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Assignment Instructions For Students: Within The 10-K Report
Assignment Instructions For Students: Within The 10-K Report
Module 4 Activity
U.S. Securities Exchange Commission (SEC) Form 10-K Report
It appears that Ford has drastically reduced its debt and pension obligations in recent years, enabling the
company to attain investment-grade ratings from credit rating agencies. Ford's automotive debt has
declined to $13.8 billion at the end of 2014, and it will decline to $10 billion by 2018. Also, Ford's pension
plan was underfunded by a staggering $18.7 billion at the end of 2014, but was halved to $9 billion at the
end of 2016.
The company's continuing operations are more profitable than those of many other companies in its
industry, resulting in an Operating Margin that is above its industry average.
It's becoming increasingly important for automakers to have a successful global luxury brand to help
increase average transaction prices and profit margins. Ford's luxury Lincoln brand has struggled for
years, and a full turnaround is probably a decade away. Lincoln sales have been cut roughly in half, from
around 190,000 units in the U.S. in 2000 to fewer than 90,000 units annually over the last five years.
Overseas, Ford, much like many automakers, is having a rough time in Europe and South America. Ford
lost a total of $4.3 billion in Europe operations. Management expects to lose less in Europe this year than
in 2014, and to break even in 2016. Meanwhile, South America went from a $33 million loss in 2013 to a
whopping $1.1 billion loss last year. Both regions will continue to drag on earnings in the near term.
Ford is subject to threats that affect all automakers, including a decline in industry sales volume in the
event of a recession, potential market shift from more profitable vehicles to smaller and cheaper vehicles,
and increased price competition which reduces profitability.