F 09.30.2011- 10Q
 

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the quarterly period ended September 30, 2011
 
 
[   ]
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.  Yes R 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).  Yes R   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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.    Large accelerated filer R 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 £ No R

As of October 28, 2011, the registrant had outstanding 3,729,248,130 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit Index begins on p. 89
 

 



 

FORD MOTOR COMPANY
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended September 30, 2011

 
Table of Contents
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

PART I. FINANCIAL INFORMATION
ITEM 1.  Financial Statements.

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
For the Periods Ended September 30, 2011 and 2010
(in millions, except per share amounts)
 
Third Quarter
 
First Nine Months
 
2011
 
2010
 
2011
 
2010
 
(unaudited)
Revenues
 
 
 
 
 
 
 
Automotive
$
31,043

 
$
27,592

 
$
95,557

 
$
89,050

Financial Services
2,004

 
2,301

 
6,131

 
7,476

Total revenues
33,047

 
29,893

 
101,688

 
96,526

 
 
 
 
 
 
 
 
Costs and expenses
 

 
 

 
 

 
 

Automotive cost of sales
27,617

 
24,233

 
83,646

 
77,200

Selling, administrative and other expenses
2,861

 
2,654

 
8,502

 
8,880

Interest expense
1,096

 
1,469

 
3,397

 
4,806

Financial Services provision for credit and insurance losses
5

 
(36
)
 
(28
)
 
(208
)
Total costs and expenses
31,579

 
28,320

 
95,517

 
90,678

 
 
 
 
 
 
 
 
Automotive interest income and other non-operating income/(expense),
net (Note 12)
98

 
88

 
337

 
336

Financial Services other income/(loss), net (Note 12)
176

 
108

 
314

 
301

Equity in net income/(loss) of affiliated companies
104

 
118

 
406

 
384

Income/(Loss) before income taxes
1,846

 
1,887

 
7,228

 
6,869

Provision for/(Benefit from) income taxes
194

 
199

 
620

 
500

Income/(Loss) from continuing operations
1,652

 
1,688

 
6,608

 
6,369

Income/(Loss) from discontinued operations

 

 

 

Net income/(loss)
1,652

 
1,688

 
6,608

 
6,369

Less: Income/(Loss) attributable to noncontrolling interests
3

 
1

 
10

 
(2
)
Net income/(loss) attributable to Ford Motor Company
$
1,649

 
$
1,687

 
$
6,598

 
$
6,371

 
 
 
 
 
 
 
 
NET INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
 
 
 
 
 
 
 
Income/(Loss) from continuing operations
$
1,649

 
$
1,687

 
$
6,598

 
$
6,371

Income/(Loss) from discontinued operations

 

 

 

Net income/(loss) attributable to Ford Motor Company
$
1,649

 
$
1,687

 
$
6,598

 
$
6,371

 
 
 
 
 
 
 
 
AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 15)
 

 
 

 
 

 
 

Basic income/(loss)
 

 
 

 
 

 
 

Income/(Loss) from continuing operations
$
0.43

 
$
0.49

 
$
1.74

 
$
1.87

Income/(Loss) from discontinued operations

 

 

 

Net income/(loss)
$
0.43

 
$
0.49

 
$
1.74

 
$
1.87

Diluted income/(loss)
 

 
 

 
 

 
 

Income/(Loss) from continuing operations
$
0.41

 
$
0.43

 
$
1.62

 
$
1.61

Income/(Loss) from discontinued operations

 

 

 

Net income/(loss)
$
0.41

 
$
0.43

 
$
1.62

 
$
1.61


The accompanying notes are part of the financial statements.

1

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
SECTOR STATEMENT OF OPERATIONS
For the Periods Ended September 30, 2011 and 2010
(in millions, except per share amounts)
 
Third Quarter
 
First Nine Months
 
2011
 
2010
 
2011
 
2010
 
(unaudited)
AUTOMOTIVE
 
 
 
 
 
 
 
Revenues
$
31,043

 
$
27,592

 
$
95,557

 
$
89,050

Costs and expenses
 
 
 
 
 
 
 
Cost of sales
27,617

 
24,233

 
83,646

 
77,200

Selling, administrative and other expenses
2,202

 
2,025

 
6,690

 
6,669

Total costs and expenses
29,819

 
26,258

 
90,336

 
83,869

Operating income/(loss)
1,224

 
1,334

 
5,221

 
5,181

 
 
 
 
 
 
 
 
Interest expense
181

 
415

 
634

 
1,475

 
 
 
 
 
 
 
 
Interest income and other non-operating income/(expense), net (Note 12)
98

 
88

 
337

 
336

Equity in net income/(loss) of affiliated companies
100

 
119

 
391

 
376

Income/(Loss) before income taxes — Automotive
1,241

 
1,126

 
5,315

 
4,418

 
 
 
 
 
 
 
 
FINANCIAL SERVICES
 

 
 

 
 

 
 

Revenues
2,004

 
2,301

 
6,131

 
7,476

Costs and expenses
 
 
 
 
 
 
 
Interest expense
915

 
1,054

 
2,763

 
3,331

Depreciation
481

 
426

 
1,289

 
1,580

Operating and other expenses
178

 
203

 
523

 
631

Provision for credit and insurance losses
5

 
(36
)
 
(28
)
 
(208
)
Total costs and expenses
1,579

 
1,647

 
4,547

 
5,334

 
 
 
 
 
 
 
 
Other income/(loss), net (Note 12)
176

 
108

 
314

 
301

Equity in net income/(loss) of affiliated companies
4

 
(1
)
 
15

 
8

Income/(Loss) before income taxes — Financial Services
605

 
761

 
1,913

 
2,451

 
 
 
 
 
 
 
 
TOTAL COMPANY
 

 
 

 
 

 
 

Income/(Loss) before income taxes
1,846

 
1,887

 
7,228

 
6,869

Provision for/(Benefit from) income taxes
194

 
199

 
620

 
500

Income/(Loss) from continuing operations
1,652

 
1,688

 
6,608

 
6,369

Income/(Loss) from discontinued operations

 

 

 

Net income/(loss)
1,652

 
1,688

 
6,608

 
6,369

Less: Income/(Loss) attributable to noncontrolling interests
3

 
1

 
10

 
(2
)
Net income/(loss) attributable to Ford Motor Company
$
1,649

 
$
1,687

 
$
6,598

 
$
6,371

 
 
 
 
 
 
 
 
NET INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
 
 
 

 
 
 
 
Income/(Loss) from continuing operations
$
1,649

 
$
1,687

 
$
6,598

 
$
6,371

Income/(Loss) from discontinued operations

 

 

 

Net income/(loss) attributable to Ford Motor Company
$
1,649

 
$
1,687

 
$
6,598

 
$
6,371

 
 
 
 
 
 
 
 
AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 15)
 

 
 

 
 

 
 

Basic income/(loss)
 

 
 

 
 

 
 

Income/(Loss) from continuing operations
$
0.43

 
$
0.49

 
$
1.74

 
$
1.87

Income/(Loss) from discontinued operations

 

 

 

Net income/(loss)
$
0.43

 
$
0.49

 
$
1.74

 
$
1.87

Diluted income/(loss)
 

 
 

 
 

 
 

Income/(Loss) from continuing operations
$
0.41

 
$
0.43

 
$
1.62

 
$
1.61

Income/(Loss) from discontinued operations

 

 

 

Net income/(loss)
$
0.41

 
$
0.43

 
$
1.62

 
$
1.61


The accompanying notes are part of the financial statements.

2

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
 
September 30,
2011
 
December 31,
2010
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
16,460

 
$
14,805

Marketable securities
16,732

 
20,765

Finance receivables, net (Note 5)
67,789

 
70,070

Other receivables, net
9,036

 
8,381

Net investment in operating leases
12,326

 
11,675

Inventories (Note 7)
7,212

 
5,917

Equity in net assets of affiliated companies
2,608

 
2,569

Net property
22,304

 
23,179

Deferred income taxes
1,694

 
2,003

Net intangible assets (Note 9)
100

 
102

Assets of held-for-sale operations (Note 14)
502

 

Other assets
5,977

 
5,221

Total assets
$
162,740

 
$
164,687

 
 
 
 
LIABILITIES
 

 
 

Payables
$
18,924

 
$
16,362

Accrued liabilities and deferred revenue
41,441

 
43,844

Debt (Note 11)
95,131

 
103,988

Deferred income taxes
1,109

 
1,135

Liabilities of held-for-sale operations (Note 14)
109

 

Total liabilities
156,714

 
165,329

 
 
 
 
EQUITY
 

 
 

Capital stock
 

 
 

Common Stock, par value $.01 per share (3,745 million shares issued)
37

 
37

Class B Stock, par value $.01 per share (71 million shares issued)
1

 
1

Capital in excess of par value of stock
20,819

 
20,803

Accumulated other comprehensive income/(loss)
(14,269
)
 
(14,313
)
Treasury stock
(166
)
 
(163
)
Retained earnings/(Accumulated deficit)
(440
)
 
(7,038
)
Total equity/(deficit) attributable to Ford Motor Company (Note 19)
5,982

 
(673
)
Equity/(Deficit) attributable to noncontrolling interests (Note 19)
44

 
31

Total equity/(deficit) (Note 19)
6,026

 
(642
)
Total liabilities and equity
$
162,740

 
$
164,687

 
The following table includes assets to be used to settle liabilities of the consolidated variable interest entities ("VIEs").  These assets and liabilities are included in the consolidated balance sheet above.  See Note 8 for additional information on our VIEs.
ASSETS
 
 
 
Cash and cash equivalents
$
3,434

 
$
4,062

Finance receivables, net
48,738

 
50,473

Other receivables, net

 
13

Net investment in operating leases
4,712

 
6,121

Inventories

 
19

Net property

 
31

Other assets
169

 
28

LIABILITIES


 


Payables

 
16

Accrued liabilities and deferred revenue
94

 
222

Debt
38,979

 
40,247


The accompanying notes are part of the financial statements.

3

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
SECTOR BALANCE SHEET
(in millions) 
 
September 30,
2011
 
December 31,
2010
ASSETS
(unaudited)
Automotive
 
 
 
Cash and cash equivalents
$
8,089

 
$
6,301

Marketable securities
12,687

 
14,207

Total cash and marketable securities
20,776

 
20,508

Receivables, less allowances of $126 and $228
4,039

 
3,992

Inventories (Note 7)
7,212

 
5,917

Deferred income taxes
103

 
359

Net investment in operating leases
1,533

 
1,282

Other current assets
934

 
610

Current receivable from Financial Services
1,639

 
1,700

Total current assets
36,236

 
34,368

Equity in net assets of affiliated companies
2,465

 
2,441

Net property
22,165

 
23,027

Deferred income taxes
2,502

 
2,468

Net intangible assets (Note 9)
100

 
102

Assets of held-for-sale operations (Note 14)
502

 

Non-current receivable from Financial Services
368

 
181

Other assets
2,476

 
2,019

Total Automotive assets
66,814

 
64,606

Financial Services
 

 
 

Cash and cash equivalents
8,371

 
8,504

Marketable securities
4,246

 
6,759

Finance receivables, net (Note 5)
71,760

 
73,265

Net investment in operating leases
10,793

 
10,393

Equity in net assets of affiliated companies
143

 
128

Other assets
3,899

 
4,221

Total Financial Services assets
99,212

 
103,270

Intersector elimination
(2,209
)
 
(2,083
)
Total assets
$
163,817

 
$
165,793

LIABILITIES
 

 
 

Automotive
 

 
 

Trade payables
$
15,603

 
$
13,466

Other payables
2,144

 
1,544

Accrued liabilities and deferred revenue
15,369

 
17,065

Deferred income taxes
350

 
392

Debt payable within one year (Note 11)
916

 
2,049

Total current liabilities
34,382

 
34,516

Long-term debt (Note 11)
11,738

 
17,028

Other liabilities
22,508

 
23,016

Deferred income taxes
248

 
344

Liabilities of held-for-sale operations (Note 14)
109

 

Total Automotive liabilities
68,985

 
74,904

Financial Services
 

 
 

Payables
1,177

 
1,352

Debt (Note 11)
82,678

 
85,112

Deferred income taxes
1,588

 
1,505

Other liabilities and deferred income
3,565

 
3,764

Payable to Automotive
2,007

 
1,881

Total Financial Services liabilities
91,015

 
93,614

Intersector elimination
(2,209
)
 
(2,083
)
Total liabilities
157,791

 
166,435

EQUITY
 

 
 

Capital stock (Note 15)
 

 
 

Common Stock, par value $.01 per share (3,745 million shares issued)
37

 
37

Class B Stock, par value $.01 per share (71 million shares issued)
1

 
1

Capital in excess of par value of stock
20,819

 
20,803

Accumulated other comprehensive income/(loss)
(14,269
)
 
(14,313
)
Treasury stock
(166
)
 
(163
)
Retained earnings/(Accumulated deficit)
(440
)
 
(7,038
)
Total equity/(deficit) attributable to Ford Motor Company (Note 19)
5,982

 
(673
)
Equity/(Deficit) attributable to noncontrolling interests (Note 19)
44

 
31

Total equity/(deficit) (Note 19)
6,026

 
(642
)
Total liabilities and equity
$
163,817

 
$
165,793


The accompanying notes are part of the financial statements.

4

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Periods Ended September 30, 2011 and 2010
(in millions)
 
First Nine Months
 
2011
 
2010
 
(unaudited)
Cash flows from operating activities of continuing operations
 
 
 
Net cash (used in)/provided by operating activities
$
10,019

 
$
10,238

 
 
 
 
Cash flows from investing activities of continuing operations
 
 
 
Capital expenditures
(3,135
)
 
(2,946
)
Acquisitions of retail and other finance receivables and operating leases
(26,150
)
 
(21,594
)
Collections of retail and other finance receivables and operating leases
25,626

 
29,075

Purchases of securities
(58,365
)
 
(79,096
)
Sales and maturities of securities
62,440

 
74,627

Proceeds from sale of business
150

 
1,318

Settlements of derivatives
50

 
(234
)
Elimination of cash balances upon disposition of discontinued/held-for-sale operations

 
(456
)
Other
375

 
(74
)
Net cash (used in)/provided by investing activities
991

 
620

 
 
 
 
Cash flows from financing activities of continuing operations
 

 
 

Sales of Common Stock

 
1,230

Changes in short-term debt
1,552

 
(908
)
Proceeds from issuance of other debt
25,070

 
25,804

Principal payments on other debt
(35,915
)
 
(39,701
)
Other
79

 
5

Net cash (used in)/provided by financing activities
(9,214
)
 
(13,570
)
 
 
 
 
Effect of exchange rate changes on cash
(72
)
 
(190
)
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
1,724

 
$
(2,902
)
 
 
 
 
Cash and cash equivalents at January 1
$
14,805

 
$
20,894

Cash and cash equivalents of held-for-sale operations at January 1

 

Net increase/(decrease) in cash and cash equivalents
1,724

 
(2,902
)
Less: Cash and cash equivalents of held-for-sale operations at September 30
69

 

Cash and cash equivalents at September 30
$
16,460

 
$
17,992


The accompanying notes are part of the financial statements.

5

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED SECTOR STATEMENT OF CASH FLOWS
For the Periods Ended September 30, 2011 and 2010
(in millions)
 
First Nine Months 2011
 
First Nine Months 2010
 
Automotive
 
Financial
Services
 
Automotive
 
Financial
Services
 
(unaudited)
Cash flows from operating activities of continuing operations
 
 
 
 
 
 
 
Net cash (used in)/provided by operating activities
$
6,783

 
$
3,194

 
$
4,625

 
$
3,500

 
 
 
 
 
 
 
 
Cash flows from investing activities of continuing operations
 
 
 
 
 
 
 
Capital expenditures
(3,121
)
 
(14
)
 
(2,932
)
 
(14
)
Acquisitions of retail and other finance receivables and operating leases

 
(26,082
)
 

 
(21,496
)
Collections of retail and other finance receivables and operating leases

 
25,626

 

 
29,075

Net (acquisitions)/collections of wholesale receivables

 
(26
)
 

 
715

Purchases of securities
(36,261
)
 
(22,104
)
 
(41,262
)
 
(38,026
)
Sales and maturities of securities
37,830

 
24,610

 
41,830

 
33,415

Settlements of derivatives
140

 
(90
)
 
(277
)
 
43

Proceeds from sale of business
135

 
15

 
1,318

 

Investing activity (to)/from Financial Services
2,589

 

 
1,374

 

Elimination of cash balances upon disposition of discontinued/held-for-sale operations

 

 
(456
)
 

Other
196

 
179

 
(126
)
 
52

Net cash (used in)/provided by investing activities
1,508

 
2,114

 
(531
)
 
3,764

 
 
 
 
 
 
 
 
Cash flows from financing activities of continuing operations
 

 
 

 
 

 
 

Sales of Common Stock

 

 
1,230

 

Changes in short-term debt
(325
)
 
1,877

 
117

 
(1,025
)
Proceeds from issuance of other debt
1,963

 
23,107

 
2,104

 
23,700

Principal payments on other debt
(7,982
)
 
(27,933
)
 
(8,481
)
 
(30,346
)
Financing activity to/(from) Automotive

 
(2,589
)
 

 
(1,374
)
Other
68

 
11

 
170

 
(165
)
Net cash (used in)/provided by financing activities
(6,276
)
 
(5,527
)
 
(4,860
)
 
(9,210
)
 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash
(158
)
 
86

 
44

 
(234
)
 
 
 
 
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
1,857

 
$
(133
)
 
$
(722
)
 
$
(2,180
)
 
 
 
 
 
 
 
 
Cash and cash equivalents at January 1
$
6,301

 
$
8,504

 
$
9,762

 
$
11,132

Cash and cash equivalents of held-for-sale operations at January 1

 

 

 

Net increase/(decrease) in cash and cash equivalents
1,857

 
(133
)
 
(722
)
 
(2,180
)
Less: Cash and cash equivalents of held-for-sale operations at September 30
69

 

 

 

Cash and cash equivalents at September 30
$
8,089

 
$
8,371

 
$
9,040

 
$
8,952


The accompanying notes are part of the financial statements.

6

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the Periods Ended September 30, 2011 and 2010
(in millions)
 
Third Quarter
 
First Nine Months
 
2011
 
2010
 
2011
 
2010
 
(unaudited)
Net income/(loss)
$
1,652

 
$
1,688

 
$
6,608

 
$
6,369

Other comprehensive income/(loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation
(1,317
)
 
(460
)
 
(481
)
 
(2,189
)
Net gain/(loss) on derivative instruments
43

 
65

 
177

 
36

Employee benefit-related
241

 
62

 
346

 
409

Net holding gain/(loss)

 

 

 
(2
)
Total other comprehensive income/(loss), net of tax
(1,033
)
 
(333
)
 
42

 
(1,746
)
Comprehensive income/(loss)
619

 
1,355

 
6,650

 
4,623

Less: Comprehensive income/(loss) attributable to noncontrolling interests
(Note 19)
3

 

 
8

 
(3
)
Comprehensive income/(loss) attributable to Ford Motor Company
$
616

 
$
1,355

 
$
6,642

 
$
4,626


The accompanying notes are part of the financial statements.

7

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

Table of Contents
Footnote
 
Page
Note 1
Presentation
Note 2
Accounting Standards Issued But Not Yet Adopted
Note 3
Fair Value Measurements
Note 4
Restricted Cash
Note 5
Finance Receivables
Note 6
Allowance for Credit Losses
Note 7
Inventories
Note 8
Variable Interest Entities
Note 9
Net Intangible Assets
Note 10
Retirement Benefits
Note 11
Debt and Commitments
Note 12
Other Income/(Loss)
Note 13
Income Taxes
Note 14
Held-for-Sale Operations, Dispositions and Acquisitions
Note 15
Amounts Per Share Attributable to Ford Motor Company Common and Class B Stock
Note 16
Derivative Financial Instruments and Hedging Activities
Note 17
Segment Information
Note 18
Commitments and Contingencies
Note 19
Equity/(Deficit) Attributable to Ford Motor Company and Noncontrolling Interests


8

Item 1. Financial Statements (Continued)

NOTE 1.  PRESENTATION

Our financial statements are presented in accordance with U.S. generally accepted accounting principles ("GAAP") 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. Intercompany items and transactions have been eliminated in both the consolidated and sector balance sheets. Where the presentation of these intercompany eliminations or consolidated adjustments differs between the consolidated and sector financial statements, reconciliations of certain line items are explained below in this Note and in Notes 5 and 11.

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, its consolidated subsidiaries, and consolidated 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, 2010 ("2010 Form 10-K Report").  For purposes of this report, "Ford," the "Company," "we," "our," "us" or similar references mean Ford Motor Company, our consolidated subsidiaries, and our consolidated VIEs of which we are the primary beneficiary, unless the context requires otherwise. 

We reclassified certain prior year amounts in our consolidated financial statements to conform to current year presentation.

UAW Subsequent Event

On October 26, 2011, we signed a new national labor agreement with the UAW covering approximately 41,000 employees in the United States ("Agreement"). Among other things, the Agreement sets wages and benefits for the covered employees for a four-year period expiring in September 2015.
The Agreement provides for a ratification bonus of $6,000 to most of the covered employees. These bonuses will be paid, and the full amount of the expense recorded, in the fourth quarter of 2011.
Covered employees also will receive four annual operational performance bonuses of up to $250 per year beginning in December 2011, and four annual inflation protection lump sum payments in the amount of $1,500 per year beginning in June 2012. The first operational performance bonus in the amount of $250 will be paid and expensed in the fourth quarter of 2011. The subsequent operational performance bonuses will be expensed over the twelve-month period leading up to each payment date. The first inflation protection lump sum payment will be expensed over the eight-month period leading up to the June 2012 payment date; each subsequent lump sum payment will be expensed over the twelve-month period leading up to the respective June payment date.
The Agreement also modifies the method for calculating payment to covered employees under our profit sharing plan. Planned profit sharing payments are accrued throughout the year in which the payment is earned. Each quarter, we evaluate and adjust as necessary the year-to-date accrual to ensure that it is consistent with our expected full-year profit and current profit sharing plan in place at the end of the quarter. We generally make any payment under the profit sharing plan in the first quarter subsequent to the year in which it is earned. This year, we intend to make a partial payment in the fourth quarter of 2011, based on first half 2011 Ford North America profits, with the remainder of the 2011 profit sharing payment to be made in the first quarter of 2012.
We also agreed to offer lump sum payments to eligible employees who elect to separate or retire, and we will expense the cost of each separation payment in the quarter in which the offer is accepted.
Adoption of New Accounting Standards

Troubled Debt Restructurings. On July 1, 2011 we adopted the new accounting standard related to a creditor's determination of whether a restructuring is a troubled debt restructuring ("TDR"). The new standard provides additional guidance as to whether a restructuring meets the criteria to be considered a TDR. Refer to Notes 5 and 6 for further information regarding TDRs.

Business Combinations. On January 1, 2011 we adopted the new accounting standard on business combinations. The new standard requires public entities that present comparative financial statements to disclose the revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the prior annual reporting period. The new accounting standard did not have an impact on our financial statement disclosures.


9

Item 1. Financial Statements (Continued)

NOTE 1.  PRESENTATION (Continued)

Reconciliations between Consolidated and Sector Financial Statements

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 the totals for the sector and consolidated balance sheets is as follows (in millions):
 
September 30,
2011
 
December 31,
2010
Sector balance sheet presentation of deferred income tax assets:
 
 
 
Automotive sector current deferred income tax assets
$
103

 
$
359

Automotive sector non-current deferred income tax assets
2,502

 
2,468

Financial Services sector deferred income tax assets *
166

 
282

Total
2,771

 
3,109

Reclassification for netting of deferred income taxes
(1,077
)
 
(1,106
)
Consolidated balance sheet presentation of deferred income tax assets
$
1,694

 
$
2,003

 
 
 
 
Sector balance sheet presentation of deferred income tax liabilities:
 

 
 

Automotive sector current deferred income tax liabilities
$
350

 
$
392

Automotive sector non-current deferred income tax liabilities
248

 
344

Financial Services sector deferred income tax liabilities
1,588

 
1,505

Total
2,186

 
2,241

Reclassification for netting of deferred income taxes
(1,077
)
 
(1,106
)
Consolidated balance sheet presentation of deferred income tax liabilities
$
1,109

 
$
1,135

__________
*
Financial Services deferred income tax assets are included in Financial Services other assets on our sector balance sheet.

10

Item 1. Financial Statements (Continued)

NOTE 1.  PRESENTATION (Continued)

Sector to Consolidated Cash Flow. We present certain cash flows from wholesale receivables, finance receivables and the Automotive acquisition of Financial Services debt differently on our sector and consolidated statements of cash flows. The reconciliation between totals for the sector and consolidated cash flows is as follows (in millions):
 
First Nine Months
 
2011
 
2010
Automotive cash flows from operating activities of continuing operations
$
6,783

 
$
4,625

Financial Services cash flows from operating activities of continuing operations
3,194

 
3,500

Total sector cash flows from operating activities of continuing operations
9,977

 
8,125

Reclassifications from investing to operating cash flows:
 

 
 

Wholesale receivables (a)
(26
)
 
715

Finance receivables (b)
68

 
98

Reclassifications from operating to financing cash flows:
 
 
 
Payments on notes to the Voluntary Employee Benefit Association ("VEBA") trust ("UAW VEBA Trust") (c)

 
1,300

Consolidated cash flows from operating activities of continuing operations
$
10,019

 
$
10,238

 
 
 
 
Automotive cash flows from investing activities of continuing operations
$
1,508

 
$
(531
)
Financial Services cash flows from investing activities of continuing operations
2,114

 
3,764

Total sector cash flows from investing activities of continuing operations
3,622

 
3,233

Reclassifications from investing to operating cash flows:
 

 
 

Wholesale receivables (a)
26

 
(715
)
Finance receivables (b)
(68
)
 
(98
)
Reclassifications from investing to financing cash flows:
 
 
 
Automotive sector acquisition of Financial Services sector debt (d)

 
(426
)
Elimination of investing activity to/(from) Financial Services in consolidation
(2,589
)
 
(1,374
)
Consolidated cash flows from investing activities of continuing operations
$
991

 
$
620

 
 
 
 
Automotive cash flows from financing activities of continuing operations
$
(6,276
)
 
$
(4,860
)
Financial Services cash flows from financing activities of continuing operations
(5,527
)
 
(9,210
)
Total sector cash flows from financing activities of continuing operations
(11,803
)
 
(14,070
)
Reclassifications from investing to financing cash flows:
 

 
 

Automotive sector acquisition of Financial Services sector debt (d)

 
426

Reclassifications from operating to financing cash flows:
 
 
 
Payments on notes to the UAW VEBA Trust (c)

 
(1,300
)
Elimination of investing activity to/(from) Financial Services in consolidation
2,589

 
1,374

Consolidated cash flows from financing activities of continuing operations
$
(9,214
)
 
$
(13,570
)
 __________
(a)
In addition to the cash flow from vehicles sold by us, the cash flow from wholesale finance receivables (being reclassified from investing to operating) includes 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 "Notes Due to UAW VEBA Trust" in Note 11 for discussion of these transactions. Cash outflows related to this transaction are reported as financing activities on the consolidated statement of cash flows and operating activities on the sector statement of cash flows.
(d)
See "Automotive Acquisition of Financial Services Debt" in Note 11 for discussion of these transactions. Cash inflows related to these transactions are reported as financing activities on the consolidated statement of cash flows and investing activities on the sector statement of cash flows.

Venezuelan Operations

At September 30, 2011 and December 31, 2010, we had $201 million and $41 million, respectively, in net monetary assets (primarily cash and receivables partially offset by payables and accrued liabilities) denominated in Venezuelan bolivars. These net monetary assets included $265 million and $132 million in cash and cash equivalents at September 30, 2011 and December 31, 2010, respectively. As a result of regulation of foreign currency exchange in Venezuela, the official exchange rate of 4.3 bolivars to the U.S. dollar is used to re-measure the assets and liabilities of our Venezuelan operations for GAAP financial statement presentation. The Venezuelan government also controls securities transactions in the parallel exchange market. Our ability to obtain funds in the parallel exchange market has been limited. For any U.S. dollars that we obtain at a rate less favorable than the official rate, we realize a loss for the difference in the exchange rates. Continuing restrictions on the foreign currency exchange market could affect our Venezuelan operations' ability to pay U.S.-dollar denominated obligations as well as our ability to benefit from those operations.

11

Item 1. Financial Statements (Continued)

NOTE 2.  ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

Intangibles - Goodwill and Other. In September 2011, the Financial Accounting Standards Board ("FASB") issued a new standard that provides the option to evaluate prescribed qualitative factors to determine whether a calculated goodwill impairment test is necessary. The standard is effective for us as of January 1, 2012. We do not expect this standard to have a material impact on our financial condition, results of operations, or financial statement disclosures.

Comprehensive Income - Presentation. In June 2011, the FASB issued a new standard that modifies the options for presentation of other comprehensive income. The new standard will require us to present comprehensive income either on a single continuous statement or two separate but consecutive statements. The standard is effective for us as of January 1, 2012. We do not expect this standard to have a material impact on our financial condition or results of operations.

Fair Value Measurement. In May 2011, the FASB issued a new standard that provides a consistent definition of fair value measurement and closely aligns disclosure requirements between GAAP and International Financial Reporting Standards. The new standard will require us to report the level in the fair value hierarchy of assets and liabilities not measured at fair value in the balance sheet but for which the fair value is disclosed, and to expand existing disclosures. The standard is effective for us as of January 1, 2012. We do not expect this standard to have a material impact on our financial condition or results of operations.

Transfers and Servicing - Repurchase Agreements. In April 2011, the FASB issued a new standard for agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The standard is effective for us as of January 1, 2012. We do not expect this standard to have a material impact on our financial condition, results of operations, or financial statement disclosures.

Financial Services - Insurance. In October 2010, the FASB issued a new standard addressing the deferral of acquisition costs within the insurance industry. The new standard modifies which types of costs can be capitalized in the acquisition and renewal of insurance contracts. The standard is effective for us as of January 1, 2012. We do not expect this standard to have a material impact on our financial condition, results of operations, or financial statement disclosures.

NOTE 3.  FAIR VALUE MEASUREMENTS

Cash equivalents, marketable securities, and derivative financial instruments are presented on our financial statements at fair value. The fair value of finance receivables and debt, together with the related carrying value, is disclosed in Notes 5 and 11, respectively. Certain other assets and liabilities are measured at fair value on a nonrecurring basis and vary based on specific circumstances such as impairments.

Fair Value Measurements

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

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 include data not observable in the market and reflect management judgment about the assumptions market participants would use in pricing the asset or liability.

The use of observable and unobservable inputs and their significance in measuring fair value are reflected in our hierarchy assessment.


12

Item 1. Financial Statements (Continued)

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)

Valuation Methodologies

Cash and Cash Equivalents. Included in Cash and cash equivalents are highly liquid investments that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of changes in value due to interest rate, market price, or penalty on withdrawal. A debt security is classified as a cash equivalent if it meets these criteria and if it has a remaining time to maturity of 90 days or less from the date of acquisition. Amounts on deposit and available upon demand, or negotiated to provide for daily liquidity without penalty, are classified as Cash and cash equivalents. These include $1.8 billion of demand deposits with financial institutions which were classified as Marketable securities prior to 2011, and this amount is reported in Sales and maturities of securities in the 2011 consolidated statement of cash flows. Time deposits, certificates of deposit, and money market accounts that meet the above criteria are classified as Cash and cash equivalents, reported at par value, and excluded from the tables below.

Marketable Securities. Investments in securities with a maturity date greater than 90 days at the date of purchase and other securities for which there is a more than insignificant risk of changes in value because of interest rate, market price, or penalty on withdrawal are classified as Marketable securities. For marketable securities, we generally measure fair value based on a market approach using prices obtained from pricing services. We review all pricing data for reasonability and observability of inputs. Pricing methodologies and inputs to valuation models used by the pricing services depend on the security type (i.e., asset class). Where possible, fair values are generated using market inputs including quoted prices (the closing price in an exchange market), bid prices (the price at which a dealer stands ready to purchase), and other market information. For securities that are not actively traded, the pricing services obtain quotes for similar fixed-income securities or utilize matrix pricing, benchmark curves, or other factors to determine fair value. In certain cases, when observable pricing data are not available, we estimate the fair value of investment securities based on an income approach using industry standard valuation models and estimates regarding non-performance risk.

Derivative Financial Instruments. Our derivatives are over-the-counter customized derivative transactions and are not exchange traded. We estimate the fair value of these instruments based on an income approach using industry standard valuation models. These models project future cash flows and discount the future amounts to a present value using market-based expectations for interest rates, foreign exchange rates, and the contractual terms of the derivative instruments. The discount rate used is the relevant interbank deposit rate (e.g., LIBOR) plus an adjustment for non-performance risk. The adjustment reflects the full credit default swap ("CDS") spread applied to a net exposure, by counterparty, considering the master netting agreements and posted collateral. We use our counterparty's CDS spread when we are in a net asset position and our own CDS spread when we are in a net liability position.

In certain cases, market data are not available and we develop assumptions or use models (e.g., Black Scholes) to determine fair value. This includes situations where there is illiquidity for a particular currency or commodity or for longer-dated instruments. Also, for interest rate swaps and cross-currency interest rate swaps used in securitization transactions, the notional amount of the swap is reset based on actual payments on the securitized contracts. We use management judgment to estimate timing and amount of the swap cash flows based on historical pre-payment speeds.

Ford Credit has two asset-backed debt transactions with derivative features related to Ford Upgrade Exchange Linked ("FUEL") notes. These features include a mandatory exchange to Ford Credit unsecured notes when Ford Credit's senior unsecured debt receives two investment grade credit ratings among Fitch, Moody's and S&P and a make-whole provision.  We estimated the fair value of these features by comparing the market value of the FUEL notes to the value of a hypothetical debt instrument without these features.

Finance Receivables. We generally estimate the fair value of finance receivables based on an income approach using internal valuation models. These models project future cash flows of financing contracts based on scheduled contract payments (including principal and interest). The projected cash flows are discounted to a present value based on market inputs and our own assumptions regarding credit losses, pre-payment speed, and the discount rate. Our assumptions regarding pre-payment speed and credit losses are based on historical performance.

Debt. We estimate the fair value of debt based on a market approach using quoted market prices or current market rates for similar debt with approximately the same remaining maturities, where possible. Where market prices or current market rates are not available, we estimate fair value based on an income approach using discounted cash flow models. These models project future cash flows and discount the future amounts to a present value using market-based expectations for interest rates, our own credit risk and the contractual terms of the debt instruments. For asset-backed debt issued in securitization transactions, the principal payments are based on projected payments for specific assets securing the underlying debt considering historical prepayment speeds.

13

Item 1. Financial Statements (Continued)

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)

Input Hierarchy of Items Measured at Fair Value on a Recurring Basis

The following tables summarize the fair values by input hierarchy of items measured at fair value on a recurring basis on our balance sheet (in millions):
 
September 30, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total
Automotive Sector
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash equivalents – financial instruments (a)
 
 
 
 
 
 
 
U.S. government
$

 
$

 
$

 
$

U.S. government-sponsored enterprises

 
394

 

 
394

Government – non-U.S.

 
131

 

 
131

Foreign government agencies (b)

 
990

 

 
990

Corporate debt

 

 

 

Total cash equivalents – financial instruments

 
1,515

 

 
1,515

Marketable securities (c)
 

 
 

 
 

 
 

U.S. government
1,240

 

 

 
1,240

U.S. government-sponsored enterprises

 
5,211

 

 
5,211

Foreign government agencies (b)

 
3,837

 

 
3,837

Corporate debt

 
1,097

 

 
1,097

Mortgage-backed and other asset-backed

 
46

 
1

 
47

Equity
146

 

 

 
146

Government – non-U.S.

 
881

 

 
881

Other liquid investments (d)

 
27

 

 
27

Total marketable securities
1,386

 
11,099

 
1

 
12,486

Derivative financial instruments
 

 
 

 
 

 
 

Foreign exchange contracts

 
401

 
1

 
402

Commodity contracts

 

 

 

Other – warrants

 

 
3

 
3

Total derivative financial instruments (e)

 
401

 
4

 
405

Total assets at fair value
$
1,386

 
$
13,015

 
$
5

 
$
14,406

Liabilities
 

 
 

 
 

 
 

Derivative financial instruments
 

 
 

 
 

 
 

Foreign exchange contracts
$

 
$
196

 
$
5

 
$
201

Commodity contracts

 
276

 
76

 
352

Total derivative financial instruments (e)

 
472

 
81

 
553

Total liabilities at fair value
$

 
$
472

 
$
81

 
$
553

 __________
(a)
"Cash equivalents - financial instruments" in this table excludes time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value totaling $5.1 billion as of September 30, 2011 for the Automotive sector. In addition to these cash equivalents, our Automotive sector also had cash on hand totaling $1.5 billion as of September 30, 2011.
(b)
Includes notes issued by foreign government agencies that include implicit and explicit guarantees, as well as notes issued by supranational institutions.
(c)
Excludes an investment in Ford Credit debt securities held by the Automotive sector with a carrying value of $201 million and an estimated fair value of $200 million as of September 30, 2011; see Note 11 for additional detail.
(d)
"Other liquid investments" in this table includes certificates of deposit and time deposits.
(e)
See Note 16 for additional information regarding derivative financial instruments.

14

Item 1. Financial Statements (Continued)

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)
 
September 30, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial Services Sector
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash equivalents – financial instruments (a)
 
 
 
 
 
 
 
U.S. government
$
5

 
$

 
$

 
$
5

U.S. government-sponsored enterprises

 
190

 

 
190

Government – non-U.S.

 
386

 

 
386

Foreign government agencies (b)

 
701

 

 
701

Corporate debt

 
1

 

 
1

Mortgage-backed and other asset-backed

 

 

 

Total cash equivalents – financial instruments
5

 
1,278

 

 
1,283

Marketable securities
 

 
 

 
 

 
 

U.S. government
905

 

 

 
905

U.S. government-sponsored enterprises

 
1,039

 

 
1,039

Foreign government agencies (b)

 
778

 

 
778

Corporate debt

 
1,198

 

 
1,198

Mortgage-backed and other asset-backed

 
152

 

 
152

Government – non-U.S.

 
157

 

 
157

Other liquid investments (c)

 
17

 

 
17

Total marketable securities
905

 
3,341

 

 
4,246

Derivative financial instruments
 

 
 

 
 

 
 

Interest rate contracts

 
905

 
550

 
1,455

Foreign exchange contracts

 
125

 

 
125

Cross currency interest rate swap contracts

 

 
8

 
8

Other (d)

 

 
158

 
158

Total derivative financial instruments (e)

 
1,030

 
716

 
1,746

Total assets at fair value
$
910

 
$
5,649

 
$
716

 
$
7,275

Liabilities
 

 
 

 
 

 
 

Derivative financial instruments
 

 
 

 
 

 
 

Interest rate contracts
$

 
$
85

 
$
168

 
$
253

Foreign exchange contracts

 
47

 

 
47

Cross-currency interest rate swap contracts

 

 
7

 
7

Total derivative financial instruments (e)

 
132

 
175

 
307

Total liabilities at fair value
$

 
$
132

 
$
175

 
$
307

 __________
(a)
"Cash equivalents - financial instruments" in this table excludes time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value on our balance sheet totaling $4.6 billion as of September 30, 2011 for the Financial Services sector. In addition to these cash equivalents, our Financial Services sector also had cash on hand totaling $2.5 billion as of September 30, 2011.
(b)
Includes notes issued by foreign government agencies that include implicit and explicit guarantees, as well as notes issues by supranational institutions.
(c)
"Other liquid investments" in this table includes certificates of deposit and time deposits.
(d)
"Other" in this table represents derivative features included in the FUEL notes.
(e)
See Note 16 for additional information regarding derivative financial instruments.






15

Item 1. Financial Statements (Continued)

NOTE 3.  FAIR VALUE MEASUREMENTS (Continued)
 
December 31, 2010
 
Level 1
 
Level 2
 
Level 3
 
Total
Automotive Sector
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash equivalents – financial instruments (a)
 
 
 
 
 
 
 
U.S. government
$

 
$

 
$

 
$

U.S. government-sponsored enterprises

 
224

 

 
224

Government – non-U.S.

 
133

 

 
133

Foreign government agencies (b)

 
1,619

 

 
1,619

Corporate debt

 
199

 

 
199

Total cash equivalents – financial instruments

 
2,175

 

 
2,175

Marketable securities (c)
 

 
 

 
 

 
 

U.S. government
2,718

 

 

 
2,718

U.S. government-sponsored enterprises

 
4,809

 

 
4,809

Foreign government agencies (b)

 
3,215

 
1

 
3,216

Corporate debt

 
517

 

 
517

Mortgage-backed and other asset-backed

 
20

 

 
20

Equity
203

 

 

 
203

Government – non-U.S.

 
818

 
1

 
819

Other liquid investments (d)

 
1,704

 

 
1,704

Total marketable securities
2,921

 
11,083

 
2

 
14,006

Derivative financial instruments
 

 
 

 
 

 
 

Foreign exchange contracts

 
58

 

 
58

Commodity contracts

 
36

 
33

 
69

Other – warrants

 

 
5

 
5

Total derivative financial instruments (e)

 
94

 
38

 
132

Total assets at fair value
$
2,921

 
$
13,352

 
$
40

 
$
16,313

Liabilities
 

 
 

 
 

 
 

Derivative financial instruments
 

 
 

 
 

 
 

Foreign exchange contracts
$

 
$
93

 
$

 
$
93

Commodity contracts

 
6

 

 
6

Total derivative financial instruments (e)

 
99

 

 
99

Total liabilities at fair value
$

 
$
99

 
$

 
$
99

 __________
(a)
"Cash equivalents - financial instruments" in this table excludes time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value totaling $2.2 billion as of December 31, 2010 for the Automotive sector. In addition to these cash equivalents, our Automotive sector also had cash on hand totaling $1.9 billion as of December 31, 2010.
(b)
Includes notes issued by foreign government agencies that include implicit and explicit guarantees, as well as notes issued by supranational institutions.
(c)
Excludes an investment in Ford Credit debt securities held by the Automotive sector with a carrying value of $201 million and an estimated fair value of $203 million as of December 31, 2010; see Note 11 for additional detail.
(d)
"Other liquid investments" in this table includes certificates of deposit and time deposits.
(e)
See Note 16 for additional information regarding derivative financial instruments.