Ford 2010 Annual Report Download - page 60

Management’s Discussion and Analysis of Financial Condition and Results of Operations
58 Ford Motor Company | 2010 Annual Report
In 2011, we expect a moderate increase in our worldwide pension expense from the $700 million we incurred in 2010,
primarily reflecting the impact of lower discount rates. We expect our cash contributions to pension plans to be about
$1.6 billion, which is about the same as in 2010. Based on our present planning assumptions for long-term pension
asset returns, a normalization of discount rates, and planned cash contributions, we expect our global pension
obligations in total to be fully funded over the next few years, with variability on a plan-by-plan basis.
As previously reported, our current low effective tax rate is primarily the result of our valuation allowance against
deferred tax assets. Sustained levels of profitability are expected to lead to reversal of the majority of this valuation
allowance, which could occur as early as the second half of 2011. See "Critical Accounting Estimates – Valuation of
Deferred Tax Assets" below for discussion of the impact of the reversal on our calculation of earnings per share.
Reversal of the valuation allowance does not affect our cash tax payments, which should remain low for a number of
years.
Turning to our operations, we expect Ford Credit to be solidly profitable for the full year although at a lower level than
2010, primarily reflecting the non-recurrence of lower lease depreciation expense and non-recurrence of credit loss
reserve reductions of the same magnitude as 2010. The non-recurrence of lower lease depreciation expense is
expected because 170,000 fewer leases are scheduled to terminate in 2011 compared with 2010, including about 80,000
leases that were impaired in 2008. This will result in fewer vehicles sold at a gain. In addition, based on its expected
portfolio performance, Ford Credit anticipates the allowance for credit losses will begin to level off in 2011 at about 0.85%
- 0.95% of receivables, down from 1.02% of receivables at year-end 2010 and 1.61% of receivables at year-end 2009,
resulting in a smaller amount being released from the allowance for credit losses than in 2010. Ford Credit estimates the
profit impact of these two items will reduce pre-tax profits by about $1.2 billion in 2011 compared with 2010.
At year-end 2011, we anticipate Ford Credit's managed receivables to be in the range of $80 billion to $85 billion.
Ford Credit is projecting distributions of about $2 billion during 2011, subject to available liquidity and managed leverage
objectives.
Overall, we believe that the strength of our business positions us to continue to grow profitably by investing
aggressively in technology and growth in all regions of the world, and further strengthen our balance sheet in the coming
year. We expect each of our operating segments to be profitable for full-year 2011. We expect to build on our 2010
performance with continued improvement in total Company pre-tax operating profit and Automotive operating-related
cash flow in 2011. With this improvement, we expect our full-year 2011 total Automotive and Ford North America
operating margins to be equal to or improved compared with 2010. We expect our improved results in 2011 to be driven
primarily by our growing product strength, a gradually strengthening global economy and our unrelenting focus on
improving the competitiveness of our Company.