Ford 2006 Annual Report Download - page 30
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Please find page 30 of the 2006 Ford annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Management’s Discussion and Analysis of Financial Condition and Results of Operations
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The weighted-average maturity of our total automotive debt is approximately 17 years, and is measured based on the
maturity dates of our debt or the first date of any put option available to the owners of our debt. About $3 billion of debt
matures by December 31, 2011, and about $15 billion matures or has a put option by December 31, 2016. For additional
information on debt, see Note 15 of the Notes to the Financial Statements.
Credit Facilities. At December 31, 2006, we had $13 billion of contractually-committed credit facilities with financial
institutions, including $11.5 billion pursuant to a senior secured credit facility established in December 2006, $1.1 billion of
global Automotive unsecured credit facilities, and $400 million of local credit facilities available to foreign affiliates. At
December 31, 2006, $12.5 billion of these facilities were available for use. For further discussion of our committed credit
facilities, see Note 15 of the Notes to the Financial Statements. This new secured credit facility, together with the
$12 billion of funds raised in December 2006 discussed above, was obtained primarily to fund the cash outflows
discussed below.
During the period 2007 through 2009, we expect cumulative Automotive operating-related cash outflows of about
$10 billion, and cumulative cash expenditures for restructuring actions of about $7 billion. More than half of this $17 billion
cash outflow is expected to occur in 2007. This cash outflow primarily reflects substantial operating losses in our
Automotive sector through 2008, and cash expenditures incurred in connection with personnel separations. It also
reflects our expectation to continue to invest in new products throughout this period at about the same level as we have
during the past few years, or approximately $7 billion annually.
In the period 2007 through 2009, we expect other non-operating related net Automotive cash inflows of about
$2 billion, reflecting the use of about $3 billion in long-term VEBA assets, proceeds from receipt of government tax
refunds and affiliate tax payments, and proceeds from planned divestitures of Automobile Protection Corporation and all
or part of Aston Martin, offset partially by pension contributions and reductions of other Automotive debt.
Pension Plan Contributions. Our policy for funded plans is to contribute annually, at a minimum, amounts required by
applicable laws, regulations, and union agreements. We do from time to time make contributions beyond those legally
required.
In 2006, we made $800 million of cash contributions to our funded pension plans. During 2007, we expect to
contribute from available Automotive cash and cash equivalents $2.2 billion to our worldwide pension plans, including
about $400 million of benefit payments paid directly by us for unfunded plans. Based on current assumptions and
regulations, we do not expect to have a legal requirement to fund our major U.S. pension plans in 2007.
For a further discussion of our pension plans, see Note 23 of the Notes to the Financial Statements.
Financial Services Sector
Ford Credit
Ford Credit's funding strategy is to maintain a high level of liquidity by having a substantial cash balance and
committed funding capacity, allowing it to meet its short-term funding obligations. As a result of lower credit ratings, its
unsecured funding costs have increased over time. While Ford Credit continues to access the unsecured debt market, it
has increased its use of securitization funding as it is presently more cost effective than unsecured funding and allows it
access to a broad investor base. Ford Credit plans to meet a significant portion of its 2007 funding requirements through
securitizations, and will continue to expand and diversify its asset-backed funding by asset class and region. In addition,
Ford Credit has various alternative business arrangements for select products and markets that reduce its funding
requirements while allowing it to support us. Ford Credit will continue to pursue such arrangements in the future. Over
time, Ford Credit may need to reduce further the amount of receivables and operating leases it purchases and originates.
A significant reduction in Ford Credit's managed receivables would reduce its ongoing profits, and could adversely affect
its ability to support the sale of our vehicles.
Debt and Cash. Ford Credit's total debt plus securitized off-balance sheet funding was $150.9 billion at
December 31, 2006, about $900 million higher compared with a year ago. At December 31, 2006, Ford Credit's cash,
cash equivalents and marketable securities (excluding marketable securities related to insurance activities) totaled
$21.8 billion (including $3.7 billion to be used only to support on-balance sheet securitizations), compared with
$17.9 billion at year-end 2005. In the normal course of its funding activities, Ford Credit may generate more proceeds