FOOL CONFERENCE CALL SYNOPSIS*
By Debra Tidwell (MF Debit)

Ford Motor Company <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %>
The American Road
Dearborn, MI 48121-1899
(313) 322-3000
http://www.ford.com

UNION CITY, CA (February 13, 1997)/FOOLWIRE/ --- Ford Motor reported fourth quarter and 1996 fiscal year-end results on January 29th. They reported earnings of $4.4 billion or $3.64 per share for the year on sales of $147 billion. These results were 7% better than 1995's earnings of $4.1 billion or $3.33 per share on revenues of $137.1 billion. In the fourth quarter, Fords earnings rose 82% to $1.2 billion or $0.99 per share on sales of $39 billion. The results include a one-time charge for voluntary separation programs and a partial reversal of a provision for losses on loans to Budget Rent-a-Car. Excluding these one-time factors, Ford's fourth quarter earnings were $1.3 billion or $1.10 per share, more than double year-ago results.

1996 OVERVIEW. 1996 was a solid year overall with earnings of $4.4 billion, up 7% from 1995. The fourth quarter was up 82%. They had record financial services earnings within that total. The auto business was really a two part story with strong momentum in the US and remaining challenges in Europe and South America. The global product development organization has been streamlined which simplifies their business. Several new products were launched including the Expedition, Ka, and Jaguar XK8. Not only were they well received, but exceeded even the expectations Ford had for those products. They enjoyed continued sales success and pointed to their worldwide truck leadership as an important event for them. On the shareholder value side, they had a less than 20% IPO they did on the Associates which is now worth about $13 billion in market value or $11 per share and was 1/3 of Ford's market cap at the end of January. Ford has maintained a very good dividend yield. As of now it is about 4.7% and is the highest of the Big Three. They have a number of action plans in place to address their remaining challenges. The business plan they have for 1997 is very tough. They are addressing Europe and South America. They don't have instant fixes for either organization but both are on the road to recovery and they have firm plans in place.

FOURTH QUARTER ONE-TIME ITEMS. For the fourth quarter there are two one-time actions they are drawing attention to. For the fourth quarter they made $1.10 per share before one-time factors on $1.336 billion in net income. There was a Budget Rent-A-Car action which was a reversal of an action they took in the middle of last year that still cost them net income of $233 million or $0.20 per share. Given the sale of Budget, they are able to offset some of that writedown in the middle of the year. The net loss is still there at $0.20 per share, but there was an addition of $0.17 per share in the fourth quarter. The separation programs are on track from what they said before -- net income of $336 million cost or $0.28 per share. Those add up to $0.11 per share and reduce their earnings per share to $0.99. The impact of the Associates IPO and the sale of USL Capital, in addition to the Budget Rent-A-Car and separation programs for the full year is just about a total offset, about $0.06 total, so these four actions don't have a big impact on total year profits, but they do have an impact on the fourth quarter.

FOURTH QUARTER RESULTS. Net income was $1.204 billion, $544 million better than 1995 Q4. Tax rate was 32%, a very low tax rate for the fourth quarter, and it was the same for the full year. Earnings per share for the fourth quarter were $0.99 versus $0.51 a year ago.

MARKET SHARE. Combined car and truck shares in the US were 26.2% at the end of the fourth quarter, up 1.3 points from the prior fourth quarter and had a 25.2% share for the full year which was down 0.4 point, but they finished the quarter in very good shape. In Europe they had 11% market share, down 0.1 point from last year. In Brazil they are up to 12.3% market share, up 0.2 point from last year's fourth quarter. December in Brazil was 12.9%. They are showing, as expected, an increasing trend in market share in Brazil and in Argentina too.

MARKETING COSTS. Marketing costs as a percent of revenue was 6.8% for the quarter and 8% for the full year, both below 1995. Automotive capital spending was $8.2 billion or 7% for the full year, somewhat less than they would have expected a year ago. That doesn't reflect any deferrals, it does reflect the fact that their programs are coming in below what their expectations were a year ago and they want that trend to continue. They are at 7% of revenue right now and hopefully that's going to go down.

NET INCOME FOR THE FULL YEAR BY BUSINESS. Total company net income was $4.4 billion. Financial services net income was $2.8 billion, $708 million better than the prior year. If you take out the one-time gains, which is principally The Associates, and the other actions, it is $196 million improvement. The automotive operations at $1.6 billion are down $401 million from 1995. Taking out the one-time gains from the voluntary separation program and a non-recurrence of a gain, they reported $230 million of gain in the fourth quarter of 1995. Taking both of those out, the automotive operations are up $119 million.

FINANCIAL SERVICES EARNINGS. The financial services businesses have grown from $660 million in 1989 to $2.3 billion in 1996. The components of that are $1.4 billion from Ford Credit, $700 million from The Associates, $200 million from Hertz, and some other. The Associates and Hertz are both up. Some one-time factors which have impacted 1996. The gain on The Associates IPO was 0.6%, the sale of assets for US Capital was a gain of 0.1%, and the net writedown on Budget was a net of (0.2)%. There were gains of $500 million all one-time, that won't flow through to forward years, but they do expect the momentum on continuing operations to maintain.

FULL YEAR 1996 AUTOMOTIVE OPERATIONS NET INCOME. Of their total profit of $1.6 billion the US actually brought in $2.007 billion, offsetting losses in Europe of $291 million and $642 million in South America. Europe was down $407 million from last year and $337 million excluding one-time charges. South America is down $548 million year over year and $224 million excluding one-time charges. The rest of the world is profitable at $581 million and is profitable pretty much across the board. Australia had a particularly good year with a record profit of $173 million. The US constitutes about 64% of Ford's revenue base in 1996.

US MARKETING COSTS. Ford thinks the best way to look at marketing costs is as a percentage of revenue. In 1996, marketing costs in the US are 8% of revenue, down slightly from 1995's 8.2% and about the same as 1994's 8.1%. It is substantially lower than the 9.2% in 1993 as well as the double-digit percentages posted in the recession years of the early '90s. In the fourth quarter of 1996, Ford's US marketing costs were 6.8% of revenue, 0.4% lower than Q4 in 1995.

STRONGER BALANCE SHEET. Ford ended the year with automotive net cash of $7.2 billion. Net cash is $15.4 billion and debt is $8.2 billion. Their pension plans ended up very well funded for the year, they are both over funded. Credit ratings are the highest among the Big Three. They also made progress on their financial services balance sheet. A number of the actions they took in restructuring financial services over the last year were really geared toward improving the capital level in the financial services balance sheet and they did that by $3 billion. That will help protect them in a downturn.

FOURTH QUARTER NET INCOME BY BUSINESS. The net income for the total company in the fourth quarter was $1.2 billion. Financial services was $814 million and automotive operations was $390 million. Financial services net income is up $170 million from Q4 1995 and automotive operations was up $374 million from a year ago. The fourth quarter earnings included a gain of $204 million from the Budget Rent-A-Car reversal and without that gain the financial services net income would have been down by $34 million. On the automotive side, taking out the voluntary separation programs and the non-recurrence of the gain of Autolatina, then the improvement is $811 million. They think there is important progress on that side of the business.

FINANCIAL SERVICES NET INCOME FOR Q4. Looking at financial services in more detail for the fourth quarter, they had total net income of $814 million. Breaking that out by business, Ford Credit had a profit of $385 million which was down $70 million from a year ago. This decline is more than explained by higher credit losses. They think that these ratios, while they are increasing, are still at competitive levels but it is something they are obviously watching. There are several things going on at Ford Credit. First, Ford Credit's results continue to be the best in the industry by far. So, they are very pleased with their results and are coming out with very good numbers. Even the fourth quarter number continues to be a very good result for them. What has happened to Ford Credit profits for most of the year is that their retail business in the US has come under attack. It is still very profitable and has very good growth, but credit losses there are probably the area that gets the most attention. At the second quarter of 1996, credit losses in the retail business in the US, only one part of Ford Credit's business, were 100 basis points. They went up to 120-125 basis points in the third quarter and are now around 150 basis points as of the fourth quarter. That is the reason they are down in terms of profits. They have growth and their margins are improving. Another thing that impacted results was a tough comparison against a lower tax rate in 1995. In addition, the restructuring actions had an impact on Ford Credit and reduced their earnings as well. That was part of the reduction year-to-year when you look at the fourth quarter or third quarter. They don't think credit losses are behind them, but they do think credit losses are containable and don't expect a major breakout over what we see today, although they do expect losses to go up some. The Associates had record earnings of $234 million of which Ford's 80% interest was $190 million and that is up $31 million from last year. Hertz posted a record fourth quarter and a record year with earnings of $36 million, almost double last year. Other net income from financial services was $203 million and reflects the $204 million reversal of Budget.

AUTOMOTIVE OPERATIONS IN Q4. Worldwide automotive profit was $390 million. The US more than made up this amount with $628 million in profit. Europe lost $88 million and South America lost $287 million. The rest of the world was $137 million. Taking out some of the separation programs, Europe was about the same as the fourth quarter of 1995 and is up considerably from Q3. They aren't out of the woods yet, But Europe certainly seems to be on the track they set for it. South America is also about even with what they expected with a loss of $287 million. As they are still in the launching phase on their new company, they should expect losses in South America through 1997.

TREND OF AUTOMOTIVE NET INCOME PER UNIT. Their unit profit for the fourth quarter 1996 was $765 per unit or a return on sales of 3.9%. Net income per unit has shown continued improvement throughout the year. In Q1, Ford's unit profit was only $50 per unit or a 0.3% return on sales. In Q2 it was $650 per unit and was $720 per unit in Q3, both representing a 3.7% return on sales. This is not yet at a level Ford is satisfied with and is below the return Chrysler is getting on their sales. Ford's target is 5% return on sales. They think the fourth quarter result is good progress and provides a good foundation for what they have to do in 1997.

1997 OUTLOOK. They think 1997 will look a lot like 1996. They expect the US market to be down a tick perhaps, that's probably an even market or up in trucks and perhaps down in the car side of the business. Europe should be a little stronger. But, overall, from an industry standpoint they expect 1997 to look like 1996. A number of new products are coming, the Escort ZX2, the Navigator, Town Car, and Ranger. Ford thinks volume is going to be relatively flat in 1997, so what is going to drive profitability is continued good results from new products and that driving product mix, and a major focus on cost reduction. As they mentioned, they expect their total costs in Ford to be down in 1997. If they accomplish that, it will be the first time in their history that has happened. They expect to see continued growth in financial services earnings, continued strengthening of the balance sheet, and obviously a continued focus on shareholder value.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.