Ford 2014 Annual Report Download - page 22

Item 1A. Risk Factors (Continued)
Work stoppages at Ford or supplier facilities or other limitations on production (whether as a result of labor
disputes, natural or man-made disasters, tight credit markets or other financial distress, production
constraints or difficulties, or other factors). A work stoppage or other limitation on production could occur at Ford
or supplier facilities for any number of reasons, including as a result of disputes under existing collective bargaining
agreements with labor unions or in connection with negotiation of new collective bargaining agreements, or as a result
of supplier financial distress or other production constraints or difficulties, or for other reasons. Recent examples of
situations that have affected industry production to varying degrees include: supplier financial distress due to reduced
production volumes during the economic downturn in 2008–2009; capacity constraints as suppliers that restructured or
downsized during the downturn work to satisfy growing industry volumes; short-term constraints on production as
consumer preferences shift more fluidly across vehicle segments and features; and the impact on certain suppliers of
natural disasters during 2011. As indicated, a work stoppage or other limitations on production at Ford or supplier
facilities for any reason (including but not limited to labor disputes, natural or man-made disasters, tight credit markets
or other financial distress, or production constraints or difficulties) could have a substantial adverse effect on our
financial condition and results of operations.
Single-source supply of components or materials. Many components used in our vehicles are available only
from a single supplier and cannot be re-sourced quickly or inexpensively to another supplier (due to long lead times,
new contractual commitments that may be required by another supplier before ramping up to provide the components
or materials, etc.). In addition to the general risks described above regarding interruption of supplies, which are
exacerbated in the case of single-source suppliers, the exclusive supplier of a key component potentially could exert
significant bargaining power over price, quality, warranty claims, or other terms relating to a component.
Labor or other constraints on Ford’s ability to maintain competitive cost structure. Substantially all of the
hourly employees in our Automotive operations in the United States and Canada are represented by unions and
covered by collective bargaining agreements. We negotiated a four-year agreement with the UAW in 2011, and a four-
year agreement with the Canadian Auto Workers Union in 2012. Although we have negotiated transformational
agreements in recent years, these agreements provide guaranteed wage and benefit levels throughout the contract
term and some degree of employment security, subject to certain conditions. As a practical matter, these agreements
may restrict our ability to close plants and divest businesses. A substantial number of our employees in other regions
are represented by unions or government councils, and legislation or custom promoting retention of manufacturing or
other employment in the state, country, or region may constrain as a practical matter our ability to sell or close
manufacturing or other facilities.
Substantial pension and postretirement health care and life insurance liabilities impairing liquidity or
financial condition. We have defined benefit retirement plans in the United States that cover many of our hourly and
salaried employees. We also provide pension benefits to non-U.S. employees and retirees, primarily in Europe. In
addition, we and certain of our subsidiaries sponsor plans to provide other postretirement benefits (“OPEB”) for retired
employees (primarily health care and life insurance benefits). See Note 12 of the Notes to the Financial Statements for
more information about these plans. These benefit plans impose significant liabilities on us that are not fully funded
and will require additional cash contributions, which could impair our liquidity.
Our qualified U.S. defined benefit pension plans are subject to Title IV of the Employee Retirement Income Security
Act of 1974 (“ERISA”). Under Title IV of ERISA, the Pension Benefit Guaranty Corporation (“PBGC”) has the authority
under certain circumstances or upon the occurrence of certain events to terminate a qualified underfunded pension
plan. One such circumstance is the occurrence of an event that unreasonably increases the risk of unreasonably large
losses to the PBGC. Although we believe it is unlikely that the PBGC would terminate any of our plans, in the event
that our qualified U.S. pension plans were terminated at a time when the liabilities of the plans exceeded the assets of
the plans, we would incur a liability to the PBGC that could be equal to the entire amount of the underfunding.
If our cash flows and capital resources were insufficient to fund our pension or OPEB obligations, we could be
forced to reduce or delay investments and capital expenditures, suspend dividend payments, seek additional capital, or
restructure or refinance our indebtedness.
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