other – primarily financing-related). Our key metrics are
operating-related cash flow, which best represents the ability of our Automotive operations to generate cash, and
Automotive gross cash. We believe the cash flow analysis reflected in the table below is useful to investors because it
includes in operating-related cash flow elements that we consider to be related to our operating activities (e.g., capital
spending) and excludes cash flow elements that we do not consider to be related to the ability of our operations to
generate cash (e.g., tax refunds). This differs from a cash flow statement presented in accordance with generally
accepted accounting principles ("GAAP") in the United States and differs from Cash flows from operating activities of
continuing operations, the most directly comparable U.S. GAAP financial measure.