Ford 2007 Annual Report Download - page 23

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Management’s Discussion and Analysis of Financial Condition and Results of Operations
Ford Motor Company | 2007 Annual Report 21
The Americas
Ford North America Segment. The improvement in earnings primarily reflected lower charges for Jobs Bank Benefits
and personnel-reduction programs, lower pension curtailment charges, the non-recurrence of 2006 impairment charges
related to our long-lived assets, higher net pricing, and retiree health care curtailment gains related to our hourly
separation programs.
Ford South America Segment. The increase in earnings is more than explained by higher net revenue and improved
volume and mix, offset partially by unfavorable cost changes and the non-recurrence of a 2006 gain associated with a
legal settlement relating to a social welfare tax liability. The unfavorable cost changes primarily reflected higher net
product costs and higher manufacturing and engineering costs. The level of profitability that our Ford South America
segment achieved in 2007 is not likely to be sustained over the next few years due in part to an expected increase in
competition.
Ford Europe and PAG
Ford Europe Segment. The increase in earnings is more than explained by favorable cost changes and improved
volume and mix, offset partially by costs associated with a U.K. plant closure and changes in currency exchange. The
favorable cost changes primarily reflected lower warranty-related costs and net product costs, offset partially by higher
manufacturing and engineering costs and advertising and sales promotion costs.
PAG Segment. The improvement in earnings primarily reflected favorable cost changes, improved volume and mix,
favorable net pricing, the effect of our sale of Aston Martin (primarily the gain on sale), and lower charges for personnel-
reduction programs, offset partially by higher impairment charges related to PAG assets and changes in currency
exchange rates. The favorable cost changes primarily reflected lower warranty-related costs (primarily the non-
recurrence of adverse 2006 adjustments to Jaguar and Land Rover warranty accruals), overhead costs, and spending-
related costs.
Ford Asia Pacific and Africa/Mazda
Ford Asia Pacific and Africa/Mazda Segment. The improvement in results for Ford Asia Pacific and Africa primarily
reflected favorable cost changes, higher net pricing, and lower charges for personnel-reduction programs, offset partially
by less favorable volume and mix. The favorable cost changes primarily reflected lower manufacturing and engineering
costs, overhead costs, and net product costs.
The decrease in earnings for Mazda and Associated Operations primarily reflected the decrease in net earnings at
Mazda (including the non-recurrence of a gain Mazda realized on the transfer of its pension liabilities back to the
Japanese government), offset partially by the non-recurrence of personnel-reduction programs at AAI.
Other Automotive
The decline in results primarily reflected higher interest expense and related costs associated with the higher debt
levels that resulted from financing actions taken in the fourth quarter of 2006, the non-recurrence in Other Automotive of
tax-related interest adjustments resulting from settlements with the Internal Revenue Service in 2006, and a loss on the
conversion of 43% of our Trust Preferred Securities. These unfavorable factors were offset partially by higher interest
income reflecting higher average cash balances, mark-to-market adjustments for changes in exchange rates on
intercompany loans and related loan hedges, and a gain on the exchange of debt securities for equity that occurred in
December 2007.