Ford Motor Company (F)

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Ford Moto (F)

Q3 2010 Earnings Call

October 26, 2010 9:00 am ET

Executives

Alan Mulally - Chief Executive Officer, President, Executive Director, Member of Long-Term Incentive Compensation Award Committee and Member of Finance Committee

Kenneth Kent - Vice Chairman, Chief Financial Officer, Principal Accounting Officer, Treasurer and Assistant Treasurer of Ford Motor Company

Neil Schloss - Vice President and Treasurer

Robert Shanks - Chief Accounting Officer, Vice President and Controller

Shawn Ryan -

Lewis Booth - Chief Financial Officer, Executive Vice President, Director of Land Volvo Brand, Director of Ford of Europe and Non-Executive Director of Volvo Cars Division

Analysts

Eric Selle - J.P. Morgan

Brian Jacoby - Goldman Sachs

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter Ford Motor Company Fixed Income Conference Call. My name is Steve and I will be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today, Mr. Shawn Ryan, Investor Relations Manager. Please proceed, sir.

Shawn Ryan

Thank you, Steve, and good morning, ladies and gentlemen. Welcome to all of you who are joining us either by phone or webcast. On behalf of the entire Ford management team, I would like to thank you for spending time with us this morning.

With me this morning are Bob Shanks, Ford Vice President and Controller; Kenneth Kent, Ford Credit Vice Chairman and Chief Financial Officer; Neil Schloss, Ford Vice President and Treasurer. We also have some other members of management who are joining us for the call including David Brandi, Assistant Treasurer; Brian Shaw, Assistant Treasurer; and Paul Andonian Director of Global Accounting.

Before we begin, I would like to review a couple of items. A copy of this morning's earnings release and the slides we will be using today have been posted on Ford Motor Company's Investor and Media website for your reference. The financial results discussed herein are presented on a preliminary basis. The final data will be included on our Form 10-Q. Additionally, the financial results presented here are on a GAAP basis and in some cases a non-GAAP basis. Any non-GAAP financial measures discussed on this call are reconciled to the U.S. GAAP equivalents as part of the appendix to the slide deck.

Finally, today's presentation includes some forward-looking statements about our expectation for Ford's future performance. Actual results could differ materially from those suggested by our comments here. The most significant factors that could affect future results are summarized at the end of this presentation. These risk factors and other key information are detailed in our SEC filings including our annual, quarterly and current reports with the SEC.

With that, I would like to turn the call over to Ford Vice President and Controller, Bob Shanks. Bob?

Robert Shanks

Thanks, Shawn. We're pleased today to report strong third quarter results as we continue to gain momentum with our One Ford plan despite still challenging business conditions.

Turning to Slide 1, I'd like to review our key financial results compared with the year ago. Let me first begin by explaining how Volvo impacts our results. We completed our sales of our Volvo to Geely on August 2, and our 2010 results through the sale date were reported as special items and excluded from our wholesale's revenue and operating results. 2009 results on the other hand include Volvo.

As shown at the top of the slide, third quarter vehicle wholesales were 1.3 million units, up 15,000 units. The increase was explained primarily by higher wholesales in North America and Asia Pacific, Africa offset partially by the exclusion of Volvo from 2010 and lower wholesales in Europe. Excluding Volvo from 2009, the wholesale increase was 91,000 units.

Our third quarter revenue was $29 billion, a $1.3 billion decrease. The change in revenue primarily reflects higher volumes and favorable net pricing more than offset by the exclusion of Volvo from 2010, lower Ford Credit receivables and unfavorable currency exchange. Excluding Volvo from 2009, revenue increased by $1.7 billion.

Our third quarter pretax operating profit excluding special items was $2.1 billion or $0.48 per share, a $1.1 billion improvement. Automotive results improved by $953 million and Financial Services results improved by $100 million.

Our third quarter net income attributable to Ford including unfavorable pretax special items of $168 million was $1.7 billion, $0.43 per share which was a $690 million improvement. For the first nine months, pretax operating profit excluding special items, was $7 billion, an $8.6 million improvement and net income attributable Ford to was $6.4 billion which was a $4.5 million improvement. We ended the quarter with $23.8 billion of Automotive gross cash.

Let's turn to Slide 2 where we're going to go through our third quarter special items. They were an unfavorable pretax amount of $168 million. Within this, we recorded $33 million of personnel and duty related charges. And as we previously mentioned relative to the sale of Volvo which took place on August 2, we recognized $102 million of charges which reflected primarily pretax operating results through the sale date, loss on sale and other related charges offset partially by cessation of depreciation.

Lastly, we recognized $33 million of foreign currency translation charges related to non-core foreign subsidiary liquidations.

On Slide 3, we show our Automotive gross cash and operating related cash flow. We ended the quarter, as I mentioned previously, with $23.8 billion in Automotive gross cash which was up $1.9 billion from the second quarter of 2010. Our operating related cash flow was $900 million positive in the quarter reflecting an Automotive pretax operating profit of $1.3 billion; capital spending during the quarter of $900 million which was equal to depreciation and amortization; other timing differences of $200 million unfavorable and payment of $200 million to Ford Credit reflecting up front payment of sub-pension.

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