Ford 2011 Annual Report Download - page 163

Notes to the Financial Statements
Ford Motor Company | 2011 Annual Report 161
NOTE 23. HELD-FOR-SALE OPERATIONS, DISPOSITIONS, AND ACQUISITIONS (Continued)
On October 1, 2011, we contributed our wholly-owned operations in Russia, consisting primarily of a manufacturing
plant near St. Petersburg and access to our Russian dealership network to the joint venture. Additionally, we entered into
an agreement with FordSollers for the granting of an exclusive right to manufacture, assemble, and distribute certain
Ford-brand vehicles in Russia through the licensing of certain trademarks and intellectual property rights. Sollers
contributed two production facilities. The joint venture will be engaged in the manufacturing and distribution of a range of
Ford passenger cars and light commercial vehicles in Russia. As part of our ongoing relationship with FordSollers, we will
supply parts and other vehicle components to the joint venture and receive a royalty of five percent of the joint venture's
net sales revenue.
The assets and liabilities of Ford Russia that were classified as held for sale were as follows (in millions):
Assets
Cash and cash equivalents
Receivables
Inventories
Net property
Other assets
Total assets of held-for-sale operations
Liabilities
Trade payables
Other payables
Accrued liabilities
Total liabilities of held-for-sale operations
October 1,
2011
$69
54
145
221
13
$502
$222
5
89
$316
Upon contribution of our wholly-owned operations in Russia to the joint venture in exchange for a 50% equity interest,
we deconsolidated the assets and liabilities shown above, recorded an equity method investment in FordSollers at its fair
value of $364 million, and recognized a pre-tax gain of $178 million attributable to the remeasurement of the retained
investment to its fair value. In addition, we received cash proceeds of $174 million, recorded a note receivable in the
amount of $133 million, recorded a payable of $27 million, and recognized loss in accumulated foreign currency
adjustment of $57 million. The total pre-tax gain of $401 million is reported in Automotive interest income and other non-
operating income/(expense), net.
We measured the fair value of our equity interest using the income approach. We used cash flows that were
developed jointly by Ford and Sollers. The significant assumptions used in this approach included:
• Projected growth in the Russian automobile market;
• Reduced import duties on certain auto parts; and
• A discount rate of 16% based on an appropriate weighted average cost of capital, adjusted for perceived business
risks related to regulatory concerns, foreign exchange volatility, execution risk, and risk associated with the
Russian automotive industry.
We, along with Sollers, pledged 100% of the shares in the joint venture to the State Corporation Bank for Development
and Foreign Economic Operations - Vnesheconombank ("VEB") as collateral securing the joint venture's debt.
Dispositions
Automotive Components Holdings, LLC ("ACH"). On June 1, 2011, ACH completed the legal sale of its blow-molded
fuel tank business located at its Milan plant to Inergy Automotive Systems. As a result of the terms of the arrangement,
the value of the property remains on our balance sheet and is being amortized over the term of the new supply agreement
with Inergy Automotive.
Volvo. On August 2, 2010, we completed the sale of Volvo and related assets to Zhejiang Geely Holding Group
Company Limited ("Geely"). As agreed, Volvo retained or acquired certain assets used by Volvo, consisting principally of
licenses to use certain intellectual property. During the first quarter of 2011, the final true-up of the purchase price was
adjusted upward by $9 million, lowering our pre-tax loss on the sale to $14 million reported in Automotive interest income
and other non-operating income/(expense), net.
As part of the agreement between Ford and Geely, we continue to supply Volvo with various vehicle components. Due
to our continued involvement with Volvo after separation, we did not classify Volvo as a discontinued operation.