form10q.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

T            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

£            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from_______________to_______________                     

Commission File Number: 1-3950


FORD MOTOR COMPANY
(Exact name of registrant as specified in its charter)


Delaware
38-0549190
(State of Incorporation)
(IRS Employer Identification No.)
   
One American Road, Dearborn, Michigan
48126
(Address of principal executive offices)
(Zip Code)

(313) 322-3000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
T     Yes
 
£     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer     T
Accelerated filer     £
Non-accelerated filer     £
Smaller reporting company     £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

£     Yes
 
T     No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

T     Yes
 
£     No

As of October 29, 2009, the registrant had outstanding 3,236,248,800 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit index located on page number 83.
 



 
 

 

PART I. FINANCIAL INFORMATION
ITEM 1.  Financial Statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
For the Periods Ended September 30, 2009 and 2008
(in millions, except per share amounts)

   
Third Quarter
   
First Nine Months
 
   
2009
   
2008
   
2009
   
2008
 
   
(unaudited)
   
(unaudited)
 
Sales and revenues
                       
Automotive sales
  $ 27,870     $ 27,733     $ 73,227     $ 103,907  
Financial Services revenues
    3,022       4,013       9,632       12,233  
Total sales and revenues
    30,892       31,746       82,859       116,140  
                                 
Costs and expenses
                               
Automotive cost of sales
    25,176       25,001       70,284       100,451  
Selling, administrative and other expenses
    3,076       4,575       9,968       16,974  
Interest expense
    1,623       2,413       5,245       7,430  
Financial Services provision for credit and insurance losses
    125       399       946       1,341  
Total costs and expenses
    30,000       32,388       86,443       126,196  
                                 
Automotive interest income and other non-operating income/(expense), net (Note 9)
    151       (244 )     5,146       (344 )
Financial Services other income/(loss), net (Note 9)
    131       300       431       935  
Equity in net income/(loss) of affiliated companies
    41       13       (27 )     119  
Income/(Loss) before income taxes
    1,215       (573 )     1,966       (9,346 )
Provision for/(Benefit from) income taxes
    139       (463 )     (40 )     (811 )
Income/(Loss) from continuing operations
    1,076       (110 )     2,006       (8,535 )
Income/(Loss) from discontinued operations (Note 12)
                5       9  
Net income/(loss)
    1,076       (110 )     2,011       (8,526 )
Less: Income/(Loss) attributable to noncontrolling interests
    79       51       180       262  
Net income/(loss) attributable to Ford Motor Company
  $ 997     $ (161 )   $ 1,831     $ (8,788 )
                                 
NET INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
                               
Income/(Loss) from continuing operations
  $ 997     $ (161 )   $ 1,826     $ (8,797 )
Income/(Loss) from discontinued operations (Note 12)
                5       9  
Net income/(loss)
  $ 997     $ (161 )   $ 1,831     $ (8,788 )
                                 
AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 13)
                               
Basic income/(loss)
                               
Income/(Loss) from continuing operations
  $ 0.31     $ (0.07 )   $ 0.63     $ (3.94 )
Income/(Loss) from discontinued operations
                       
Net income/(loss)
  $ 0.31     $ (0.07 )   $ 0.63     $ (3.94 )
Diluted income/(loss)
                               
Income/(Loss) from continuing operations
  $ 0.29     $ (0.07 )   $ 0.61     $ (3.94 )
Income/(Loss) from discontinued operations
                       
Net income/(loss)
  $ 0.29     $ (0.07 )   $ 0.61     $ (3.94 )

The accompanying notes are part of the financial statements

 
2

 
 
Item 1. Financial Statements (Continued)
 
FORD MOTOR COMPANY AND SUBSIDIARIES

SECTOR STATEMENT OF OPERATIONS
For the Periods Ended September 30, 2009 and 2008
(in millions, except per share amounts)

   
Third Quarter
   
First Nine Months
 
   
2009
   
2008
   
2009
   
2008
 
   
(unaudited)
   
(unaudited)
 
AUTOMOTIVE
                       
Sales
  $ 27,870     $ 27,733     $ 73,227     $ 103,907  
Costs and expenses
                               
Cost of sales
    25,176       25,001       70,284       100,451  
Selling, administrative and other expenses
    2,027       2,740       6,182       8,804  
Total costs and expenses
    27,203       27,741       76,466       109,255  
Operating income/(loss)
    667       (8 )     (3,239 )     (5,348 )
                                 
Interest expense
    311       493       1,161       1,566  
                                 
Interest income and other non-operating income/(expense), net (Note 9)
    151       (244 )     5,146       (344 )
Equity in net income/(loss) of affiliated companies
    38       13       107       109  
Income/(Loss) before income taxes — Automotive
    545       (732 )     853       (7,149 )
                                 
FINANCIAL SERVICES
                               
Revenues
    3,022       4,013       9,632       12,233  
Costs and expenses
                               
Interest expense
    1,312       1,920       4,084       5,864  
Depreciation
    862       1,596       3,261       7,544  
Operating and other expenses
    187       239       525       626  
Provision for credit and insurance losses
    125       399       946       1,341  
Total costs and expenses
    2,486       4,154       8,816       15,375  
                                 
Other income/(loss), net (Note 9)
    131       300       431       935  
Equity in net income/(loss) of affiliated companies
    3             (134 )     10  
                                 
Income/(Loss) before income taxes — Financial Services
    670       159       1,113       (2,197 )
                                 
TOTAL COMPANY
                               
Income/(Loss) before income taxes
    1,215       (573 )     1,966       (9,346 )
Provision for/(Benefit from) income taxes
    139       (463 )     (40 )     (811 )
Income/(Loss) from continuing operations
    1,076       (110 )     2,006       (8,535 )
Income/(Loss) from discontinued operations (Note 12)
                5       9  
Net income/(loss)
    1,076       (110 )     2,011       (8,526 )
Less: Income/(Loss) attributable to noncontrolling interests
    79       51       180       262  
Net income/(loss) attributable to Ford Motor Company
  $ 997     $ (161 )   $ 1,831     $ (8,788 )
                                 
NET INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
                               
Income/(Loss) from continuing operations
  $ 997     $ (161 )   $ 1,826     $ (8,797 )
Income/(Loss) from discontinued operations (Note 12)
                5       9  
Net income/(loss)
  $ 997     $ (161 )   $ 1,831     $ (8,788 )
                                 
AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 13)
                               
Basic income/(loss)
                               
Income/(Loss) from continuing operations
  $ 0.31     $ (0.07 )   $ 0.63     $ (3.94 )
Income/(Loss) from discontinued operations
                       
Net income/(loss)
  $ 0.31     $ (0.07 )   $ 0.63     $ (3.94 )
Diluted income/(loss)
                               
Income/(Loss) from continuing operations
  $ 0.29     $ (0.07 )   $ 0.61     $ (3.94 )
Income/(Loss) from discontinued operations
                       
Net income/(loss)
  $ 0.29     $ (0.07 )   $ 0.61     $ (3.94 )

The accompanying notes are part of the financial statements

 
3

 
 
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(in millions)

   
September 30,
   
December 31,
 
   
2009
   
2008
 
   
(unaudited)
 
ASSETS
           
Cash and cash equivalents
  $ 25,798     $ 22,049  
Marketable securities
    22,568       17,411  
Finance receivables, net (Note 2)
    75,613       93,484  
Other receivables, net
    7,296       5,674  
Net investment in operating leases
    18,803       25,250  
Inventories (Note 3)
    6,560       6,988  
Equity in net assets of affiliated companies
    1,544       1,599  
Net property
    24,812       24,143  
Deferred income taxes
    3,664       3,108  
Goodwill and other net intangible assets (Note 5)
    225       246  
Assets of held-for-sale operations (Note 12)
    9,023       8,612  
Other assets
    7,200       9,734  
Total assets
  $ 203,106     $ 218,298  
                 
LIABILITIES
               
Payables
  $ 15,209     $ 13,145  
Accrued liabilities and deferred revenue
    55,151       59,526  
Debt (Note 7)
    132,017       152,577  
Deferred income taxes
    2,644       2,035  
Liabilities of held-for-sale operations (Note 12)
    5,355       5,542  
Total liabilities
    210,376       232,825  
                 
EQUITY
               
Capital stock
               
Common Stock, par value $0.01 per share (3,244 million shares issued)
    32       23  
Class B Stock, par value $0.01 per share (71 million shares issued)
    1       1  
Capital in excess of par value of stock
    14,698       10,875  
Accumulated other comprehensive income/(loss)
    (8,704 )     (10,085 )
Treasury stock
    (178 )     (181 )
Retained earnings/(Accumulated deficit)
    (14,524 )     (16,355 )
Total equity/(deficit) attributable to Ford Motor Company (Note 19)
    (8,675 )     (15,722 )
Equity/(Deficit) attributable to noncontrolling interests (Note 19)
    1,405       1,195  
Total equity/(deficit) (Note 19)
    (7,270 )     (14,527 )
Total liabilities and equity
  $ 203,106     $ 218,298  

The accompanying notes are part of the financial statements

 
4

 

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

SECTOR BALANCE SHEET
(in millions)

   
September 30,
   
December 31,
 
   
2009
   
2008
 
   
(unaudited)
 
ASSETS
           
Automotive
           
Cash and cash equivalents
  $ 10,176     $ 6,377  
Marketable securities
    14,572       9,296  
Total cash and marketable securities
    24,748       15,673  
Receivables, net
    3,747       3,065  
Inventories (Note 3)
    6,560       6,988  
Deferred income taxes
    428       302  
Other current assets
    2,796       3,450  
Current receivable from Financial Services
    2,588       2,035  
Total current assets
    40,867       31,513  
Equity in net assets of affiliated companies
    1,412       1,076  
Net property
    24,627       23,930  
Deferred income taxes
    5,733       7,204  
Goodwill and other net intangible assets (Note 5)
    216       237  
Assets of held-for-sale operations (Note 12)
    8,112       8,414  
Other assets
    1,544       1,441  
Total Automotive assets
    82,511       73,815  
Financial Services
               
Cash and cash equivalents
    15,622       15,672  
Marketable securities
    8,642       8,607  
Finance receivables, net (Note 2)
    79,173       96,101  
Net investment in operating leases
    16,819       23,120  
Equity in net assets of affiliated companies
    132       523  
Goodwill and other net intangible assets (Note 5)
    9       9  
Assets of held-for-sale operations (Note 12)
    911       198  
Other assets
    5,322       7,437  
Total Financial Services assets
    126,630       151,667  
Intersector elimination
    (3,245 )     (2,535 )
Total assets
  $ 205,896     $ 222,947  
                 
LIABILITIES
               
Automotive
               
Trade payables
  $ 11,622     $ 9,193  
Other payables
    2,367       1,982  
Accrued liabilities and deferred revenue
    27,638       29,584  
Deferred income taxes
    2,894       2,790  
Debt payable within one year (Note 7)
    1,635       1,191  
Total current liabilities
    46,156       44,740  
Long-term debt (Note 7)
    25,254       23,036  
Other liabilities
    22,030       23,766  
Deferred income taxes
    495       614  
Liabilities of held-for-sale operations (Note 12)
    5,355       5,487  
Total Automotive liabilities
    99,290       97,643  
Financial Services
               
Payables
    1,220       1,970  
Debt (Note 7)
    105,774       128,842  
Deferred income taxes
    2,045       3,280  
Other liabilities and deferred income
    5,494       6,184  
Liabilities of held-for-sale operations (Note 12)
          55  
Payable to Automotive
    2,588       2,035  
Total Financial Services liabilities
    117,121       142,366  
Intersector elimination
    (3,245 )     (2,535 )
Total liabilities
    213,166       237,474  
                 
EQUITY
               
Capital stock
               
Common Stock, par value $0.01 per share (3,244 million shares issued)
    32       23  
Class B Stock, par value $0.01 per share (71 million shares issued)
    1       1  
Capital in excess of par value of stock
    14,698       10,875  
Accumulated other comprehensive income/(loss)
    (8,704 )     (10,085 )
Treasury stock
    (178 )     (181 )
Retained earnings/(Accumulated deficit)
    (14,524 )     (16,355 )
Total equity/(deficit) attributable to Ford Motor Company (Note 19)
    (8,675 )     (15,722 )
Equity/(Deficit) attributable to noncontrolling interests (Note 19)
    1,405       1,195  
Total equity/(deficit) (Note 19)
    (7,270 )     (14,527 )
Total liabilities and equity
  $ 205,896     $ 222,947  

The accompanying notes are part of the financial statements.

 
5

 

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Periods Ended September 30, 2009 and 2008
(in millions)

   
First Nine Months
 
   
2009
   
2008
 
   
(unaudited)
 
Cash flows from operating activities of continuing operations
           
Net cash (used in)/provided by operating activities
  $ 15,630     $ 3,269  
                 
Cash flows from investing activities of continuing operations
               
Capital expenditures
    (3,391 )     (4,875 )
Acquisitions of retail and other finance receivables and operating leases
    (21,214 )     (36,932 )
Collections of retail and other finance receivables and operating leases
    31,713       32,278  
Purchases of securities
    (61,461 )     (49,881 )
Sales and maturities of securities
    56,927       47,852  
Settlements of derivatives
    451       1,826  
Proceeds from sale of businesses
    380       6,293  
Cash paid for acquisitions
          (13 )
Transfer of cash balances upon disposition of discontinued/held-for-sale operations
          (925 )
Other
    (609 )     348  
Net cash (used in)/provided by investing activities
    2,796       (4,029 )
                 
Cash flows from financing activities of continuing operations
               
Sales of Common Stock
    2,270       663  
Changes in short-term debt
    (5,668 )     (4,422 )
Proceeds from issuance of other debt
    35,642       27,565  
Principal payments on other debt
    (46,072 )     (32,768 )
Other
    (743 )     (531 )
Net cash (used in)/provided by financing activities
    (14,571 )     (9,493 )
                 
Effect of exchange rate changes on cash
    524       (136 )
Cumulative correction of Financial Services prior period error (Note 1)
    (630 )      
                 
Net increase/(decrease) in cash and cash equivalents from continuing operations
    3,749       (10,389 )
                 
Cash flows from discontinued operations
               
Cash flows from operating activities of discontinued operations
           
Cash flows from investing activities of discontinued operations
           
Cash flows from financing activities of discontinued operations
           
                 
Net increase/(decrease) in cash and cash equivalents
  $ 3,749     $ (10,389 )
                 
Cash and cash equivalents at January 1
  $ 22,049     $ 35,283  
Cash and cash equivalents of discontinued/held-for-sale operations at January 1
           
Net increase/(decrease) in cash and cash equivalents
    3,749       (10,389 )
Less: cash and cash equivalents of discontinued/held-for-sale operations at September 30
           
Cash and cash equivalents at September 30
  $ 25,798     $ 24,894  

The accompanying notes are part of the financial statements

 
6

 

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONDENSED SECTOR STATEMENT OF CASH FLOWS
For the Periods Ended September 30, 2009 and 2008
(in millions)

   
First Nine Months 2009
   
First Nine Months 2008
 
   
Automotive
   
Financial Services
   
Automotive
   
Financial Services
 
   
(unaudited)
   
(unaudited)
 
Cash flows from operating activities of continuing operations
                       
Net cash (used in)/provided by operating activities
  $ 754     $ 4,203     $ (7,242 )   $ 8,088  
                                 
Cash flows from investing activities of continuing operations
                               
Capital expenditures
    (3,377 )     (14 )     (4,815 )     (60 )
Acquisitions of retail and other finance receivables and operating leases
          (21,214 )           (36,932 )
Collections of retail and other finance receivables and operating leases
          31,824             32,643  
Net (increase)/decrease of wholesale receivables
          9,435             2,058  
Purchases of securities
    (40,974 )     (22,135 )     (33,430 )     (16,721 )
Sales and maturities of securities
    36,201       21,128       33,676       14,176  
Settlements of derivatives
    (52 )     503       1,136       690  
Proceeds from sale of businesses
    6       374       2,595       3,698  
Cash paid for acquisitions
                (13 )      
Transfer of cash balances upon disposition of discontinued/held-for-sale operations
                (925 )      
Investing activity from Financial Services
    15             9        
Other
    (735 )     126       71       277  
Net cash (used in)/provided by investing activities
    (8,916 )     20,027       (1,696 )     (171 )
                                 
Cash flows from financing activities of continuing operations
                               
Sales of Common Stock
    2,270             663        
Changes in short-term debt
    242       (5,910 )     56       (4,478 )
Proceeds from issuance of other debt
    11,412       24,230       116       27,449  
Principal payments on other debt
    (952 )     (42,747 )     (456 )     (32,042 )
Financing activity to Automotive
          (15 )           (9 )
Other
    (193 )     (550 )     (206 )     (325 )
Net cash (used in)/provided by financing activities
    12,779       (24,992 )     173       (9,405 )
                                 
Effect of exchange rate changes on cash
    246       278       (64 )     (72 )
Net change in intersector receivables/payables and other liabilities
    (1,064 )     1,064       (1,242 )     1,242  
Cumulative correction of prior period error (Note 1)
          (630 )            
Net increase/(decrease) in cash and cash equivalents from continuing operations
    3,799       (50 )     (10,071 )     (318 )
                                 
Cash flows from discontinued operations
                               
Cash flows from operating activities of discontinued operations
                       
Cash flows from investing activities of discontinued operations
                       
Cash flows from financing activities of discontinued operations
                       
                                 
Net increase/(decrease) in cash and cash equivalents
  $ 3,799     $ (50 )   $ (10,071 )   $ (318 )
                                 
Cash and cash equivalents at January 1
  $ 6,377     $ 15,672     $ 20,678     $ 14,605  
Cash and cash equivalents of discontinued/held-for-sale operations at January 1
                       
Net increase/(decrease) in cash and cash equivalents
    3,799       (50 )     (10,071 )     (318 )
Less: cash and cash equivalents of discontinued/held-for-sale operations at September 30
                       
Cash and cash equivalents at September 30
  $ 10,176     $ 15,622     $ 10,607     $ 14,287  

The accompanying notes are part of the financial statements

 
7

 

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the Periods Ended September 30, 2009 and 2008
(in millions)

   
Third Quarter
   
First Nine Months
 
   
2009
   
2008
   
2009
   
2008
 
   
(unaudited)
   
(unaudited)
 
Net income/(loss)
  $ 1,076     $ (110 )   $ 2,011     $ (8,526 )
Other comprehensive income/(loss), net of tax:
                               
Foreign currency translation
    513       (2,061 )     2,209       (2,615 )
Net gain/(loss) on derivative instruments
    (68 )     (109 )     (191 )     (136 )
Employee benefit-related
    (131 )     1,442       (587 )     2,722  
Net holding gain/(loss)
    2       (12 )     (1 )     (45 )
Total other comprehensive income/(loss), net of tax
    316       (740 )     1,430       (74 )
Comprehensive income/(loss)
    1,392       (850 )     3,441       (8,600 )
Less: Comprehensive income/(loss) attributable to noncontrolling interests (Note 19)
    94       15       229       203  
Comprehensive income/(loss) attributable to Ford Motor Company
  $ 1,298     $ (865 )   $ 3,212     $ (8,803 )

The accompanying notes are part of the financial statements

 
8

 

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


Footnote
 
Page
Note 1
Principles of Presentation and Consolidation
10
Note 2
Finance Receivables – Financial Services Sector
15
Note 3
Inventories
15
Note 4
Variable Interest Entities
16
Note 5
Goodwill and Other Net Intangible Assets
20
Note 6
Restricted Cash
20
Note 7
Debt and Commitments
21
Note 8
Impairments
29
Note 9
Other Income/(Loss)
30
Note 10
Employee Separation Actions and Exit and Disposal Activities
30
Note 11
Income Taxes
31
Note 12
Discontinued Operations, Held-For-Sale Operations, Other Dispositions, and Acquisitions
32
Note 13
Amounts Per Share Attributable to Ford Motor Company Common and Class B Stock
35
Note 14
Derivative Financial Instruments and Hedging Activities
35
Note 15
Retirement Benefits
39
Note 16
Fair Value Measurements
39
Note 17
Segment Information
42
Note 18
Guarantees
44
Note 19
Equity/(Deficit) Attributable to Ford Motor Company and Noncontrolling Interests
45

 
9

 

Item 1. Financial Statements (Continued)

NOTE 1.  PRINCIPLES OF PRESENTATION AND CONSOLIDATION

Our financial statements are presented in accordance with generally accepted accounting principles ("GAAP") in the United States for interim financial information, and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X.  We show certain of our financial statements on both a consolidated and a sector basis for our Automotive and Financial Services sectors.  All intercompany items and transactions have been eliminated in both the consolidated and sector basis financial statements.  Reconciliations of certain line items are explained below in this Note, where the presentation of these intercompany eliminations or consolidated adjustments differs between the consolidated and sector financial statements.

In the opinion of management, these unaudited financial statements reflect a fair statement of the results of operations and financial condition of Ford Motor Company and its consolidated subsidiaries and consolidated variable interest entities ("VIEs") of which we are the primary beneficiary for the periods and at the dates presented.  The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.  Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2008 ("2008 Form 10-K Report").  For purposes of this report, "Ford," the "Company," "we," "our," "us" or similar references mean Ford Motor Company and our consolidated subsidiaries and our consolidated VIEs of which we are the primary beneficiary, unless the context requires otherwise.  All held-for-sale assets and liabilities are excluded from the footnotes unless otherwise noted.  See Note 12 for details of held-for-sale operations.

In the first quarter of 2009, our wholly-owned subsidiary Ford Motor Credit Company LLC ("Ford Credit") recorded a $630 million cumulative adjustment to correct for the overstatement of Financial Services sector cash and cash equivalents and certain accounts payable that originated in prior periods.  The impact on previously-issued annual and interim financial statements was not material.

Subsequent Events.  We evaluated the effects of all subsequent events from the end of the third quarter through November 6, 2009, the date we filed our financial statements with the U.S. Securities and Exchange Commission ("SEC").

Noncontrolling Interests.  We adopted the Financial Accounting Standards Board's ("FASB") revised standard on accounting for noncontrolling interests on its effective date, January 1, 2009.  This standard establishes accounting and reporting requirements for the noncontrolling interest (formerly "minority interest") in a subsidiary and for the deconsolidation of a subsidiary.  The standard clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements.  The presentation and disclosure requirements of this standard must be applied retrospectively for all periods.  This requirement changed the presentation of our consolidated and sector statements of operations and our consolidated and sector balance sheets.  It also required us to incorporate a consolidated statement of comprehensive income.  Footnote disclosures for our interim financial periods include separate reconciliations of our beginning-of-period to end-of-period equity/(deficit) for Ford and the noncontrolling interests.

Convertible Debt Instruments.  We adopted the FASB's standard on accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement), on its effective date, January 1, 2009.  The standard specifies that issuers of convertible debt securities that, upon conversion, may be settled in cash should separately account for the liability and equity components in a manner that will reflect the entity's nonconvertible debt borrowing rate resulting in higher interest expense over the life of the instrument due to amortization of the discount.  This standard applies to our 4.25% Senior Convertible Notes due December 15, 2036 ("Convertible Notes") issued in December 2006.  We have applied the standard retrospectively to all periods presented.
 
 
10

 

Item 1. Financial Statements (Continued)

NOTE 1.  PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)

The following financial statement line items from our sector statement of operations and sector balance sheet were affected by implementation of the change in accounting for convertible debt instruments that, upon conversion, may be settled in cash (in millions, except per share information):

    Revised Third Quarter     As Originally Reported Third Quarter     Effect of  
Statement of Operations
 
2008
   
2008
   
Change
 
Automotive interest expense
  $ 493     $ 462     $ 31  
Income/(Loss) from continuing operations attributable to Ford Motor Company
    (161 )     (129 )     (32 )
Net income/(loss) attributable to Ford Motor Company
    (161 )     (129 )     (32 )
Earnings per share attributable to Ford Motor Company
    (0.07 )     (0.06 )     (0.01 )

    Revised First Nine Months     As Originally Reported First Nine Months     Effect of  
Statement of Operations
 
 2008
   
2008
   
Change
 
Automotive interest expense
  $ 1,566     $ 1,475     $ 91  
Income/(Loss) from continuing operations attributable to Ford Motor Company
    (8,797 )     (8,705 )     (92 )
Net income/(loss) attributable to Ford Motor Company
    (8,788 )     (8,696 )     (92 )
Earnings per share attributable to Ford Motor Company
    (3.94 )     (3.89 )     (0.05 )

    Revised December 31,     As Originally Reported December 31,     Effect of  
Balance Sheet (a)
 
2008
   
 
2008
   
Change
 
Automotive other assets – noncurrent (b)
  $ 1,441     $ 1,512     $ (71 )
Automotive long-term debt
    23,036       24,655       (1,619 )
Capital in excess of par value of stock (c)
    10,875       9,076       1,799  
Retained earnings/(Accumulated deficit)
    (16,355 )     (16,145 )     (210 )
__________
(a)
As a result of the retrospective application of the standard on accounting for convertible debt instruments that, upon conversion, may be settled in cash, the December 31, 2008 column on our consolidated and sector balance sheets is "unaudited."
(b)
Effect of Change related to the standard on accounting for convertible debt instruments that, upon conversion, may be settled in cash includes capitalized charges of $30 million; the remaining $41 million relates to the assets of Volvo classified as held-for-sale operations (see Note 12 for discussion of Volvo).
(c)
Effect of Change represents the equity component under the standard on accounting for convertible debt instruments that, upon conversion, may be settled in cash (i.e., $1,864 million), less those amounts previously recorded on conversions prior to adoption of the standard (i.e., $65 million).

The following shows the effect on the per share amounts attributable to Ford Common and Class B Stock before and after the adoption of the standard on accounting for convertible debt instruments that, upon conversion, may be settled in cash:

   
Third Quarter 2009
 
Basic income/(loss)
 
Before Adoption
   
After Adoption
   
Change
 
Income/(Loss) from continuing operations
  $ 0.31     $ 0.31     $  
Income/(Loss) from discontinued operations
                 
Net income/(loss)
  $ 0.31     $ 0.31     $  
Diluted income/(loss)
                       
Income/(Loss) from continuing operations
  $ 0.29     $ 0.29     $  
Income/(Loss) from discontinued operations
                 
Net income/(loss)
  $ 0.29     $ 0.29     $  

   
First Nine Months 2009
 
Basic income/(loss)
 
Before Adoption
   
After Adoption
   
Change
 
Income/(Loss) from continuing operations
  $ 0.65     $ 0.63     $ (0.02 )
Income/(Loss) from discontinued operations
                 
Net income/(loss)
  $ 0.65     $ 0.63     $ (0.02 )
Diluted income/(loss)
                       
Income/(Loss) from continuing operations
  $ 0.61     $ 0.61     $  
Income/(Loss) from discontinued operations
                 
Net income/(loss)
  $ 0.61     $ 0.61     $  

 
11

 

Item 1. Financial Statements (Continued)

NOTE 1.  PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)

Presentation of Balance Sheet

Deferred Tax Assets and Liabilities. The difference between the total assets and total liabilities as presented in our sector balance sheet and consolidated balance sheet is the result of netting of deferred income tax assets and liabilities.  The reconciliation between total sector and consolidated balance sheets is as follows (in millions):

   
September 30,
   
December 31,
 
   
2009
   
2008
 
Sector balance sheet presentation of deferred income tax assets:
           
Automotive sector current deferred income tax assets
  $ 428     $ 302  
Automotive sector non-current deferred income tax assets
    5,733       7,204  
Financial Services sector deferred income tax assets*
    293       251  
Total
    6,454       7,757  
Reclassification for netting of deferred income taxes
    (2,790 )     (4,649 )
Consolidated balance sheet presentation of deferred income tax assets
  $ 3,664     $ 3,108  
                 
Sector balance sheet presentation of deferred income tax liabilities:
               
Automotive sector current deferred income tax liabilities
  $ 2,894     $ 2,790  
Automotive sector non-current deferred income tax liabilities
    495       614  
Financial Services sector deferred income tax liabilities
    2,045       3,280  
Total
    5,434       6,684  
Reclassification for netting of deferred income taxes
    (2,790 )     (4,649 )
Consolidated balance sheet presentation of deferred income tax liabilities
  $ 2,644     $ 2,035  
__________
*      Financial Services deferred income tax assets are included in Financial Services other assets on our sector balance sheet.

Ford Acquisition of Ford Credit Debt.  In connection with our Registration Statement (No. 333-151355) filed on Form S-3 and the related prospectus dated June 2, 2008 and the prospectus supplements dated August 14, 2008 and October 2, 2008, we issued shares of Ford Common Stock from time to time in market transactions and used the proceeds therefrom to purchase outstanding Ford Credit debt securities maturing prior to 2012.  These transactions are summarized as follows:

·
In the second half of 2008, we issued 88,325,372 shares of Ford Common Stock resulting in proceeds of $434 million that we then used to purchase debt of Ford Credit with a carrying value of $492 million and $10 million in related interest.  We recognized a gain on extinguishment of debt of $68 million on the transaction, recorded in Automotive interest income and other non-operating income/(expense), net.
·
On January 12, 2009, $135 million of these debt securities matured.
·
During August 2009, we issued 71,587,743 shares of Ford Common Stock, resulting in proceeds of $565 million that we then used to purchase debt of Ford Credit with a carrying value of $556 million and $9 million in related interest.  A de minimis loss on the extinguishment of the debt was recorded in Automotive interest income and other non-operating income/(expense), net.
·
In September 2009, Ford Credit bought back from us $267 million principal amount of its debt securities and $8 million in interest for $276 million in cash.  We recognized an Automotive sector gain of $1 million and Financial Services sector loss of $1 million on the transaction, recorded in Automotive interest income and other non-operating income/(expense), net and Financial Services other income/(loss), net, respectively.
 
At September 30, 2009 the remaining Ford Credit debt securities we purchased had a carrying value of $646 million and an estimated fair value of $650 million.

On our consolidated balance sheet, the remaining debt is no longer reported in our Debt balances.  On our sector balance sheet, the debt is reported as outstanding as it has not been retired or cancelled by Ford Credit.  Accordingly, on our sector balance sheet, $646 million and $492 million of debt are reported as Financial Services debt at September 30, 2009 and December 31, 2008, respectively.  Likewise, included in Automotive marketable securities are $646 million and $492 million at September 30, 2009 and December 31, 2008, respectively, related to Ford's purchase of the Ford Credit debt securities.  Consolidating elimination adjustments for these debt securities and related interest of $11 million and $8 million at September 30, 2009 and December 31, 2008, respectively, are included in the Intersector elimination lines on the sector balance sheet.

 
12

 

Item 1. Financial Statements (Continued)
 
NOTE 1.  PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)

Presentation of Cash Flows

The reconciliation between total sector and consolidated cash flows from operating activities of continuing operations is as follows (in millions):
 
   
First Nine Months
 
   
2009
   
2008
 
Sum of sector cash flows from operating activities of continuing operations
  $ 4,957     $ 846  
Reclassification of wholesale receivable cash flows from investing to operating for consolidated presentation (a)
    9,435       2,058  
Reclassification of finance receivable cash flows from investing to operating for consolidated presentation (b)
    111       365  
Reclassification of Ford Credit's cash outflow related to the acquisition of Ford's public unsecured debt securities from operating to financing for consolidated presentation (c)
    1,127        
Consolidated cash flows from operating activities of continuing operations
  $ 15,630     $ 3,269  
__________
(a)
In addition to vehicles sold by us, the cash flows from wholesale finance receivables being reclassified from investing to operating include financing by Ford Credit of used and non-Ford vehicles.  100% of cash flows from wholesale finance receivables have been reclassified for consolidated presentation as the portion of these cash flows from used and non-Ford vehicles is impracticable to separate.
(b)
Includes cash flows of finance receivables purchased/collected from certain divisions and subsidiaries of the Automotive sector.
(c)
See discussion of "Ford Credit Acquisition of Ford Debt" below.

Ford Credit Acquisition of Ford Debt.  During the first quarter of 2009, Ford Credit conducted a cash tender offer for our secured term loan under the secured credit agreement that we entered into with various banks and financial institutions on December 15, 2006 (the "Credit Agreement").  Pursuant to this offer, Ford Credit purchased from lenders thereof $2.2 billion principal amount of term loan for an aggregate cost of $1.1 billion (including transaction costs).  This transaction settled on March 27, 2009, following which Ford Credit distributed the term loan to its immediate parent, Ford Holdings LLC ("Ford Holdings"), whereupon the debt was forgiven.  As a result, we recorded a gain on extinguishment of debt in the amount of $1.1 billion, net of transaction costs, in Automotive interest income and other non-operating income/(expense), net.  Approximately $4.6 billion aggregate principal amount of term loan remains outstanding.

On our consolidated statement of cash flows, the $1.1 billion cash outflow related to Ford Credit's purchase of our secured term loan is presented as Principal payments on other debt within Cash flows from financing activities of continuing operations.  On our sector statement of cash flows, the cash outflow is presented as Purchases of securities by our Financial Services sector within Cash flows from investing activities of continuing operations.

During the second quarter of 2009, Ford Credit conducted a cash tender offer for Ford's public unsecured debt securities.  Pursuant to this offer, Ford Credit purchased $3.4 billion principal amount of public unsecured debt securities for an aggregate cost of $1.1 billion (including transaction costs and accrued and unpaid interest payments for such tendered debt securities).  This transaction settled on April 8, 2009, following which Ford Credit transferred the repurchased debt securities to us in satisfaction of $1.1 billion of Ford Credit's tax liabilities to us.  As a result, we recorded a gain on extinguishment of debt in the amount of $2.2 billion, net of unamortized discounts, premiums and fees, in Automotive interest income and other non-operating income/(expense), net.  Approximately $5.6 billion aggregate principal amount of our public unsecured debt securities (including about $100 million of industrial revenue bonds) remains outstanding.

On our consolidated statement of cash flows, the $1.1 billion cash outflow related to Ford Credit's purchase of our public unsecured debt securities is presented as a principal payment on debt within Cash flows from financing activities of continuing operations.  On our sector statement of cash flows, the cash outflow is presented as a decrease in taxes payable by our Financial Services sector within Cash flows from operating activities of continuing operations.

Ford Acquisition of Ford Credit Debt.  The cash flows related to our acquisition of Ford Credit's debt securities discussed in "Presentation of Balance Sheet" above are presented differently on our consolidated and sector statements of cash flows.

 
13

 

Item 1. Financial Statements (Continued)
 
NOTE 1.  PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)

As discussed above in "Presentation of Balance Sheet," we purchased $424 million of Ford Credit debt securities during the second half of 2008, $270 million of which was purchased during the third quarter of 2008.  The cash outflow is reclassified from Automotive purchases of securities within Cash flows from investing activities of continuing operations on our sector statement of cash flows to Principal payments on other debt within Cash flows from financing activities of continuing operations on our consolidated statement of cash flows.

Also as discussed above, the $135 million cash payment from Ford Credit to us related to the maturity of Ford Credit's debt securities is not shown as a cash outflow on our consolidated statement of cash flows, because the debt was not reported as outstanding on our consolidated balance sheet.  On our sector statement of cash flows, the $135 million cash payment is presented as a cash inflow from Automotive sales and maturities of securities within Cash flows from investing activities of continuing operations and a cash outflow from Financial Services principal payments on other debt within Cash flows from financing activities of continuing operations.

The cash outflow of $556 million related to our acquisition of Ford Credit's debt securities discussed above is reclassified from Automotive purchases of securities within Cash flows from investing activities of continuing operations on our sector statement of cash flows to Principal payments on other debt within Cash flows from financing activities of continuing operations on our consolidated statement of cash flows.

On our consolidated statement of cash flows, the $267 million cash payment from Ford Credit to us related to its repurchase of debt securities from us discussed above is not shown as a cash outflow because the debt was not reported as outstanding on our consolidated balance sheet.  On our sector statement of cash flows, the $267 million cash payment is presented as a cash inflow from Automotive sales and maturities of securities within Cash flows from investing activities of continuing operations and a cash outflow from Financial Services principal payments on other debt within Cash flows from financing activities of continuing operations.

Ford Leasing Acquisition of Ford Debt.  In July 2009, Ford Leasing, LLC ("Ford Leasing"), a wholly-owned subsidiary of Ford, purchased from the lenders under our Credit Agreement $45 million principal amount of our secured term loan thereunder for an aggregate cost of $37 million.  Ford Holdings elected to receive the $37 million from Ford Leasing as a dividend, whereupon the debt was immediately forgiven.  As a result of this transaction, we recorded a pre-tax gain of $8 million in Automotive interest income and other non-operating income/(expense), net in the third quarter of 2009.

The cash outflow of $37 million is presented differently on our consolidated and sector statements of cash flows.  The cash outflow is reclassified from Financial Services purchases of securities within Cash flows from investing activities of continuing operations on our sector statement of cash flows to Principal payments on other debt within Cash flows from financing activities of continuing operations on our consolidated statement of cash flows.

Liquidity
 
At September 30, 2009, our Automotive sector had total cash, cash equivalents, and marketable securities of $24.7 billion (including about $700 million of Temporary Asset Account ("TAA") and other securities, and about $200 million of marketable securities for which the cash settlement was not made by September 30, 2009 and for which there was a payable or receivable recorded on the balance sheet).
 
We experienced substantial negative cash flows during 2008, and had negative equity of $7.3 billion at September 30, 2009.  We continue to face many risks and uncertainties related to the global economy, our industry in particular, and the credit environment, which could materially impact our plan.  Our current planning assumptions forecast full-year 2009 U.S. industry sales volume of about 10.6 million units, and industry sales volume of about 15.7 million units for the 19 markets we track in Europe.  We previously have forecasted 2010 industry sales volume of about 12.5 million units in the United States, and estimated a range of 13 to 14.5 million units for the 19 markets we track in Europe; we will update our full-year 2010 planning assumptions when we disclose full-year 2009 results.  Our planning assumptions also include Ford Credit's ability to obtain funding in sufficient amounts to support the sale of Ford vehicles.
 
We believe that all reasonably possible scenarios, including a decline in 2009 – 2010 industry sales volumes to levels below our planning assumptions, or constraints on Ford Credit's ability to execute its funding plan in order to support the sale of Ford products, would not exhaust our presently available liquidity.  Therefore, we do not believe that these reasonably possible scenarios cause substantial doubt about our ability to continue as a going concern for the next year.
 
Accordingly, we have concluded that there is no substantial doubt about our ability to continue as a going concern, and our financial statements have been prepared on a going concern basis.

 
14

 

Item 1. Financial Statements (Continued)

NOTE 1.  PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)

Fair Value Measurements

In determining fair value, we use various valuation techniques and prioritize the use of observable inputs.  We assess the inputs with which we measure fair value using a three-tier hierarchy, based on the extent to which the inputs used are observable in the market as follows:

 
·
Level 1 – inputs include quoted prices for identical instruments and are the most observable.
 
·
Level 2 – inputs include quoted prices for similar assets and observable inputs such as interest rates, currency exchange rates and yield curves.
 
·
Level 3 – inputs are not observable in the market and include management’s judgments about the assumptions market participants would use in pricing the asset or liability.

See Note 16 for a discussion of fair value measurements.

NOTE 2.  FINANCE RECEIVABLES – FINANCIAL SERVICES SECTOR

Net finance receivables were as follows (in millions):

   
September 30,
   
December 31,
 
   
2009
   
2008
 
Retail (including direct financing leases)
  $ 60,269     $ 67,316  
Wholesale
    18,489       27,483  
Other finance receivables
    3,708       4,057  
Total finance receivables
    82,466       98,856  
Unearned interest supplements
    (1,830 )     (1,343 )
Allowance for credit losses
    (1,486 )     (1,417 )
Other
    23       5  
Net finance receivables – sector balance sheet
  $ 79,173     $ 96,101  
                 
Net finance receivables subject to fair value
  $ 74,022     $ 91,584  
Fair value
  $ 74,669     $ 84,615  
                 
Net finance receivables – sector balance sheet
  $ 79,173     $ 96,101  
Reclassification of receivables purchased from Automotive sector and Other Financial Services to Other receivables, net
    (3,560 )     (2,617 )
Net finance receivables – consolidated balance sheet
  $ 75,613     $ 93,484  

The fair value of finance receivables is generally calculated by discounting future cash flows using an estimated discount rate that reflects the current credit, interest rate, and prepayment risks associated with similar types of instruments.

NOTE 3.  INVENTORIES

Inventories are summarized as follows (in millions):

   
September 30,
   
December 31,
 
   
2009
   
2008
 
Raw materials, work-in-process and supplies
  $ 3,057     $ 2,747  
Finished products
    4,