F 03.31.2012- 10Q


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)
 
R
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
For the quarterly period ended March 31, 2012
 
 
 
or
 
 
o
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)
(I.R.S. 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 if 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  o

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  o

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 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 o     Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes  o   No  R
 
As of April 27, 2012, Ford had outstanding 3,745,515,422 shares of Common Stock and 70,852,076 shares of Class B Stock.  

Exhibit Index begins on page 75

 








FORD MOTOR COMPANY
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended March 31, 2012

 
Table of Contents
 
Page
 
 
 
Item 1
Financial Statements
 
 
 
 
Consolidated Statement of Comprehensive Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Financial Information
 
Item 3
 
 
 
 
Financial Services Sector
 
Item 4
 
 
 
 
 
 
Part II - Other Information
 
 
Item 1
 
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
 
Item 6
 
 
Signature
 
 
Exhibit Index
 




PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
For the Periods Ended March 31, 2012 and 2011
(in millions, except per share amounts)
 
First Quarter
 
2012
 
2011
 
(unaudited)
Revenues
 
 
 
Automotive
$
30,525

 
$
31,038

Financial Services
1,920

 
2,076

Total revenues
32,445

 
33,114

 
 
 
 
Costs and expenses
 

 
 

Automotive cost of sales
26,854

 
26,776

Selling, administrative and other expenses
2,886

 
2,734

Interest expense
1,011

 
1,174

Financial Services provision for credit and insurance losses
(13
)
 
(54
)
Total costs and expenses
30,738

 
30,630

 
 
 
 
Automotive interest income and other non-operating income/(expense), net (Note 14)
152

 
40

Financial Services other income/(loss), net (Note 14)
84

 
85

Equity in net income/(loss) of affiliated companies
95

 
167

Income/(Loss) before income taxes
2,038

 
2,776

Provision for/(Benefit from) income taxes (Note 15)
640

 
220

Net income/(loss)
1,398

 
2,556

Less: Income/(Loss) attributable to noncontrolling interests
2

 
5

Net income/(loss) attributable to Ford Motor Company
$
1,396

 
$
2,551

 
 
 
 
AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 16)
Basic income/(loss)
$
0.37

 
$
0.68

Diluted income/(loss)
$
0.35

 
$
0.61

 
 
 
 
Cash dividends declared
$
0.05

 
$
—



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the Periods Ended March 31, 2012 and 2011
(in millions)
 
First Quarter
 
2012
 
2011
 
(unaudited)
Net income/(loss)
$
1,398

 
$
2,556

Other comprehensive income/(loss), net of tax (Note 13)
 
 
 
Foreign currency translation
523

 
588

Derivative instruments
(63
)
 
117

Pension and other postretirement benefits
(40
)
 
(78
)
Total other comprehensive income/(loss), net of tax
420

 
627

Comprehensive income/(loss)
1,818

 
3,183

Less: Comprehensive income/(loss) attributable to noncontrolling interests
2

 
3

Comprehensive income/(loss) attributable to Ford Motor Company
$
1,816

 
$
3,180


The accompanying notes are part of the financial statements.

1
Item 1. Financial Statements (Continued)                                 

FORD MOTOR COMPANY AND SUBSIDIARIES
SECTOR STATEMENT OF OPERATIONS
For the Periods Ended March 31, 2012 and 2011
(in millions, except per share amounts)
 
First Quarter
 
2012
 
2011
 
(unaudited)
AUTOMOTIVE
 
 
 
Revenues
$
30,525

 
$
31,038

Costs and expenses
 
 
 
Cost of sales
26,854

 
26,776

Selling, administrative and other expenses
2,135

 
2,143

Total costs and expenses
28,989

 
28,919

Operating income/(loss)
1,536

 
2,119

 
 
 
 
Interest expense
185

 
251

 
 
 
 
Interest income and other non-operating income/(expense), net (Note 14)
152

 
40

Equity in net income/(loss) of affiliated companies
79

 
162

Income/(Loss) before income taxes — Automotive
1,582

 
2,070

 
 
 
 
FINANCIAL SERVICES
 

 
 

Revenues
1,920

 
2,076

Costs and expenses
 
 
 
Interest expense
826

 
923

Depreciation
600

 
430

Operating and other expenses
151

 
161

Provision for credit and insurance losses
(13
)
 
(54
)
Total costs and expenses
1,564

 
1,460

 
 
 
 
Other income/(loss), net (Note 14)
84

 
85

Equity in net income/(loss) of affiliated companies
16

 
5

Income/(Loss) before income taxes — Financial Services
456

 
706

 
 
 
 
TOTAL COMPANY
 

 
 

Income/(Loss) before income taxes
2,038

 
2,776

Provision for/(Benefit from) income taxes (Note 15)
640

 
220

Net income/(loss)
1,398

 
2,556

Less: Income/(Loss) attributable to noncontrolling interests
2

 
5

Net income/(loss) attributable to Ford Motor Company
$
1,396

 
$
2,551


The accompanying notes are part of the financial statements.

2
Item 1. Financial Statements (Continued)                                 

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
 
March 31,
2012
 
December 31,
2011
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
15,244

 
$
17,148

Marketable securities
20,783

 
18,618

Finance receivables, net (Note 5)
69,897

 
69,976

Other receivables, net
9,904

 
8,565

Net investment in operating leases
13,476

 
12,838

Inventories (Note 7)
7,031

 
5,901

Equity in net assets of affiliated companies
2,964

 
2,936

Net property
23,150

 
22,371

Deferred income taxes
14,535

 
15,125

Net intangible assets
97

 
100

Other assets
4,994

 
4,770

Total assets
$
182,075

 
$
178,348

 
 
 
 
LIABILITIES
 

 
 

Payables
$
19,638

 
$
17,724

Accrued liabilities and deferred revenue (Note 9)
44,714

 
45,369

Debt (Note 11)
100,490

 
99,488

Deferred income taxes
583

 
696

Total liabilities
165,425

 
163,277

 
 
 
 
EQUITY
 

 
 

Capital stock
 

 
 

Common Stock, par value $.01 per share (3,763 million shares issued)
38

 
37

Class B Stock, par value $.01 per share (71 million shares issued)
1

 
1

Capital in excess of par value of stock
20,884

 
20,905

Retained earnings/(Accumulated deficit)
14,190

 
12,985

Accumulated other comprehensive income/(loss) (Note 13)
(18,314
)
 
(18,734
)
Treasury stock
(193
)
 
(166
)
Total equity/(deficit) attributable to Ford Motor Company
16,606

 
15,028

Equity/(Deficit) attributable to noncontrolling interests
44

 
43

Total equity/(deficit)
16,650

 
15,071

Total liabilities and equity
$
182,075

 
$
178,348

 
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.
 
March 31,
2012
 
December 31, 2011
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
3,901

 
$
3,402

Finance receivables, net
49,977

 
49,795

Net investment in operating leases
5,695

 
6,354

Other assets
113

 
157

LIABILITIES


 


Accrued liabilities and deferred revenue
128

 
97

Debt
42,325

 
41,421


The accompanying notes are part of the financial statements.

3
Item 1. Financial Statements (Continued)                                 

FORD MOTOR COMPANY AND SUBSIDIARIES
SECTOR BALANCE SHEET
(in millions) 
 
March 31,
2012
 
December 31,
2011
ASSETS
(unaudited)
Automotive
 
 
 
Cash and cash equivalents
$
7,261

 
$
7,965

Marketable securities
15,801

 
14,984

Total cash and marketable securities
23,062

 
22,949

Receivables, less allowances of $127 and $126
4,880

 
4,219

Inventories (Note 7)
7,031

 
5,901

Deferred income taxes
1,980

 
1,791

Net investment in operating leases
1,159

 
1,356

Other current assets
1,066

 
1,053

Current receivable from Financial Services
1,404

 
878

Total current assets
40,582

 
38,147

Equity in net assets of affiliated companies
2,821

 
2,797

Net property
23,011

 
22,229

Deferred income taxes
13,277

 
13,932

Net intangible assets
97

 
100

Non-current receivable from Financial Services
—

 
32

Other assets
1,860

 
1,549

Total Automotive assets
81,648

 
78,786

Financial Services
 

 
 

Cash and cash equivalents
7,983

 
9,183

Marketable securities
4,982

 
3,835

Finance receivables, net (Note 5)
73,911

 
73,330

Net investment in operating leases
12,317

 
11,482

Equity in net assets of affiliated companies
143

 
139

Other assets
3,528

 
3,605

Total Financial Services assets
102,864

 
101,574

Intersector elimination
(1,404
)
 
(1,112
)
Total assets
$
183,108

 
$
179,248

LIABILITIES
 

 
 

Automotive
 

 
 

Trade payables
$
15,918

 
$
14,015

Other payables
2,609

 
2,734

Accrued liabilities and deferred revenue (Note 9)
15,159

 
15,003

Deferred income taxes
57

 
40

Debt payable within one year (Note 11)
1,142

 
1,033

Total current liabilities
34,885

 
32,825

Long-term debt (Note 11)
12,549

 
12,061

Other liabilities (Note 9)
26,119

 
26,910

Deferred income taxes
107

 
255

Total Automotive liabilities
73,660

 
72,051

Financial Services
 

 
 

Payables
1,111

 
975

Debt (Note 11)
86,799

 
86,595

Deferred income taxes
1,452

 
1,301

Other liabilities and deferred income (Note 9)
3,436

 
3,457

Payable to Automotive
1,404

 
910

Total Financial Services liabilities
94,202

 
93,238

Intersector elimination
(1,404
)
 
(1,112
)
Total liabilities
166,458

 
164,177

EQUITY
 

 
 

Capital stock
 

 
 

Common Stock, par value $.01 per share (3,763 million shares issued)
38

 
37

Class B Stock, par value $.01 per share (71 million shares issued)
1

 
1

Capital in excess of par value of stock
20,884

 
20,905

Retained earnings/(Accumulated deficit)
14,190

 
12,985

Accumulated other comprehensive income/(loss) (Note 13)
(18,314
)
 
(18,734
)
Treasury stock
(193
)
 
(166
)
Total equity/(deficit) attributable to Ford Motor Company
16,606

 
15,028

Equity/(Deficit) attributable to noncontrolling interests
44

 
43

Total equity/(deficit)
16,650

 
15,071

Total liabilities and equity
$
183,108

 
$
179,248


The accompanying notes are part of the financial statements.

4
Item 1. Financial Statements (Continued)                                 

FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Periods Ended March 31, 2012 and 2011
(in millions)
 
First Quarter
 
2012
 
2011
 
(unaudited)
Cash flows from operating activities of continuing operations
 
 
 
Net cash provided by/(used in) operating activities
$
2,075

 
$
2,497

 
 
 
 
Cash flows from investing activities of continuing operations
 
 
 
Capital expenditures
(1,093
)
 
(929
)
Acquisitions of retail and other finance receivables and operating leases
(8,929
)
 
(8,068
)
Collections of retail and other finance receivables and operating leases
7,850

 
8,444

Purchases of securities
(19,816
)
 
(19,194
)
Sales and maturities of securities
17,704

 
26,479

Proceeds from sale of business
5

 
—

Settlements of derivatives
(201
)
 
15

Other
(31
)
 
147

Net cash provided by/(used in) investing activities
(4,511
)
 
6,894

 
 
 
 
Cash flows from financing activities of continuing operations
 

 
 

Cash dividends
(190
)
 
—

Purchases of Common Stock
(27
)
 
—

Changes in short-term debt
(1,651
)
 
561

Proceeds from issuance of other debt
10,318

 
9,268

Principal payments on other debt
(8,164
)
 
(13,199
)
Other
84

 
88

Net cash provided by/(used in) financing activities
370

 
(3,282
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
162

 
404

 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
(1,904
)
 
$
6,513

 
 
 
 
Cash and cash equivalents at January 1
$
17,148

 
$
14,805

Net increase/(decrease) in cash and cash equivalents
(1,904
)
 
6,513

Cash and cash equivalents at March 31
$
15,244

 
$
21,318


The accompanying notes are part of the financial statements.

5
Item 1. Financial Statements (Continued)                                 

FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED SECTOR STATEMENT OF CASH FLOWS
For the Periods Ended March 31, 2012 and 2011
(in millions)
 
First Quarter 2012
 
First Quarter 2011
 
Automotive
 
Financial
Services
 
Automotive
 
Financial
Services
 
(unaudited)
Cash flows from operating activities of continuing operations
 
 
 
 
 
 
 
Net cash provided by/(used in) operating activities
$
875

 
$
1,269

 
$
2,963

 
$
1,035

 
 
 
 
 
 
 
 
Cash flows from investing activities of continuing operations
 
 
 
 
 
 
 
Capital expenditures
(1,083
)
 
(10
)
 
(926
)
 
(3
)
Acquisitions of retail and other finance receivables and operating leases
—

 
(9,043
)
 
—

 
(7,990
)
Collections of retail and other finance receivables and operating leases
—

 
7,850

 
—

 
8,444

Net collections/(acquisitions) of wholesale receivables
—

 
45

 
—

 
(1,579
)
Purchases of securities
(14,302
)
 
(5,514
)
 
(11,364
)
 
(7,830
)
Sales and maturities of securities
13,525

 
4,380

 
16,815

 
9,664

Settlements of derivatives
(174
)
 
(27
)
 
35

 
(20
)
Proceeds from sale of business
—

 
5

 
—

 
—

Investing activity (to)/from Financial Services
45

 
—

 
838

 
—

Other
10

 
(41
)
 
130

 
17

Net cash provided by/(used in) investing activities
(1,979
)
 
(2,355
)
 
5,528

 
703

 
 
 
 
 
 
 
 
Cash flows from financing activities of continuing operations
 

 
 

 
 

 
 

Cash dividends
(190
)
 
—

 
—

 
—

Purchases of Common Stock
(27
)
 
—

 
—

 
—

Changes in short-term debt
(19
)
 
(1,632
)
 
(110
)
 
671

Proceeds from issuance of other debt
674

 
9,644

 
574

 
8,694

Principal payments on other debt
(132
)
 
(8,233
)
 
(3,000
)
 
(10,199
)
Financing activity to/(from) Automotive
—

 
(45
)
 
—

 
(838
)
Other
9

 
75

 
59

 
29

Net cash provided by/(used in) financing activities
315

 
(191
)
 
(2,477
)
 
(1,643
)
 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
85

 
77

 
229

 
175

 
 
 
 
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
(704
)
 
$
(1,200
)
 
$
6,243

 
$
270

 
 
 
 
 
 
 
 
Cash and cash equivalents at January 1
$
7,965

 
$
9,183

 
$
6,301

 
$
8,504

Net increase/(decrease) in cash and cash equivalents
(704
)
 
(1,200
)
 
6,243

 
270

Cash and cash equivalents at March 31
$
7,261

 
$
7,983

 
$
12,544

 
$
8,774


The accompanying notes are part of the financial statements.

6
Item 1. Financial Statements (Continued)                                 

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
For the Periods Ended March 31, 2012 and 2011
(in millions, unaudited)
 
Equity/(Deficit) Attributable to Ford Motor Company
 
 
 
 
 
Capital Stock
 
Cap. in
Excess of
Par Value 
of Stock
 
Retained Earnings/
(Accumulated Deficit)
 
Accumulated Other Comprehensive Income/(Loss) (Note 13)
 
Treasury Stock
 
Total
 
Equity/(Deficit)
Attributable
to Non-controlling Interests
 
Total
Equity/
(Deficit)
Balance at December 31, 2011
$
38

 
$
20,905

 
$
12,985

 
$
(18,734
)
 
$
(166
)
 
$
15,028

 
$
43

 
$
15,071

Net income/(loss)
—

 
—

 
1,396

 
—

 
—

 
1,396

 
2

 
1,398

Other comprehensive income/(loss), net of tax
—

 
—

 
—

 
420

 
—

 
420

 
—

 
420

Common stock issued (including share-
based compensation impacts)

1

 
(21
)
 
—

 
—

 
—

 
(20
)
 
—

 
(20
)
Treasury stock/other 
—

 
—

 
—

 
—

 
(27
)
 
(27
)
 
(1
)
 
(28
)
Cash dividends declared
—

 
—

 
(191
)
 
—

 
—

 
(191
)
 
—

 
(191
)
Balance at March 31, 2012
$
39

 
$
20,884

 
$
14,190

 
$
(18,314
)
 
$
(193
)
 
$
16,606

 
$
44

 
$
16,650

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2010
$
38

 
$
20,803

 
$
(7,038
)
 
$
(14,313
)
 
$
(163
)
 
$
(673
)
 
$
31

 
$
(642
)
Net income/(loss)
—

 
—

 
2,551

 
—

 
—

 
2,551

 
5

 
2,556

Other comprehensive income/(loss), net of tax
—

 
—

 
—

 
629

 
—

 
629

 
(2
)
 
627

Common stock issued (including share-
based compensation impacts)
—

 
(74
)
 
—

 
—

 
—

 
(74
)
 
—

 
(74
)
Treasury stock/other 
—

 
(6
)
 
—

 
—

 
(1
)
 
(7
)
 
5

 
(2
)
Cash dividends declared
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Balance at March 31, 2011
$
38

 
$
20,723

 
$
(4,487
)
 
$
(13,684
)
 
$
(164
)
 
$
2,426

 
$
39

 
$
2,465


The accompanying notes are part of the financial statements.

7
Item 1. Financial Statements (Continued)                                 

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

Table of Contents
Footnote
 
Page
Note 1
Presentation
Note 2
Accounting Standards Issued But Not Yet Adopted
Note 3
Fair Value Measurements
Note 4
Restricted Cash
Note 5
Finance Receivables
Note 6
Allowance for Credit Losses
Note 7
Inventories
Note 8
Variable Interest Entities
Note 9
Accrued Liabilities and Deferred Revenue
Note 10
Retirement Benefits
Note 11
Debt and Commitments
Note 12
Derivative Financial Instruments and Hedging Activities
Note 13
Accumulated Other Comprehensive Income/(Loss)
Note 14
Other Income/(Loss)
Note 15
Income Taxes
Note 16
Amounts Per Share Attributable to Ford Motor Company Common and Class B Stock
Note 17
Segment Information
Note 18
Commitments and Contingencies



8
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.  PRESENTATION

Our financial statements are presented in accordance with U.S. generally accepted accounting principles ("GAAP") 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. Where the presentation of these intercompany eliminations or consolidated adjustments differs between the consolidated and sector financial statements, reconciliations of certain line items are explained below in this Note or in related footnotes.

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, 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, 2011 ("2011 Form 10-K Report").  For purposes of this report, "Ford," the "Company," "we," "our," "us" or similar references mean Ford Motor Company, 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

Fair Value Measurement. On January 1, 2012, we adopted the new accounting standard that requires us to report the level in the fair value hierarchy of assets and liabilities not measured at fair value in the balance sheet but for which the fair value is disclosed, and to expand existing disclosures. Refer to Note 3 for further disclosure regarding our fair value measurements.

Comprehensive Income - Presentation. On January 1, 2012, we adopted the new accounting standard that modifies the options for presentation of other comprehensive income. The new accounting standard requires us to present comprehensive income either in a single continuous statement or two separate but consecutive statements. We have elected to present comprehensive income in two separate but consecutive statements.

On January 1, 2012, we also adopted the new accounting standards Intangibles - Goodwill and Other, Transfers and Servicing - Repurchase Agreements, and Financial Services - Insurance. The adoption of these new accounting standards did not impact our financial condition or results of operations.



9
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.  PRESENTATION (Continued)

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 deferred income tax assets and liabilities. The reconciliation between the totals for the sector and consolidated balance sheets was as follows (in millions):
 
March 31,
2012
 
December 31,
2011
Sector balance sheet presentation of deferred income tax assets
 
 
 
Automotive sector current deferred income tax assets
$
1,980

 
$
1,791

Automotive sector non-current deferred income tax assets
13,277

 
13,932

Financial Services sector deferred income tax assets (a)
311

 
302

Total
15,568

 
16,025

Reclassification for netting of deferred income taxes
(1,033
)
 
(900
)
Consolidated balance sheet presentation of deferred income tax assets
$
14,535

 
$
15,125

 
 
 
 
Sector balance sheet presentation of deferred income tax liabilities
 

 
 

Automotive sector current deferred income tax liabilities
$
57

 
$
40

Automotive sector non-current deferred income tax liabilities
107

 
255

Financial Services sector deferred income tax liabilities
1,452

 
1,301

Total
1,616

 
1,596

Reclassification for netting of deferred income taxes
(1,033
)
 
(900
)
Consolidated balance sheet presentation of deferred income tax liabilities
$
583

 
$
696

__________
(a)
Financial Services deferred income tax assets are included in Financial Services other assets on our sector balance sheet.

10
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.  PRESENTATION (Continued)

Sector to Consolidated Cash Flow. We present certain cash flows from wholesale receivables, finance receivables and the acquisition of intersector debt differently on our sector and consolidated statements of cash flows. The reconciliation between totals for the sector and consolidated cash flows for the periods ended March 31 was as follows (in millions):
 
First Quarter
 
2012
 
2011
Automotive net cash provided by/(used in) operating activities
$
875

 
$
2,963

Financial Services net cash provided by/(used in) operating activities
1,269

 
1,035

Total sector net cash provided by/(used in) operating activities
2,144

 
3,998

Reclassifications from investing to operating cash flows
 

 
 

Wholesale receivables (a)
45

 
(1,579
)
Finance receivables (b)
(114
)
 
78

Consolidated net cash provided by/(used in) operating activities
$
2,075

 
$
2,497

 
 
 
 
Automotive net cash provided by/(used in) investing activities
$
(1,979
)
 
$
5,528

Financial Services net cash provided by/(used in) investing activities
(2,355
)
 
703

Total sector net cash provided by/(used in) investing activities
(4,334
)
 
6,231

Reclassifications from investing to operating cash flows
 

 
 

Wholesale receivables (a)
(45
)
 
1,579

Finance receivables (b)
114

 
(78
)
Reclassifications from investing to financing cash flows
 
 
 
Maturity of Financial Services sector debt held by Automotive sector
(201
)
 
—

Elimination of investing activity to/(from) Financial Services in consolidation
(45
)
 
(838
)
Consolidated net cash provided by/(used in) investing activities
$
(4,511
)
 
$
6,894

 
 
 
 
Automotive net cash provided by/(used in) financing activities
$
315

 
$
(2,477
)
Financial Services net cash provided by/(used in) financing activities
(191
)
 
(1,643
)
Total sector net cash provided by/(used in) financing activities
124

 
(4,120
)
Reclassifications from investing to financing cash flows
 

 
 

Maturity of Financial Services sector debt held by Automotive sector
201

 
—

Elimination of investing activity to/(from) Financial Services in consolidation
45

 
838

Consolidated net cash provided by/(used in) financing activities
$
370

 
$
(3,282
)
 __________
(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 by the Financial Services sector from certain divisions and subsidiaries of the Automotive sector.

Venezuelan Operations

At March 31, 2012 and December 31, 2011, we had $347 million and $301 million, respectively, in net monetary assets (primarily cash and receivables partially offset by payables and accrued liabilities) denominated in Venezuelan bolivars. These net monetary assets included $404 million and $331 million in cash and cash equivalents at
March 31, 2012 and December 31, 2011, respectively. As a result of regulation of foreign currency exchange in Venezuela, the official exchange rate of 4.3 bolivars to the U.S. dollar is used to re-measure the assets and liabilities of our Venezuelan operations for GAAP financial statement presentation. The Venezuelan government also controls securities transactions in the parallel exchange market. Our ability to obtain funds in the parallel exchange market has been limited. For any U.S. dollars that we obtain at a rate less favorable than the official rate, we realize a loss for the difference in the exchange rates at the time of the transaction. Based on our net monetary position at March 31, 2012, a devaluation equal to a 50% change in the official bolivar exchange rate would have resulted in a balance sheet translation loss of approximately $115 million. Continuing restrictions on the foreign currency exchange market could affect our Venezuelan operations' ability to pay obligations denominated in U.S. dollars as well as our ability to benefit from those operations.

11
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 2.  ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

Balance Sheet - Offsetting. In December of 2011, the Financial Accounting Standards Board issued a new accounting standard that requires disclosures about offsetting and related arrangements for recognized financial instruments and derivative instruments. The new accounting standard is effective for us as of January 1, 2013.

NOTE 3.  FAIR VALUE MEASUREMENTS

Cash equivalents, marketable securities, and derivative instruments are presented in our financial statements on a recurring basis at fair value, while other assets and liabilities are measured at fair value on a nonrecurring basis such as impairments.

Fair Value Measurements

In measuring fair value, we use various valuation methodologies and prioritize the use of observable inputs. The use of observable and unobservable inputs and their significance in measuring fair value are reflected in our fair value hierarchy assessment.

•
Level 1 — inputs include quoted prices for identical instruments and are the most observable
•
Level 2 — inputs include quoted prices for similar instruments 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 judgment about the assumptions market participants would use in pricing the instruments

We review the inputs to the fair value measurements to ensure they are appropriately categorized within the fair value hierarchy. Transfers into and transfers out of the hierarchy levels are recognized as if they had taken place at the end of the reporting period.

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 change 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. 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 change in value due to interest rate, market price, or penalty on withdrawal are classified as Marketable securities. We generally measure fair value using prices obtained from pricing services. 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 buyer stands ready to purchase), and other market information. For fixed income securities that are not actively traded, the pricing services use alternative methods to determine fair value for the securities, including: quotes for similar fixed-income securities, matrix pricing, income approach using benchmark curves, or other factors to determine fair value. In certain cases, when market data are not available, we use broker quotes to determine fair value.

A review is performed on the security prices received from our pricing services, which includes discussion and analysis of the inputs used by the pricing services to value our securities. We also compare the price of certain securities sold close to the quarter end to the price of the same security at the balance sheet date to ensure the reported fair value is reasonable.  
 


12
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

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 using industry-standard valuation models such as a discounted cash flow. 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, commodity prices, 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 use broker quotes and models (e.g., Black Scholes) to determine fair value. This includes situations where there is illiquidity for a particular currency or commodity or for longer-dated instruments.

Ford Credit's two Ford Upgrade Exchange Linked securitization transactions ("FUEL Notes") have derivative features which include a mandatory exchange to Ford Credit unsecured notes when Ford Credit's senior unsecured debt receives two investment grade credit ratings among Fitch, Moody's, and S&P, and a make-whole provision.  We estimated the fair value of these features by comparing the market value of the FUEL Notes to the value of a hypothetical debt instrument without these features.

Finance Receivables. The fair value of finance receivables is measured for purposes of disclosure (see Note 5). We measure 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 assumptions regarding credit losses, pre-payment speed, and the discount rate, which is based on the characteristics of the receivables. Our assumptions regarding pre-payment speed and credit losses are based on historical performance. The fair value of finance receivables is categorized within Level 3 of the hierarchy.

On a nonrecurring basis, when retail contracts are greater than 120 days past due or deemed to be uncollectible, or if individual dealer loans are probable of foreclosure, we use the fair value of collateral, adjusted for estimated costs to sell, to determine the fair value adjustment to our receivables. The collateral for retail receivables is the vehicle financed, and for dealer loans is real estate or other property.

The fair value measurements for retail receivables are based on the number of contracts multiplied by the loss severity and the probability of default ("POD") percentage, or the outstanding receivable balances multiplied by the average recovery value ("ARV") percentage to determine the fair value adjustment.

The fair value measurements for dealer loans are based on an assessment of the estimated market value of collateral. The assessment is performed by reviewing various appraisals, which include total adjusted appraised value of land and improvements, alternate use appraised value, broker's opinion of value, and purchase offers. The fair value adjustment is determined by comparing the net carrying value of the dealer loan and the estimated market value of collateral.

Debt. We measure debt at fair value for purposes of disclosure (see Note 11) using quoted market prices for our own debt with approximately the same remaining maturities, where possible. Where market prices are not available, we estimate fair value using discounted cash flow models with market-based expectations for interest rates, our own credit risk and the contractual terms of the debt instruments. For certain short-term debt issuances with an original maturity date of one year or less, we assume that book value is a reasonable approximation of the debt's fair value. 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 pre-payment speeds. The fair value of debt is categorized within Level 2 of the hierarchy.
  

13
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)

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

The following tables categorize the fair values of items measured at fair value on a recurring basis on our balance sheet (in millions):
 
March 31, 2012
 
Level 1 (a)
 
Level 2 (a)
 
Level 3
 
Total
Automotive Sector
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash equivalents – financial instruments
 
 
 
 
 
 
 
U.S. government
$
—

 
$
—

 
$
—

 
$
—

U.S. government-sponsored enterprises
—

 
466

 
—

 
466

Non-U.S. government
—

 
84

 
—

 
84

Non-U.S. government agencies (b)
—

 
175

 
—

 
175

Corporate debt
—

 
49

 
—

 
49

Total cash equivalents – financial instruments (c)
—

 
774

 
—

 
774

Marketable securities
 

 
 

 
 

 
 

U.S. government
3,988

 
—

 
—

 
3,988

U.S. government-sponsored enterprises
—

 
3,716

 
—

 
3,716

Non-U.S. government agencies (b)
—

 
4,630

 
—

 
4,630

Corporate debt
—

 
2,074

 
—

 
2,074

Mortgage-backed and other asset-backed
—

 
27

 
—

 
27

Equities
127

 
—

 
—

 
127

Non-U.S. government
—

 
1,222

 
—

 
1,222

Other liquid investments (d)
—

 
17

 
—

 
17

Total marketable securities
4,115

 
11,686

 
—

 
15,801

Derivative financial instruments
 

 
 

 
 

 
 

Foreign currency exchange contracts
—

 
115

 
—

 
115

Commodity contracts
—

 
11

 
3

 
14

Total derivative financial instruments (e)
—

 
126

 
3

 
129

Total assets at fair value
$
4,115

 
$
12,586

 
$
3

 
$
16,704

Liabilities
 

 
 

 
 

 
 

Derivative financial instruments
 

 
 

 
 

 
 

Foreign currency exchange contracts
$
—

 
$
437

 
$
—

 
$
437

Commodity contracts
—

 
179

 
47

 
226

Total derivative financial instruments (e)
—

 
616

 
47

 
663

Total liabilities at fair value
$
—

 
$
616

 
$
47

 
$
663

 __________
(a)
There were no transfers between Level 1 and 2 during the period.
(b)
Includes notes issued by non-U.S. government agencies, as well as notes issued by supranational institutions.
(c)
Excludes time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value totaling $4.8 billion as of March 31, 2012 for the Automotive sector. In addition to these cash equivalents, our Automotive sector also had cash on hand totaling $1.7 billion as of March 31, 2012.
(d)
Includes certificates of deposit and time deposits subject to changes in value.
(e)
See Note 12 for additional information regarding derivative financial instruments.

14
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)
 
March 31, 2012
 
Level 1 (a)
 
Level 2 (a)
 
Level 3
 
Total
Financial Services Sector
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash equivalents – financial instruments
 
 
 
 
 
 
 
U.S. government
$
5

 
$
—

 
$
—

 
$
5

U.S. government-sponsored enterprises
—

 
125

 
—

 
125

Non-U.S. government
—

 
255

 
—

 
255

Non-U.S. government agencies (b)
—

 
—

 
—

 
—

Corporate debt
—

 
—

 
—

 
—

Mortgage-backed and other asset-backed
—

 
—

 
—

 
—

Total cash equivalents – financial instruments (c)
5

 
380

 
—

 
385

Marketable securities
 

 
 

 
 

 
 

U.S. government
1,455

 
—

 
—

 
1,455

U.S. government-sponsored enterprises
—

 
1,285

 
—

 
1,285

Non-U.S. government agencies (b)
—

 
797

 
—

 
797

Corporate debt
—

 
1,110

 
—

 
1,110

Mortgage-backed and other asset-backed
—

 
85

 
—

 
85

Non-U.S. government
—

 
243

 
—

 
243

Other liquid investments (d)
—

 
7

 
—

 
7

Total marketable securities
1,455

 
3,527

 
—

 
4,982

Derivative financial instruments
 

 
 

 
 

 
 

Interest rate contracts
—

 
1,169

 
—

 
1,169

Foreign currency exchange contracts
—

 
2

 
—

 
2

Cross-currency interest rate swap contracts
—

 
—

 
—

 
—

Other (e)
—

 
—

 
99

 
99

Total derivative financial instruments (f)
—

 
1,171

 
99

 
1,270

Total assets at fair value
$
1,460

 
$
5,078

 
$
99

 
$
6,637

Liabilities
 

 
 

 
 

 
 

Derivative financial instruments
 

 
 

 
 

 
 

Interest rate contracts
$
—

 
$
301

 
$
—

 
$
301

Foreign currency exchange contracts
—

 
43

 
—

 
43

Cross-currency interest rate swap contracts
—

 
46

 
—

 
46

Total derivative financial instruments (f)
—

 
390

 
—

 
390

Total liabilities at fair value
$
—

 
$
390

 
$
—

 
$
390

 __________
(a)
There were no transfers between Level 1 and 2 during the period.
(b)
Includes notes issued by non-U.S. government agencies, as well as notes issued by supranational institutions.
(c)
Excludes time deposits, certificates of deposit, and money market accounts reported at par value on our balance sheet totaling $5.4 billion as of March 31, 2012 for the Financial Services sector. In addition to these cash equivalents, our Financial Services sector also had cash on hand totaling $2.2 billion as of March 31, 2012.
(d)
Includes certificates of deposit and time deposits subject to changes in value.
(e)
Represents derivative features included in the FUEL Notes.
(f)
See Note 12 for additional information regarding derivative financial instruments.


15
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)
 
December 31, 2011
 
Level 1 (a)
 
Level 2 (a)
 
Level 3
 
Total
Automotive Sector
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash equivalents – financial instruments
 
 
 
 
 
 
 
U.S. government
$
—

 
$
—

 
$
—

 
$
—

U.S. government-sponsored enterprises
—

 
319

 
—

 
319

Non-U.S. government
—

 
168

 
—

 
168

Non-U.S. government agencies (b)
—

 
820

 
—

 
820

Corporate debt
—

 
2

 
—

 
2

Total cash equivalents – financial instruments (c)
—

 
1,309

 
—

 
1,309

Marketable securities (d)
 

 
 

 
 

 
 

U.S. government
2,960

 
—

 
—

 
2,960

U.S. government-sponsored enterprises
—

 
4,852

 
—

 
4,852

Non-U.S. government agencies (b)
—

 
4,558

 
—

 
4,558

Corporate debt
—

 
1,631

 
—

 
1,631

Mortgage-backed and other asset-backed
—

 
38

 
—

 
38

Equities
129

 
—

 
—

 
129

Non-U.S. government
—

 
598

 
—

 
598

Other liquid investments (e)
—

 
17

 
—

 
17

Total marketable securities
3,089

 
11,694

 
—

 
14,783

Derivative financial instruments
 

 
 

 
 

 
 

Foreign currency exchange contracts
—

 
198

 
14

 
212

Commodity contracts
—

 
1

 
1

 
2

Other – warrants
—

 
—

 
4

 
4

Total derivative financial instruments (f)
—

 
199

 
19

 
218

Total assets at fair value
$
3,089

 
$
13,202

 
$
19

 
$
16,310

Liabilities
 

 
 

 
 

 
 

Derivative financial instruments
 

 
 

 
 

 
 

Foreign currency exchange contracts
$
—

 
$
442

 
$
6

 
$
448

Commodity contracts
—

 
289

 
83

 
372

Total derivative financial instruments (f)
—

 
731

 
89

 
820

Total liabilities at fair value
$
—

 
$
731

 
$
89

 
$
820

 __________
(a)
There were no transfers between Level 1 and 2 during the year.
(b)
Includes notes issued by non-U.S. government agencies, as well as notes issued by supranational institutions.
(c)
Excludes time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value totaling $4.6 billion as of December 31, 2011 for the Automotive sector. In addition to these cash equivalents, our Automotive sector also had cash on hand totaling $2.1 billion as of December 31, 2011.
(d)
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 $201 million as of December 31, 2011.
(e)
Includes certificates of deposit and time deposits subject to changes in value.
(f)
See Note 12 for additional information regarding derivative financial instruments.


16
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)
 
December 31, 2011
 
Level 1 (a)
 
Level 2 (a)
 
Level 3
 
Total
Financial Services Sector
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash equivalents – financial instruments
 
 
 
 
 
 
 
U.S. government
$
1

 
$
—

 
$
—

 
$
1

U.S. government-sponsored enterprises
—

 
75

 
—

 
75

Non-U.S. government
—

 
15

 
—

 
15

Non-U.S. government agencies (b)
—

 
150

 
—

 
150

Corporate debt
—

 
—

 
—

 
—

Total cash equivalents – financial instruments (c)
1

 
240

 
—

 
241

Marketable securities
 

 
 

 
 

 
 

U.S. government
619

 
—

 
—

 
619

U.S. government-sponsored enterprises
—

 
713

 
—

 
713

Non-U.S. government agencies (b)
—

 
778

 
—

 
778

Corporate debt
—

 
1,186

 
—

 
1,186

Mortgage-backed and other asset-backed
—

 
88

 
—

 
88

Non-U.S. government
—

 
444

 
—

 
444

Other liquid investments (d)
—

 
7

 
—

 
7

Total marketable securities
619

 
3,216

 
—

 
3,835

Derivative financial instruments
 

 
 

 
 

 
 

Interest rate contracts
—

 
1,196

 
—

 
1,196

Foreign currency exchange contracts
—

 
30

 
—

 
30

Cross-currency interest rate swap contracts
—

 
12

 
—

 
12

Other (e)
—

 
—

 
137

 
137

Total derivative financial instruments (f)
—

 
1,238

 
137

 
1,375

Total assets at fair value
$
620

 
$
4,694

 
$
137

 
$
5,451

Liabilities
 

 
 

 
 

 
 

Derivative financial instruments
 

 
 

 
 

 
 

Interest rate contracts
$
—

 
$
237

 
$
—

 
$
237

Foreign currency exchange contracts
—

 
50

 
—

 
50

Cross-currency interest rate swap contracts
—

 
12

 
—

 
12

Total derivative financial instruments (f)
—

 
299

 
—

 
299

Total liabilities at fair value
$
—

 
$
299

 
$
—

 
$
299

 __________
(a)
There were no transfers between Level 1 and 2 during the year.
(b)
Includes notes issued by non-U.S. government agencies, as well as notes issued by supranational institutions.
(c)
Excludes time deposits, certificates of deposit, and money market accounts reported at par value on our balance sheet totaling $6 billion as of December 31, 2011 for the Financial Services sector. In addition to these cash equivalents, our Financial Services sector also had cash on hand totaling $3 billion as of December 31, 2011.
(d)
Includes certificates of deposit and time deposits subject to changes in value.
(e)
Represents derivative features included in the FUEL Notes.
(f)
See Note 12 for additional information regarding derivative financial instruments.


17
Item 1. Financial Statements (Continued)                                

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)

Reconciliation of Changes in Level 3 Balances

The following tables summarize the changes recorded through income in Level 3 items measured at fair value on a recurring basis and reported on our balance sheet for the periods ended March 31 (in millions):
 
 
 
 
 
 
 
First Quarter 2012
 
Marketable Securities
 
Derivative Financial Instruments,
Net
 
Total Level 3
Fair Value
Automotive Sector
 
 
 
 
 
Beginning balance
$
—

 
$
(70
)
 
$
(70
)
Realized/unrealized gains/(losses)
 

 
 
 
 

Cost of sales 
—

 
23

 
23

Interest income and other non-operating income/(expense), net
—

 
(4
)
 
(4
)
Other comprehensive income/(loss)
—

 
—

 
—

Total realized/unrealized gains/(losses)
—

 
19

 
19