Ford 2012 Annual Report Download - page 43

Ford Motor Company | 2012 Annual Report 41
Management's Discussion and Analysis of Financial Condition and Results of Operations
Based on present planning assumptions for long-term asset returns, a normalization of discount rates and planned
cash contributions, we expect our global funded pension obligations to be fully funded by mid-decade, with variability on a
plan-by-plan basis.
For a detailed discussion of our pension plans, see Note 16 of the Notes to the Financial Statements.
Liquidity Sufficiency. One of the four key priorities of our One Ford plan is to finance our plan and improve our
balance sheet, while at the same time having resources available to grow our business. The actions described above are
consistent with this priority. Based on our planning assumptions, we believe that we have sufficient liquidity and capital
resources to continue to invest in new products that customers want and value, transform and grow our business, pay our
debts and obligations as and when they come due, pay a sustainable dividend, and provide protection within an uncertain
global economic environment. We will continue to look for opportunities to strengthen our balance sheet, primarily by
working to ensure our underlying business generates positive Automotive operating-related cash flow, even as we
continue to invest in the growth of our business.
Financial Services Sector
Ford Credit
Funding Strategy. Ford Credit's funding strategy remains focused on diversification and it plans to continue
accessing a variety of markets, channels, and investors. Ford Credit completed its full-year 2012 funding plan, issuing
over $23 billion of public term funding. Ford Credit's public unsecured issuance was over $9 billion, including more
than $700 million issued under the Ford Credit U.S. Retail Notes program. Ford Credit also issued its first public
investment grade unsecured debt transaction since 2005. Additionally, Ford Credit launched an unsecured
commercial paper program in the United States, which has grown to about $1.7 billion.
Ford Credit's liquidity remains strong and it ended the year with $19.7 billion of available liquidity and $31.5 billion of
committed capacity, compared with about $17 billion and $33 billion at December 31, 2011, respectively.
Ford Credit's funding plan is subject to risks and uncertainties, many of which are beyond its control, including
disruption in the capital markets that could impact both unsecured debt and asset-backed securities issuance and the
effects of regulatory reform efforts on the financial markets. Potential impacts of industry events and regulation on
Ford Credit's ability to access debt and derivatives markets, or renew its committed liquidity programs in sufficient
amounts and at competitive rates, represents another risk to its funding plan. As a result of such events or regulation,
Ford Credit may need to reduce new originations of receivables, thereby reducing its ongoing profits and adversely
affecting its ability to support the sale of our vehicles. Ford Credit is focused on maintaining liquidity levels that meet
its business and funding requirement through economic cycles.
Funding. Ford Credit requires substantial funding in the normal course of business. Its funding requirements are
driven mainly by the need to: (i) purchase retail installment sale contracts and retail lease contracts to support the sale
of Ford products, which are influenced by Ford-sponsored special-rate financing programs that are available
exclusively through Ford Credit, (ii) provide wholesale financing and capital financing for Ford dealers, and (iii) repay
its debt obligations.
Ford Credit's funding sources include primarily securitization transactions (including other structured financings)
and unsecured debt. Ford Credit issues both short- and long-term debt that is held by both institutional and retail
investors, with long-term debt having an original maturity of more than 12 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 demand notes under its Ford Interest
Advantage program and by issuing unsecured commercial paper in the United States, Europe, Mexico, and other
international markets. At December 31, 2012, the principal amount outstanding of Ford Interest Advantage notes,
which may be redeemed at any time at the option of the holders thereof without restriction, was $4.9 billion. At
December 31, 2012, the principal amount outstanding of Ford Credit's unsecured commercial paper was about
$1.7 billion, which primarily represents issuance under its commercial paper program in the United States. Ford Credit
does not hold reserves specifically to fund the payment of any of its unsecured short-term funding obligations. Instead,
Ford Credit maintains multiple sources of liquidity, including cash, cash equivalents, and marketable securities
(excluding marketable securities related to insurance activities), unused committed liquidity programs, excess
securitizable assets, and committed and uncommitted credit facilities, which should be sufficient to meet Ford Credit's
unsecured short-term funding obligations.
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