F - Ford Motor Company - J.P. Morgan 2013 Automotive Conference Transcript

    Company Name:Ford Motor Company
    Event Title:J.P. Morgan 2013 Automotive Conference Transcript
    Event Date:14-Aug-2013
    Event Time:12:25 PM ET


    Robert L. Shanks

    Executive Vice President and Chief Financial Officer
    Good morning everybody. How are you? Or good morning I guess sorry. All right, today what I would like to do is to take the opportunity to update you on our business. Specifically a more in-depth discussion of our capital strategy that underlines our One Ford plan. I'll provide an overview of our strategy and then share additional insights into how we think about and how we allocate the capital that we deploy across Ford. I'll conclude with the summary of our 2013 planning assumptions and key metrics and recap our mid-decade targets.

    And of course I will leave time at the end for any questions that you may have and at that time I will ask Neil Schloss, who is our Treasurer to join me.

    In any discussion of Ford's capital strategy one would have to start with our One Ford plan which is shown here. The plan hasn't changed and is as relevance today as it was about six years ago when it became our guide. The goal of the plan is straight forward and is represented by the graphic at the bottom of the slide to serve our markets with a full family of best in class vehicles, small, medium and large, cars, utilities and trucks , executed through our One Ford plan delivering profitable growth for all.

    Although the external environment in which we operate is almost always uncertain to one degree or another and if anytime it presents significant challenges in some part of the world. We have made substantial progress over the past six years and are continuing to move forward in all elements of our plan. Given the fluidity of the external environment including the cyclicality of our industry as well as the high capital requirements of our growing business the success of our One Ford plan requires a robust capital strategy. One that's completely aligned with our business strategies and that commands appropriate returns on the capital that we deploy.

    Slide three outlines the core principles of our capital strategy. The first principle is to ensure a solid foundation for the company by developing, then maintaining a strong balance that progressively achieves the strongest possible investment grade ratings overtime. This includes holding sufficient liquidity achieving an appropriate level of automotive debt and fully funding and de-risking our global funded pension plans. Second principle is to finance our One Ford plan targeting returns in excess of our cost of capital this includes developing new products and technologies to maintain the freshest showroom of best in class products across a full family of vehicles while aggressively growing our business in developed and emerging markets.

    It also includes a strong Ford credit , that supports our automotive growth generates solid profits and distributes dividends to Ford through its parent Ford holdings. These actions as they are successfully executed will provide profitable growth for all which is our third principle. This includes our shareholders who will benefit from share price appreciation and distributions. As we continue to deliver our plan we'll consider additional ways to generate value to our shareholders including increasing returns, returning excess capital and reducing the volatility of our results.

    Slide four illustrates the calls on capital required to support our business. The capital available for these various uses is represented by the bubble at the center of the graphic which is capital in excess of liquidity levels we target to run the automotive business day to day while protecting for cyclical downturns and exogenous shocks and that's where we'll start our discussion.

    As indicated here on slide five we presently target to have on hand and average ongoing automotive cash balance of about $20 billion there will be periods of course when we will be above or below this amount due to future cash flow expectations such as pension contributions, debt maturities, capital investments or restructuring requirements as well as short-term planning differences plus our assessment of where we happen to be in the business cycle. Our automotive cash target includes sufficient cash to satisfy minimum operating requirements as well as protect for a sever economic downturn while maintaining an investment grade credit rating.

    In addition to cash we also target to maintain a revolving facility for our automotive business above the $10 billion to protect against exogenous shocks and today our global committed facility is $10.7 billion. We presently asses the appropriate long-term target for total automotive liquidity that's cash plus the revolving facility to be about $30 billion an amount sufficient to support our business priorities and to protect our business as well. As you would expect we continually monitor our liquidity needs. So as a result our automotive cash and total liquidity targets could be reduced overtime based on improved operating performance and changes in our risk profile.

    Now let's discuss our uses of capital. Beginning here on slide six. Consistent with our One Ford plan as mentioned earlier our goal is to deliver profitable growth for all by generating returns in excess of our cost of capital. As you would expect products and growth investments represent by far the largest cost of capital.

    Before we discuss this in more detail, just a few words, first on restructuring and infrastructure. Over the past several years, as we implemented the One Ford plan, we incurred substantial restructuring costs first in North America and now presently under underway in Europe. While our expectation is that restructuring cost of capital will be minimal once our European transformation plan is completed the reality is that it's likely that there will be times in the future when it will be necessary to prove parts of our business given the global and competitive forces of change to which we are exposed. Recognizing the need for such actions and then acting quickly and decisively will be critical to maintaining a healthy and successful business.

    In addition continually and prudently investing in infrastructure which includes most of our non-product investments is another important priority to ensure that we have an efficient and effective global enterprise within the ever-changing dynamics of our industry.

Single Page View