Ford Posts Record Second Quarter Operating Earnings of $2.5 Billion; 13^th Consecutive Quarter of Operating Improvement

DEARBORN, Mich., - Ford Motor Company [NYSE: F] earned $2,338 million in the second quarter of 1999, or $1.89 per diluted share of common and Class B stock. These earnings include the results of Volvo Car, which was acquired on March 31, and a one-time profit reduction of $146 million, or $0.11 per share, related to the acquisition. Under U.S. accounting rules, Ford was required to write-up the value of inventory acquired to fair value, resulting in a one-time increase in cost of sales in the second quarter of 1999.

On an operating basis, a measure that excludes the Volvo Car inventory-related profit reduction, Ford's second quarter earnings were a record $2,484 million. Earnings in the second quarter of 1998 were $2,381 million. On a per-share basis, second quarter 1999 operating earnings were $2.00 per share, up nine cents, or 5 percent, from last year's second quarter. Ford now has posted improved operating results for 13 consecutive quarters.

"Throughout its history, Ford Motor Company has been constantly evolving to improve its competitive position, deliver consistent financial results and provide better value to consumers," said President and CEO Jac Nasser. "Our strong earnings momentum over the last 13 quarters is the result of our intense drive to improve quality, lower costs and become more nimble. Progress in these areas has given us the confidence to pursue our 21^st century vision of becoming the world's leading consumer company for automotive products and services. What this means, in practice, is that Ford wants to become the 'and' company - one that delivers the highest quality products AND the best customer satisfaction AND the best shareholder returns."

During the second quarter, Ford announced several major consumer-focused initiatives, including:

• In Europe, Ford will introduce low emissions powertrains five years ahead of regulatory requirements. These powertrains, initially available in the Ford Ka and Ford Fiesta in early 2000, will be at least 50 percent cleaner than what next year's European Union standard requires.
• All pickup trucks in the U.S. and Canada will be Low Emission Vehicles beginning with the 2000-model year Ford F-Series and 2001 Ford Ranger. This action will bring a significant number of Ford trucks into compliance with an initial U.S. Environmental Protection Agency standard proposed for the 2004 model year.

"Ford has moved ahead of the industry to bring clean air technologies to high-volume production quickly and cost effectively to make real contributions to environmental quality. It's simply the right thing to do," Nasser said.

AUTOMOTIVE OPERATIONS

Worldwide net income from automotive operations was $1,931 million in the second quarter of 1999, down $120 million from the second quarter of 1998. Excluding the one-time $146 million profit-reduction related to the Volvo Car acquisition, worldwide automotive earnings were a record $2,077 million, up $26 million.

Worldwide automotive revenues increased 15 percent from the second quarter of 1998 to a record $35.9 billion, and after-tax return on sales (ROS) was 5.4 percent, down 1.2 points. Automotive cash was a record $24 billion at the end of the second quarter, up from $22.3 billion in the same period a year ago. Net cash was $12.6 billion, down from $14.1 billion a year ago because of acquisition spending.

In the first half of 1999, earnings from automotive operations increased 9 percent to $3,582 million. The Volvo Car inventory-related profit reduction was more than offset by a $165 million first quarter gain on the sale of AutoEuropa. In the first half of 1998, automotive operations earned $3,286 million. Worldwide automotive revenues in the first half of 1999 were a record $67.9 billion, up 12 percent compared with the first half of 1998, and ROS was 5.3 percent, down two-tenths of a point.

Total automotive costs declined $300 million at constant volume and mix in the second quarter of 1999, compared with the same period a year ago. Year-to-date, costs are down $400 million. The company's full-year milestone is to reduce total costs by $1 billion compared with 1998.

North America: Automotive earnings in North America in the second quarter of 1999 were a record $1,969 million, up $314 million from a year ago. ROS was 7.7 percent, up four-tenths of a point.

For the first half of 1999, earnings in North America were a record $3,557 million and ROS was 7.1 percent. The full-year milestone for 1999 is to achieve a ROS greater than 5 percent. In the first half of 1998, earnings in North America were $2,665 million and ROS was 6.2 percent. Vehicle sales in the U.S. in the first half of 1999 set a new all-time industry record, with the annual selling rate reaching 17.1 million units. Ford expects full-year sales to exceed the record of 16.3 million units set in 1986.

"There are so many positive factors at work in the U.S. economy right now. We're confident vehicle sales will remain strong through the balance of 1999 and into the year 2000," Nasser said. "If slightly higher short-term interest rates help to prolong the economic expansion, that's great news for consumers and our shareholders."

Among the other drivers of Ford's North American results is exceptional productivity. In the 1999 Harbour Report, a widely-recognized analysis of manufacturing productivity in the North American automotive industry, Ford plants ranked first in nine of 12 vehicle segments evaluated.

South America: Ford lost $120 million in South America in the second quarter of 1999, compared with earnings of $14 million a year ago. First half losses totaled $285 million, compared with losses of $31 million a year ago. Industry sales in Brazil, Ford's largest market in the region, were down more than 20 percent in the first half of 1999, compared with a year ago, and the Brazilian economy is expected to remain weak for the balance of this year.

"Ford's problems in Brazil are not intractable, but meaningful improvement will take creativity and ingenuity on our part, a continued focus on costs, and government policies that encourage sustainable economic growth," Nasser said. "The core of our strategy includes a new, highly competitive manufacturing facility in Brazil, improved service and distribution, and new products designed to meet the needs of our South American customers."

Europe: Including a $125 million share of the Volvo Car inventory-related profit reduction, automotive earnings in Europe in the second quarter of 1999 were $89 million, compared with $310 million in the same period a year ago. Excluding the one-time profit reduction related to the Volvo Car acquisition, earnings in Europe were $214 million.

These results reflect lower volumes and market share for Ford-branded vehicles, principally Ford Fiesta and Mondeo, and lower export volumes, offset partially by the success of the Ford Focus and higher volumes at Jaguar.

First half 1999 earnings totaled $254 million, including the AutoEuropa gain and the Volvo Car inventory-related profit reduction, compared with $540 million a year ago. Although Volvo Car will contribute to operating earnings in 1999, it will be a challenge for Ford to achieve its full-year 1999 milestone for Europe, which is to grow earnings compared with 1998.

"Ford Motor Company's market share is up in Europe, but restoring our profits in the region to a more robust level will take time and a continued focus on great products, quality and lower costs," Nasser said.