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ONE Ford
Ford Motor Company / 2009 Annual Report

Table of contents

  • Page 1
    ONE Ford Ford Motor Company / 2009 Annual Report

  • Page 2
    ... Jaguar Land Rover for 2008. (b) Automotive gross cash includes cash and cash equivalents and net marketable securities. (c) Source: Bowne Shareholder Value Dividends per share Total shareholder returns % (c) $ - 337% $ (66)% ONE FORD: ONE Ford expands on the company's four-point business plan...

  • Page 3
    ...include Ford, Lincoln, Mercury and Volvo. The company provides financial services through Ford Motor Credit Company. For more information regarding Ford's products, please visit www.ford.com. Alan Mulally and William Clay Ford, Jr. introduce the next-generation Ford Focus at the 2010 North American...

  • Page 4
    ... of high-quality, fuel-efficient, safe new products that customers want and value. • Finance our plan and improve our balance sheet. • Work together as one team, leveraging our global assets. ONE Ford helped us achieve profitability and grow our business despite a global recession...

  • Page 5
    ... focus on improving our cost structure and strengthening our balance sheet will continue going forward. Among other actions, we anticipate completing the sale of Volvo Cars to Zhejiang Geely Holding Group Co. Ltd. in the second quarter of 2010. ´ ONE Ford DNA and Global Vehicle Strategy 2011 Ford...

  • Page 6
    ... important part of our efforts to help build a better world. Ford Motor Company Fund and Community Services, our philanthropic organization, celebrated its 60th anniversary in 2009. Our Ford Volunteer Corps, which was established in 2005, encourages salaried employees to take two work days per year...

  • Page 7
    ... James P. Tetreault North America Manufacturing Frederiek Toney Ford Customer Service Division Kenneth M. Czubay U.S. Marketing, Sales & Service Raymond F. Day Communications Robert J. Graziano Chairman and CEO, Ford Motor China *As of March 4, 2010 Ford Motor Company | 2009 Annual Report 5

  • Page 8
    ...MAX family vehicles, while in India the Figo was revealed to bring a new class of drivers into the Ford brand. These stylish new offerings feature Ford DNA design cues and numerous fuel-efficient powertrain alternatives. Ford Figo (left) and Grand C-MAX 6 Ford Motor Company | 2009 Annual Report

  • Page 9
    ...Fordengineered and Ford-built 6.7-liter Power Stroke® turbocharged V-8 diesel. The new engine will feature best-in-class fuel economy and enable class-leading towing and payload. All-new 6.7-liter V-8 turbocharged Power Stroke diesel engine 2011 Ford Edge Ford Motor Company | 2009 Annual Report 7

  • Page 10
    ... manufacturer has taken home both titles. The 2010 Ford Fusion Hybrid - also honored as one of CAR and DRIVER's "10Best" Cars for 2010 and one of AUTOMOBILE's 2010 All-Stars - edged out 8 Ford Motor Company | 2009 Annual Report Mark Fields accepting the 2010 North American Car of the Year and Truck...

  • Page 11
    ... MyFord driver connect technology. Across different models, different trim levels, even different countries, drivers immediately will know they're behind the wheel of a Ford vehicle equipped with the technology, safety and convenience features they expect. Ford Motor Company | 2009 Annual Report 9

  • Page 12
    ...like the three-wet, high-solids paint application. In 2009, Ford Motor Credit Company celebrated 50 years as Ford's global financial services subsidiary, providing focused support of Ford dealers and customers. Ford Credit's profits and dividends support development of new cars and trucks. Strong...

  • Page 13
    ... successes were shared with Ford's global operations. In 2009, Ford became the first automaker to join the CDP Water Disclosure Project, which will establish a water usage reporting protocol and promote conservation of this increasingly scarce resource. From 2000 to 2008, Ford cut its global water...

  • Page 14
    ... World Headquarters pink to show support for breast cancer patients and survivors. Ford's Warriors in Pink campaign is designed to recognize the strength and courage it takes to deal with the everyday challenges of fighting breast cancer 365 days a year. 12 Ford Motor Company | 2009 Annual Report

  • Page 15
    ... of Cash Flows Sector Statement of Cash Flows Consolidated Statement of Equity Notes to the Financial Statements Report of Independent Registered Public Accounting Firm Selected Financial Data Employment Data Management's Report on Internal Control Over Financial Reporting New York Stock Exchange...

  • Page 16
    ...special-rate vehicle financing and leasing programs that we sponsor. Ford Credit records these payments as revenue, and, for contracts purchased prior to 2008, our Automotive sector made the related cash payments, over the expected life of the related finance receivable or operating lease. Effective...

  • Page 17
    ... higher long-term interest rates, could drive a higher cost of capital over our planning period. Higher interest rates and/or taxes to address the higher deficits may also impede real GDP growth and, therefore, vehicle sales over our planning period. Ford Motor Company | 2009 Annual Report 15

  • Page 18
    ... our objectives Aggressively restructure to operate profitably at the current demand and changing model mix; Accelerate development of new products our customers want and value; Finance our plan and improve our balance sheet; and Work together effectively as one team, leveraging our global assets...

  • Page 19
    ... and central operations. During 2010, Ford Credit plans to reduce its staffing by about 1,000 positions to improve its cost structure, in response to lower financing volumes resulting from lower automotive industry sales volumes and the transition of Jaguar, Land Rover, Mazda, and Volvo financing to...

  • Page 20
    ...increase versus 2008 and its best market share since 1998. Fiesta was the second best-selling model in Europe in 2009, reaching its best full-year sales since 1996. One year after its debut, more than 600,000 customers have purchased the new Fiesta globally. In 2010, we will continue to build on our...

  • Page 21
    .... MyKey - which debuted on the 2010 Ford Focus and is quickly becoming standard on many other Ford, Lincoln and Mercury models - allows owners to program a key that can limit the vehicle's top speed and audio volume. We also began offering a new advanced crash-avoidance technology, Collision Warning...

  • Page 22
    ... strong supplier and dealer relationships, the positive acceptance of our products by customers, and our full pipeline of new products allow us to compete effectively in the global vehicle markets while we reduce our debt to a more competitive level. Work Together Effectively as One Team As part of...

  • Page 23
    Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS FULL-YEAR 2009 RESULTS OF OPERATIONS Our worldwide net income attributable to Ford Motor Company was $2.7 billion or $0.86 per share of Common and Class B Stock in 2009, an improvement of $17...

  • Page 24
    ......Total Mazda...Jaguar Land Rover and Aston Martin Sale-related/Other ...Total Other Items - Automotive sector ...Financial Services sector DFO Partnership impairment/gain on sale ...Ford Credit net operating lease impairment charge...Gain from purchase of Ford Holdings debt securities...Total...

  • Page 25
    ..., pension and OPEB, overhead, etc.), is at constant exchange and excludes special items and discontinued operations. In addition, costs that vary directly with volume, such as material, freight, and warranty costs, are measured at constant volume and mix. Ford Motor Company | 2009 Annual Report 23

  • Page 26
    ...Discussion and Analysis of Financial Condition and Results of Operations AUTOMOTIVE SECTOR RESULTS OF OPERATIONS 2009 Compared with 2008 Details by segment or business unit of Income/(Loss) before income taxes are shown below (in millions), with Mazda and Jaguar Land Rover and Aston Martin separated...

  • Page 27
    ...Automotive sector market share for selected markets for 2009 and 2008, along with the level of dealer stocks as of December 31, 2009 and 2008, are shown...ಧ            2YHU 8QGHU                    Ford Motor Company | 2009 Annual Report 25

  • Page 28
    ... the non-recurrence of favorable 2008 balance sheet valuations. The favorable cost changes primarily reflect lower structural costs (including lower manufacturing and engineering, pension and OPEB, and spending-related costs) and lower net product costs. Ford South America Segment. The decrease in...

  • Page 29
    ... with mark-to-market adjustments reported in Other Automotive. Jaguar Land Rover and Aston Martin Segment. During the second quarter of 2008, we sold our Jaguar Land Rover operations. During the second quarter of 2007, we sold our Aston Martin operations. Ford Motor Company | 2009 Annual Report 27

  • Page 30
    Management's Discussion and Analysis of Financial Condition and Results of Operations 2008 Compared with 2007 Details by segment or business unit of Income/(Loss) before income taxes are shown below (in millions), with Mazda and Jaguar Land Rover and Aston Martin separated out from "ongoing" ...

  • Page 31
    Management's Discussion and Analysis of Financial Condition and Results of Operations Details by segment of Automotive revenues ("sales") and wholesale unit volumes... sector market share for selected markets for 2008 and 2007, along with the level of dealer stocks as of December 31, 2008 and ...

  • Page 32
    ... sales volumes, lower market share, and unfavorable product mix), unfavorable net pricing, and unfavorable changes in currency exchange rates. The favorable cost changes primarily reflects lower structural costs (including lower manufacturing and engineering, overhead, and advertising and sales...

  • Page 33
    ... portion of our investment in Mazda. Our remaining ownership interest is treated as marketable securities, with mark-to-market adjustments reported in Other Automotive. Jaguar Land Rover and Aston Martin Segment. During the second quarter of 2008, we sold our Jaguar Land Rover operations. During the...

  • Page 34
    ... of Financial Condition and Results of Operations partially by lower operating costs. The change in unallocated risk management income reflected the non-recurrence of net losses related to market valuation adjustments to derivatives primarily related to movements in interest rates. Ford Credit...

  • Page 35
    ... and Analysis of Financial Condition and Results of Operations Receivables decreased from year-end 2008, primarily reflecting lower industry volumes, lower dealer stocks, and the transition of Jaguar, Land Rover, and Mazda financing to other finance providers. In 2009, as part of Ford Credit...

  • Page 36
    ...   5HWXUQUDWHV In 2009, placement volumes were down 250,000 units compared with 2008, primarily reflecting changes in our marketing programs that emphasized retail installment sale contracts, lower industry volumes, and the transition of Jaguar Land Rover and Mazda financing to other providers...

  • Page 37
    ... shows return volumes for Ford Credit's Ford, Lincoln, and Mercury brand U.S. operating lease portfolio. Also included are auction values at constant fourth quarter 2009 vehicle mix for lease terms comprising 59% of Ford Credit's active Ford, Lincoln, and Mercury brand U.S. operating lease portfolio...

  • Page 38
    ... income investments and could be used within 18 months to pay for benefits ("short-term VEBA assets"). Consistent with our Retiree Health Care Settlement Agreement dated March 28, 2008, in 2008 we reclassified out of our Automotive gross cash calculation the short-term VEBA assets and TAA securities...

  • Page 39
    ...LQJURVVFDVK BBBBBBBBBB D  Excluding sale proceeds, total change in Automotive gross cash attributable to Jaguar Land Rover operations was $300 million net cash outflow for 2008. Except for up-front subvention payments to Ford Credit, Jaguar Land Rover cash outflows are excluded from each...

  • Page 40
    Management's Discussion and Analysis of Financial Condition and Results of Operations Equity and Equity-Linked Issuances. On May 18, 2009, we issued 345 million shares of Ford Common Stock pursuant to a public offering at a price of $4.75 per share, resulting in net proceeds totaling $1.59 billion. ...

  • Page 41
    ... 2008 (1.33 to 1). In addition to customary payment, representation, bankruptcy, and judgment defaults, the Credit Agreement contains cross-payment and cross-acceleration defaults with respect to other debt for borrowed money, and a change in control default. Ford Motor Company | 2009 Annual Report...

  • Page 42
    ... actions discussed below. See Note 19 of the Notes to the Financial Statements for our debt maturity table as of December 31, 2009 and additional debt disclosures. BBBBBBBBBB &UHGLWIDFLOLWLHVRIRXU9,(VDUHH[FOXGHGDVZHGRQRWFRQWUROWKHLUXVH 40 Ford Motor Company | 2009 Annual Report

  • Page 43
    ... by certain subsidiary guarantors of the New Notes, limited to an aggregate of $3 billion of obligations thereunder (the "Guaranties") and (iv) warrants to purchase 362,391,305 shares of Ford Common Stock, issued pursuant to a Warrant Agreement (the Ford Motor Company | 2009 Annual Report 41

  • Page 44
    ...New Securities, irrevocably settled our obligation, valued at about $13.6 billion on December 31, 2009, to provide retiree health care benefits to eligible active and retired UAW Ford hourly employees and their eligible spouses, surviving spouses and dependents. 42 Ford Motor Company | 2009 Annual...

  • Page 45
    ... our balance sheet, primarily by working to improve our underlying business to generate positive Automotive operating-related cash flow. Financial Services Sector Ford Credit Funding Strategy. Ford Credit's funding strategy is to maintain sufficient liquidity to meet short-term funding obligations...

  • Page 46
    ...months. Ford Credit sponsors a number of securitization programs that can be structured to provide both short- and long-term funding through institutional investors in the United States and international capital markets. Ford Credit obtains short-term unsecured funding from the sale of floating rate...

  • Page 47
    ... for short-term liquidity. The present term limitation is three months; however, in the past the term has been as long as one year. The funding efficiency of liquidity provided under this program is typically lower than if the asset-backed securities were placed in the public or private markets...

  • Page 48
    ... (excluding Ford Credit's on-balance sheet asset-backed commercial paper program) in several markets, including about $4 billion in Canada. These private transactions included retail, lease, and wholesale assetbacked securitization transactions. 46 Ford Motor Company | 2009 Annual Report

  • Page 49
    ... marketable securities related to insurance activities and cash and cash equivalents to support on-balance sheet securitization transactions). At December 31, 2009, Ford Credit's liquidity available for use was lower than year-end 2008 by about $300 million, as debt maturities and cash payments...

  • Page 50
    ... securities related to insurance activities) at December 31, 2009. Ford Credit's balance sheet is inherently liquid because of the short-term nature of its finance receivables, investment in operating leases and cash. Maturities of investment in operating leases consist primarily of rental payments...

  • Page 51
    ... numerator and denominator in order to exclude the interim effects of changes in market interest rates. Ford Credit believes the managed leverage measure provides its investors with meaningful information regarding management's decision-making processes. Ford Motor Company | 2009 Annual Report 49

  • Page 52
    ...-balance sheet securitization transactions have an effect on its financial condition, operating results, and liquidity. Ford Credit securitizes its assets because the securitization market provides it with a lower cost source of funding compared with unsecured debt given Ford Credit's present credit...

  • Page 53
    ... include collecting payments on the securitized assets and preparing monthly investor reports on the performance of the securitized assets and on amounts of interest and/or principal payments to be made to investors. While servicing securitized assets, Ford Credit applies the same servicing policies...

  • Page 54
    ... to support the sale of Ford vehicles. On-Balance Sheet Arrangements Most of Ford Credit's securitization transactions do not satisfy the requirements for accounting sale treatment and, therefore, the securitized assets and related debt are included in Ford Credit's financial statements. Ford Credit...

  • Page 55
    Management's Discussion and Analysis of Financial Condition and Results of Operations Credit Ratings. Our short-term and long-term debt is rated by four credit rating agencies designated as NRSROs by the SEC DBRS Limited ("DBRS"); Fitch, Inc. ("Fitch"); Moody's Investors Service, Inc. ("Moody's"); ...

  • Page 56
    ... our business to operate profitably at current demand and changing model mix, accelerate development of new products customers want and value, finance our plan and improve our balance sheet, and work together effectively as one team to leverage our global resources - provides the right strategy to...

  • Page 57
    ...billion. The projected decline in managed receivables primarily reflects lower industry and financing volumes in 2009 and 2010 compared with prior years, and the effect of transitioning Jaguar, Land Rover, Mazda and some Volvo financing to other providers. Ford Credit expects to pay distributions of...

  • Page 58
    ... to increase their share of financing Ford vehicles; Collection and servicing problems related to finance receivables and net investment in operating leases; Lower-than-anticipated residual values or higher-than-expected return volumes for leased vehicles; New or increased credit, consumer, or data...

  • Page 59
    ... cash outflows for each major plan to a yield curve comprised of high quality bonds specific to the country of the plan. Benefit payments are discounted at the rates on the curve and a single discount rate specific to the plan is determined. • Expected return on plan assets. The expected return...

  • Page 60
    ... Note 18 of the Notes to the Financial Statements for more information regarding costs and assumptions for employee retirement benefits. Sensitivity Analysis. The December 31, 2009 pension funded status and 2010 expense are affected by year-end 2009 assumptions. These sensitivities may be asymmetric...

  • Page 61
    ... of net expense over the expected future years of service (approximately 14 years). See Note 18 of the Notes to the Financial Statements for more information regarding costs and assumptions for other postretirement employee benefits. Sensitivity Analysis. The effect on U.S. and Canadian plans of...

  • Page 62
    ... market capitalization) of companies that are engaged in the same or similar line of business. Automotive Sector - Goodwill We had $34 million of Automotive goodwill on our balance sheet at December 31, 2009, all related to Ford of Europe. Volvo goodwill is reflected as part of held-for-sale assets...

  • Page 63
    ... reporting unit by about 50%. Even this more conservative analysis, however, did not support an impairment of Volvo goodwill at year-end 2008. For information regarding 2009 testing, see "Automotive Sector - Held-for-Sale Operations" shown below. Automotive Sector - Held-and-Used Long-Lived Assets...

  • Page 64
    ... interest in Aston Martin; in 2008, we sold our interest in Jaguar Land Rover, and a significant portion of our ownership in Mazda. During the first quarter of 2009, based on our strategic review of Volvo and in light of our goal to focus on the global Ford brand, our Board of Directors committed to...

  • Page 65
    ... the number of vehicles that will be returned at lease-end. • Discount rate. Ford Credit's estimation of the discount rate, reflecting hypothetical market assumptions regarding borrowing rates, credit loss patterns, and residual value risk. See Notes 15 of the Notes to the Financial Statements for...

  • Page 66
    ... in judgment regarding the need for a full valuation allowance in 2010. The consumption of tax attributes to offset expected operating profits during 2010, however, would reduce the overall level of deferred tax assets subject to valuation allowance. 64 Ford Motor Company | 2009 Annual Report

  • Page 67
    ... Return volume. Ford Credit's projection of the number of vehicles that will be returned to us at lease-end. See Note 8 of the Notes to the Financial Statements for more information regarding accumulated depreciation on vehicles subject to operating leases. Ford Motor Company | 2009 Annual Report...

  • Page 68
    ...IRU  &UHGLW/RVVHV ([SHQVH &UHGLW/RVVHV ([SHQVH * Reflects the number of finance receivables and operating lease contracts that Ford Credit expects will default over a period of time relative to the average number of contracts outstanding. 66 Ford Motor Company | 2009 Annual Report

  • Page 69
    ...insurance losses on our statement of operations and the allowance for credit losses contained within Finance receivables, net and Net investment in operating leases on our balance sheet, in each case under the Financial Services sector. ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED For information...

  • Page 70
    ... cannot be reasonably estimated. For additional information regarding long-term debt, operating lease obligations, and pension and OPEB obligations and the UAW VEBA Trust, see Notes 19, 8, and 18, respectively, of the Notes to the Financial Statements. 68 Ford Motor Company | 2009 Annual Report

  • Page 71
    ...loans resulting from local funding actions. For additional information on our derivatives, see Note 26 of the Notes to the Financial Statements. The market and counterparty risks of our Automotive sector and Ford Credit are discussed and quantified below. Ford Motor Company | 2009 Annual Report 69

  • Page 72
    ... following: purchases and sales of finished vehicles and production parts, debt and other payables, subsidiary dividends, and investments in foreign operations. These expenditures and receipts create exposures to changes in exchange rates. We also are exposed to changes in prices of commodities used...

  • Page 73
    ... risks, as well as liquidity risk, are discussed above in "Management's Discussion and Analysis of Financial Condition and Results of Operations." A discussion of Ford Credit's market risks (interest rate risk and foreign currency risk) is included below. Ford Motor Company | 2009 Annual Report 71

  • Page 74
    ... enters into interest rate swaps, when available, which effectively change the re-pricing profile of its debt, to ensure that any repricing mismatch (between assets and liabilities) existing in a particular time-band falls within an established tolerance. 72 Ford Motor Company | 2009 Annual Report

  • Page 75
    ... agreement to buy or sell an amount of funds in an agreed currency at a certain time in the future for a certain price. As a result of this policy, Ford Credit believes its market risk exposure relating to changes in currency exchange rates is insignificant. While the sensitivity analysis presented...

  • Page 76
    Consolidated Statement of Operations CONSOLIDATED STATEMENT OF OPERATIONS FORD MOTOR COMPANY AND SUBSIDIARIES For the Years Ended December 31, 2009, 2008 and 2007 (in millions, except per share...The accompanying notes are part of the financial statements. 74 Ford Motor Company | 2009 Annual Report

  • Page 77
    ...Statement of Operations SECTOR STATEMENT OF OPERATIONS FORD MOTOR COMPANY AND SUBSIDIARIES For the Years Ended December 31, 2009, 2008 and 2007 (in millions, except per share ...LQFRPH ORVV The accompanying notes are part of the financial statements. Ford Motor Company | 2009 Annual Report 75

  • Page 78
    Consolidated Balance Sheet SHEET CONSOLIDATED BALANCE FORD MOTOR COMPANY AND SUBSIDIARIES (in millions) 'HFHPEHU 'HFHPEHU 66(76  $...OLDELOLWLHVDQGHTXLW\ 'HFHPEHU 'HFHPEHU  The accompanying notes are part of the financial statements 76 Ford Motor Company | 2009 Annual Report

  • Page 79
    Sector Balance Sheet SECTOR BALANCE SHEET FORD MOTOR COMPANY AND SUBSIDIARIES (in millions) '...                                                The accompanying notes are part of the financial statements. Ford Motor Company | 2009 Annual Report 77

  • Page 80
    Consolidated Statement of Cash Flows CONSOLIDATED STATEMENT OF CASH FLOWS FORD MOTOR COMPANY AND SUBSIDIARIES For the Years Ended December 31, 2009, 2008 and...     ಧ  The accompanying notes are part of the financial statements. 78 Ford Motor Company | 2009 Annual Report

  • Page 81
    ...Statement of Cash Flows SECTOR STATEMENT OF CASH FLOWS FORD MOTOR COMPANY AND SUBSIDIARIES For the Years Ended December 31, 2009, 2008...  ಧ    ಧ    ಧ   The accompanying notes are part of the financial statements. Ford Motor Company | 2009 Annual Report 79

  • Page 82
    Consolidated Statement of Equity CONSOLIDATED STATEMENT OF EQUITY FORD MOTOR COMPANY AND SUBSIDIARIES For the Years Ended December 31, 2009, 2008...             The accompanying notes are part of the financial statements. 80 Ford Motor Company | 2009 Annual Report

  • Page 83
    ... ...91 Cash and Restricted Cash ...98 Marketable and Other Securities ...98 Finance Receivables - Financial Services Sector ...99 Net Investment in Operating Leases ...Allowance for Credit Losses - Financial Services Sector ...101 102 Inventories ...103 Equity in Net Assets of Affiliated Companies...

  • Page 84
    .... For additional information on fair value, see Note 4. To provide comparative prior-year balance sheets, certain amounts on our December 31, 2008 consolidated and sector balance sheets and related footnotes have been reclassified for operations held for sale in 2009. All held-for-sale assets and...

  • Page 85
    ...the standard on accounting for convertible debt. The net change of $1,799 million in 2008 impacted calendar years 2006 and 2008 by $1,850 million and $(51) million, respectively. The 2006 change impacted the beginning balance of the 2007 equity statement. Ford Motor Company | 2009 Annual Report 83

  • Page 86
    ... statement of cash flows for the year ended December 31, 2008, we changed the presentation of cash flows to separately disclose the purchases of trading securities and the sale and maturities of trading securities as gross amounts within Cash flows from investing activities of continuing operations...

  • Page 87
    ... 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 $646 million and $492 million at December 31, 2009 and 2008, respectively. On our...

  • Page 88
    .... (d) See "Debt Reduction Actions" above for further discussion. Cash outflows 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. 86 Ford Motor Company | 2009 Annual Report

  • Page 89
    ... and Canada to be paid to Ford Credit over the term of the related finance contracts at December 31, 2009 and 2008, respectively. Liquidity At December 31, 2009, our Automotive sector had total cash, cash equivalents, and marketable securities of $25.5 billion and full-year operating cash flows...

  • Page 90
    ... the vehicle is sold to the ultimate customer. Income generated from cash and cash equivalents, investments in marketable securities, and other miscellaneous receivables is reported in Automotive interest income and other non-operating income/(expense), net. Revenue Recognition - Financial Services...

  • Page 91
    ... payments and costs for special financing and leasing programs paid to the Financial Services sector. The revenue reductions are accrued at the later of the date the related vehicle sales to the dealers are recorded or the date the incentive program is both approved and communicated. We generally...

  • Page 92
    ... revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. We are addressing the potential impact of this guidance on our financial condition, results of operations, and financial statement disclosures. 90 Ford Motor Company | 2009 Annual Report

  • Page 93
    ... 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 commodity prices, taking into account the contractual terms of the derivative instruments. Ford Motor Company | 2009 Annual Report 91

  • Page 94
    ...Alternative investments include investments in private equity and hedge funds, and are valued based on year-end reported net asset value, with adjustments as appropriate for lagged reporting of 1 - 3 months. For pension assets, the balance sheet includes the funded status of the benefit plans, which...

  • Page 95
    ...DVRI'HFHPEHUVHH1RWHIRUDGGLWLRQDOGHWDLO ,QFOXGHVFHUWLILFDWHVRIGHSRVLWDQGWLPHGHSRVLWVZLWKDPDWXULW\RIPRUHWKDQGD\VDWGDWHRISXUFKDVH Ford Motor Company | 2009 Annual Report 93

  • Page 96
    Notes to the Financial Statements NOTE 4. FAIR VALUE MEASUREMENTS (Continued)  /HYHO /HYHO  $XWRPRWLYH6HFWRU  $XWRPRWLYH6HFWRU $VVHWV  $...YDOXHRIPLOOLRQDQGDQHVWLPDWHGIDLU YDOXHRIPLOOLRQ6HH1RWHIRUDGGLWLRQDOGHWDLO 94 Ford Motor Company | 2009 Annual Report

  • Page 97
    ...Financial Statements NOTE 4. FAIR VALUE MEASUREMENTS (Continued) Reconciliation of Changes in Level 3 Balances The following tables summarize the changes in Level 3 items measured at fair value on a recurring basis on our balance sheet for the years...GDWH Ford Motor Company | 2009 Annual Report 95

  • Page 98
    ... (Continued) The following tables summarize the realized/unrealized gains/(losses) on Level 3 items by financial statement position for the period ending December 31 (in millions):  $XWRPRWLYH ,...RQILQDQFLDOVWDWHPHQWSUHVHQWDWLRQE\KHGJHGHVLJQDWLRQ 96 Ford Motor Company | 2009 Annual Report

  • Page 99
    ...7KHGLVFRXQWUDWHUHIOHFWHGK\SRWKHWLFDOPDUNHW DVVXPSWLRQVUHJDUGLQJERUURZLQJUDWHVFUHGLWORVVSDWWHUQVDQGUHVLGXDOYDOXHULVN6HH1RWHIRUDGGLWLRQDOGLVFXVVLRQRIWKLVLPSDLUPHQW Ford Motor Company | 2009 Annual Report 97

  • Page 100
    ... OTHER SECURITIES Ford holds various investments classified as marketable securities including U.S. government and non-U.S. government securities, corporate obligations and equities, and asset-backed securities. Highly-liquid investments with a maturity of 90 days or less at the date of purchase are...

  • Page 101
    ...- FINANCIAL SERVICES SECTOR Retail finance receivables consist primarily of installment loans and direct financing lease contracts for new and used vehicles with retail customers, daily rental companies, government entities, and fleet customers. Wholesale finance receivables include dealer financing...

  • Page 102
    ... relates to the leasing of vehicles with a term greater than 60 months. Scheduled maturities of minimum lease rentals, as included above, are as follows (in millions): 0LQLPXPUHQWDOVRQGLUHFWILQDQFLQJOHDVHV 7KHUHDIWHU 7RWDO 7KHUHDIWHU 7RWDO 100 Ford Motor Company | 2009 Annual Report

  • Page 103
    ... to the Financial Statements NOTE 8. NET INVESTMENT IN OPERATING LEASES Net investment in operating leases on our balance sheet consists primarily of lease contracts for vehicles with daily rental companies, fleet customers, and retail customers. Assets subject to operating leases are depreciated...

  • Page 104
    ...vehicle values and economic conditions. Additions to the allowance for credit losses are made by recording charges to Financial Services provision for credit and insurance losses on our consolidated statement of operations. Finance receivables, investments in direct financing leases, and investments...

  • Page 105
    ...carried at lower costs prevailing in prior years as compared with the cost of 2009 purchases, the effect of which decreased Automotive cost of sales by about $33 million. NOTE 11. EQUITY IN NET ASSETS OF AFFILIATED COMPANIES We use the equity method of accounting for our investments in entities over...

  • Page 106
    ...longer hold significant influence over Mazda's operating and financial policies. Consequently, we account for our remaining investment of $447 million as of December 31, 2009 as a marketable security. As a result, we had no equity in net assets of affiliated companies at December 31, 2008 associated...

  • Page 107
    ... automatic transmissions for Ford Explorer, Ranger, and Mustang vehicles. During the second quarter of 2009, we transferred legal ownership of First Aquitaine to HZ Holding France. We also entered into a volume-dependent pricing agreement with the new owner to purchase transmissions through the...

  • Page 108
    ...of vehicles and parts for these dealerships, and the operators have a contract to buy our equity interest over a period of time. See Note 4 for discussion of the impairment of our investment in these assets. The total consolidated VIE assets and liabilities reflected on our December 31 balance sheet...

  • Page 109
    ... below, are accounted for as equity method investments and are included in Equity in net assets of affiliated companies. AAT is a 50/50 joint venture with Mazda in Thailand. AAT is engaged in the manufacture of automobiles on behalf of Ford and Mazda for the Thai domestic market and for export...

  • Page 110
    ... others who obtain funding from government programs. The assetbacked securities are secured by the expected cash flows from finance receivables and interests in net investments in operating leases. The expected cash flows from these assets have been legally sold but Ford Credit retains interests in...

  • Page 111
    ...for additional information regarding Ford Credit's derivatives. Finance receivables and net investment in operating leases that secure the debt of the VIE remain on Ford Credit's balance sheet and therefore are not included in the VIE assets shown in the following table. As of December 31, 2009, the...

  • Page 112
    ... 31, 2009 and 2008, respectively. NOTE 14. NET PROPERTY AND LEASE COMMITMENTS Net Property Net property includes land, buildings and land improvements, machinery and equipment, special tools, and other assets that we use in our normal operations. These assets are recorded at cost, net of accumulated...

  • Page 113
    ...preferences combined with lower-than-anticipated U.S. industry demand and greater-than-anticipated escalation of commodity costs resulted in impairment charges related to Ford North America's long-lived assets and Ford Credit's operating lease portfolio. Ford Motor Company | 2009 Annual Report 111

  • Page 114
    ... the Financial Statements NOTE 15. IMPAIRMENT OF LONG-LIVED ASSETS (Continued) Automotive Sector North America Long-Lived Assets. Based upon the financial impact of rapidly-changing U.S. market conditions during the second quarter of 2008, we projected a decline in net cash flows for the Ford North...

  • Page 115
    Notes to the Financial Statements NOTE 16. GOODWILL AND OTHER NET INTANGIBLE ASSETS (Continued) The following table summarizes the changes in the carrying amount of goodwill (in millions): )LQDQFLDO...DUU\LQJ $PRXQW $PRXQW 1HW&DUU\LQJ $PRXQW PRXQW Ford Motor Company | 2009 Annual Report 113

  • Page 116
    Notes to the Financial Statements NOTE 16. GOODWILL AND OTHER NET INTANGIBLE ASSETS (Continued) Our manufacturing and production incentive rights were acquired in 2006 and have a useful life of 4 years, our license and advertising agreements have amortization periods of 5 years to 25 years, and our ...

  • Page 117
    ...to our primary employee savings plan in the United States of $0, $58 million, and $37 million in 2009, 2008 and 2007, respectively. Company matching contributions for U.S. employees were suspended January 1, 2009 and reinstated effective January 1, 2010. Ford Motor Company | 2009 Annual Report 115

  • Page 118
    ...of our subsidiaries, sponsor plans to provide OPEB for retired employees, primarily certain health care and life insurance benefits. During 2009, the Ford UAW Hospital-Surgical-Medical-Drug-Dental-Vision Program ("H-S-M-D-D-V Program") covered hourly employees represented by the UAW and hired before...

  • Page 119
    ... of the foregoing assets, we removed from our balance sheet and transferred to the UAW VEBA Trust our UAW postretirement health care obligation of about $13.6 billion. Upon settlement, we recognized a net loss of $264 million in Automotive cost of sales, including the effect of a deferred gain...

  • Page 120
    ...a market price of $10 per share (the closing sale price of Ford Common Stock on December 31, 2009). The fair value of the warrants reflects a risk-free rate based on a three-year U.S. Treasury debt instrument and a 40% volatility assumption which was derived from a historical volatility analysis and...

  • Page 121
    Notes to the Financial Statements NOTE 18. RETIREMENT BENEFITS (Continued) The year-end status of these plans was as follows (dollar amounts in millions): 3HQVLRQ%HQHILWV 3HQVLRQ%HQHILWV  ...DQG9ROYRIRU  :RUOGZLGH23(%  :RUOGZLGH23  Ford Motor Company | 2009 Annual Report 119

  • Page 122
    .... In addition, benefit payments made directly by us for unfunded plans are expected to be about $400 million. Based on current assumptions and regulations, we do not expect to have a legal requirement to fund our major U.S. pension plans in 2010. 120 Ford Motor Company | 2009 Annual Report

  • Page 123
    ... 30% public equity investments, 45% fixed income investments, and up to 25% alternative investments (e.g., private equity, real estate, and hedge funds). Our largest non-U.S. plans (Ford U.K. and Ford Canada) have similar target asset allocations and investment objectives and strategies. Investment...

  • Page 124
    ... communicated to managers, and periodic compliance and audit reviews to ensure adherence. Ford securities comprised less than 5% of the total market value of our assets in major worldwide plans during 2009 and 2008. Expected Long-Term Rate of Return on Assets. The long-term return assumption at year...

  • Page 125
    ... Financial Statements NOTE 18. RETIREMENT BENEFITS (Continued) Fair Value of Plan Assets. The fair value of our pension benefits plan assets (including dividends and interest receivables of $267 million and $75 million for U.S. and non-U.S. plans, respectively) at December 31, 2009 by asset category...

  • Page 126
    Notes to the Financial Statements NOTE 18. RETIREMENT BENEFITS (Continued) 1RQ 1RQ863ODQV 863ODQV /HYHO /HYHO...FKDQJHSXUFKDVHVVDOHV                                                   124 Ford Motor Company | 2009 Annual Report

  • Page 127
    ...Financial Statements NOTE 18. RETIREMENT BENEFITS (Continued) The following table summarizes the changes in Level 3 pension benefits plan assets measured at fair value on a recurring basis for the period ended December 31, 2009...DW 'HFHPEHU Ford Motor Company | 2009 Annual Report 125

  • Page 128
    ... programs that provide short-term and long-term asset-backed financing through institutional investors in the U.S. and international capital markets. Debt is recorded on our balance sheet at par value adjusted for unamortized discount or premium (in addition to adjustments related to debt...

  • Page 129
    Notes to the Financial Statements NOTE 19. DEBT AND COMMITMENTS (Continued) Debt outstanding at December 31 is shown below (in millions, except percentages): ,QWHUHVW5DWHV... VDFTXLVLWLRQRI)RUG&UHGLWGHEWVHFXULWLHVVHH1RWHIRUDGGLWLRQDOGHWDLO Ford Motor Company | 2009 Annual Report 127

  • Page 130
    ... on Financial Services sector debt is reported in Financial Services other liabilities and deferred income and was $1.1 billion and $1.3 billion at December 31, 2009 and 2008, respectively. The change in the fair value of our debt in 2009 was primarily driven by improvements in the credit markets...

  • Page 131
    ... Stock, par value $0.01 per share, in exchange for $431 million principal amount of our outstanding public unsecured debt securities. As a result of the exchange, we recorded a pre-tax gain of $73 million (net of unamortized discounts, premiums and fees). Ford Motor Company | 2009 Annual Report...

  • Page 132
    ... in the fourth quarter of 2008, $67 million principal amount of 2036 Convertible Notes was exchanged for an aggregate of 7,253,035 shares of Ford Common Stock. As a result of the conversion we retrospectively recorded a pre-tax gain of $29 million. 130 Ford Motor Company | 2009 Annual Report

  • Page 133
    ... to defer future interest payments related to the Trust Preferred Securities for up to 5 years. Trust II is not consolidated by us as it is a VIE in which we do not have a significant variable interest and of which we are not the primary beneficiary. Ford Motor Company | 2009 Annual Report 131

  • Page 134
    ...of marketable securities or cash proceeds therefrom; 100% of the stock of our principal domestic subsidiaries, including Ford Credit (but excluding the assets of Ford Credit); certain intercompany notes of Volvo Holding Company Inc., a holding company for Volvo, Ford Motor Company of Canada, Limited...

  • Page 135
    ... Stock. Any Ford Common Stock to be delivered in satisfaction of such payment obligation is to be valued based on its volume-weighted average price per share for the 30 trading-day period ending on the second business day prior to the relevant payment date. Ford Motor Company | 2009 Annual Report...

  • Page 136
    .... The Arrangement Agreement also contains a negative covenant substantially similar to the liquidity covenant in the Credit Agreement requiring that we not permit Available Liquidity (as defined in the Arrangement Agreement) to be less than $4 billion. 134 Ford Motor Company | 2009 Annual Report

  • Page 137
    ... such transactions are recorded as a secured borrowing and the assets continue to be reported on our financial statements as Finance receivables, net or as Net investment in operating leases. The following table shows the assets and liabilities related to Ford Credit's secured debt arrangements that...

  • Page 138
    ... terminated if the performance of the underlying assets deteriorates beyond specified levels. Based on Ford Credit's experience and knowledge as servicer of the related assets, it does not expect any of these programs to be terminated due to such events. 136 Ford Motor Company | 2009 Annual Report

  • Page 139
    ... of the awards under the two plans is calculated differently: 1998 LTIP - Fair value is the average of the high and low market price of our Common Stock on the grant date. 2008 LTIP - Fair value is the closing price of our Common Stock on the grant date. Ford Motor Company | 2009 Annual Report 137

  • Page 140
    ... using a three-year graded vesting methodology. Upon stock-settled compensation exercises and awards, we issued new shares of Common Stock. We do not expect to repurchase a significant number of shares for treasury stock during 2010. Restricted Stock Units RSU-stock activity during 2009 was as...

  • Page 141
    ...the Financial Statements NOTE 21. SHARE-BASED COMPENSATION (Continued) As of December 31, 2009, there was approximately $86 million in unrealized compensation cost related to non-vested RSU-stock. This expense will be recognized over a weighted average period of 1.3 years. Stock Options Stock option...

  • Page 142
    Notes to the Financial Statements NOTE 21. SHARE-BASED COMPENSATION (Continued) As of December 31, 2009, there was about $15 million in unrealized compensation cost related to non-vested stock options. This expense will be recognized over a weighted average period of 1.3 years. A summary of the ...

  • Page 143
    ...Financial Statements NOTE 22. EMPLOYEE SEPARATION ACTIONS As part of our plan to realign our vehicle assembly capacity to operate profitably at the current demand and changing model mix, we have implemented a number of different employee separation plans. The accounting for employee separation plans...

  • Page 144
    ... positive and negative evidence related to the likelihood of realization of the deferred tax assets. If, based on the weight of available evidence, it is more likely than not the deferred tax assets will not be realized, we record a valuation allowance. 142 Ford Motor Company | 2009 Annual Report

  • Page 145
    ... to the Financial Statements NOTE 23. INCOME TAXES (Continued) Components of Income Taxes Components of income taxes excluding discontinued operations, cumulative effects of changes in accounting principles, other comprehensive income, and equity in net results of affiliated companies accounted for...

  • Page 146
    ... to a net deferred tax asset position. Due to the cumulative losses we have incurred at these operations and their near-term financial outlook, at December 31, 2009 we have a valuation allowance of $17.5 billion against the net deferred tax asset. 144 Ford Motor Company | 2009 Annual Report

  • Page 147
    ...year period. In connection with the tax benefit preservation plan, our Board of Directors declared a dividend of one preferred share purchase right for each share of Ford Common Stock and Class B Stock outstanding as of the close of business on September 25, 2009. In accordance with the Plan, shares...

  • Page 148
    ... in Aston Martin; in 2008, we sold our interest in our Jaguar Land Rover operations, and a significant portion of our ownership in Mazda. During the first quarter of 2009, based on our strategic review of Volvo and in light of our goal to focus on the global Ford brand, our Board of Directors...

  • Page 149
    ... support, including engineering, information technology, accounting and other services. Ford Credit provided financing for Jaguar Land Rover dealers and customers during a transition period, which varied by market, for up to 12 months. Automotive Components Holdings, LLC ("ACH") - Milan. In 2008...

  • Page 150
    ... within five years. As a result of the exchange, we recognized in Automotive cost of sales a pre-tax loss of $70 million. Our investment in AFCC is reported in Equity in net assets of affiliated companies. Thai-Swedish Assembly Group ("TSA"). In 2008, Ford and our subsidiary, Volvo Car Corporation...

  • Page 151
    ... was recorded in Financial Services other income/(loss), net related to these assets. The receivables were sold on October 1, 2009. Primus Leasing Company Limited ("Primus Thailand"). In March 2009, Ford Credit completed the sale of Primus Thailand, its operation in Thailand that offered automotive...

  • Page 152
    ...) in Financial Services other income/(loss), net. Ford Credit reports its remaining ownership interest as a cost method investment. Primus Finance and Leasing, Inc. ("Primus Philippines"). In 2008, Ford Credit completed the sale of its 60% ownership interest in Primus Philippines, its operation in...

  • Page 153
    ...first half of 2008, we issued an aggregate of 46,437,906 shares of Ford Common Stock in exchange for $431 million principal amount of our outstanding public unsecured debt securities. On May 18, 2009, we issued 345,000,000 shares of Ford Common Stock pursuant to a public offering at a price of $4.75...

  • Page 154
    ...Financial Statements NOTE 25. CAPITAL STOCK AND AMOUNTS PER SHARE (Continued) Tax Benefits Preservation Plan For information regarding our Tax Benefits Preservation Plan, see Note 23. Warrants In conjunction with the transfer of assets to the UAW VEBA Trust on December 31, 2009, warrants to purchase...

  • Page 155
    ... the Financial Statements NOTE 26. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES In the normal course of business, our operations are exposed to global market risks, including the effect of changes in foreign currency exchange rates, certain commodity prices, and interest rates. To manage...

  • Page 156
    ..., the fair value adjustment to the hedged debt continues to be reported as part of the carrying basis of the item and is amortized over its remaining life. Net Investment Hedges. We have used foreign currency exchange derivatives to hedge the net assets of certain foreign entities to offset the...

  • Page 157
    ... 26. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued) For our Automotive sector, we report in Automotive cost of sales on our consolidated statement of operations gains and losses on cash flow hedges and foreign exchange contracts on operating exposures and commodity contracts not...

  • Page 158
    ...foreign currency and commodity derivative contracts. As of December 31, 2009, we posted $64 million in cash collateral related to derivative instruments, which is included in restricted cash and reported in Other assets on our consolidated balance sheet. 156 Ford Motor Company | 2009 Annual Report

  • Page 159
    ... Financial Statements NOTE 27. OPERATING CASH FLOWS The reconciliation of Net income/(loss) attributable to Ford Motor Company to cash flows from operating activities of continuing operations is...IORZV IURPRSHUDWLQJDFWLYLWLHVRIFRQWLQXLQJRSHUDWLRQV Ford Motor Company | 2009 Annual Report 157

  • Page 160
    ...Sector In 2008, we changed the reporting structure of our Automotive sector to separately disclose the following seven segments: 1) Ford North America, 2) Ford South America, 3) Ford Europe, 4) Ford Asia Pacific Africa, 5) Volvo, 6) Mazda, and 7) Jaguar Land Rover and Aston Martin. Automotive sector...

  • Page 161
    ... Financial Services. Ford Credit provides vehicle-related financing, leasing, and insurance. Other Financial Services includes a variety of businesses including holding companies, real estate, and the financing and leasing of some Volvo vehicles in Europe. Ford Motor Company | 2009 Annual Report...

  • Page 162
    Notes to the Financial Statements NOTE 28. SEGMENT INFORMATION (Continued) ,QPLOOLRQV  ...  ಧ ಧ   ಧ ಧ    ಧ               ಧ      _____ *$VUHSRUWHGRQRXUVHFWRUEDODQFHVKHHW 160 Ford Motor Company | 2009 Annual Report

  • Page 163
    Notes to the Financial Statements NOTE 28. SEGMENT INFORMATION (Continued) ,QPLOOLRQV  ,QPLOOLRQV   ...  D  ,QFOXGHVLQWHUVHFWRUWUDQVDFWLRQVRFFXUULQJLQWKHRUGLQDU\FRXUVHRIEXVLQHVV E  $VUHSRUWHGRQRXUVHFWRUEDODQFHVKHHW Ford Motor Company | 2009 Annual Report 161

  • Page 164
    ... principal amount of our secured term loan for $1.1 billion of cash, a $292 million reduction of expense related to a change in benefits and our ability to redeploy employees, and a $650 million impairment charge related to our total investment in Volvo. 162 Ford Motor Company | 2009 Annual Report

  • Page 165
    ..., 2011 and supports the payment obligations of Hertz Vehicle Finance LLC under one or more series of asset-backed notes. The letters of credit can be drawn upon on any date funds allocated to pay interest on the asset-backed notes are insufficient to pay Ford Motor Company | 2009 Annual Report 163

  • Page 166
    ... government incentives related to capital investments; tax matters; financial services; employment-related matters; dealer, supplier, and other contractual relationships; intellectual property rights; product warranties; environmental matters; shareholder or investor matters; and financial reporting...

  • Page 167
    ...Board of Directors and Stockholders Ford Motor Company: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of stockholder's equity and of cash flows present fairly, in all material respects, the financial position of Ford Motor Company...

  • Page 168
    ...future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. PricewaterhouseCoopers LLP Detroit, Michigan February 25, 2010 166 Ford Motor Company | 2009 Annual Report

  • Page 169
    ... Data The following table sets forth selected financial data for each of the last five years (dollar amounts in millions, except for per share amounts). 6800$5

  • Page 170
    ...the Canadian operations of General Motors Company and Chrysler LLC and are expected to result in annual cost savings. The agreement also confirms the end of production at the St. Thomas Assembly Plant in 2011. On November 2, 2009, the UAW announced that a majority of its members employed by Ford had...

  • Page 171
    ... 31, 2009. The effectiveness of the Company's internal control over financial reporting as of December 31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report included herein. Ford Motor Company | 2009 Annual Report 169

  • Page 172
    ... Company of the New York Stock Exchange Corporate Governance listing standards, other than has been notified to the Exchange pursuant to Section 303A.12 (b), of which there was none. We have filed with the Securities and Exchange Commission, as exhibits to our Annual Report on Form 10-K for the year...

  • Page 173
    ... is more informative since there are no other publicly-traded, U.S.-based automotive manufacturers. COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN $200 $150 $100 $50 $0 2004 2005 2006 2007 2008 2009 Total Return To Shareholders (Includes reinvestment of dividends) Indexed Returns Base...

  • Page 174
    ... of stockholder-related services. Computershare offers the DirectSERVICE Investment and Stock Purchase Program. This shareholder-paid program provides an alternative to traditional retail brokerage methods of purchasing, holding, and selling Ford Common Stock. You can contact Computershare through...

  • Page 175
    ...customer financing products and services globally in support of Ford Motor Company vehicle sales - One of the world's largest automotive finance companies, with managed receivables of $95 billion at year-end 2009 Genuine Parts and Service - A total service experience for Ford, Lincoln and Mercury...

  • Page 176
    Ford Motor Company One American Road Dearborn, Michigan 48126 www.ford.com Printed in U.S.A. 10% post-consumer waste paper. Please recycle.