Recent Developments in the Ford Motor Company

During the mid to late 1990s, Ford sold large numbers of vehicles, in a booming American economy with soaring stock market and low fuel prices. With the dawn of the new century, legacy health care costs, higher fuel prices, and a faltering economy led to falling market shares, declining sales, and sliding profit margins. Most of the corporate profits came from financing consumer automobile loans through Ford Motor Credit Company.

By 2005, corporate bond rating agencies had downgraded the bonds of both Ford Motor Company and GM to junk status, citing high U.S. health care costs for an aging workforce, soaring gasoline prices, eroding market share, and dependence on declining SUV sales for revenues. Profit margins decreased on large vehicles due to increased "incentives" (in the form of rebates or low interest financing) to offset declining demand.

In the face of demand for higher fuel efficiency and falling sales of mini vans, Ford moved to introduce a range of new vehicles, including "Crossover SUVs" built on unibody car platforms, rather than more body-on-frame chassis. In developing the hybrid electric power train technologies for the Ford Escape Hybrid SUV, Ford licensed similar Toyota hybrid technologies to avoid patent infringements. Ford announced that it will team up with electricity supply company Southern California Edison (SCE) to examine the future of plug-in hybrids in terms of how home and vehicle energy systems will work with the electrical grid. Under the multi-million-dollar, multi-year project, Ford will convert a demonstration fleet of Ford Escape Hybrids into plug-in hybrids, and SCE will evaluate how the vehicles might interact with the home and the utility's electrical grid. Some of the vehicles will be evaluated "in typical customer settings," according to Ford.

In December 2006, the Ford Motor Company raised its borrowing capacity to about $25 billion, placing substantially all corporate assets as collateral to secure the line of credit. Chairman Bill Ford has stated that "bankruptcy is not an option". In order to control its sky rocketing labor costs (the most expensive in the world), the company and the United Auto Workers, representing approximately 46,000 hourly workers in North America, agreed to a historic contract settlement in November of 2007 giving the company a substantial break in terms of its ongoing retiree health care costs and other economic issues. The agreement includes the establishment of a company-funded, independently-run Voluntary Employee Beneficiary Association (more commonly known as a VEBA) trust to shift the burden of retiree health care from the company's books, thereby improving its balance sheet. However, this arrangement will not begin to take effect until January 1, 2010. The agreement also gives hourly workers the job security they were seeking by having the Ford Motor Company commit to substantial investments in most of its factories.

The auto maker reported the largest annual loss in company history in 2006 of $12.7 billion, and estimated that it would not return to profitability until 2009. However, Ford surprised Wall Street in the second quarter of 2007 by posting a $750 million profit. Despite the gains, the Ford Motor Company finished the year with a $2.7 billion loss, largely attributed to finance restructuring at Volvo.

In March 2008, the Ford Motor Company announced that it has reached agreement to sell its Jaguar and Land Rover operations to Tata Motors for $2.3 billion. The sale is expected to be completed by the end of the second quarter of 2008. It is understood that Ford Motor Company Ltd. will not retain any share holding in either the Jaguar or Land-Rover companies, unlike Aston Martin where on its sale a small share holding was retained; when the total sum to be paid in cash by Tata Motors of approximately US$2.3 billion, Ford Motor Company will then contribute up to US $600 million to the Jaguar Land Rover pension plans.

In January 2008, the Ford Motor Company launched a web site listing the 10 Built Ford Tough Rules as well as a series of webisodes that parodies the show COPS (TV Series).

During November 2008, Ford, together with Chrysler and General Motors, sought financial aid at Congressional hearings in Washington D.C. in the face of worsening conditions caused by the automotive industry crisis. The three companies presented action plans for the sustainability of the industry. The Detroit based auto makers were unsuccessful at obtaining assistance through Congressional legislation. GM and Chrysler later received assistance through the Executive Branch from the T.A.R.P. funding provisions. On December 19, the cost of credit default swaps to insure the debt of Ford Motor Co was 68 percent the sum insured for five years in addition to annual payments of 5 percent. That means it costs $6.8 million paid up front to insure $10 million in debt, in addition to payments of $500,000 per year.