Edgar Filing: FORD MOTOR CO

a6708785.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2011

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

	Commission File Number: 1-3950

FORD MOTOR COMPANY

(Exact name of registrant as specified in its charter)

Delaware	38-0549190
(State of Incorporation)	(IRS Employer Identification No.)

One American Road, Dearborn, Michigan	48126
(Address of principal executive offices)	(Zip Code)

(313) 322-3000

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer R Accelerated filer £ Non-accelerated filer £ Smaller reporting company £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No R

As of April 28, 2011, the registrant had outstanding 3,727,332,952 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit index located on page number 80.

FORD MOTOR COMPANY
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2011

	Table of Contents
		Page
	Part I – Financial Information
Item 1	Financial Statements	1
	Consolidated Statement of Operations	1
	Sector Statement of Operations	2
	Consolidated Balance Sheet	3
	Sector Balance Sheet	4
	Consolidated Statement of Cash Flows	5
	Sector Statement of Cash Flows	6
	Consolidated Statement of Comprehensive Income	7
	Notes to the Financial Statements	8
	Report of Independent Registered Public Accounting Firm	53
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	54
	First Quarter Results of Operations	54
	Automotive Sector Results of Operations	55
	Financial Services Sector Results of Operations	60
	Liquidity and Capital Resources	64
	Outlook	72
	Critical Accounting Estimates	75
	Accounting Standards Issued But Not Yet Adopted	76
	Other Financial Information	76
Item 3	Quantitative and Qualitative Disclosures About Market Risk	77
	Automotive Sector	77
	Financial Services Sector	77
Item 4	Controls and Procedures	77

	Part II – Other Information
Item 1	Legal Proceedings	78
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	78
Item 5	Other Information	78
Item 6	Exhibits	79
	Signature	79
	Exhibit Index	80

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

CONSOLIDATED STATEMENT OF OPERATIONS

For the Periods Ended March 31, 2011 and 2010

(in millions, except per share amounts)

	First Quarter
	2011			2010
	(unaudited)
Sales and revenues
Automotive sales	$	31,038		$	28,894
Financial Services revenues		2,076			2,672
Total sales and revenues		33,114			31,566

Costs and expenses
Automotive cost of sales		26,776			25,139
Selling, administrative and other expenses		2,734			3,089
Interest expense		1,174			1,701
Financial Services provision for credit and insurance losses		(54	)		(41	)
Total costs and expenses		30,630			29,888

Automotive interest income and other non-operating income/(expense), net (Note 12)		40			189
Financial Services other income/(loss), net (Note 12)		85			126
Equity in net income/(loss) of affiliated companies		167			142
Income/(Loss) before income taxes		2,776			2,135
Provision for/(Benefit from) income taxes		220			50
Income/(Loss) from continuing operations		2,556			2,085
Income/(Loss) from discontinued operations		—			—
Net income/(loss)		2,556			2,085
Less: Income/(Loss) attributable to noncontrolling interests		5			—
Net income/(loss) attributable to Ford Motor Company	$	2,551		$	2,085

NET INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
Income/(Loss) from continuing operations	$	2,551		$	2,085
Income/(Loss) from discontinued operations		—			—
Net income/(loss)	$	2,551		$	2,085

AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 15)
Basic income/(loss)
Income/(Loss) from continuing operations	$	0.68		$	0.62
Income/(Loss) from discontinued operations		—			—
Net income/(loss)	$	0.68		$	0.62
Diluted income/(loss)
Income/(Loss) from continuing operations	$	0.61		$	0.50
Income/(Loss) from discontinued operations		—			—
Net income/(loss)	$	0.61		$	0.50

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

SECTOR STATEMENT OF OPERATIONS

For the Periods Ended March 31, 2011 and 2010

(in millions, except per share amounts)

	First Quarter
	2011			2010
	(unaudited)
AUTOMOTIVE
Sales	$	31,038		$	28,894
Costs and expenses
Cost of sales		26,776			25,139
Selling, administrative and other expenses		2,143			2,220
Total costs and expenses		28,919			27,359
Operating income/(loss)		2,119			1,535

Interest expense		251			542

Interest income and other non-operating income/(expense), net (Note 12)		40			189
Equity in net income/(loss) of affiliated companies		162			138
Income/(Loss) before income taxes — Automotive		2,070			1,320

FINANCIAL SERVICES
Revenues		2,076			2,672
Costs and expenses
Interest expense		923			1,159
Depreciation		430			660
Operating and other expenses		161			209
Provision for credit and insurance losses		(54	)		(41	)
Total costs and expenses		1,460			1,987

Other income/(loss), net (Note 12)		85			126
Equity in net income/(loss) of affiliated companies		5			4
Income/(Loss) before income taxes — Financial Services		706			815

TOTAL COMPANY
Income/(Loss) before income taxes		2,776			2,135
Provision for/(Benefit from) income taxes		220			50
Income/(Loss) from continuing operations		2,556			2,085
Income/(Loss) from discontinued operations		—			—
Net income/(loss)		2,556			2,085
Less: Income/(Loss) attributable to noncontrolling interests		5			—
Net income/(loss) attributable to Ford Motor Company	$	2,551		$	2,085

NET INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
Income/(Loss) from continuing operations	$	2,551		$	2,085
Income/(Loss) from discontinued operations		—			—
Net income/(loss)	$	2,551		$	2,085

AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 15)
Basic income/(loss)
Income/(Loss) from continuing operations	$	0.68		$	0.62
Income/(Loss) from discontinued operations		—			—
Net income/(loss)	$	0.68		$	0.62
Diluted income/(loss)
Income/(Loss) from continuing operations	$	0.61		$	0.50
Income/(Loss) from discontinued operations		—			—
Net income/(loss)	$	0.61		$	0.50

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)

	March 31, 2011			December 31, 2010
	(unaudited)
ASSETS
Cash and cash equivalents	$	21,318		$	14,805
Marketable securities		13,548			20,765
Finance receivables, net (Note 5)		70,704			70,070
Other receivables, net		8,999			7,388
Net investment in operating leases		11,239			11,675
Inventories (Note 7)		7,414			5,917
Equity in net assets of affiliated companies		2,525			2,569
Net property		23,407			23,179
Deferred income taxes		1,962			2,003
Net intangible assets (Note 9)		98			102
Other assets		6,177			6,214
Total assets	$	167,391		$	164,687

LIABILITIES
Payables	$	19,984		$	16,362
Accrued liabilities and deferred revenue		42,092			43,844
Debt (Note 11)		101,638			103,988
Deferred income taxes		1,212			1,135
Total liabilities		164,926			165,329

EQUITY
Capital stock
Common Stock, par value $0.01 per share (3,742 million shares issued)		37			37
Class B Stock, par value $0.01 per share (71 million shares issued)		1			1
Capital in excess of par value of stock		20,723			20,803
Accumulated other comprehensive income/(loss)		(13,684	)		(14,313	)
Treasury stock		(164	)		(163	)
Retained earnings/(Accumulated deficit)		(4,487	)		(7,038	)
Total equity/(deficit) attributable to Ford Motor Company (Note 19)		2,426			(673	)
Equity/(Deficit) attributable to noncontrolling interests (Note 19)		39			31
Total equity/(deficit) (Note 19)		2,465			(642	)
Total liabilities and equity	$	167,391		$	164,687

The following table includes assets to be used to settle liabilities of the consolidated variable interest entities ("VIEs"). These assets and liabilities are included in the consolidated balance sheet above. See Note 8 for additional information on our VIEs.

ASSETS
Cash and cash equivalents	$	4,375	$	4,062
Marketable securities		—		—
Finance receivables, net		50,414		50,473
Other receivables, net		—		13
Net investment in operating leases		5,345		6,121
Inventories		—		19
Net property		—		31
Deferred income taxes		—		—
Other assets		44		28
LIABILITIES
Payables		—		16
Accrued liabilities and deferred revenue		105		222
Debt		41,379		40,247

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

SECTOR BALANCE SHEET

(in millions)

ASSETS	March 31, 2011			December 31, 2010
	(unaudited)
Automotive
Cash and cash equivalents	$	12,544		$	6,301
Marketable securities		8,822			14,207
Total cash and marketable securities		21,366			20,508
Receivables, less allowances of $218 and $228		4,259			3,992
Inventories (Note 7)		7,414			5,917
Deferred income taxes		265			359
Net investment in operating leases		847			1,282
Other current assets		796			610
Current receivable from Financial Services		2,063			1,700
Total current assets		37,010			34,368
Equity in net assets of affiliated companies		2,386			2,441
Net property		23,261			23,027
Deferred income taxes		2,365			2,468
Net intangible assets (Note 9)		98			102
Non-current receivable from Financial Services		190			181
Other assets		2,241			2,019
Total Automotive assets		67,551			64,606
Financial Services
Cash and cash equivalents		8,774			8,504
Marketable securities		4,927			6,759
Finance receivables, net (Note 5)		75,199			73,265
Net investment in operating leases		10,392			10,393
Equity in net assets of affiliated companies		139			128
Other assets		3,739			4,221
Total Financial Services assets		103,170			103,270
Intersector elimination		(2,455	)		(2,083	)
Total assets	$	168,266		$	165,793
LIABILITIES
Automotive
Trade payables	$	16,756		$	13,466
Other payables		1,712			1,544
Accrued liabilities and deferred revenue		15,942			17,065
Deferred income taxes		318			392
Debt payable within one year (Note 11)		2,011			2,049
Total current liabilities		36,739			34,516
Long-term debt (Note 11)		14,589			17,028
Other liabilities		22,977			23,016
Deferred income taxes		282			344
Total Automotive liabilities		74,587			74,904
Financial Services
Payables		1,516			1,352
Debt (Note 11)		85,239			85,112
Deferred income taxes		1,487			1,505
Other liabilities and deferred income		3,174			3,764
Payable to Automotive		2,253			1,881
Total Financial Services liabilities		93,669			93,614
Intersector elimination		(2,455	)		(2,083	)
Total liabilities		165,801			166,435
EQUITY
Capital stock (Note 15)
Common Stock, par value $0.01 per share (3,742 million shares issued)		37			37
Class B Stock, par value $0.01 per share (71 million shares issued)		1			1
Capital in excess of par value of stock		20,723			20,803
Accumulated other comprehensive income/(loss)		(13,684	)		(14,313	)
Treasury stock		(164	)		(163	)
Retained earnings/(Accumulated deficit)		(4,487	)		(7,038	)
Total equity/(deficit) attributable to Ford Motor Company		2,426			(673	)
Equity/(Deficit) attributable to noncontrolling interests		39			31
Total equity/(deficit)		2,465			(642	)
Total liabilities and equity	$	168,266		$	165,793

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Periods Ended March 31, 2011 and 2010

(in millions)

	First Quarter
	2011			2010
	(unaudited)
Cash flows from operating activities of continuing operations
Net cash (used in)/provided by operating activities	$	2,497		$	2,683

Cash flows from investing activities of continuing operations
Capital expenditures		(929	)		(1,068	)
Acquisitions of retail and other finance receivables and operating leases		(8,068	)		(6,979	)
Collections of retail and other finance receivables and operating leases		8,444			9,602
Purchases of securities		(19,194	)		(18,341	)
Sales and maturities of securities		26,479			17,987
Settlements of derivatives		15			46
Other		147			(80	)
Net cash (used in)/provided by investing activities		6,894			1,167

Cash flows from financing activities of continuing operations
Sales of Common Stock		—			530
Changes in short-term debt		561			(1,042	)
Proceeds from issuance of other debt		9,268			8,827
Principal payments on other debt		(13,199	)		(8,506	)
Other		88			79
Net cash (used in)/provided by financing activities		(3,282	)		(112	)

Effect of exchange rate changes on cash		404			(276	)

Net increase/(decrease) in cash and cash equivalents from continuing operations		6,513			3,462

Cash flows from discontinued operations
Cash flows from operating activities of discontinued operations		—			—
Cash flows from investing activities of discontinued operations		—			—
Cash flows from financing activities of discontinued operations		—			—

Net increase/(decrease) in cash and cash equivalents	$	6,513		$	3,462

Cash and cash equivalents at January 1	$	14,805		$	20,894
Cash and cash equivalents of discontinued/held-for-sale operations at January 1		—			—
Net increase/(decrease) in cash and cash equivalents		6,513			3,462
Less: cash and cash equivalents of discontinued/held-for-sale operations at March 31		—			—
Cash and cash equivalents at March 31	$	21,318		$	24,356

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONDENSED SECTOR STATEMENT OF CASH FLOWS

For the Periods Ended March 31, 2011 and 2010

(in millions)

	First Quarter 2011						First Quarter 2010
	Automotive			Financial Services			Automotive			Financial Services
	(unaudited)						(unaudited)
Cash flows from operating activities of continuing operations
Net cash (used in)/provided by operating activities	$	2,963		$	1,035		$	20		$	2,071

Cash flows from investing activities of continuing operations
Capital expenditures		(926	)		(3	)		(1,064	)		(4	)
Acquisitions of retail and other finance receivables and operating leases		—			(7,990	)		—			(6,979	)
Collections of retail and other finance receivables and operating leases		—			8,444			—			9,673
Net (acquisitions)/collections of wholesale receivables		—			(1,579	)		—			521
Purchases of securities		(11,364	)		(7,830	)		(9,102	)		(9,239	)
Sales and maturities of securities		16,815			9,664			11,917			6,284
Settlements of derivatives		35			(20	)		(128	)		174
Investing activity (to)/from Financial Services		838			—			375			—
Other		130			17			(7	)		(73	)
Net cash (used in)/provided by investing activities		5,528			703			1,991			357

Cash flows from financing activities of continuing operations
Sales of Common Stock		—			—			530			—
Changes in short-term debt		(110	)		671			269			(1,311	)
Proceeds from issuance of other debt		574			8,694			310			8,517
Principal payments on other debt		(3,000	)		(10,199	)		(117	)		(8,603	)
Investing activity to/(from) Automotive		—			(838	)		—			(375	)
Other		59			29			116			(37	)
Net cash (used in)/provided by financing activities		(2,477	)		(1,643	)		1,108			(1,809	)

Effect of exchange rate changes on cash		229			175			(80	)		(196	)
Net increase/(decrease) in cash and cash equivalents from continuing operations		6,243			270			3,039			423

Cash flows from discontinued operations
Cash flows from operating activities of discontinued operations		—			—			—			—
Cash flows from investing activities of discontinued operations		—			—			—			—
Cash flows from financing activities of discontinued operations		—			—			—			—

Net increase/(decrease) in cash and cash equivalents	$	6,243		$	270		$	3,039		$	423

Cash and cash equivalents at January 1	$	6,301		$	8,504		$	9,762		$	11,132
Cash and cash equivalents of discontinued/held-for-sale operations at January 1		—			—			—			—
Net increase/(decrease) in cash and cash equivalents		6,243			270			3,039			423
Less: cash and cash equivalents of discontinued/held-for-sale operations at March 31		—			—			—			—
Cash and cash equivalents at March 31	$	12,544		$	8,774		$	12,801		$	11,555

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Periods Ended March 31, 2011 and 2010

(in millions)

	First Quarter
	2011			2010
	(unaudited)
Net income/(loss)	$	2,556		$	2,085
Other comprehensive income/(loss), net of tax:
Foreign currency translation		588			(489	)
Net gain/(loss) on derivative instruments		117			(1	)
Employee benefit-related		(78	)		157
Net holding gain/(loss)		—			(2	)
Total other comprehensive income/(loss), net of tax		627			(335	)
Comprehensive income/(loss)		3,183			1,750
Less: Comprehensive income/(loss) attributable to noncontrolling interests (Note 19)		3			—
Comprehensive income/(loss) attributable to Ford Motor Company	$	3,180		$	1,750

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents

Footnote		Page

Note 1	Presentation	9
Note 2	Accounting Standards Issued But Not Yet Adopted	11
Note 3	Fair Value Measurements	11
Note 4	Restricted Cash	20
Note 5	Finance Receivables	20
Note 6	Allowance for Credit Losses	27
Note 7	Inventories	30
Note 8	Variable Interest Entities	30
Note 9	Net Intangible Assets	34
Note 10	Retirement Benefits	35
Note 11	Debt and Commitments	35
Note 12	Other Income/(Loss)	43
Note 13	Income Taxes	44
Note 14	Dispositions and Acquisitions	44
Note 15	Amounts Per Share Attributable to Ford Motor Company Common and Class B Stock	45
Note 16	Derivative Financial Instruments and Hedging Activities	46
Note 17	Segment Information	50
Note 18	Commitments and Contingencies	51
Note 19	Equity/(Deficit) Attributable to Ford Motor Company and Noncontrolling Interests	52

Item 1. Financial Statements (Continued)

NOTE 1. PRESENTATION

Our financial statements are presented in accordance with generally accepted accounting principles ("GAAP") in the United States for interim financial information, and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. We show certain of our financial statements on both a consolidated and a sector basis for our Automotive and Financial Services sectors. Intercompany items and transactions have been eliminated in both the consolidated and sector balance sheets. Reconciliations of certain line items are explained below in this Note, where the presentation of these intercompany eliminations or consolidated adjustments differs between the consolidated and sector financial statements.

In the opinion of management, these unaudited financial statements reflect a fair statement of the results of operations and financial condition of Ford Motor Company and its consolidated subsidiaries and consolidated VIEs of which we are the primary beneficiary for the periods and at the dates presented. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2010 ("2010 Form 10-K Report"). For purposes of this report, "Ford," the "Company," "we," "our," "us" or similar references mean Ford Motor Company and our consolidated subsidiaries and our consolidated VIEs of which we are the primary beneficiary, unless the context requires otherwise.

We reclassified certain prior year amounts in our consolidated financial statements to conform to current year presentation.

Adoption of New Accounting Standards

Business Combinations. On January 1, 2011 we adopted the new standard on business combinations. The new standard requires public entities that present comparative financial statements to disclose the revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the prior annual reporting period. The new accounting standard did not have a material impact on our financial statement disclosures.

Reconciliations between Consolidated and Sector Financial Statements

Deferred Tax Assets and Liabilities. The difference between the total assets and total liabilities as presented in our sector balance sheet and consolidated balance sheet is the result of netting of deferred income tax assets and liabilities. The reconciliation between the total sector and consolidated balance sheets is as follows (in millions):

	March 31, 2011			December 31, 2010
Sector balance sheet presentation of deferred income tax assets:
Automotive sector current deferred income tax assets	$	265		$	359
Automotive sector non-current deferred income tax assets		2,365			2,468
Financial Services sector deferred income tax assets*		207			282
Total		2,837			3,109
Reclassification for netting of deferred income taxes		(875	)		(1,106	)
Consolidated balance sheet presentation of deferred income tax assets	$	1,962		$	2,003

Sector balance sheet presentation of deferred income tax liabilities:
Automotive sector current deferred income tax liabilities	$	318		$	392
Automotive sector non-current deferred income tax liabilities		282			344
Financial Services sector deferred income tax liabilities		1,487			1,505
Total		2,087			2,241
Reclassification for netting of deferred income taxes		(875	)		(1,106	)
Consolidated balance sheet presentation of deferred income tax liabilities	$	1,212		$	1,135

__________

* Financial Services deferred income tax assets are included in Financial Services other assets on our sector balance sheet.

Item 1. Financial Statements (Continued)

NOTE 1. PRESENTATION (Continued)

Automotive Acquisition of Financial Services Debt. During 2008 and 2009 we issued 159,913,115 shares of Ford Common Stock through an equity distribution agreement and used the proceeds of $1 billion to purchase $1,048 million of Ford Credit debt and related interest of $20 million. During the second quarter of 2010, we utilized cash of $192 million to purchase $200 million of Ford Credit debt and related interest of about $1 million. As of March 31, 2011, approximately $780 million of the debt purchased has matured, and $267 million was repurchased from us by Ford Credit.

On our consolidated balance sheet, we net the remaining debt purchased by Ford with the outstanding debt of Ford Credit, reducing our consolidated marketable securities and debt balances by $201 million at March 31, 2011 and December 31, 2010, respectively. On our sector balance sheet, the debt is reported separately as Automotive marketable securities and Financial Services debt as it has not been retired or cancelled by Ford Credit.

Sector to Consolidated Cash Flow Reconciliation. We present certain cash flows from wholesale receivables, finance receivables and the Automotive acquisition of Financial Services debt differently on our sector and consolidated statements of cash flows. The reconciliation between total sector and consolidated cash flows is as follows (in millions):

	First Quarter
	2011			2010
Automotive cash flows from operating activities of continuing operations	$	2,963		$	20
Financial Services cash flows from operating activities of continuing operations		1,035			2,071
Total sector cash flows from operating activities of continuing operations		3,998			2,091
Reclassifications from investing to operating cash flows:
Wholesale receivables (a)		(1,579	)		521
Finance receivables (b)		78			71
Consolidated cash flows from operating activities of continuing operations	$	2,497		$	2,683

Automotive cash flows from investing activities of continuing operations	$	5,528		$	1,991
Financial Services cash flows from investing activities of continuing operations		703			357
Total sector cash flows from investing activities of continuing operations		6,231			2,348
Reclassifications from investing to operating cash flows:
Wholesale receivables (a)		1,579			(521	)
Finance receivables (b)		(78	)		(71	)
Reclassifications from investing to financing cash flows:
Automotive sector acquisition of Financial Services sector debt (c)		—			(214	)
Elimination of investing activity to/(from) Financial Services in consolidation		(838	)		(375	)
Consolidated cash flows from investing activities of continuing operations	$	6,894		$	1,167

Automotive cash flows from financing activities of continuing operations	$	(2,477	)	$	1,108
Financial Services cash flows from financing activities of continuing operations		(1,643	)		(1,809	)
Total sector cash flows from financing activities of continuing operations		(4,120	)		(701	)
Reclassifications from investing to financing cash flows:
Automotive sector acquisition of Financial Services sector debt (c)		—			214
Elimination of investing activity to/(from) Financial Services in consolidation		838			375
Consolidated cash flows from financing activities of continuing operations	$	(3,282	)	$	(112	)

(a)

In addition to the cash flow from vehicles sold by us, the cash flow from wholesale finance receivables (being reclassified from investing to operating) includes financing by Ford Credit of used and non-Ford vehicles. 100% of cash flows from wholesale finance receivables have been reclassified for consolidated presentation as the portion of these cash flows from used and non-Ford vehicles is impracticable to separate.

(b)	Includes cash flows of finance receivables purchased/collected from certain divisions and subsidiaries of the Automotive sector.

(c)	See "Debt Reduction Actions" above for further discussion. Cash inflows related to these transactions are reported as financing activities on the consolidated statement of cash flows and investing activities on the sector statement of cash flows.

Item 1. Financial Statements (Continued)

NOTE 2. ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

Troubled Debt Restructurings. In April 2011, the Financial Accounting Standards Board ("FASB") issued a new standard to clarify the accounting for and disclosures about troubled debt restructurings by creditors. The new standard was issued to address concerns about the diversity in practice related to identifying troubled debt restructurings and provides additional guidance as to whether a restructuring meets the criteria to be considered a troubled debt restructuring for purposes of recording an impairment and related disclosures. The standard is effective for us as of July 1, 2011 and will be applied prospectively to troubled debt restructurings occurring on or after January 1, 2011. We do not expect this standard will have a material impact on our financial condition, results of operations, and financial statement disclosures.

Financial Services - Insurance. In October 2010, the FASB issued a new standard addressing the deferral of acquisition costs within the insurance industry. The new standard modifies which types of costs can be capitalized in the acquisition and renewal of insurance contracts. The standard is effective for us as of January 1, 2012. We do not expect this standard to have a material impact on our financial condition, results of operations, and financial statement disclosures.

NOTE 3. FAIR VALUE MEASUREMENTS

Cash equivalents, marketable securities, and derivative financial instruments are presented on our financial statements at fair value. The fair value of finance receivables and debt, together with the related carrying value, is disclosed in Notes 5 and 11, respectively. Certain other assets and liabilities are measured at fair value on a nonrecurring basis and vary based on specific circumstances such as impairments.

Fair Value Measurements

In determining fair value, we use various valuation methodologies and prioritize the use of observable inputs. We assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market:

	●	Level 1 – inputs include quoted prices for identical instruments and are the most observable.
	●	Level 2 – inputs include quoted prices for similar assets and observable inputs such as interest rates, currency exchange rates and yield curves.
	●	Level 3 – inputs include data not observable in the market and reflect management's judgments about the assumptions market participants would use in pricing the asset or liability.

The use of observable and unobservable inputs and their significance in measuring fair value are reflected in our hierarchy assessment.

Valuation Methodologies

Cash and Cash Equivalents. Included in Cash and cash equivalents are highly liquid investments that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of changes in value due to interest rate, market price, or penalty on withdrawal. A debt security is classified as a cash equivalent if it meets these criteria and if it has a remaining time to maturity of 90 days or less from the date of acquisition. Amounts on deposit and available upon demand, or negotiated to provide for daily liquidity without penalty, are classified as Cash and cash equivalents. At March 31, 2011 these include $1.8 billion of demand deposits with financial institutions which were previously classified as Marketable securities, and this amount is reported in Sales and maturities of securities in the first quarter 2011 consolidated statement of cash flows.

Time deposits, certificates of deposit, and money market accounts that meet the above criteria are classified as Cash and cash equivalents, reported at par value, and excluded from the tables below.

Marketable Securities. Investments in securities with a maturity date greater than 90 days at the date of purchase and other securities for which there is a more than insignificant risk of changes in value because of interest rate, market price, or penalty on withdrawal are classified as Marketable securities. For marketable securities, we generally measure fair value based on a market approach using prices obtained from pricing services. We review all pricing data for reasonability and observability of inputs. Pricing methodologies and inputs to valuation models used by the pricing services depend on the security type (i.e., asset class). Where possible, fair values are generated using market inputs including quoted prices (the closing price in an exchange market), bid prices (the price at which a dealer stands ready to purchase) and other market information. For securities that are not actively traded, the pricing services obtain quotes for similar fixed-income securities or utilize matrix pricing, benchmark curves or other factors to determine fair value. In certain cases, when observable pricing data are not available, we estimate the fair value of investment securities based on an income approach using industry standard valuation models and estimates regarding non-performance risk.

Item 1. Financial Statements (Continued)

NOTE 3. FAIR VALUE MEASUREMENTS (Continued)

Derivative Financial Instruments. Our derivatives are over-the-counter customized derivative transactions and are not exchange traded. We estimate the fair value of these instruments based on an income approach using industry standard valuation models. These models project future cash flows and discount the future amounts to a present value using market-based expectations for interest rates, foreign exchange rates and the contractual terms of the derivative instruments. The discount rate used is the relevant interbank deposit rate (e.g., LIBOR) plus an adjustment for non-performance risk. The adjustment reflects the full credit default swap ("CDS") spread applied to a net exposure, by counterparty, considering the master netting agreements and posted collateral. We use our counterparty's CDS spread when we are in a net asset position and our own CDS spread when we are in a net liability position.

In certain cases, market data are not available and we develop assumptions or use models (e.g., Black Scholes) which are used to determine fair value. This includes situations where there is illiquidity for a particular currency or commodity or for longer-dated instruments. Also, for interest rate swaps and cross-currency interest rate swaps used in securitization transactions, the notional amount of the swap is reset based on actual payments on the securitized contracts. We use management judgment to estimate the timing and amount of the swap cash flows based on historical pre-payment speeds.

Finance Receivables. We generally estimate the fair value of finance receivables based on an income approach using internal valuation models. These models project future cash flows of financing contracts based on scheduled contract payments (including principal and interest). The projected cash flows are discounted to a present value based on market inputs and our own assumptions regarding credit losses, pre-payment speed, and the discount rate. Our assumptions regarding pre-payment speed and credit losses are based on historical performance.

Debt. We estimate the fair value of debt based on a market approach using quoted market prices or current market rates for similar debt with approximately the same remaining maturities, where possible. Where market prices or current market rates are not available, we estimate fair value based on an income approach using discounted cash flow models. These models project future cash flows and discount the future amounts to a present value using market-based expectations for interest rates, our own credit risk and the contractual terms of the debt instruments. For asset-backed debt issued in securitization transactions, the principal payments are based on projected payments for specific assets securing the underlying debt considering historical prepayment speeds.

Item 1. Financial Statements (Continued)

NOTE 3. FAIR VALUE MEASUREMENTS (Continued)

Input Hierarchy of Items Measured at Fair Value on a Recurring Basis

The following tables summarize the fair values by input hierarchy of items measured at fair value on a recurring basis on our balance sheet (in millions):

	March 31, 2011
	Level 1		Level 2		Level 3		Total
Automotive Sector
Assets
Cash equivalents – financial instruments (a)
U.S. government	$	368	$	—	$	—	$	368
U.S. government-sponsored enterprises		—		1,448		—		1,448
Government –non-U.S.		—		392		—		392
Foreign government agencies (b)		—		3,567		—		3,567
Corporate debt		—		43		—		43
Total cash equivalents – financial instruments		368		5,450		—		5,818
Marketable securities (c)
U.S. government		2,442		—		—		2,442
U.S. government-sponsored enterprises		—		1,795		—		1,795
Foreign government agencies (b)		—		2,623		—		2,623
Corporate debt		—		944		—		944
Mortgage-backed and other asset-backed		—		53		1		54
Equity		158		—		—		158
Government –non-U.S.		—		578		—		578
Other liquid investments (d)		—		27		—		27
Total marketable securities		2,600		6,020		1		8,621
Derivative financial instruments
Foreign exchange contracts		—		222		—		222
Commodity contracts		—		48		8		56
Other – warrants		—		—		5		5
Total derivative financial instruments (e)		—		270		13		283
Total assets at fair value	$	2,968	$	11,740	$	14	$	14,722
Liabilities
Derivative financial instruments
Foreign exchange contracts	$	—	$	117	$	—	$	117
Commodity contracts		—		6		11		17
Total derivative financial instruments (e)		—		123		11		134
Total liabilities at fair value	$	—	$	123	$	11	$	134

(a)	"Cash equivalents –financial instruments" in this table exclude time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value totaling $5.3 billion as of March 31, 2011 for the Automotive sector. In addition to these cash equivalents, our Automotive sector also had cash on hand totaling $1.4 billion as of March 31, 2011.
(b)	Includes notes issued by foreign government agencies that include implicit and explicit guarantees, as well as notes issued by supranational institutions.
(c)	Excludes an investment in Ford Credit debt securities held by the Automotive sector with a carrying value of $201 million and an estimated fair value of $203 million as of March 31, 2011; see Note 1 for additional detail.
(d)	Other liquid investments include certificates of deposit and time deposits.
(e)	See Note 16 for additional information regarding derivative financial instruments.

Item 1. Financial Statements (Continued)

NOTE 3. FAIR VALUE MEASUREMENTS (Continued)

	March 31, 2011
	Level 1		Level 2		Level 3		Total
Financial Services Sector
Assets
Cash equivalents – financial instruments (a)
U.S. government	$	—	$	—	$	—	$	—
U.S. government-sponsored enterprises		—		250		—		250
Government –non-U.S.		—		314		—		314
Foreign government agencies (b)		—		308		—		308
Corporate debt		—		1		—		1
Total cash equivalents – financial instruments		—		873		—		873
Marketable securities
U.S. government		828		—		—		828
U.S. government-sponsored enterprises		—		1,521		—		1,521
Foreign government agencies (b)		—		1,188		—		1,188
Corporate debt		—		1,187		—		1,187
Mortgage-backed		—		176		—		176
Government –non-U.S.		—		10		—		10
Other liquid investments (c)		—		17		—		17
Total marketable securities		828		4,099		—		4,927
Derivative financial instruments (d)
Interest rate contracts		—		784		118		902
Foreign exchange contracts		—		70		—		70
Cross currency interest rate swap contracts		—		—		—		—
Total derivative financial instruments		—		854		118		972
Total assets at fair value	$	828	$	5,826	$	118	$	6,772
Liabilities
Derivative financial instruments (d)
Interest rate contracts	$	—	$	101	$	125	$	226
Foreign exchange contracts		—		25		—		25
Cross-currency interest rate swap contracts		—		—		54		54
Total derivative financial instruments		—		126		179		305
Total liabilities at fair value	$	—	$	126	$	179	$	305

(a)	"Cash equivalents –financial instruments" in this table excludes time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value on our balance sheet totaling $5.6 billion as of March 31, 2011 for the Financial Services sector. In addition to these cash equivalents, our Financial Services sector also had cash on hand totaling $2.3 billion as of March 31, 2011.
(b)	Includes notes issued by foreign government agencies that include implicit and explicit guarantees, as well as notes issues by supranational institutions.
(c)	Other liquid investments include certificates of deposit and time deposits.
(d)	See Note 16 for additional information regarding derivative financial instruments.

Item 1. Financial Statements (Continued)

NOTE 3. FAIR VALUE MEASUREMENTS (Continued)

	December 31, 2010
	Level 1		Level 2		Level 3		Total
Automotive Sector
Assets
Cash equivalents – financial instruments (a)
U.S. government	$	—	$	—	$	—	$	—
U.S. government-sponsored enterprises		—		224		—		224
Government –non-U.S.		—		133		—		133
Foreign government agencies (b)		—		1,619		—		1,619
Corporate debt		—		199		—		199
Total cash equivalents – financial instruments		—		2,175		—		2,175
Marketable securities (c)
U.S. government		2,718		—		—		2,718
U.S. government-sponsored enterprises		—		4,809		—		4,809
Foreign government agencies (b)		—		3,215		1		3,216
Corporate debt		—		517		—		517
Mortgage-backed and other asset-backed		—		20		—		20
Equity		203		—		—		203
Government –non-U.S.		—		818		1		819
Other liquid investments (d)		—		1,704		—		1,704
Total marketable securities		2,921		11,083		2		14,006
Derivative financial instruments
Foreign exchange contracts		—		58		—		58
Commodity contracts		—		36		33		69
Other – warrants		—		—		5		5
Total derivative financial instruments (e)		—		94		38		132
Total assets at fair value	$	2,921	$	13,352	$	40	$	16,313
Liabilities
Derivative financial instruments
Foreign exchange contracts	$	—	$	93	$	—	$	93
Commodity contracts		—		6		—		6
Total derivative financial instruments (e)		—		99		—		99
Total liabilities at fair value	$	—	$	99	$	—	$	99

(a)	"Cash equivalents –financial instruments" in this table exclude time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value totaling $2.2 billion as of December 31, 2010 for the Automotive sector. In addition to these cash equivalents, our Automotive sector also had cash on hand totaling $1.9 billion as of December 31, 2010.
(b)	Includes notes issued by foreign government agencies that include implicit and explicit guarantees, as well as notes issued by supranational institutions.
(c)	Excludes an investment in Ford Credit debt securities held by the Automotive sector with a carrying value of $201 million and an estimated fair value of $203 million as of December 31, 2010; see Note 1 for additional detail.
(d)	Other liquid investments include certificates of deposit and time deposits.
(e)	See Note 16 for additional information regarding derivative financial instruments.