UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the quarterly period ended March 31, 2007
   
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the transition period from ____________ to ____________
   
 
Commission File Number: 1-3950
 
FORD MOTOR COMPANY
(Exact name of registrant as specified in its charter)


 
1-3950
  
38-0549190
  
 
(Commission File Number)
  
(IRS Employer Identification No.)
  

 
One American Road, Dearborn, Michigan
  
48126
  
 
(Address of principal executive offices)
  
(Zip Code)
  
 
(313) 322-3000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days
x Yes                    o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 
x Yes                  o No

As of May 1, 2007, the registrant had outstanding 1,809,295,575 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit index located on page number 39.
 
 
PART I. FINANCIAL INFORMATION

ITEM 1.
Financial Statements.
 
FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME
For the Periods Ended March 31, 2007 and 2006
(in millions, except per share amounts)


   
First Quarter
  
   
2007
  
2006
  
   
(unaudited)
  
Sales and revenues
          
Automotive sales
  
$
38,630
  
$
36,961
  
Financial Services revenues
    
4,389
    
3,828
  
Total sales and revenues
    
43,019
    
40,789
  
               
Costs and expenses
              
Automotive cost of sales
    
34,715
    
36,655
  
Selling, administrative and other expenses
    
5,972
    
4,594
  
Interest expense
    
2,718
    
2,135
  
Financial Services provision for credit and insurance losses
    
59
    
46
  
Total costs and expenses
    
43,464
    
43,430
  
               
Automotive interest income and other non-operating income/(expense), net
    
329
    
214
  
Automotive equity in net income/(loss) of affiliated companies
    
72
    
79
  
Income/(loss) before income taxes
    
(44
)
  
(2,348
)
Provision for/(benefit from) income taxes
    
182
    
(982
)
Income/(loss) before minority interests
    
(226
)
  
(1,366
)
Minority interests in net income/(loss) of subsidiaries
    
58
    
59
  
Income/(loss) from continuing operations
    
(284
)
  
(1,425
)
Income/(loss) from discontinued operations (Note 7)
    
2
    
2
  
Net income/(loss)
  
$
(282
)
$
(1,423
)
               
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK (Note 8)
              
Basic income/(loss)
              
Income/(loss) from continuing operations
  
$
(0.15
)
$
(0.76
)
Income/(loss) from discontinued operations
    
—
    
—
  
Net income/(loss)
  
$
(0.15
)
$
(0.76
)
Diluted income/(loss)
              
Income/(loss) from continuing operations
  
$
(0.15
)
$
(0.76
)
Income/(loss) from discontinued operations
    
—
    
—
  
Net income/(loss)
  
$
(0.15
)
$
(0.76
)
               
Cash dividends
  
$
—
  
$
0.10
  

The accompanying notes are part of the financial statements

2
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

SECTOR STATEMENT OF INCOME
For the Periods Ended March 31, 2007 and 2006
(in millions, except per share amounts)

   
First Quarter
  
   
2007
  
2006
  
   
(unaudited)
  
AUTOMOTIVE
          
Sales
  
$
38,630
  
$
36,961
  
Costs and expenses
              
Cost of sales
    
34,715
    
36,655
  
Selling, administrative and other expenses
    
4,074
    
2,976
  
Total costs and expenses
    
38,789
    
39,631
  
Operating income/(loss)
    
(159
)
  
(2,670
)
               
Interest expense
    
580
    
346
  
               
Interest income and other non-operating income/(expense), net
    
329
    
214
  
Equity in net income/(loss) of affiliated companies
    
72
    
79
  
Income/(loss) before income taxes — Automotive
    
(338
)
  
(2,723
)
               
FINANCIAL SERVICES
              
Revenues
    
4,389
    
3,828
  
Costs and expenses
              
Interest expense
    
2,138
    
1,789
  
Depreciation
    
1,500
    
1,208
  
Operating and other expenses
    
398
    
410
  
Provision for credit and insurance losses
    
59
    
46
  
Total costs and expenses
    
4,095
    
3,453
  
Income/(loss) before income taxes — Financial Services
    
294
    
375
  
               
TOTAL COMPANY
              
Income/(loss) before income taxes
    
(44
)
  
(2,348
)
Provision for/(benefit from) income taxes
    
182
    
(982
)
Income/(loss) before minority interests
    
(226
)
  
(1,366
)
Minority interests in net income/(loss) of subsidiaries
    
58
    
59
  
Income/(loss) from continuing operations
    
(284
)
  
(1,425
)
Income/(loss) from discontinued operations (Note 7)
    
2
    
2
  
Net income/(loss)
  
$
(282
)
$
(1,423
)
               
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK (Note 8)
              
Basic income/(loss)
              
Income/(loss) from continuing operations
  
$
(0.15
)
$
(0.76
)
Income/(loss) from discontinued operations
    
—
    
—
  
Net income/(loss)
  
$
(0.15
)
$
(0.76
)
Diluted income/(loss)
              
Income/(loss) from continuing operations
  
$
(0.15
)
$
(0.76
)
Income/(loss) from discontinued operations
    
—
    
—
  
Net income/(loss)
  
$
(0.15
)
$
(0.76
)
               
Cash dividends
  
$
—
  
$
0.10
  

The accompanying notes are part of the financial statements
 
3
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(in millions)

 
 
  
March 31,
2007
  
December 31,
2006
  
   
(unaudited)
      
ASSETS
          
Cash and cash equivalents
  
$
26,867
  
$
28,896
  
Marketable securities
    
22,485
    
21,472
  
Loaned securities
    
668
    
5,256
  
Finance receivables, net
    
106,048
    
106,863
  
Other receivables, net
    
10,727
    
7,682
  
Net investment in operating leases
    
30,404
    
29,834
  
Retained interest in sold receivables
    
936
    
990
  
Inventories (Note 2)
    
12,525
    
11,482
  
Equity in net assets of affiliated companies
    
2,817
    
2,787
  
Net property
    
37,638
    
38,238
  
Deferred income taxes
    
3,942
    
4,920
  
Goodwill and other net intangible assets (Note 3)
    
6,308
    
6,821
  
Assets of discontinued/held-for-sale operations (Note 7)
    
1,107
    
616
  
Other assets
    
9,738
    
12,697
  
Total assets
  
$
272,210
  
$
278,554
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Payables
  
$
24,480
  
$
23,427
  
Accrued liabilities and deferred revenue
    
79,618
    
82,394
  
Debt
    
167,179
    
172,049
  
Deferred income taxes
    
3,261
    
2,743
  
Liabilities of discontinued/held-for-sale operations (Note 7)
    
249
    
247
  
Total liabilities
    
274,787
    
280,860
  
               
Minority interests
    
1,133
    
1,159
  
               
Stockholders’ equity
              
Capital stock
              
Common Stock, par value $0.01 per share (1,840 million shares issued)
    
18
    
18
  
Class B Stock, par value $0.01 per share (71 million shares issued)
    
1
    
1
  
Capital in excess of par value of stock
    
4,596
    
4,562
  
Accumulated other comprehensive income/(loss)
    
(9,106
)
  
(7,846
)
Treasury stock
    
(175
)
  
(183
)
Retained earnings/(Accumulated deficit)
    
956
    
(17
)
Total stockholders’ equity
    
(3,710
)
  
(3,465
)
Total liabilities and stockholders’ equity
  
$
272,210
  
$
278,554
  

The accompanying notes are part of the financial statements
 
4
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

SECTOR BALANCE SHEET
(in millions)
 
   
March 31,
2007
  
December 31,
2006
  
   
(unaudited)
      
ASSETS
          
Automotive
          
Cash and cash equivalents
$
15,692
  
$
16,022
  
Marketable securities
  
16,807
    
11,310
  
Loaned securities
  
668
    
5,256
  
Total cash, marketable and loaned securities
  
33,167
    
32,588
  
Receivables, net
  
5,634
    
3,778
  
Inventories (Note 2)
  
12,525
    
11,482
  
Deferred income taxes
  
388
    
1,569
  
Other current assets
  
6,031
    
7,708
  
Current receivable from Financial Services
  
870
    
—
  
Total current assets
  
58,615
    
57,125
  
Equity in net assets of affiliated companies
  
2,086
    
2,029
  
Net property
  
37,379
    
37,969
  
Deferred income taxes
  
12,680
    
14,850
  
Goodwill and other net intangible assets (Note 3)
  
6,291
    
6,804
  
Assets of discontinued/held-for-sale operations (Note 7)  
1,107 
    
616 
  
Other assets
  
2,362
    
3,241
  
Total Automotive assets
  
120,520
    
122,634
  
Financial Services
            
Cash and cash equivalents
  
11,175
    
12,874
  
Marketable securities
  
5,678
    
10,162
  
Finance receivables, net
  
111,141
    
110,767
  
Net investment in operating leases
  
27,176
    
26,606
  
Retained interest in sold receivables
  
936
    
990
  
Goodwill and other net intangible assets (Note 3)
  
17
    
17
  
Other assets
  
5,718
    
6,167
  
Receivable from Automotive
  
—
    
1,467
  
Total Financial Services assets
  
161,841
    
169,050
  
Intersector elimination
  
(870
)
  
(1,467
)
Total assets
$
281,491
  
$
290,217
  
             
LIABILITIES AND STOCKHOLDERS’ EQUITY
            
Automotive
            
Trade payables
$
18,932
  
$
16,947
  
Other payables
  
3,957
    
4,893
  
Accrued liabilities and deferred revenue
  
27,587
    
28,877
  
Deferred income taxes
  
3,676
    
3,138
  
Debt payable within one year
  
1,536
    
1,499
  
Current payable to Financial Services
  
—
    
640
  
Total current liabilities
  
55,688
    
55,994
  
Long-term debt
  
28,370
    
28,514
  
Other liabilities
  
47,530
    
49,392
  
Deferred income taxes
  
1,054
    
441
  
Liabilities of discontinued/held-for-sale operations (Note 7)
  
249
    
247
  
Non-current payable to Financial Services
  
830
    
827
  
Total Automotive liabilities
  
133,721
    
135,415
  
Financial Services
            
Payables
  
1,591
    
1,587
  
Debt
  
137,273
    
142,036
  
Deferred income taxes
  
7,812
    
10,827
  
Other liabilities and deferred income
  
4,501
    
4,125
  
Payable to Automotive
  
40
    
—
  
Total Financial Services liabilities
  
151,217
    
158,575
  
             
Minority interests
  
1,133
    
1,159
  
             
Stockholders’ equity
            
Capital stock
            
Common Stock, par value $0.01 per share (1,840 million shares issued)
  
18
    
18
  
Class B Stock, par value $0.01 per share (71 million shares issued)
  
1
    
1
  
Capital in excess of par value of stock
  
4,596
    
4,562
  
Accumulated other comprehensive income/(loss)
  
(9,106
)
  
(7,846
)
Treasury stock
  
(175
)
  
(183
)
Retained earnings/(Accumulated deficit)
  
956
    
(17
)
Total stockholders’ equity
  
(3,710
)
  
(3,465
)
Intersector elimination
  
(870
)
  
(1,467
)
Total liabilities and stockholders’ equity
$
281,491
  
$
290,217
  
 
The accompanying notes are part of the financial statements 

5
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Periods Ended March 31, 2007 and 2006
(in millions)

   
First Quarter
  
 
  
2007
  
2006
  
   
(unaudited)
  
       
Cash flows from operating activities of continuing operations
      
Net cash (used in)/provided by operating activities
  
$
979
  
$
(17
)
               
Cash flows from investing activities of continuing operations
              
Capital expenditures
    
(1,296
)
  
(1,838
)
Acquisitions of retail and other finance receivables and operating leases
    
(12,813
)
  
(13,732
)
Collections of retail and other finance receivables and operating leases
    
11,061
    
11,446
  
Purchases of securities
    
(2,229
)
  
(6,735
)
Sales and maturities of securities
    
6,768
    
4,501
  
Proceeds from sales of retail and other finance receivables and operating leases
    
697
    
2,540
  
Proceeds from sale of businesses
    
35
    
50
  
Cash paid for acquisitions
    
(2
)
  
—
  
Transfer of cash balances upon disposition of discontinued/held-for-sale operations
    
—
    
(4
)
Other
    
257
    
(36
)
Net cash (used in)/provided by investing activities
    
2,478
    
(3,808
)
               
Cash flows from financing activities of continuing operations
              
Cash dividends
    
—
    
(186
)
Sales of Common Stock
    
27
    
153
  
Purchases of Common Stock
    
(31
)
  
(111
)
Changes in short-term debt
    
259
    
1,015
  
Proceeds from issuance of other debt
    
4,270
    
10,007
  
Principal payments on other debt
    
(9,861
)
  
(14,446
)
Other
    
(51
)
  
126
  
Net cash (used in)/provided by financing activities
    
(5,387
)
  
(3,442
)
               
Effect of exchange rate changes on cash
    
(91
)
  
49
  
               
Net increase/(decrease) in cash and cash equivalents from continuing operations
    
(2,021
)
  
(7,218
)
               
Cash flows from discontinued operations
              
Cash flows from operating activities of discontinued operations
    
5
    
(13
)
Cash flows from investing activities of discontinued operations
    
—
    
—
  
Cash flows from financing activities of discontinued operations
    
—
    
—
  
               
Net increase/(decrease) in cash and cash equivalents
  
$
(2,016
)
$
(7,231
)
               
Cash and cash equivalents at January 1
  
$
28,896
  
$
28,393
  
Cash and cash equivalents of discontinued/held-for-sale operations at January 1
    
(2
)
  
17
  
Net increase/(decrease) in cash and cash equivalents
    
(2,016
)
  
(7,231
)
Less: cash and cash equivalents of discontinued/held-for-sale operations at March 31
    
(11
)
  
—
  
Cash and cash equivalents at March 31
  
$
26,867
  
$
21,179
  

The accompanying notes are part of the financial statements
 
6
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONDENSED SECTOR STATEMENT OF CASH FLOWS
For the Periods Ended March 31, 2007 and 2006
(in millions)

   
First Quarter 2007
  
First Quarter 2006
  
 
 
  
 
Automotive
  
Financial
Services
  
 
Automotive
  
Financial
Services
  
   
(unaudited)
  
(unaudited)
  
Cash flows from operating activities of continuing operations
                  
Net cash (used in)/provided by operating activities
  
$
1,466
  
$
619
  
$
(645
)
$
1,212
  
                           
Cash flows from investing activities
                          
Capital expenditures
    
(1,286
)
  
(10
)
  
(1,820
)
  
(18
)
Acquisitions of retail and other finance receivables and operating leases
    
—
    
(12,813
)
  
—
    
(13,732
)
Collections of retail and other finance receivables and operating leases
    
—
    
11,076
    
—
    
11,276
  
Net (increase)/decrease of wholesale receivables
    
—
    
(1,121
)
  
—
    
(414
)
Purchases of securities
    
(480
)
  
(1,749
)
  
(1,739
)
  
(4,996
)
Sales and maturities of securities
    
463
    
6,305
    
1,271
    
3,230
  
Proceeds from sales of retail and other finance receivables and operating leases
    
—
    
697
    
—
    
2,540
  
Proceeds from sale of businesses
    
35
    
—
    
50
    
—
  
Cash paid for acquisitions
    
(2
)
  
—
    
—
    
—
  
Transfer of cash balances upon disposition of discontinued/held-for-sale operations
    
—
    
—
    
(4
)
  
—
  
Investing activity from Financial Services
    
—
    
—
    
196
    
—
  
Investing activity to Financial Services
    
(4
)
  
—
    
(12
)
  
—
  
Other
    
177
    
80
    
28
    
(64
)
Net cash (used in)/provided by investing activities
    
(1,097
)
  
2,465
    
(2,030
)
  
(2,178
)
                           
Cash flows from financing activities
                          
Cash dividends
    
—
    
—
    
(186
)
  
—
  
Sales of Common Stock
    
27
    
—
    
153
    
—
  
Purchases of Common Stock
    
(31
)
  
—
    
(111
)
  
—
  
Changes in short-term debt
    
(118
)
  
377
    
86
    
929
  
Proceeds from issuance of other debt
    
102
    
4,168
    
91
    
9,916
  
Principal payments on other debt
    
(150
)
  
(9,711
)
  
(271
)
  
(14,175
)
Financing activity from Automotive
    
—
    
4
    
—
    
12
  
Financing activity to Automotive
    
—
    
—
    
—
    
(196
)
Other
    
(17
)
  
(34
)
  
131
    
(5
)
Net cash (used in)/provided by financing activities
    
(187
)
  
(5,196
)
  
(107
)
  
(3,519
)
                           
Effect of exchange rate changes on cash
    
15
    
(106
)
  
(23
)
  
72
  
Net change in intersector receivables/payables and other liabilities
    
(519
)
  
519
    
(470
)
  
470
  
Net increase/(decrease) in cash and cash equivalents from continuing operations
    
(322
)
  
(1,699
)
  
(3,275
)
  
(3,943
)
                           
Cash flows from discontinued operations
                          
Cash flows from operating activities of discontinued operations
    
5
    
—
    
(13
)
  
—
  
Cash flows from investing activities of discontinued operations
    
—
    
—
    
—
    
—
  
Cash flows from financing activities of discontinued operations
    
—
    
—
    
—
    
—
  
                           
Net increase/(decrease) in cash and cash equivalents
  
$
(317
)
$
(1,699
)
$
(3,288
)
$
(3,943
)
                           
Cash and cash equivalents at January 1
  
$
16,022
  
$
12,874
  
$
13,375
  
$
15,018
  
Cash and cash equivalents of discontinued/held-for-sale operations at January 1
    
(2
)
  
—
    
17
    
—
  
Net increase/(decrease) in cash and cash equivalents
    
(317
)
  
(1,699
)
  
(3,288
)
  
(3,943
)
Less: cash and cash equivalents of discontinued/held-for-sale operations at March 31
    
(11
)
  
—
    
—
    
—
  
Cash and cash equivalents at March 31
  
$
15,692
  
$
11,175
  
$
10,104
  
$
11,075
  

The accompanying notes are part of the financial statements

7
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.
FINANCIAL STATEMENTS

The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States ("GAAP") for interim financial information, and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, these unaudited financial statements reflect those adjustments necessary for a fair statement of the results of operations and financial condition of Ford Motor Company and its consolidated subsidiaries and consolidated variable interest entities ("VIEs") of which we are the primary beneficiary for the periods and at the dates presented. Results for interim periods should not be considered indicative of results for a full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2006 (the "2006 Form 10-K Report"). For purposes of this report, "Ford," the "Company," "we," "our," "us" or similar references mean Ford Motor Company and our consolidated subsidiaries and our consolidated VIEs of which we are the primary beneficiary, unless the context requires otherwise.
 
NOTE 2.
INVENTORIES

Inventories are summarized as follows (in millions):

 
  
March 31,
2007
  
December 31,
2006
  
Raw materials, work-in-process and supplies
  
$
4,554
  
$
4,559
  
Finished products
    
9,013
    
7,938
  
Total inventories under first-in, first-out method ("FIFO")
    
13,567
    
12,497
  
Less: last-in, first-out method ("LIFO") adjustment
    
(1,042
)
  
(1,015
)
Total inventories
  
$
12,525
  
$
11,482
  

During 2006, inventory quantities were reduced, resulting in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of 2006 purchases, the effect of which decreased Automotive cost of sales by about $4 million.
 
NOTE 3.
GOODWILL AND OTHER INTANGIBLES

Our policy is to perform annual testing of goodwill and certain other intangible assets during the fourth quarter to determine whether any impairment has occurred. Testing is conducted at the reporting unit level.

Changes in the carrying amount of goodwill are as follows (in millions):

   
Goodwill,
December 31, 2006
  
Goodwill Acquired
  
Exchange Translation/Other
  
Goodwill,
March 31, 2007
  
Automotive Sector
                  
Ford North America
  
$
95
  
$
—
  
$
(4
)
$
91
  
Ford Europe
    
35
    
—
    
—
    
35
  
Premier Automotive Group ("PAG")
    
5,580
    
—
    
(496
)
  
5,084
  
Total Automotive Sector
    
5,710
    
—
    
(500
)
  
5,210
  
Financial Services Sector
                          
Ford Credit
    
17
    
—
    
—
    
17
  
Total Financial Services Sector
    
17
    
—
    
—
    
17
  
Total
  
$
5,727
  
$
—
  
$
(500
)
$
5,227
  

Aston Martin Lagonda Group Limited ("Aston Martin") was owned primarily through our wholly-owned subsidiary, Jaguar Cars Limited, and has been a component of our PAG reporting unit. Its operations were integrated with our other PAG reporting entities, sharing, among other things, certain facilities and tooling, intellectual property, in-bound logistics, information technology services, and parts supply.

During the first quarter of 2007, Aston Martin was classified as held-for-sale. Accordingly, we commissioned a third-party valuation to determine an appropriate allocation of goodwill for Aston Martin based on its fair value relative to the overall fair value of PAG. The third-party valuation used discounted cash flow and market methods of determining fair value, which resulted in $434 million of goodwill being allocated to Aston Martin. We deemed the third-party valuations

8
Item 1. Financial Statements (Continued)
 
NOTE 3.
GOODWILL AND OTHER INTANGIBLES (Continued)
 
to be appropriate, and we classified the goodwill allocated to Aston Martin within Assets of discontinued/held-for-sale operations as of March 31, 2007. The goodwill remaining in our PAG reporting unit was tested at March 31, 2007, and no goodwill impairment was necessary.

During the first quarter of 2007, our wholly-owned North American subsidiary, Automobile Protection Corporation ("APCO"), was classified as a discontinued operation. APCO was not an integrated component of our Ford North America reporting unit. Accordingly, the full amount of APCO's goodwill, $112 million, was classified within Assets of discontinued/held-for-sale operations at both March 31, 2007 and December 31, 2006.

In addition to the goodwill presented in the above table, included within Automotive equity in net assets of affiliated companies was goodwill of $246 million at March 31, 2007.

The components of identifiable intangible assets are as follows (in millions):

   
March 31, 2007
  
December 31, 2006
  
   
Gross
Carrying
Amount
  
Less:
Accumulated Amortization
  
Net Intangible
Assets
  
Gross
Carrying
Amount
  
Less:
Accumulated Amortization
  
Net Intangible
Assets
  
Automotive Sector
                          
Tradename
  
$
490
  
$
—
  
$
490
  
$
491
  
$
—
  
$
491
  
Distribution networks
    
367
    
(99
)
  
268
    
372
    
(98
)
  
274
  
Manufacturing and production incentive rights
    
246
    
(4
)
  
242
    
246
    
—
    
246
  
Other
    
238
    
(157
)
  
81
    
240
    
(157
)
  
83
  
Total Automotive Sector
    
1,341
    
(260
)
  
1,081
    
1,349
    
(255
)
  
1,094
  
Total Financial Services Sector
    
4
    
(4
)
  
—
    
4
    
(4
)
  
—
  
Total
  
$
1,345
  
$
(264
)
$
1,081
  
$
1,353
  
$
(259
)
$
1,094
  

Our identifiable intangible assets are comprised of a non-amortizable tradename, distribution networks with a useful life of 40 years, manufacturing and production incentive rights related to an acquisition with a useful life of 4 years, and other intangibles with various amortization periods (primarily patents, customer contracts, technology, and land rights).

Pre-tax amortization expense related to these intangible assets was as follows (in millions):

   
First Quarter
  
   
2007
  
2006
  
Pre-tax amortization expense
  
$
22
  
$
6
  

Intangible asset amortization is forecasted to range from $80 million to $90 million per year for the next four years and $20 million to $30 million thereafter, excluding the impact of foreign currency translation.

NOTE 4.
VARIABLE INTEREST ENTITIES

We consolidate VIEs of which we are the primary beneficiary. The liabilities recognized as a result of consolidating these VIEs do not represent additional claims on our general assets; rather, they represent claims against the specific assets of the consolidated VIEs. Conversely, assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against our general assets. Reflected in our March 31, 2007 and December 31, 2006 balance sheets are consolidated VIE assets of $5.7 billion and $5.6 billion, respectively, for the Automotive sector and $68.8 billion and $69.5 billion, respectively, for the Financial Services sector. Included in Automotive consolidated VIE assets are $565 million and $488 million of cash and cash equivalents at March 31, 2007 and December 31, 2006, respectively. For the Financial Services sector, consolidated VIE assets included $4.4 billion and $3.7 billion in cash and cash equivalents and $64.4 billion and $65.8 billion of receivables and beneficial interests in net investment in operating leases at March 31, 2007 and December 31, 2006, respectively.

We have several investments in other entities determined to be VIEs of which we are not the primary beneficiary. The risks and rewards associated with our interests in these entities are based primarily on ownership percentages. Our maximum exposure was $322 million and $294 million for the Automotive sector and $188 million and $182 million for the Financial Services sector at March 31, 2007 and December 31, 2006, respectively. Any potential losses associated with these VIEs, should they occur, is limited to the value of our invested capital or equity rights and, where applicable, receivables due from the VIEs.

9
Item 1. Financial Statements (Continued)

NOTE 4.
VARIABLE INTEREST ENTITIES (Continued)

Ford Motor Credit Company LLC ("Ford Credit") uses special purpose entities ("SPEs") that are considered VIEs for most of our on-balance sheet securitizations.* Ford Credit also sells finance receivables to bank-sponsored asset-backed commercial paper issuers that are SPEs of the sponsor bank; these SPEs are not consolidated by us. The outstanding balance of finance receivables that have been sold by Ford Credit to the SPEs of the sponsored banks was approximately $5.2 billion at both March 31, 2007 and December 31, 2006.

NOTE 5.
EMPLOYEE SEPARATION ACTIONS

Automotive Sector

General

In 2006, we announced a major business improvement plan for our North American Automotive operations, which we refer to as the Way Forward plan. As part of this plan, we began implementing a number of different employment separation actions during 2006, our accounting for which is dependent on the design of the individual benefit action.

Jobs Bank Benefits Reserve

We expense Jobs Bank Benefits (see Note 17 of the Notes to the Financial Statements in our 2006 Form 10-K Report) expected to be provided to our hourly employees in accordance with our International Union, United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW") and National Automobile, Aerospace, Transportation and General Workers Union of Canada ("CAW") collective bargaining agreements at facilities that will be idled when it becomes probable that the employees will be permanently idled. The following table summarizes the activity in the Jobs Bank Benefits reserve:

   
Reserve (in millions)
  
Number of employees
  
   
First Quarter
2007
  
Full-year
2006
  
First Quarter
2007
  
Full-year
2006
  
Beginning balance
  
$
1,036
  
$
—
    
10,728
    
—
  
Additions to Jobs Bank/transfers from voluntary separation program (i.e., rescissions)
    
84
    
2,583
    
810
    
25,849
  
Voluntary separations and relocations
    
(149
)
  
(1,445
)
  
(2,555
)
  
(15,121
)
Benefit payments and other adjustments
    
(85
)
  
(102
)
  
—
    
—
  
Ending balance
  
$
886
  
$
1,036
    
8,983
    
10,728
  

Separation Actions

The cost of both hourly and salaried voluntary employee separation actions are recorded at the time of the employee's acceptance, unless the acceptance needs explicit approval by the Company. Conditional voluntary separations are accrued when all of the conditions are satisfied. Involuntary separation programs are accrued for when management has approved the program and the affected employees are identified.

UAW Voluntary Separations. During 2006, we offered voluntary separation packages to our entire UAW hourly workforce. The following table summarizes the activity in this separation reserve:

   
Reserve (in millions)
  
Number of employees
  
   
First Quarter
2007
  
Full-year
2006
  
First Quarter
2007
  
Full-year
2006
  
Beginning balance
  
$
2,435
  
$
—
    
26,351
    
—
  
Voluntary acceptances, including transfers from Jobs Bank
    
—
    
3,240
    
—
    
36,623
  
Payments/terminations
    
(1,094
)
  
(788
)
  
(13,208
)
  
(10,084
)
Rescissions
    
(174
)
  
(17
)
  
(1,809
)
  
(188
)
Ending balance
  
$
1,167
  
$
2,435
    
11,334
    
26,351
  

Other Employee Separation Actions. Most salaried reductions within the United States were completed by the end of the first quarter of 2007, and were achieved through early retirements, voluntary separations, and involuntary separations where necessary. These actions resulted in a pre-tax charge of $153 million and $3 million in the first quarter of 2007 and 2006, respectively, in Automotive cost of sales and Selling, administrative and other expenses.
_______
*
Effective May 1, 2007, Ford Motor Credit Company converted its form of organization from a Delaware corporation to a Delaware limited liability company ("LLC") and changed its name to "Ford Motor Credit Company LLC."

10
Item 1. Financial Statements (Continued)

NOTE 5.
EMPLOYEE SEPARATION ACTIONS (Continued)

The following table shows the pre-tax charges of other hourly and salaried employee separation actions for the first quarter of 2007 and 2006 (in millions):


   
First Quarter
  
   
2007
  
2006
  
Ford Canada
 
$
168
  
$
14
  
Ford Europe
   
6
    
28
  
PAG
   
7
    
2
  
Ford Asia Pacific and Africa
   
2
    
—
  

The above charges exclude costs for pension and other postretirement employee benefits ("OPEB"). For further information, see Note 10 for employee separation costs related to pension, postretirement health care and life insurance benefits. For further discussion of the Way Forward plan, see Note 17 of the Notes to the Financial Statements in our 2006 Form 10-K Report.

Financial Services Sector

Employee Separation Actions

In the first quarter of 2007, we recognized pre-tax charges of $43 million in Selling, administrative and other expenses for employee separation actions announced in 2006 in the United States and in the first quarter of 2007 in Canada associated with Ford Credit's North American business transformation initiative (i.e., the consolidation of its North American branches into its seven existing business centers). These charges excluded costs for pension and OPEB. For further information, see Note 10 for employee separation costs related to pension, postretirement health care and life insurance benefits.
 
NOTE 6.
INCOME TAXES

Generally for interim tax reporting, one overall estimated annual effective tax rate is computed for tax jurisdictions not subject to valuation allowance and applied to the year-to-date ordinary income (or loss). However, we manage our operations by multi-jurisdictional business units and thus are unable to reasonably compute one overall effective tax rate. Accordingly, the worldwide tax provision is calculated under Financial Accounting Standards Board ("FASB") Interpretation No. 18, Accounting for Income Taxes in Interim Periods, which provides that tax (or benefit) in each foreign jurisdiction, not subject to valuation allowance, be separately computed as ordinary income (or loss) occurs within the jurisdiction.

In June 2006, FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods, and thus requires increased disclosures.

We adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, we recorded an increase of $1.3 billion to Retained earnings. The favorable impact to Retained earnings is primarily the result of recognizing a receivable of approximately $1.5 billion associated with refund claims and related interest for prior years that meet the "more-likely-than-not" recognition threshold of FIN 48. These prior year refund claims and related interest were not recognized as of December 31, 2006 because they were considered gain contingencies under Statement of Financial Accounting Standards ("SFAS") No. 5, Accounting for Contingencies and could not be recognized until the contingency lapsed. The amount of gross unrecognized tax benefits at January 1, 2007 is $1.7 billion, of which $471 million would affect our effective tax rate, if recognized.

11
Item 1. Financial Statements (Continued)

NOTE 6.
INCOME TAXES (Continued)

Examinations by tax authorities have been completed through 1998 in the United Kingdom, 1999 in Germany, and 2000 in Canada, Sweden, and the United States.

Effective with the adoption of FIN 48, we have elected to recognize accrued interest related to unrecognized tax benefits and tax-related penalties in the Provision for/(benefit from) income taxes on our consolidated statement of income. As of January 1, 2007, we had recorded a liability of about $221 million for the payment of interest.

We anticipate settlement of tax matters related to the acquisition of Land Rover with the U.K. tax authorities within the next twelve months. The final resolution remains uncertain, but could have an unfavorable impact to the financial statements of up to $200 million as a result of an increase to the valuation allowance related to incremental deferred tax assets at the acquisition date.
 
NOTE 7.
DISCONTINUED OPERATIONS, HELD-FOR-SALE OPERATIONS, AND OTHER DISPOSITIONS

Discontinued Operations. On April 2, 2007, we completed the sale of APCO, our wholly-owned subsidiary, to a global private equity fund. This transaction is the result of the ongoing strategic review of our operations. As a result of the transaction, we expect to realize a pre-tax gain of about $50 million in the second quarter of 2007.

The assets and liabilities of APCO classified as a discontinued operation are summarized as follows (in millions):

 
  
March 31,
2007
  
December 31,
2006
  
Assets
          
Cash and cash equivalents
 
$
5
  
$
—
  
Receivables
   
14
    
20
  
Net property
   
8
    
8
  
Goodwill
   
112
    
112
  
Other assets
   
11
    
16
  
Total assets of the discontinued operations
 
$
150
  
$
156
  
               
Liabilities
              
Payables
 
$
2
  
$
16
  
Other liabilities
   
21
    
22
  
Total liabilities of the discontinued operations
 
$
23
  
$
38
  

The results of this discontinued operation are as follows (in millions):

   
First Quarter
  
 
  
2007
  
2006
  
Sales and revenues
 
$
14
  
$
12
  
               
Operating income/(loss) from discontinued operations
 
$
3
  
$
3
  
Gain/(loss) on discontinued operations
   
—
    
—
  
(Provision for)/benefit from income taxes
   
(1
)
  
(1
)
Income/(loss) from discontinued operations
 
$
2
  
$
2
  

Held-for-Sale Operations. On March 31, 2007, Automotive Components Holdings, LLC ("ACH") completed a sale agreement with Cooper-Standard Automotive Inc. for its El Jarudo Plant (which produces fuel rails, fuel charging assemblies, and spring lock connectors); as a result of the sale, we recognized a de minimis pre-tax loss in the first quarter of 2007.

In March 2007, management committed to sell Aston Martin, a wholly-owned subsidiary, in order to restructure our core Automotive operations and build liquidity. On March 12, 2007, we announced that we had entered into a definitive agreement with an investor group pursuant to which we have agreed to sell Aston Martin and other specific assets. Under the terms of the transaction, which is expected to close during the second quarter of 2007, we will receive a combination of cash and preferred stock in the new entity. Accordingly, we have reported Aston Martin as held-for-sale and have ceased depreciating its long-lived assets.
 
12
Item 1. Financial Statements (Continued)

NOTE 7.
DISCONTINUED OPERATIONS, HELD-FOR-SALE OPERATIONS, AND OTHER DISPOSITIONS (Continued)

The assets and liabilities of Aston Martin classified as a held-for-sale operation are summarized as follows (in millions):

   
March 31, 2007
  
December 31, 2006
  
Assets
          
Cash and cash equivalents
 
$
6
  
$
(2
)
Receivables
   
102
    
80
  
Inventories
   
110
    
93
  
Net property
   
261
    
251
  
Goodwill and other net intangible assets*
   
437
    
4
  
Other assets
   
41
    
22
  
Total assets of the held-for-sale operations
 
$
957
  
$
448
  
               
Liabilities
              
Payables
 
$
107
  
$
106
  
Other liabilities
   
119
    
102
  
Total liabilities of the held-for-sale operations
 
$
226
  
$
208
  
__________
* For further discussion of goodwill allocated to Aston Martin, see Note 3.

Other Dispositions. In support of the acceleration of our Way Forward plan announced on September 15, 2006, ACH entered into non-binding agreements for the sale of five of its businesses. The following table lists the businesses with their corresponding products and the quarter in which the agreement was entered into:

Fourth Quarter 2006
  
Sheldon Road plant
Produces heating, ventilating and cooling assemblies; heat exchangers; and manual control panel components
Milan plant
Produces fuel tanks and bumper fascias
   
First Quarter 2007
  
Monroe plant
Produces catalytic converters, driveshafts, and springs (driveshaft business only included in agreement - not the plant itself)
   
April 2007
  
Nashvillle, Tulsa, and VidrioCar (Mexico) plants
Produces automotive and architectural glass products
Converca I (Mexico) plant
Produces transmission parts

The sale of the U.S. businesses is conditional on a successful negotiation of labor terms with the UAW. Therefore, the sale of these facilities has not yet reached the level of probability required to be classified on our balance sheet as held-for-sale.
 
13
Item 1. Financial Statements (Continued)

NOTE 8.
AMOUNTS PER SHARE OF COMMON AND CLASS B STOCK

The calculation of diluted income per share of Common and Class B Stock takes into account the effect of common stock equivalents, such as stock options and convertible securities, considered to be potentially dilutive. Basic and diluted income/(loss) per share were calculated using the following (in millions):

   
First Quarter
  
   
2007
  
2006
  
Basic and Diluted Income/(Loss)
          
Basic income/(loss) from continuing operations
  
$
(284
)
$
(1,425
)
Effect of dilutive senior convertible notes (a)
    
—
    
—
  
Effect of dilutive convertible preferred securities (b)
    
—
    
—
  
Diluted income/(loss) from continuing operations
  
$
(284
)
$
(1,425
)
               
Basic and Diluted Shares
              
Average shares outstanding
    
1,894
    
1,865
  
Restricted and uncommitted-ESOP shares
    
(2
)
  
(2
)
Basic shares
    
1,892
    
1,863
  
Net dilutive options and restricted and uncommitted-ESOP shares (c)
    
—
    
—
  
Dilutive senior convertible notes (a)
    
—
    
—
  
Dilutive convertible preferred securities (b)
    
—
    
—
  
Diluted shares
    
1,892
    
1,863
  
__________
Not included in calculation of diluted earnings per share due to their antidilutive effect:
(a)
538 million shares and the related income effect for senior convertible notes.
(b)
282 million shares and the related income effect for convertible preferred securities.
(c)
9 million and 8 million contingently-issuable shares for first quarter 2007 and 2006, respectively.

14
Item 1. Financial Statements (Continued)

NOTE 9.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Our operations are exposed to global market risks, including the effect of changes in foreign currency exchange rates, certain commodity prices and interest rates. We enter into various derivatives, including interest rate, foreign currency and commodity forwards, options and swaps to manage the financial and operational exposure arising from these risks. We have elected to apply hedge accounting to certain of these derivative financial instruments. Refer to Note 22 of the Notes to the Financial Statements in our 2006 Form 10-K Report for a more detailed description of our derivative financial instruments and hedge accounting designations.

Income Statement Effect of Derivative Instruments

The following table summarizes the estimated pre-tax gains/(losses) for each type of hedge designation for the Automotive and Financial Services sectors (in millions):
 
 
  
First Quarter 
      
 
  
2007
  
2006
  
Income Statement Classification
  
Automotive Sector
                    
Cash flow hedges:
                    
Ineffectiveness and impact of discontinued hedges
 
$
10
  
$
1
    
Automotive cost of sales
  
Net investment hedges:
                    
Ineffectiveness
   
(1
)
  
15
    
Automotive cost of sales
  
Derivatives not designated as hedging instruments:
                    
Commodities
   
32
    
180
    
Automotive cost of sales
  
Foreign currency forward contracts (a)
   
8
    
—
    
Automotive cost of sales
  
Other
   
(54
 )   1    
Automotive cost of sales/ Automotive interest income and other non-operating income/(expense), net
  
                     
Financial Services Sector
                    
Fair value hedges:
                    
Ineffectiveness
 
$
—
  
$
8
    
Financial Services  revenues
  
Net interest settlements and accruals excluded from the assessment of hedge effectiveness
    
—
     8    
Interest expense
  
Foreign exchange revaluation adjustments excluded from the assessment of hedge effectiveness (a) (b)
    
—
     24    
Financial Services revenues
  
Derivatives not designated as hedging instruments:
                    
Interest rate swaps
   
30
    
(258
)
  
Financial Services revenues
  
Foreign currency swaps and forward contracts (a)
   
(7
)
  
74
    
Financial Services revenues
  
Other
   
—
    
—
    
Financial Services revenues
  
__________
 
(a)
These gains/(losses) were related to foreign currency derivatives and were substantially offset by net revaluation impacts on foreign denominated debt, which were recorded to the same income statement line item as the hedge gains/(losses).
 
(b)
Amount represents the portion of the derivative's fair value attributable to the change in foreign currency exchange rates.
 
15
Item 1. Financial Statements (Continued)

NOTE 9.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Instruments

The fair value of derivatives reflects the price that a third party would be willing to pay or receive in arm's length transactions and includes mark-to-market adjustments to reflect the effects of changes in the related index. The following table summarizes the estimated fair value of our derivative financial instruments (in millions):

   
March 31, 2007
  
December 31, 2006
  
   
Fair Value
Assets
  
Fair Value
Liabilities
  
Fair Value
Assets
  
Fair Value
Liabilities
  
Automotive Sector
                  
Cash flow hedges
  
$
1,184
  
$
588
  
$
1,736
  
$
860
  
Net investment hedges
    
—
    
—
    
6
    
—
  
Derivatives not designated as hedging instruments
    
981
    
197
    
977
    
256
  
Total derivative financial instruments
  
$
2,165
  
$
785
  
$
2,719
  
$
1,116
  
Financial Services Sector
                          
Fair value hedges
  
$
—
  
$
—
  
$
111
  
$
1
  
Derivatives not designated as hedging instruments
    
2,368
    
829
    
2,334
    
891
  
Impact of netting agreements
    
(547
)
  
(547
)
  
(641
)
  
(641
)
Total derivative financial instruments
  
$
1,821
  
$
282
  
$
1,804
  
$
251
  
 
NOTE 10.
RETIREMENT BENEFITS  

Pension, postretirement health care and life insurance benefit expense is summarized as follows (in millions):

   
First Quarter
  
   
Pension Benefits
  
Health Care and
  
   
U.S. Plans
  
Non-U.S. Plans
  
Life Insurance
  
   
2007
  
2006
  
2007
  
2006
  
2007
  
2006
  
Service cost
  
$
121
  
$
178
  
$
160
  
$
171
  
$
94
  
$
179
  
Interest cost
    
647
    
594
    
395
    
337
    
446
    
547
  
Expected return on assets
    
(870
)
  
(835
)
  
(463
)
  
(399
)
  
(67
)
  
(129
)
Amortization of:
                                      
Prior service costs/(credits)
    
68
    
118
    
26
    
30
    
(268
)
  
(160
)
(Gains)/losses and other
    
13
    
24
    
111
    
131
    
190
    
229
  
Separation programs
    
832
    
15
    
77
    
16
    
22
    
—
  
(Gain)/loss from curtailment
    
176
    
414
    
(14
)
  
—
    
(960
)
  
—
  
Costs allocated to Visteon
    
—
    
—
    
—
    
—
    
1
    
1
  
Net expense/(income)
  
$
987
  
$
508
  
$
292
  
$
286
  
$
(542
)
$
667
  

In the first quarter of 2007, we recorded a $176 million curtailment loss for the U.S. salaried pension plan (a $189 million loss for the Automotive sector offset by a $13 million gain for the Financial Services sector), a $14 million curtailment adjustment for the Canadian hourly pension plan, and a $960 million curtailment gain for the U.S. hourly retiree health care plan. These amounts are associated with employee separations related to the Way Forward plan, and are recorded in Automotive cost of sales and Selling, administrative and other expenses.

The weighted average discount rate assumption used at March 31, 2007 to determine the U.S. pension obligation was 5.86%. The weighted average discount rate assumption used at March 31, 2007 to determine the U.S. OPEB obligation was 5.98%. The weighted average initial health care cost trend rate was 6% for the 2007 calendar year.

Plan Contributions and Drawdowns

Our policy for funded plans is to contribute annually, at a minimum, amounts required by applicable laws, regulations, and union agreements. From time to time, we make contributions beyond those legally required.

Pension. In the first quarter of 2007, we contributed about $1 billion to our worldwide pension plans, including benefit payments paid directly by the Company for unfunded plans. We expect to contribute from Automotive cash and cash equivalents an additional $1.2 billion in 2007, for a total of $2.2 billion this year. 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.

Health Care and Life Insurance. During 2007, we expect to withdraw $900 million from our Voluntary Employee Beneficiary Association trust ("VEBA") as reimbursement for U.S. hourly retiree benefit payments.

16
Item 1. Financial Statements (Continued)

NOTE 11.
SEGMENT INFORMATION

(In millions)
                                      
   
Automotive Sector
  
   
Ford North America
  
Ford South America
  
 
Total
Americas
  
 
Ford Europe
  
 
 
PAG
  
Total Ford Europe & PAG
  
Ford Asia Pacific & Africa/Mazda
  
 
 
Other
  
 
 
Total
  
FIRST QUARTER 2007
                                      
Sales/Revenues
                                      
External customer
  
$
18,223
  
$
1,283
  
$
19,506
  
$
8,632