Ford may consolidate $1.7 billion trust in third quarter - Ford Forums

Stacy94PGT · 03-17-2003, 08:14

Monday, March 17, 2003
By Bret Okeson / Bloomberg News
The Financial Times reported the story earlier.

DEARBORN -- Ford Motor Co., the world's second-largest automaker, said it probably will consolidate a trust in which the company has a $1.7 billion equity investment by the third quarter. The move may have a "material impact" on earnings.

The limited-purpose trust is owned by a Ford Credit subsidiary and outside investors, the company said in a filing to the Securities and Exchange Commission. The trust buys asset- backed securities and issues commercial paper.

The carmaker is required by U.S. accounting regulations to consolidate so-called "variable interest entities" by the third quarter. U.S. regulators and lawmakers have been reviewing corporate accounting practices, trying to rebuild investor confidence after alleged fraud forced the bankruptcies of companies such as Enron Corp.

In addition to the trust, Ford has invested $806 million in joint ventures to manufacture car parts. The company has sold about $5.9 billion of "retail installment receivables" originated by Ford Credit to variable interest entities set up by banks.

"Consolidation of the above variable interests could result in a material impact to the 2003 earnings and would be reported as a change in accounting principle," the company said in the SEC filing. "We believe that the meaningful estimate of potential loss related to variable interest entities is equal to our investment and retained interest."

General Motors Corp. said last week in an SEC filing that "it is reasonably possible" that it will consolidate variable interest entities with assets of $1.1 billion. The company's credit division may have to consolidate entities with assets of $17.5 billion. General Motors said the maximum losses from the units would be about $4.3 billion.

As of December 31, the Ford trust had gross assets of $12.2 billion and gross liabilities of $11.8 billion.

Ford spokesman Don Hume declined to comment.

The company also will break out the operating results of the domestic and international car divisions beginning with the company's first-quarter report. The international segment will include the Premier Automotive Group. The group manages the Volvo, Jaguar, Land Rover and Aston Martin brands.