Profitable Growth for All
Ford Motor Company 2012 Annual Report
Ford Motor Company | 2012 Annual Report
On the Cove
The One Ford plan enables accelerated development of products
that customers truly want and value, resulting in a full-line of cars,
utilities and trucks that meet and exceed owner expectations
across global markets. The upper photo includes the stylish Ford
Focus hatchback, the sporty subcompact Fiesta ST and the
distinctive Escape utility vehicle. From left to right, lower photos
illustrate the innovative new Lincoln MKZ, the family-friendly Ford
B-MAX and the iconic F-150 pickup truck.
Revenues 2012 2011
Worldwide wholesale unit volumes by automotive segment (in thousands)
Ford North America 2,784 2,686
Ford South America 498 506
Ford Europe 1,353 1,602
Ford Asia Pacific Africa 1,033 901
Total 5,668 5,695
Revenues (in millions)
Automotive $ 126,567 $ 128,168
Financial Services 7,685 8,096
Total $ 134,252 $ 136,264
Financial Results
Income before income taxes (in millions)
Automotive $ 6,010 $ 6,250
Financial Services 1,710 2,431
Total $ 7,720 $ 8,681
Amounts Attributable to Ford Motor Company
Net income (in millions) $ 5,665 $ 20,213
Diluted net income per share of Common
and Class B Stock $ 1.42 $ 4.94
Cash and Spending
Automotive capital expenditures
Amount (in billions) $ 5.5 $ 4.3
As a percentage of Automotive sales 4.3% 3.3%
Automotive cash at year end (in billions)
Automotive gross cash (a) $ 24.3 $ 22.9
– Cash net of Automotive debt 10.0 9.8
Shareholder Value
Dividends paid per share $ 0.20 $ 0.00
Total shareholder returns % (b) 23% (36)%
Operating Highlights
Content
1 More Products People Want
2 A Message from the Executive Chairman
3 A Message from the President and CEO
7 Board of Directors and Executives
8 Shareholder Information
9 Financial Content
161 Global Overview
(a) Automotive gross cash includes cash and cash equivalents and net marketable securities.
(b) Source: Standard & Poor’s, a division of the McGraw Hill Companies, Inc.
Ford Motor Company | 2012 Annual Report 1
CA
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TR
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CK
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LN
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More Products People Want
Ford designs, builds and sells cars, utilities and trucks of all sizes to meet the needs of a diverse global customer base.
From small cars such as the Ka and Fiesta to large trucks like the venerable F-150 and Super Duty, Ford Motor Company
vehicles cover the full spectrum of global automobile requirements.
Small
Sporting a refreshed look, the Fiesta boasts
the three-cylinder 1-liter EcoBoost engine
providing better power and fuel efficiency
than previous models. The Ka and Figo
ound out a global lineup that offers
premium features in smaller packages.
Small
The EcoSport, a market leader in
South America, debuted globally.
This SUV is specifically designed
for the u
an environment in South
America, India and Thailand and is
now offered in China.
Small
The Transit Connect provides highly
configurable interiors, generous cargo
space, easy loading and unloading,
and exceptional maneuverability
with car-like driving dynamics and
safety features.
The new Lincoln
and will be defined
y great new luxury vehicles, such as the
new MKZ, that feature unique style and
innovative technology. These elements
enable Lincoln to appeal to today’s new
luxury customer.
Lincoln introduced the MKC Concept,
a vision of how Lincoln will enter the
industry’s fastest-growing segment –
small luxury utilities. The MKC Concept
uilds on the foundation of the Lincoln
design DNA found in the new MKZ.
Medium
The C-MAX Hy
id and C-MAX Energi
plug-in hy
id, two ecofriendly yet practical
vehicles large enough to fit a family,
debuted in 2012. In the same segment,
the redesigned Ford Focus is one of the
top-selling vehicles in the world.
Medium
The redesigned Kuga offers class-leading
technology, fuel efficiency, safety, and
comfort in Europe, South America and
Asia. Known as Escape in North America,
three robust engine options provide strong
fuel economy and technological features.
Medium
The new Ranger is the truck for work and
play in Europe, South America, Asia and
Africa; offered in three versatile cab
odystyles. It comes with a choice of two
powerful and economical diesel engines,
and with a 4x2 or 4x4 drivetrain.
Large
The Mondeo, known as the Fusion in North
America, will debut its striking new look next
year in Europe. Both offer a wide a
ay of
driver assist technologies. Fusion offers a
Hy
id and Energi plug-in hy
id, providing
enhanced fuel economy in a stylish package.
Large
The redesigned, sleeker Explorer
combines enhanced fuel economy
with new safety features such as Curve
Control, which can slow the vehicle by
up to 10 mph if it senses a curve is being
taken too fast.
Large
F-Series Trucks are the ultimate
work tool for various industries. The
dependable F-150 is the top-selling
light-duty pickup in the U.S. and the
F-Series Super Duty is the most
popular heavy-duty truck.
Fiesta
EcoSport
Transit
Connect
Lincoln MKZ Lincoln MKC Concept
C-MAX Mondeo
Kuga Explore
F-Series
For detailed product and
financial information, view our
full online annual report at:
www.annualreport.ford.com
Range
2 Ford Motor Company | 2012 Annual Report
“ WE ARE ANTICIPATING
NEW CHALLENGES
AND OPPORTUNITIES
THAT ARE EMERGING,
SPECIFICALLY THOSE
AROUND THE FUTURE
OF TRANSPORTATION.”
In 2012 Ford Motor Company continued to go further to meet
the needs of our customers, the challenges of our industry
and the issues confronting our world. Our efforts produced
strong financial results and our fourth year in a row of
positive net income.
We expect 2013 to be another strong year for our company.
We anticipate our outstanding performance in North
America will continue, with higher pre-tax profits than in
2012. We are refreshing our entire product line in South
America and continuing to invest for growth in Asia Pacific
Africa. The transformation of our European operations,
which is aimed at achieving profitability under difficult
economic conditions, is on track and ongoing.
We will continue to focus on producing vehicles with best-
in-class quality, fuel efficiency, safety, smart design and
value – built on global platforms. They will help us toward
our goal of increased global sales and market share, as
well as support our ongoing commitment to reducing the
environmental impact of our vehicles and operations.
Our strong showing in the electrified vehicle market is a
good example of how great products can help build a strong
usiness as well as a better world. In 2012 we introduced six
new electrified vehicles in North America, including hy
id,
plug-in hy
id and pure battery electric models. By offering
a variety of vehicles, we make it easier for customers to
em
ace fuel-saving technologies.
As a result of our aggressive move into this growing segment
we sold more hy
ids in the U.S. in the fourth quarter of
2012 than in any other quarter in our history, and that strong
momentum has continued in 2013.
Looking further ahead, we are anticipating new challenges
and opportunities that are emerging, specifically those
around the future of transportation. Cu
ently there are
a billion vehicles on the road worldwide, a number that
is expected to double by 2020 and double again by mid-
century. As the number of vehicles on the road continues to
grow, mobility issues are expected to emerge in many major
u
an areas, potentially presenting a serious challenge to
economic, social and environmental progress.
To help address this issue, we are committed to being the
automotive leader in wireless communication technology,
developing vehicles that communicate with each other and
the world around them to improve safety and reduce traffic
congestion.
As we move forward, our employees around the world
continue to work together as a global team. We have a
great plan, outstanding leadership and positive momentum.
We are determined to keep going further so that we
can continue rewarding our shareholders and all of our
stakeholders.
Thank you for your continued support of our efforts.
William Clay Ford, Jr.
Executive Chairman
March 14, 2013
A Message from the Executive Chairman
Ford Motor Company | 2012 Annual Report 3
“ OUR PROVEN ONE FORD
PLAN PUT US ON THE
PATH TO PROFITABLE
GROWTH, AND WE ARE
CONFIDENT IT WILL
KEEP US ON THAT PATH
GOING FORWARD.”
A Message from the President and CEO
Ford Motor Company continued on our path to deliver
profitable growth in 2012 by following our proven One Ford
plan, despite the ongoing challenges in the global market.
Along the way, we achieved several important milestones,
including restoring Ford’s investment grade status and
eclaiming the Ford Blue Oval, resuming regular dividend
payments to our shareholders and achieving 14 straight
quarters of operating profit.
In a strong North America market, we set full year records for
pre-tax profit and operating margins. In South America, we
are in the middle of launching a new global product lineup.
In Europe, we responded to challenging economic conditions
y beginning a transformation plan to aggressively
accelerate our new product rollouts, strengthen our
and
and restructure our manufacturing operations. In Asia Pacific
Africa, we are undertaking an unprecedented investment
program to grow our business in what is now the world’s
largest automotive market.
The success of our One Ford plan to date gives us
confidence that it will continue to create profitable growth
for us in the future. We remain laser focused on the key
aspects of our plan, which remain unchanged:
• Aggressively restructure to operate profitably at the cu
ent
demand and changing model mix.
• Accelerate development of new products our customers
want and value.
• Finance our plan and improve our balance sheet.
• Work together effectively as one team, leveraging our
global assets.
By following this plan, we will continue to build great
products, a strong business and a better world.
Great Products
The great products that we build at Ford drive our success.
We launched 25 vehicles and 31 powertrains globally in
2012, a testament to our ongoing commitment to product
development. We also announced plans to revitalize our
Lincoln
and as the Lincoln Motor Company, which will
introduce an exciting new lineup of great luxury vehicles.
Our plan is centered on serving customers in all markets
around the world with a full family of vehicles – small, medium
and large; cars, utilities and trucks – that offer the very best
quality, fuel efficiency, safety, smart design and value.
The best way to measure the success of our products is sales,
and 2012 was a strong year. We sold 2.3 million vehicles in
the United States in 2012. Ford is the only
and to top the
2 million mark in the United States since 2007, and it has
topped 2 million for 2 years in a row. In Asia Pacific Africa, we
sold more than 1 million vehicles for the first time, including
ecord sales in China.
Our strong global performance was led by Focus, which was
the best-selling nameplate in the world in 2012, and Fiesta,
which was the best-selling B-Car in the world based on the
latest global data. Ford also was the only
and to have three
vehicles among the top 10 best-sellers worldwide, with the
F-Series truck coming in as the fourth best-selling global
nameplate.
Leveraging key new technologies across multiple regions
and on global platforms helps drive tremendous scale
and efficiency savings that can be reinvested, enabling
us to have one of the freshest showrooms in the industry.
Our outstanding product lineup, which we are continually
transforming and improving, is the foundation on which we
have built our strong business.
For more information visit www.annualreport.ford.com
4 Ford Motor Company | 2012 Annual Report
Ford’s Senior
Management Team
The senior management team
continues to successfully advance
the company’s One Ford global
plan. Pictured with the Ford
Escape, all-new Transit Connect
and Fiesta ST from left to right:
Bob Shanks, Jim Farley,
Ray Day, Tony Brown, Nick Smither,
Felicia Fields, David Schoch,
Stephen Odell, Mark Fields,
Alan Mulally, Bernard Silverstone,
Joe Hinrichs, Ziad Ojakli,
Robert Brown, David Leitch,
Bennie Fowler, Raj Nair and
John Fleming.
Strong Business
Our 2012 full year pre-tax operating profit, excluding special items, was
$8 billion, or $1.41 per share. We delivered record results of $8.3 billion in
North America, continued solid performance from Ford Credit of $1.7 billion,
positive results in South America, continued investment in Asia Pacific Africa
and began a challenging transition in Europe.
We remain committed to strengthening our balance sheet. We ended 2012 with
Automotive gross cash of $24.3 billion, exceeding debt by $10 billion. We also have
a strong liquidity position of $34.5 billion, an increase of $2.1 billion over 2011.
We also worked to de-risk our pension obligations, contributing $3.4 billion in cash
contributions to our worldwide funded plans.
With an eye to the future, we continued our largest and fastest manufacturing
expansion in more than 50 years, adding capacity to support growth plans in
North America and Asia Pacific Africa.
In 2012, we added more than 8,100 hourly and salaried jobs in the U.S. as we
increased production capacity and expanded other areas to meet the growing
demand for our fuel-efficient, high-tech vehicles.
In Europe, we are moving quickly to ca
y out our transformation plan. As we did in
North America, we are making tough choices and intelligent investments now to
transform our European business for profitable growth in the future.
Additionally, we further strengthened and developed our leadership team by
announcing the appointment of our chief operating officer, a new chief financial
officer, a new Global Product Development leader and senior leadership changes
for the Americas, Europe, Asia Pacific, Ford Credit and our Lincoln Brand.
Ford Motor Company | 2012 Annual Report 5
Better World
Even as we strive to improve our products and enhance our
usiness, we recognize that doing our part to contribute to
a better world is at the core of our business. In addition to
economic goals, we also pursue environmental and social
objectives.
Ford is going further than our competitors by offering an
industry-best seven Ford-
and vehicles in the U.S. that
deliver 40 or more miles per gallon.
We reached this milestone by developing the best
conventional and alternative powertrains. In 2012, we
produced our 500,000th fuel-saving EcoBoost engine just
three years after its launch. We also introduced six new
electrified vehicles, including hy
ids, plug-in hy
ids and
a pure battery electric vehicle.
We are giving customers the power of choice among a range
of powertrains that generate fewer emissions and consume
less gasoline.
Serving in our communities is another important part of
uilding a better world. In 2012, 25,000 Ford employees
and retirees volunteered more than 115,000 hours at 1,350
projects to help people in their local communities. As part
of that effort, our seventh annual Global Week of Caring
featured 12,000 employees, retirees and dealers working
on more than 300 community projects on six continents.
ONE FORD:
ONE Ford expands on the company’s four-point business plan
for achieving success globally. It encourages focus, teamwork
and a single global approach, aligning employee efforts toward
a common definition of success and optimizing their collective
strengths worldwide. The elements of ONE Ford are:
ONE TEAM:
ONE Ford emphasizes the importance of working together as
one team to achieve automotive leadership, which is measured
y the satisfaction of our customers, employees and essential
usiness partners, such as our dealers, investors, suppliers,
unions/councils and communities.
ONE PLAN:
• Aggressively restructure to operate profitably at the cu
ent
demand and changing model mix.
• Accelerate development of new products our customers want
and value.
• Finance our plan and improve our balance sheet.
• Work together effectively as one team.
ONE GOAL:
The goal of ONE Ford is to create an exciting and viable
company delivering profitable growth for all.
For more information visit www.annualreport.ford.com
6 Ford Motor Company | 2012 Annual Report
Going Furthe
In the coming year, we expect global growth to
continue, despite ongoing challenges in the external
environment. We anticipate global economic growth
in the 2 to 3 percent range, and global industry sales
of 80 million to 85 million units.
In North America, we expect our strong performance
to continue, and we anticipate higher pre-tax profits
than 2012, due to our strong Ford
and and products,
the growing industry, a lean cost structure and our
continued success in matching production with
demand.
Conditions in South America will be uneven, with
some countries experiencing growth while others face
increasing economic and political risks. We expect
esults in the region to be about
eakeven in 2013, as
the benefits of new global products will be tempered
y the competitive environment and cu
ency risks
across the region that are expected to affect our
profits adversely.
Asia Pacific Africa also is expected to be about
eakeven in 2013, as growing volume and revenue
are offset by continued strong investment across the
egion. This investment will pay off as we look even
further forward, and our goal is to have a full third of
our global sales in Asia Pacific Africa by 2020.
In Europe, we are working to deliver our European
transformation plan, but we expect weak economic
conditions in several markets to extend into 2013 and
industry volume to be lower in 2013 than 2012. As a
esult, we expect to incur another substantial loss in
Europe in 2013. We believe that 2013 is likely the trough
for European industry sales volume, and we expect
industry sales volume and our results to begin to
improve in 2014.
Overall, we expect 2013 will be another strong year for
the Ford Motor Company with pre-tax operating profit
about equal to 2012, Automotive operating-related
cash flow to be higher than 2012, and pre-tax profit for
Ford Credit to be about the same as 2012.
Our proven One Ford plan put us on the path to
profitable growth, and we are confident it will keep us
on that path going forward.
As always, we thank you for your support of our efforts.
Alan R. Mulally
President and Chief Executive Office
March 14, 2013
Nine hundred Ford employees formed a human Ford logo outside Ford World Headquarters to cele
ate the return of the “Blue Oval”
and other assets that had been used as collateral to secure Ford’s revolving credit facility. The cele
ation took place on May 22, 2012
after Fitch and Moody’s Investor Service restored Ford’s credit rating to investment grade.
Ford Motor Company | 2012 Annual Report 7
Executive Officer Group
William Clay Ford, Jr.
Executive Chairman and
Chairman of the Board
Alan R. Mulally
President and Chief Executive Office
Mark Fields
Chief Operating Office
James D. Farley, Jr.
Executive Vice President, Global
Marketing, Sales and Service and Lincoln
John Fleming
Executive Vice President, Global
Manufacturing and Labor Affairs
Joseph R. Hinrichs
Executive Vice President and
President, The Americas
Stephen T. Odell
Executive Vice President and
President, Europe, Middle East and Africa
Robert L. Shanks
Executive Vice President and
Chief Financial Office
Thomas K. Brown
Group Vice President, Global Purchasing
Raymond F. Day
Group Vice President, Communications
Felicia J. Fields
Group Vice President, Human Resources
and Corporate Services
Bennie W. Fowler
Group Vice President,
Quality and New Model Launch
David G. Leitch
Group Vice President and
General Counsel
J Mays
Group Vice President and
Chief Creative Officer, Design
Raj Nair
Group Vice President,
Global Product Development
Stuart J. Rowley
Vice President and Controlle
Ziad S. Ojakli
Group Vice President,
Government and Community Relations
David L. Schoch
Group Vice President and
President, Asia Pacific
Bernard B. Silverstone
Group Vice President,
Chairman and Chief Executive Officer,
Ford Motor Credit Company
Nicholas J. Smither
Group Vice President and
Chief Information Office
Board of Directors
Stephen G. Butler (1,5)
Kimberly A. Casiano (1,3,5)
Anthony F. Earley, Jr. (2,3,5)
Edsel B. Ford II (3,4)
William Clay Ford, Jr. (3,4)
Richard A. Gephardt (3,5)
James H. Hance, Jr. (1,4,5)
William W. Helman IV (3,4,5)
Irvine O. Hockaday, Jr. (1,5)
Jon M. Huntsman, Jr. (2,3,5)
Richard A. Manoogian (2,5)
Ellen R. Ma
am (2,3,5)
Alan R. Mulally (4)
Homer A. Neal (3,4,5)
Gerald L. Shaheen (1,5)
John L. Thornton (2,4,5)
William Clay Ford
(Director Emeritus)
Committee Membership
( 1 ) Audit
(2) Compensation
(3) Sustainability
(4) Finance
(5) Nominating and Governance
Other Vice Presidents
Joseph Bakaj
Powertrain Engineering
Stephen E. Biegun
International Governmental Affairs
Marin A. Burela
President, Changan Ford Automobile
Corporation, Ltd.
Robert D. Brown
Sustainability, Environment and
Safety Engineering
Kenneth M. Czubay
U.S. Marketing, Sales and Service
Roelant de Waard
Marketing, Sales and Service,
Ford of Europe
Elena A. Ford
Global Dealer and Consumer Experience
Kumar A. Galhotra
Product Development, Asia Pacific
and Africa
Gary A. Johnson
Manufacturing, Asia Pacific and Africa
John T. Lawler
Chairman and Chief Executive Officer,
Ford Motor China
Paul A. Mascarenas
Chief Technical Officer, Research and
Advanced Engineering
Martin J. Mulloy
Labor Affairs
Ba
J. Samardzich
Product Development, Ford of Europe
Neil M. Schloss
Treasure
James P. Tetreault
North America Manufacturing
Hau Thai-Tang
Engineering
Frederiek Toney
President, Global Ford Customer
Service Division
Jeffery C. Wood
Manufacturing, Ford of Europe
Board of Directors and Executives*
*As of March 14, 2013
For more information visit www.annualreport.ford.com
8 Ford Motor Company | 2012 Annual Report
Corporate Headquarters
Ford Motor Company
One American Road
Dea
orn, MI 48126
(313) 322-3000
Shareholder Account Assistance
Computershare Trust Company, our transfer agent, maintains
the records for our registered stockholders and can help you
with a variety of stockholder-related services. Computershare
offers the DirectSERVICE Investment and Stock Purchase
Program. This shareholder-paid program provides an
alternative to traditional retail
okerage methods of
purchasing, holding and selling Ford Common Stock. You can
contact Computershare through the following methods:
Ford Motor Company
c/o Computershare Trust Company, N.A.
P.O. Box 43087
Providence, RI 02940-3087
Telephone: (800) 279-1237 (U.S. and Canada)
(781) 575-2732 (International)
E-mail:
[email protected] Website: www.computershare.com
Stock Exchanges
Ford Common Stock is listed and traded on the New York
Stock Exchange in the United States and on stock exchanges
in Belgium and France.
The NYSE trading symbol is:
F Common Stock
Investor Information
Investor information including this report, quarterly financial
esults, press releases and various other reports are available
online at www.shareholder.ford.com.
Alternatively, individual investors may contact us at:
Ford Motor Company
Shareholder Relations
One American Road
Dea
orn, MI 48126
Telephone: (800) 555-5259 (U.S. and Canada)
(313) 845-8540 (International)
Fax: (313) 845-6073
E-mail:
[email protected]Security analysts and institutional investors may contact:
Ford Motor Company
Investor Relations
One American Road
Dea
orn, MI 48126
Telephone: (313) 390-4563
Fax: (313) 845-6073
E-mail:
[email protected]Annual Meeting
The 2013 Annual Meeting of Shareholders will be held
in Wilmington, Delaware on May 9, 2013. A notice of the
meeting and instructions for voting will be mailed to
shareholders in advance.
Shareholder Information
Ford Motor Company | 2012 Annual Report 9For more information visit www.annualreport.ford.com
10 Management’s Discussion and Analysis of Financial Condition and Results of Operations
58 Quantitative and Qualitative Disclosures About Market Risk
63 Report of Independent Registered Public Accounting Firm
64 Consolidated Income Statement
65 Sector Income Statement
66 Consolidated Balance Sheet
67 Sector Balance Sheet
68 Condensed Consolidated Statement of Cash Flows
69 Condensed Sector Statement of Cash Flows
70 Consolidated Statement of Equity
7 1 Notes to the Financial Statements
156 Selected Financial Data
157 Employment Data
158 Management’s Report on Internal Control Over Financial Reporting
159 New York Stock Exchange Required Disclosures
Financial Content*
* Financial information contained herein (pages 10-159) is excerpted from the Annual Report on Form 10-K for the year ended December 31, 2012 of
Ford Motor Company (refe
ed to herein as “Ford”, the “Company”, “we”, “our” or “us”), which is available on our website at www.shareholder.ford.com.
10 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
10
OVERVIEW
Revenue
Our Automotive sector's revenue is generated primarily by sales of vehicles, parts, and accessories; we generally
treat sales and marketing incentives as a reduction to revenue. Revenue is recorded when all risks and rewards of
ownership are transfe
ed to our customers (generally, our dealers and distributors). For the majority of sales, this
occurs when products are shipped from our manufacturing facilities. This is not the case, however, with respect to
vehicles produced for sale to daily rental car companies that are subject to a guaranteed repurchase option. These
vehicles are accounted for as operating leases, with lease revenue and profits recognized over the term of the lease.
When we sell the returned vehicle at auction, we recognize a gain or loss on the difference, if any, between actual
auction value and the projected auction value. In addition, revenue for finished vehicles we sell to customers or vehicle
modifiers on consignment is not recognized until the vehicle is sold to the ultimate customer.
Most of the vehicles sold by us to our dealers and distributors are financed at wholesale by Ford Credit. Upon
Ford Credit originating the wholesale receivable related to a dealer's purchase of a vehicle, Ford Credit pays cash to
the relevant legal entity in our Automotive sector in payment of the dealer's obligation for the purchase price of the
vehicle. The dealer then pays the wholesale finance receivable to Ford Credit when it sells the vehicle to a retail
customer.
Our Financial Services sector's revenue is generated primarily from interest on finance receivables, net of certain
defe
ed origination costs that are included as a reduction of financing revenue, and such revenue is recognized over
the term of the receivable using the interest method. Also, revenue from operating leases, net of certain defe
ed
origination costs, is recognized on a straight-line basis over the term of the lease. Income is generated to the extent
evenues exceed expenses, most of which are interest, depreciation, and operating expenses.
Transactions between our Automotive and Financial Services sectors occur in the ordinary course of business. For
example, we offer special retail financing and lease incentives to dealers' customers who choose to finance or lease
our vehicles from Ford Credit. The estimated cost for these incentives is recorded as revenue reduction to Automotive
sales at the later of the date the related vehicle sales to our dealers are recorded or the date the incentive program is
oth approved and communicated. In order to compensate Ford Credit for the lower interest or lease rates offered to
the retail customer, we pay the discounted value of the incentive directly to Ford Credit when it originates the retail
finance or lease contract with the dealer's customer. Ford Credit recognizes the amount over the life of the related
contracts as an element of financing revenue. See Note 1 of the Notes to the Financial Statements for a more detailed
discussion of transactions and payments between our Automotive and Financial Services sectors.
Costs and Expenses
Our income statement classifies our Automotive total costs and expenses into two categories: (i) cost of sales, and
(ii) selling, administrative, and other expenses. We include within cost of sales those costs related to the development,
manufacture, and distribution of our vehicles, parts, and accessories. Specifically, we include in cost of sales each of
the following: material costs (including commodity costs); freight costs; wa
anty, including product recall and customer
satisfaction program costs; labor and other costs related to the development and manufacture of our products;
depreciation and amortization; and other associated costs. We include within selling, administrative, and other
expenses labor and other costs not directly related to the development and manufacture of our products, including
such expenses as advertising and sales promotion costs.
Certain of our costs, such as material costs, generally vary directly with changes in volume and mix of production.
In our industry, production volume often varies significantly from quarter to quarter and year to year. Quarterly
production volumes experience seasonal shifts throughout the year (including peak retail sales seasons, and the
impact on production of model changeover and new product launches). As we have seen in recent years, annual
production volumes are heavily impacted by external economic factors, including the pace of economic growth and
factors such as the availability of consumer credit and cost of fuel.
Ford Motor Company | 2012 Annual Report 11
Management's Discussion and Analysis of Financial Condition and Results of Operations
11
As a result, we analyze the profit impact of certain cost changes holding constant present-year volume and mix
and cu
ency exchange, in order to evaluate our cost trends absent the impact of varying production and cu
ency
exchange levels. We analyze these cost changes in the following categories:
• Material excluding commodity costs - primarily reflecting the change in cost of purchased parts used in the
assembly of our vehicles.
• Commodity costs - reflecting the change in cost for raw materials (such as steel, aluminum, and resins) used in
the manufacture of our products.
• Structural costs - reflecting the change in costs that generally do not have a directly proportionate relationship
to our production volumes, such as labor costs, including pension and health care; other costs related to the
development and manufacture of our vehicles; depreciation and amortization; and advertising and sales
promotion costs.
• Wa
anty and other costs - reflecting the change in cost related to wa
anty coverage, including product recalls
and customer satisfaction actions, as well as the change in freight and other costs related to the distribution of
our vehicles and support for the sale and distribution of parts and accessories.
While material (including commodity), freight, and wa
anty costs generally vary directly in proportion to production
volume, elements within our structural costs category are impacted to differing degrees by changes in production
volume. We also have varying degrees of discretion when it comes to controlling the different elements within our
structural costs. For example, depreciation and amortization expense largely is associated with prior capital spending
decisions. On the other hand, while labor costs do not vary directly with production volume, manufacturing labor costs
may be impacted by changes in volume, for example when we increase overtime, add a production shift or add
personnel to support volume increases. Other structural costs, such as advertising or engineering costs, do not
necessarily have a directly proportionate relationship to production volume. Our structural costs generally are within
our discretion, although to varying degrees, and can be adjusted over time in response to external factors.
We consider certain structural costs to be a direct investment in future growth and revenue. For example,
increases in structural costs are necessary to grow our business and improve profitability as we expand around the
world, invest in new products and technologies, respond to increasing industry sales volume, and grow our market
share.
Automotive total costs and expenses for full-year 2012 was $121.6 billion. Material costs (including commodity
costs) make up the largest portion of our Automotive total costs and expenses, representing in 2012 about two-thirds of
the total amount. Of the remaining balance of our Automotive costs and expenses, the largest piece is structural costs.
Although material costs are our largest absolute cost, our margins can be affected significantly by changes in any
category of costs.
Key Economic Factors and Trends Affecting the Automotive Industry
Global Economic Conditions. During 2011, global economic growth slowed to about 2.5% from 4% in 2010, as the
worsening debt crisis in Europe, regime changes in North Africa, natural disasters in Japan and Thailand, and
moderating economic growth in several key newly-developed and emerging markets all contributed to slow growth.
Global growth in 2012 remained at the relatively low level of about 2.5% due to the European debt crisis, slowing of
Chinese economic growth, and moderate pace of recovery in the United States. During 2013, global economic growth
is expected to remain in the 2% - 3% range. The European debt crisis remains a key risk to economic growth. The
cu
ent economic performance in many European countries, particularly Greece, Ireland, Italy, Portugal and Spain, is
eing hampered by excessive government debt levels and the resulting budget austerity measures that are
contributing to weak economic growth. The EU, the European Central Bank, and the International Monetary Fund
have provided important support for many of these countries undergoing structural changes. During 2013, economic
growth is likely to remain weak in these markets, even though financial markets have begun to stabilize. The U.K.
government has implemented budget cuts and tax increases that will depress growth, although the labor market has
stabilized in recent months.
Uncertainties associated with the European debt crisis, and policy responses to it, could impact global economic
performance in 2013. Although housing is stabilizing in some of the worst hit markets, such as the United States, the
prospect of a strong economic rebound is hampered by fiscal tightening.
For more information visit www.annualreport.ford.com
12 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
12
Global industry vehicle sales volume (including medium and heavy truck) is estimated to have increased to
81 million units in 2012, up more than 4 million units - or about 5% - from 2011 levels. In 2013, in light of the volatile
external environment, global industry sales are projected to be in a range of 80 million - 85 million units.
Excess Capacity. According to IHS Automotive, an automotive research firm, the estimated automotive industry
global production capacity for light vehicles (which as of 2011 includes an expanded truck segment compared with
previous years) of about 108 million units exceeded global production by about 26 million units in 2012. In North
America and Europe, the two regions where the majority of industry revenue and profits are earned, excess capacity
as a percent of production in 2012 was an estimated 11% and 37%, respectively. According to production capacity
data projected by IHS Automotive, global excess capacity conditions could continue for several years at an average of
about 31 million units per year during the period from 2013 to 2017.
Pricing Pressure. Excess capacity, coupled with a proliferation of new products being introduced in key segments,
will keep pressure on manufacturers' ability to increase prices. In North America, the industry restructuring of the past
few years has allowed manufacturers to better match production with demand, although Japanese and Korean
manufacturers also have capacity (located outside of the region) directed to North America. In the future, Chinese and
Indian manufacturers are expected to enter U.S. and European markets, further intensifying competition. Although
there has been some firming of pricing in the U.S. market, particularly in 2011, it seems likely that over the long term
intense competition and apparent excess capacity will continue to put downward pressure on inflation-adjusted prices
for similarly-contented vehicles in the United States and contribute to a challenging pricing environment for the
automotive industry. In Europe, the excess capacity situation was exace
ated by weakening demand and the lack of
eductions in existing capacity, such that negative pricing pressure is expected to continue for the foreseeable future.
Commodity and Energy Price Increases. Despite weak demand conditions, light sweet crude oil prices increased
from an average of $80 per ba
el in 2010 to $95 per ba
el in 2011, before declining slightly to about $87 per ba
el in
late 2012. Commodity prices have declined recently, but over the longer term prices are likely to trend higher given
global demand growth.
Vehicle Profitability. Our financial results depend on the profitability of the vehicles we sell, which may vary
significantly by vehicle line. In general, larger vehicles tend to command higher prices and be more profitable than
smaller vehicles, both across and within vehicle segments. For example, in North America, our larger, more profitable
vehicles had an average contribution margin that was about 130% of our total average contribution margin across all
vehicles, whereas our smaller vehicles had significantly lower contribution margins. As we execute our One Ford plan,
we are working to create best-in-class vehicles on global platforms that contribute higher margins, and offering a more
alanced portfolio of vehicles with which we aim to be among the leaders in fuel efficiency in every segment in which
we compete.
Increasing Sales of Smaller Vehicles. Like other manufacturers, we are increasing our participation in newly-
developed and emerging markets, such as Brazil, Russia, India, and China, in which vehicle sales are expected to
increase at a faster rate than in most mature markets. The largest segments in these markets are small vehicles
(i.e., Sub-B, B, and C segments). To increase our participation in these fast-growing markets, we are significantly
increasing our production capacity, directly or through joint ventures. In addition, we expect that increased demand for
smaller, more fuel-efficient vehicles will continue in the mature markets of North America and Europe and,
consequently, we have seen and expect in the future strong demand in those markets for our small car offerings
(including our new Ford Fiesta and Focus models that are based on global platforms). Although we expect positive
contribution margins from higher small vehicle sales, one result of increased production of small vehicles may be that,
over time, our average per unit margin decreases because small vehicles tend to have lower margins than medium
and large vehicles.
Cu
ency Exchange Rate Volatility. The European debt crisis has contributed to recent financial market volatility.
Coupled with the ongoing policy actions taken by central banks to support the financial system, exchange rates have
emained volatile. Most recently, the euro cu
ency value has fluctuated as progress toward a solution to the sovereign
debt crisis remains highly uncertain; the yen has depreciated significantly as a result of policy changes by the
Japanese government and Bank of Japan. The high inflation in newly-developed and emerging markets and capital
flight to perceived stable investments have started to erode the strength of some local cu
encies. In most markets,
exchange rates are market-determined, and all are impacted by many different macroeconomic and policy factors, and
thus likely to remain volatile. In some other markets, exchange rates are heavily influenced or controlled by
governments.
Ford Motor Company | 2012 Annual Report 13
Management's Discussion and Analysis of Financial Condition and Results of Operations
13
Trade Policy. To the extent governments in various regions erect or intensify ba
iers to imports, or implement
cu
ency policy that advantages local exporters selling into the global marketplace, there can be a significant negative
impact on manufacturers based in markets that promote free trade. While we believe the long-term trend is toward the
growth of free trade, we have noted with concern recent developments in a number of regions. In Asia Pacific Africa,
for example, the recent dramatic depreciation of the yen significantly reduces the cost of exports into the United States,
Europe, and other global markets by Japanese manufacturers. Over a period of time, the emerging weakness of the
yen can contribute to other countries pursuing weak cu
ency policies by intervening in the exchange rate markets.
This is particularly likely in other Asian countries, such as South Korea. As another example, government actions in
South America to incentivize local production and balance trade are driving trade frictions between South American
countries and also with Mexico, resulting in business environment instability and new trade ba
iers. We will continue
to monitor and address developing issues around trade policy.
Other Economic Factors. The eventual implications of higher government deficits and debt, with potentially higher
long-term interest rates, could drive a higher cost of capital over our planning period. Higher interest rates and/or taxes
to address the higher deficits also may impede real growth in gross domestic product and, therefore, vehicle sales over
our planning period.
Trends and Strategies
We remain firm in our belief that our continued focus on executing the four key priorities of our One Ford plan
enables us to go further for our customers, dealers, suppliers, employees, shareholders, and other key constituencies:
• Aggressively restructure to operate profitably at the cu
ent demand and changing model mix;
• Accelerate development of new products our customers want and value;
• Finance our plan and improve our balance sheet; and
• Work together effectively as one team, leveraging our global assets.
Despite the external economic environment in recent years, we have made significant progress in transforming our
usiness.
Aggressively Restructure to Operate Profitably
Brands. In recent years, we have eliminated a number of
ands from our portfolio in order to devote fully our
financial, product development, production, and marketing and sales and services resources toward further growing
our core Ford and Lincoln
ands. We sold Aston Martin, Jaguar, Land Rover, and Volvo, and we discontinued the
Mercury
and and further reduced our stake in Mazda. In 2012, we announced the revitalization of Lincoln reflecting
the
and's distinct product strategy, including its own dedicated design studio, separate creative agency in New York,
and financial services team to complement the vehicle acquisition and ownership experience.
Manufacturing. We are committed to maintaining an appropriate manufacturing footprint in markets around the
world, both in the more mature markets in which we have an established presence, and in fast-growing newly-
developed and emerging markets. We are making substantial investments in newly-developed and emerging
markets, including in China, India, and Thailand to increase our production capacity with flexible new manufacturing
plants. We and our unconsolidated affiliates in Asia Pacific Africa launched two new plants in 2012, and have
announced that we expect to complete seven more plants in the region by mid-decade. We also are making
substantial investments in North America to grow production as industry sales rebound, including the addition of
400,000 annual incremental units of production capacity during 2012 and significant hiring in the United States as part
of our manufacturing capacity expansions.
In October 2012, we also announced our plan to transform our European operations in response to structural
industry overcapacity in the region. Our plan targets all areas of the business, including product,
and, and cost. We
have detailed an aggressive product acceleration in Europe, including plans to introduce 15 global vehicles within five
years; we are taking steps to further strengthen our
and, and to enhance
and awareness in fast-growing emerging
markets within the region; and we are moving to ensure a more efficient manufacturing footprint. As announced, we
intend to close three European manufacturing facilities, which would affect approximately 6,200 positions. Our intent to
close our assembly plant in Genk, Belgium is subject to an information and consultation process with employee
epresentatives, which we have commenced. See "Outlook" for additional discussion of our European transformation
plan.
For more information visit www.annualreport.ford.com
14 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
14
Suppliers. We continue to work to strengthen our global supply base. As part of this process, we have been
educing the global number of production suppliers from 3,300 in 2004 to about 1,260 at year-end 2012. We have
identified plans that will take us to a target of about 750 suppliers, and we are confident that our consolidation efforts
will result in a stronger and healthier supply base. We continue to work closely with our suppliers to address any near-
term capacity constraints as we continue to ramp up production. In addition, our move to global vehicle platforms
increases our ability to source to common suppliers for the total global volume of vehicle components resulting in a
smaller number of suppliers receiving a greater volume of purchases to support our global vehicle platforms and
allowing us to gain greater economies of scale.
Ford and Lincoln Dealerships. Our dealers are a source of strength in North America and around the world,
epresenting the face of Ford to local communities. Our goal is to achieve a sustainable and profitable dealer network
y rightsizing the number of dealerships, identifying the right locations, and ensuring the appropriate
anded facilities
to satisfy cu
ent and future demand. We are adding dealerships rapidly in markets in our Asia Pacific Africa region
where industry volume is growing at a rapid pace. Our network includes about 460 dealerships in China, and about
170 dealerships in India. We have plans to continue our expansion of these networks, in addition to the dealership
networks in our growth markets of Brazil and Russia. We have completed planned dealer consolidations in the United
States to rightsize the number of Ford and Lincoln outlets, particularly in our largest 130 metropolitan markets. As part
of these efforts, we have reduced the number of outlets in our U.S. Ford and Lincoln network from about 4,400 at the
end of 2005 to about 3,290 at the end of 2012. This has contributed to increased profitability of our U.S. dealers as
they have grown their businesses by investing in their facilities, employees, and communities while continuously
striving to improve the experience of retail customers.
Product Development. Our One Ford global product development system is fully operationalized, utilizing global
platforms to deliver customer-focused programs rapidly and efficiently across global markets. Through our "hub and
satellite" approach, one lead product development engineering center - the hub - is assigned for each global vehicle
line, thereby ensuring global scale and efficiency through common designs, parts, suppliers, and manufacturing
processes. The hubs are supported by regional engineering centers - satellites - which also help deliver products
tuned to local market customer preferences while maintaining global design DNA. Typical delivery metrics for global
programs include 80% part commonality, 75% pre-sourcing to global suppliers, and 100% common manufacturing and
assembly process.
The global Ford lineup is now one of the most extensive in the industry and includes a full spectrum of offerings
from innovative small cars (B-platform products) such as the B-MAX sold in Europe to large commercial trucks sold
around the world. The strength of our One Ford plan has enabled a focus on delivering the industry's best refresh rate,
sustained and funded by efficiencies and delivered by a world-class global network of engineering centers. We agree
with external analysts that a sustained fresh showroom is a good indicator of long-term market share growth.
We are making swift progress on our commitment to platform consolidation. In 2007, we utilized 27 different
vehicle platforms. By 2014, we will have 14 total platforms, and we are on track to meet our target of nine core
platforms globally. By 2013, more than 87% of our global volume will be produced across just nine core platforms.
One of these platforms, our global C-platform, which underpins a number of unique vehicles including the best-selling
Focus, will produce more platform volume than any other automaker - evidence small cars are a clear global priority.
Our new B-sized Fiesta and C-sized Focus are now among the best-selling nameplates in the world. Over the past
few years, we have been reinventing our global portfolio of vehicles - small, medium, large, cars, utilities and trucks -
and have a mid-decade target of selling approximately 8 million vehicles around the world.
In 2013, we also are focused on strategic opportunities around commercial vehicles. The global commercial
vehicle industry represented approximately 17 million units in 2012, and is forecasted to grow by 4.8 million units - or
28% - through 2017. Ford has been the best-selling
and of commercial vehicles in North America for 28 years. In
Europe, Transit vans are the best-selling medium commercial
and. We plan to leverage these strengths through a
common global family of commercial vehicles across all applicable markets.
Our full spectrum of van products now ca
ies the Transit badge um
ella and spans three platforms, including the
B-sized Transit Courier; C-sized Transit Connect; full-size, one-ton front-wheel-drive Transit Custom; and full-size, two-
ton rear-wheel-drive Transit - providing right-sized Built Ford Tough products for all customer applications and markets.
Our new lineup of full-size Transit commercial vans will offer the largest available selection of configurations and
engine types to global customers (and provide an initial average scale of more than 475,000 units annually). In
Europe, the Transit Custom, which launched in 2012, won the 2013 International Van of the Year award.
Ford Motor Company | 2012 Annual Report 15
Management's Discussion and Analysis of Financial Condition and Results of Operations
15
We also will supplement our commercial van line with personal-use variants, including the Tourneo wagon
offerings, delivering premium look and feel to discerning customers and additional premium revenue.
Further proof of our commitment to truck leadership is our 36 years as America's top truck producer. In 2012, our
F-Series outsold its nearest competitors by a wide margin. At the 2013 North American International Auto Show, we
provided a glimpse of our strategy to protect and expand our truck leadership by showing the Ford Atlas Concept -
which won Autoweek Magazine's Most Significant vehicle award. The bold emotive styling, innovative features, and
fuel economy leadership intentions are more than a hint of the designs to come.
Our market strength in trucks is due to great products and strong customer relationships - Ford trucks are clear
leaders in commercial subcategories, including mining, construction, oil and energy, small business, etc. Our future
market expectations are further bolstered by global economic recovery indicators.
Additionally, Ford Motor Company is firmly committed to the transformation and success of the Lincoln
and. The
2013 Lincoln MKZ is our first transformational product - with four all-new Lincolns in total launching within the next four
years. Each will deliver:
• A uniquely Lincoln experience, inside and out - built on our core platforms, leveraging global scale and
efficiencies
• Design excellence that is stunning and understated, with premium amenities offered on every nameplate
• Product excellence that is enabled by class-leading technologies
• The full spectrum of customer services that discerning luxury customers expect and appreciate
Lincoln is focusing on the largest and fastest-growing segments of the luxury market, with the intention of having
all-new entries competing in 90% of the premium industry by 2015.
The global premium industry is projected to grow 39% by 2017. China will play a key role in that period. By 2017,
the United States and China will represent 50% of the global premium opportunity - exactly why Lincoln recently
announced plans to enter China, the single largest car market in the world.
Accelerate Development of New Products Our Customers Want and Value
Our global product strategy is to serve our key geographic markets with a complete family of small, medium and
large, cars, utilities and trucks that have best-in-class design and quality, are environmentally responsible, and contain
high-value feature content. The result of this strategy is a full line of vehicles that:
• Have bold, emotive exterior design
• Are great to drive
• Are great to sit in (with the comfort and convenience of a second home on wheels and exceptional quietness)
• Provide fuel economy as a reason to buy
• Are unmistakably a Ford or Lincoln in look, sound and feel
• Provide exceptional value and quality
Developing products customers want and value for Ford and Lincoln demands consistent focus on our
commitment to lead in four key areas - Quality, Green, Safe and Smart.
Quality. We have made significant strides in recent years to achieve world-class levels of quality and desirability.
This has been accomplished by following an established global set of disciplined, standardized processes that are
aimed at making us a leader in automotive quality. Via our common global management team, we are leveraging our
assets by eliminating duplication, implementing best practices and utilizing a systematic approach to quality.
Overall, we expect quality to improve in 2013, including improvement in North America, where we are making
progress addressing specific customer concerns. We already have made steady and significant progress in South
America, Europe, and Asia Pacific Africa.
In fact, using the key quality measure of "things gone wrong" ("TGW") per 1,000 vehicles at three months in service,
as measured by Global Quality Research System, a Ford-sponsored competitive research survey, we had our best
performance of the last five years in 2012 in South America, Europe, and Asia Pacific Africa, and we expect to build on
this solid accomplishment in 2013.
For more information visit www.annualreport.ford.com
16 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
16
Green. Our commitment and approach to sustainability is unique in the industry. We prefer to provide our
customers the power of choice. All Ford front-wheel drive and all-wheel drive global platforms are engineered to
accept a full technology range of gasoline, diesel, hy
id, plug-in hy
id or electric vehicle propulsion systems. That
concept, coupled with our commitment to standardized flexible production facilities, provides Ford the advantage of
producing vehicles to meet unique customer preferences or changes across markets real-time as they occur. More
importantly, our commitment to provide fuel economy leadership with every all-new or significantly refreshed product is
unwavering.
The new C-platform is a good example. The 2013 Focus SFE, with 2.0-liter gasoline engine technology, is among
the fuel economy leaders in the United States, delivering an EPA-rated 40 mpg on the highway. In Europe, the same
Focus with a 1.6-liter diesel enjoys fuel economy/CO2 leadership in the most competitive diesel market in the world.
The same Focus is also available in North America as a full battery-electric vehicle with leadership in charge rate and
ange. Focus Electric has been certified by EPA to offer 110 MPGe in the city. Additionally, the 2013 C-MAX Hy
id
and C-MAX Energi plug-in hy
id sold in North America are built on the same C-platform and deliver leadership against
competitive vehicles. Lastly, our first global C-size sports car, Focus ST, delivers more than 250 horsepower from an
advanced 2.0-liter EcoBoost® engine; Focus ST offers driving excitement and leadership in fuel economy against its
competitors. All of these vehicles, from Focus Electric and C-MAX Energi to the high-performance Focus ST, are built
for North America at the same plant - Michigan Assembly Plant - running on the same line resulting in lower overall
costs.
South America and Asia Pacific regions are rapidly evolving to em
ace fuel economy and low-emissions
technologies as well. Therefore, Ford is accelerating migration of world-class EcoBoost, hy
id and next-generation
diesels to those markets at the same time we are leveraging global platforms and top hats. That translates into global-
scale cost and investment efficiencies as well as ongoing affordable freshening and technology cadence across all
markets.
Safe. We are strengthening our safety leadership by focusing on three key areas - addressing driver behavior,
enhancing crash protection even further, and pioneering the next frontier of safety with driver-assist crash-avoidance
technologies.
For example, we introduced MyKey® to help parents encourage teenagers to drive more safely and fuel efficiently,
and to increase safety belt usage. MyKey - which debuted on the 2010 Focus and Taurus, and is now standard on
most Ford and Lincoln models - allows owners to program a key that can limit the vehicle's top speed and audio
volume as well as mute the audio if front seat occupants are not buckled up. For 2013, the SYNC "Do Not Distu
"
feature was added to MyKey. We also are the leader in another dimension of driver behavior - enabling drivers to
more safely operate vehicles during recent years in which we have seen a sharp growth in the number of personal
electronic devices (e.g., cell phones, MP3 players, etc.). Our SYNC system provides hands-free connectivity, with
more than 5 million SYNC-equipped vehicles on the road, and our just-launched second generation of SYNC has
added a "Do Not Distu
" feature that allows users to redirect incoming messages and calls directly to their cellular
mailbox. We expect to have 14 million SYNC-equipped vehicles on the road by 2015 as we launch SYNC globally.
We have led the industry in migrating driver assist technologies from premium segments to family segments. We
also offer a new advanced crash-avoidance technology - collision warning with
ake support - on several Ford and
Lincoln vehicles including Ford Taurus, Fusion, Edge and Explorer, and Lincoln MKS, MKX, MKZ and MKT. This
feature uses radar to monitor traffic directly ahead, and warns the driver with an authoritative beep and a red warning
light projected on the windshield if a collision threat is detected. We also launched the industry's first-ever production
use of inflatable seat belts, designed to provide additional protection for rear-seat occupants - often children and older
passengers who can be more vulnerable to head, chest, and neck injuries. This technology is now incorporated into
the 2013 Ford Flex and Explorer, and Lincoln MKT and MKZ, and we plan to expand further offerings to other vehicles
globally.
Other global driver-assist features such as Blind Spot Information System (BLIS®), active park assist and adaptive
cruise control have enjoyed strong customer demand and expanded vehicle applications. We also have begun offering
the next suite of new safety features and driver-assistance technologies - we introduced Lane-Keeping Aid and Driver
Alert on the 2013 Ford Explorer and Fusion and Lincoln MKS, MKZ and MKT in North America and the Ford Mondeo
and Focus in Europe.
Ford Motor Company | 2012 Annual Report 17
Management's Discussion and Analysis of Financial Condition and Results of Operations
17
The independent car safety organization, Euro NCAP, named the Focus Europe's best-in-class small family car,
while Focus also became the industry's first vehicle to earn four Euro NCAP Advanced Technology Awards, being
ecognized for Active City Stop, Lane-Keeping Aid, Driver Alert, and Forward Alert. Features such as Speed Limiter,
Torque Vectoring Control, Traffic Sign Recognition System, All-Seat BeltMinder® and Power Child Locks also have
een introduced in Europe on Focus, C-MAX, Grand C-MAX, Mondeo, S-MAX and Galaxy.
Smart. We recently completed our seventh consecutive year participating in the International Consumer
Electronics Show ("CES"), which many media say is becoming more important than ever to automakers. At the 2013
show, Ford Chief Technical Officer Paul Mascarenas and Vice President of Engineering Hau Thai-Tang introduced the
Ford Developer Program, the automotive industry's first smartphone app software development program. The program
allows for those outside the company with innovative ideas to work with Ford to create compelling and valuable new
features and services for our customers at an unprecedented rate. Using SYNC AppLink™, drivers are able to connect
their smartphones and control their favorite mobile apps simply using their voice.
We continue to work on the future of the connected car, having introduced the Ford Evos Concept to North
America for the first time at the 2012 CES. The Evos Concept showcases a dramatic four-door, four-seat fastback
concept with a state-of-the-art lithium-ion plug-in hy
id powertrain that previews our vision for customer-focused,
intuitive technologies. Driver engagement technologies explore a seamless enhancement of the driving experience
and smart electrified powertrain. Technologies use online data to check for potential travel routes and to set the most
efficient
aking, steering and suspension settings with efficient and enjoyable powertrain settings, and to reserve a
charging parking spot at the driver's destination. We also built on our power of choice fuel-efficient powertrain
momentum by showcasing and offering drives of the Fiesta with EcoBoost 1.0-liter three-cylinder engine, Fusion
Hy
id and C-MAX Energi plug-in hy
id - which was named Official Car of CES at the 2013 show.
Building upon our demonstrated strategy to globally democratize our technology, Fusion and Explorer launched
with a full suite of driver-assist technologies, each leading their respective segments. With features including Lane-
Keeping Aid, adaptive cruise control and active park assist, both vehicles help drivers with a new level of convenience.
Lane-Keeping uses a forward-facing camera to monitor the lane markings ahead and warn drivers if they are drifting
outside, and will even nudge the car back into the co
ect lane if the driver does not immediately respond. Adaptive
cruise control features radar that tracks the vehicles ahead of you and keeps pace and maintains a safe distance,
adjusting as necessary to the speed of traffic. Active park assist helps drivers minimize the stress associated with
parallel parking. Using sonar, the car can identify an appropriate parallel parking spot and then assist the driver by
automatically steering the car into the spot while the driver maintains control of the throttle and
akes. Additionally,
the new Lincoln MKZ introduces Active Noise Control ("ANC"), which helps manage the sounds passengers hear
inside the car. Using elements of the audio system, ANC technology will block out unwanted engine and road noise,
helping improve the overall in-car experience.
We also are cele
ating the first anniversary of the new Ford Silicon Valley Lab, which opened in 2012 in
downtown Palo Alto, California. Our lab employees are working closely with local universities including Stanford, new
startup companies, and leading innovators such as Facebook, Microsoft, and Google.
Leveraging key new technologies across multiple regions and on global platforms helps drive tremendous scale
and efficiency savings that can be reinvested, allowing us to have the freshest showroom in the industry. In 2012, we
showed growth in nearly every aspect of our business, with 25 new vehicles launched around the world. We expect to
grow even further in 2013, driven by having the freshest products in the business - the average age of our global
product lineup improves again this year compared with 2012.
Our aggressive freshening cadence and relentless focus on efficiency is producing results that are greater than our
major global full-line competitors. Our global programs continue to offer bold, emotive designs, high levels of quality,
fuel economy leadership, top safety ratings, innovative technologies, and greater feature content than higher-series
competitive offerings, which will allow us to reduce
and discounts and increase revenue across our portfolio. This
overall combination of cost efficiency and revenue enhancement that is being realized from One Ford and our global
product strategy will help us continue to profitably grow and Go Further.
For more information visit www.annualreport.ford.com
18 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
18
Finance Our Plan and Strengthen Our Balance Sheet
Execution of our One Ford plan has generated significant positive Automotive operating-related cash flow in recent
years, which has allowed us to strengthen our balance sheet while continuing to invest in new products that customers
want and value, transform and grow our business, pay our debts and obligations as and when they come due, pay a
sustainable dividend, and provide protection within an uncertain global economic environment. We expect to generate
significant positive Automotive operating-related cash flow again in 2013.
Work Together Effectively as One Team
As part of the One Team approach, we have implemented a disciplined business plan process to regularly review
our business environment, risks and opportunities, strategy, and plan, and to identify areas of our plan that need
special attention while pursuing opportunities to improve our plan. Everyone is included and contributes, openness is
encouraged, our leaders are responsible and accountable, we use facts and data to make our decisions, high
performance teamwork is a performance criteria - and we follow this process every week, every month, and every
quarter, driving continuous improvement. We believe this process gives us a clear picture of our business in real time
and the ability to respond quickly and decisively to new issues and changing conditions - as we have done in the face
of rapid changes in the market and business environment in the last few years. As needed, we convene daily
management meetings to handle potentially acute situations, which allows us to ensure that we are vigorously
managing daily developments and moving decisively in response to changing conditions.
In addition, we are partnering with and enlisting all of our stakeholders to help us execute our plan to deal with our
usiness realities and create an exciting and viable business going forward. We are reaching out and listening to
customers, dealers, employees, labor unions, suppliers, investors, communities, retirees, and federal, state, and local
governments. Each of these constituencies is a critical part of the success of our business going forward. Realizing
our goal of profitable growth for all is as important to these stakeholders as it is to our shareholders.
RESULTS OF OPERATIONS
TOTAL COMPANY
As shown in the table below, full year net income in 2012 was lower than a year ago, primarily reflecting the non-
epeat of the 2011 release of the tax valuation allowance against defe
ed tax assets.
2012 2011 2010
(Mils.) (Mils.) (Mils.)
Income
Pre-tax results (excl. special items) $ 7,966 $ 8,763 $ 8,300
Special items (246) (82) (1,151)
Pre-tax results (incl. special items) 7,720 8,681 7,149
(Provision for)/Benefit from income taxes (2,056) 11,541 (592)
Net income 5,664 20,222 6,557
Less: Income/(Loss) attributable to noncontrolling interests (1) 9 (4)
Net income attributable to Ford $ 5,665 $ 20,213 $ 6,561
Income before income taxes includes certain items ("special items") that we have grouped into "Personnel and
Dealer-Related Items" and "Other Items" to provide useful information to investors about the nature of the special items.
The first category includes items related to our efforts to match production capacity and cost structure to market demand
and changing model mix and therefore helps investors track amounts related to those activities. The second category
includes items that we do not generally consider to be indicative of our ongoing operating activities, and therefore allows
investors analyzing our pre-tax results to identify certain infrequent significant items that they may wish to exclude when
considering the trend of ongoing operating results.
As detailed in Note 28 of the Notes to the Financial Statements, we allocate special items to a separate reconciling
item, as opposed to allocating them among the operating segments and Other Automotive, reflecting the fact that
management excludes these items from its review of operating segment results for purposes of measuring segment
profitability and allocating resources among the segments.
Ford Motor Company | 2012 Annual Report 19
Management's Discussion and Analysis of Financial Condition and Results of Operations
19
The following table details Automotive sector special items in each category:
2012 2011 2010
(Mils.) (Mils.) (Mils.)
Personnel and Dealer-Related Items
Personnel-reduction actions (a) $ (498) $ (269) $ (145)
Mercury discontinuation/Other dealer actions (71) (151) (339)
Job Security Benefits/Other 17 93 36
Total Personnel and Dealer-Related Items (552) (327) (448)
Other Items
CFMA restructuring 625 — —
AAI consolidation (b) 136 — —
FordSollers gain 1 401 —
U.S. pension lump-sum program (250) — —
Loss on sale of two component businesses (174) — —
Belgium pension settlement — (109) —
Debt reduction actions — (60) (853)
Sale of Volvo and related charges — 8 179
Other (32) 5 (29)
Total Other Items 306 245 (703)
Total Special Items $ (246) $ (82) $ (1,151)
__________
(a) Includes pension-related special items other than the U.S. pension lump-sum program.
(b) The special item of $136 million is comprised of the $155 million gain from the consolidation of AAI (see Note 25 of the Notes to the Financial
Statements), less a related $19 million adjustment for sales in September 2012 of Ford-
and vehicles produced by AAI.
Discussion of Automotive sector, Financial Services sector, and total Company results of operations below is on a pre-
tax basis and excludes special items unless otherwise specifically noted.
The chart below details 2012 pre-tax results by sector:
Total Company 2012 pre-tax profit of $8 billion reflects strong results from both sectors. Compared with 2011, total
Company pre-tax profit declined, primarily explained by the expected reduction in Financial Services.
For more information visit www.annualreport.ford.com
20 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
20
AUTOMOTIVE SECTOR
In general, we measure year-over-year change in Automotive pre-tax operating profit for our total Automotive sector
and reportable segments using the causal factors listed below, with revenue and cost variances calculated at present-year
volume and mix and exchange:
• Market Factors:
Volume and Mix - Primarily measures profit variance from changes in wholesale volumes (at prior-year average
margin per unit) driven by changes in industry volume, market share, and dealer stocks, as well as the profit
variance resulting from changes in product mix, including mix among vehicle lines and mix of trim levels and
options within a vehicle line
Net Pricing - Primarily measures profit variance driven by changes in wholesale prices to dealers and marketing
incentive programs such as rebate programs, low-rate financing offers, and special lease offers
• Contribution Costs - Primarily measures profit variance driven by per-unit changes in cost categories that typically
vary with volume, such as material costs (including commodity and component costs), wa
anty expense, and freight
and duty costs
• Other Costs - Primarily measures profit variance driven by absolute change in cost categories that typically do not
have a directly proportionate relationship to production volume. These include mainly structural costs, described
elow, as well as all other costs, which include items such as litigation costs and costs related to our after-market
parts, accessories, and service business. Structural costs include the following cost categories:
Manufacturing and Engineering - consists primarily of costs for hourly and salaried manufacturing- and
engineering-related personnel, plant overhead (such as utilities and taxes), new product launch expense,
prototype materials, and outside engineering services
Spending-Related - consists primarily of depreciation and amortization of our manufacturing and engineering
assets, but also includes asset retirements and operating leases
Advertising and Sales Promotions - includes costs for advertising, marketing programs,
and promotions,
customer mailings and promotional events, and auto shows
Administrative and Selling - includes primarily costs for salaried personnel and purchased services related to our
staff activities and selling functions, as well as associated information technology costs
Pension and OPEB - consists primarily of past service pension cost and other postretirement employee benefit
costs
• Exchange - Primarily measures profit variance driven by one or more of the following: (i) impact of gains or losses
arising from transactions denominated in cu
encies other than the functional cu
ency of the locations, including
cu
ency transactions, (ii) effect of remeasuring income, assets, and liabilities of foreign subsidiaries using U.S. dollars
as the functional cu
ency, or (iii) results of our foreign cu
ency hedging activities
• Net Interest and Other - Primarily measures profit variance driven by changes in our Automotive sector's centrally-
managed net interest (primarily interest expense, interest income, and other adjustments) and related fair value
market adjustments in our investment portfolio and marketable securities as well as other items not included in the
causal factors defined above
Ford Motor Company | 2012 Annual Report 21
Management's Discussion and Analysis of Financial Condition and Results of Operations
21
2012 Compared with 2011
Total Automotive. The charts below detail key metrics and the change in 2012 pre-tax results compared with 2011 by
causal factor. Automotive operating margin is defined as Automotive pre-tax results, excluding special items and Other
Automotive, divided by Automotive revenue.
As shown above, all four key metrics were about equal for 2012 compared with 2011, with pre-tax profit primarily
eflecting higher net pricing and lower compensation costs (primarily the non-repeat of 2011 UAW ratification bonuses),
offset by higher costs, mainly structural, and unfavorable volume and mix.
For more information visit www.annualreport.ford.com
22 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
22
Total costs and expenses for our Automotive sector for 2012 and 2011 was $121.6 billion and $122.4 billion,
espectively, a difference of about $800 million. An explanation of the changes, as reconciled to our income statement, is
shown below (in billions):
2012
Bette
(Worse)
2011
Explanation of change:
Volume and mix, exchange, and other $ 3.0
Contribution costs (a)
Commodity costs (incl. hedging) —
Material costs excluding commodity costs (0.9)
Wa
anty/Freight 0.8
Other costs (a)
Structural costs (1.5)
Other (0.2)
Special items (0.4)
Total $ 0.8
_________
(a) Our key cost change elements are measured primarily at present-year exchange; in addition, costs that vary directly with volume, such as material,
freight and wa
anty costs, are measured at present-year volume and mix. Excludes special items.
Results by Automotive Segment. Details by segment of Income before income taxes are shown below for 2012.
Total Automotive pre-tax profit in 2012 was more than explained by profit from Ford North America. Ford South
America was profitable and Ford Asia Pacific Africa incu
ed a small loss, while Ford Europe reported a substantial loss.
The loss in Other Automotive was more than explained by net interest expense.
For 2013, we expect net interest expense to be higher than our fourth quarter 2012 run rate of $147 million, reflecting
the increase in Automotive debt associated with our January 2013 issuance (discussed under "Liquidity and Capital
Resources - Automotive Sector") and lower interest income.
Ford Motor Company | 2012 Annual Report 23
Management's Discussion and Analysis of Financial Condition and Results of Operations
23
Ford North America Segment. The charts below detail key metrics, and the change in 2012 pre-tax results compared
with 2011 by causal factor.
As shown above, all four key metrics increased for 2012 compared with 2011. The increase in pre-tax profit for 2012
compared with 2011 primarily reflected favorable market factors, lower contribution costs, and lower compensation costs
(primarily the non-repeat of 2011 UAW ratification bonuses), offset partially by higher structural cost.
For the year, total U.S. market share was down 1.3 percentage points, while U.S. retail share of retail industry
declined 0.7 of a percentage point. The declines largely reflected the discontinuation of the Crown Victoria and Ranger,
capacity constraints, and reduced availability associated with our Fusion and Escape model changeovers.
For 2013, we expect the strong Ford North America performance to continue with higher pre-tax profits than 2012 and
an operating margin of about 10%. This reflects a growing industry, a strong Ford
and, an outstanding product line-up
driven by industry-leading refresh rates, continued discipline in matching our production with demand, and a lean cost
structure.
For more information visit www.annualreport.ford.com
24 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
24
Ford South America Segment. The charts below detail key metrics, and the change in 2012 pre-tax results compared
with 2011 by causal factor.
As shown above, all four key metrics decreased for 2012 compared with 2011. The decrease in pre-tax profit for 2012
compared with 2011 primarily reflects higher costs and unfavorable exchange, primarily in Brazil, offset partially by higher
net pricing.
For 2013, we expect Ford South America results to be about
eakeven. Although results will benefit from new
products recently launched or to be launched during the year, the competitive environment and cu
ency risks across the
egion, especially in Venezuela, are expected to impact our profits adversely. In addition, government actions to
incentivize local production and balance trade are driving trade frictions between South American countries and also with
Mexico, resulting in business environment instability and new trade ba
iers.
Ford Motor Company | 2012 Annual Report 25
Management's Discussion and Analysis of Financial Condition and Results of Operations
25
Ford Europe Segment. The charts below detail key metrics, and the change in 2012 pre-tax results compared with 2011
y causal factor.
All four key metrics declined for 2012 compared with 2011. The decline in wholesales and revenue primarily reflected lower
industry sales and market share, and reductions in dealer stocks. Exchange was also a contributing factor adversely affecting
net revenue. The decline in 2012 pre-tax results compared with 2011 primarily reflected unfavorable market factors.
Our 2012 results are consistent with our guidance from October 2012, when we announced our European transformation
plan. In 2013, compared with 2012, we expect to benefit from the non-repeat of dealer stock reductions to the degree incu
ed
in 2012. However, consistent with our guidance, we will incur higher costs associated with restructuring actions, mainly
investment in new products, as well as accelerated depreciation and costs to implement our revised manufacturing footprint.
Similar to our successful restructuring of North America, these are the investments we are making to enable the transformation
of our European business for profitable growth in the future.
While our restructuring-related investments this year are consistent with our October 2012 guidance, our outlook for industry
volume in 2013 has deteriorated - now expected to be at the lower end of the range of 13 million to 14 million units. In addition,
we are being affected adversely by higher pension costs due to lower discount rates and a stronger euro. As a result, we now
expect a loss of about $2 billion for 2013, compared with prior guidance of a loss about equal to 2012. The business
environment in Europe remains uncertain. As is our practice, we will continue to monitor the situation and will take further action
as necessary to ensure we remain on track to deliver our plan.
For more information visit www.annualreport.ford.com
26 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
26
Ford Asia Pacific Africa Segment. The charts below detail key metrics, and the change in 2012 pre-tax results
compared with 2011 by causal factor.
As shown above, all four key metrics improved for 2012 compared with 2011. The improvement in 2012 pre-tax
esults compared with 2011 is more than explained by higher net pricing, favorable volume and mix, and favorable
exchange, offset partially by higher costs associated with new products and investments to support higher volumes and
future growth.
Our market share in the region increased sequentially each quarter during 2012, with fourth quarter 2012 market
share at 3.4%, as we continued to benefit from increased capacity and new products. Further demonstrating the growth
we are experiencing in Asia Pacific Africa, since 2009, wholesale volume has about doubled, market share has improved
y half a point and net revenue has increased by about two-thirds even though our reported revenue does not include the
evenue of unconsolidated joint ventures in China.
For 2013, we expect Asia Pacific Africa to be about
eakeven. We expect our volume and revenue growth in the
egion to accelerate, supported by the launch of the all-new Kuga, EcoSport, and refreshed Fiesta across the region, as
well as the launch of Mondeo and Explorer in China. This will be offset in large part by continued strong investment
across the region to support our longer-range growth plans.
Ford Motor Company | 2012 Annual Report 27
Management's Discussion and Analysis of Financial Condition and Results of Operations
27
2011 Compared with 2010
Total Automotive. The charts below detail full-year key metrics and the change in full-year 2011 pre-tax operating
esults compared with full-year 2010 by causal factor. Automotive operating margin is defined as Automotive pre-tax
operating results, excluding special items and Other Automotive, divided by Automotive revenue.
As shown above, full-year wholesale volume and revenue were higher than the year-ago period, but operating margin
was down seven-tenths of a point; higher commodity costs reduced our margin by 1.8 points.
Total Automotive pre-tax operating profit in 2011 was $6.3 billion, an increase of $1 billion from 2010. The increase in
earnings is explained by strong performance in market factors, and lower interest expense net of interest income (due
primarily to lower debt levels). This was offset partially by higher contribution costs, higher structural costs (including the
effect of higher volumes, new product launches, and investments to support our future product, capacity, and
and-
uilding plans), higher compensation costs in North America, and unfavorable exchange.
For more information visit www.annualreport.ford.com
28 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
28
Total costs and expenses for our Automotive sector for 2011 and 2010 was $122.4 billion and $113.5 billion,
espectively, a difference of $8.9 billion. An explanation of the change as reconciled to our income statement is shown
elow (in billions):
2011
Bette
(Worse)
2010
Explanation of change:
Volume and mix, exchange, and other $ (11.4)
Contribution costs (a)
Commodity costs (incl. hedging) (2.3)
Material costs excluding commodity costs (1.2)
Wa
anty/Freight (0.7)
Other costs (a)
Structural costs (1.4)
Other 0.1
Special items (b) 8.0
Total $ (8.9)
_________
(a) Our key cost change elements are measured primarily at present-year exchange; in addition, costs that vary directly with volume, such as material,
freight and wa
anty costs, are measured at present-year volume and mix. Excludes special items.
(b) Special items primarily reflect the non-recu
ence of Volvo costs and expenses in 2011.
Results by Automotive Segment. Details by segment of Income before income taxes are shown below for 2011.
Total Automotive pre-tax operating profit of $6.3 billion was led by a $6.2 billion profit from Ford North America. Ford
South America earned a solid profit, while Ford Europe was about
eakeven, incu
ing a small loss driven by the
economic uncertainty in the region. Ford Asia Pacific Africa incu
ed a loss as well, more than explained by the impact of
the Japan and Thailand natural disasters. The loss in Other Automotive was $601 million, reflecting higher interest
expense net of interest income and unfavorable fair market valuation adjustments, mainly for our investment in Mazda.
Ford Motor Company | 2012 Annual Report 29
Management's Discussion and Analysis of Financial Condition and Results of Operations
29
Ford North America Segment. The charts below detail key metrics and the change in 2011 pre-tax operating profit
compared with 2010 by causal factor.
As shown above, full-year wholesale volume and revenue improved in 2011 compared with the prior year. Operating
margin declined one-tenth of a percentage point; this includes an adverse impact of 2 points due to higher commodity
costs.
Ford North America reported a pre-tax operating profit of $6.2 billion, compared with a profit of $5.4 billion a year ago.
Higher net pricing reflects the strength of our
and and products, a disciplined approach to incentive spending, and our
ongoing practice to match production to customer demand. Favorable volume and mix was more than explained by
higher U.S. industry and dealer stocks. These were offset partially by unfavorable contribution costs reflecting higher
commodity costs, higher material costs excluding commodities, and higher wa
anty and freight costs. Other costs reflect
unfavorable structural costs.
For more information visit www.annualreport.ford.com
30 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
30
Ford South America Segment. The charts below detail key metrics and the change in 2011 pre-tax operating profit
compared with 2010 by causal factor.
As shown above, full-year wholesales and revenue increased compared with a year ago, while operating margin
declined.
Ford South America reported a pre-tax operating profit of $861 million, compared with a profit of $1 billion a year ago.
The decline in earnings is more than explained by higher structural costs (driven primarily by local inflation), higher
contribution costs (more than explained by commodity costs), and unfavorable exchange, offset partially by favorable net
pricing and volume and mix.
Ford Motor Company | 2012 Annual Report 31
Management's Discussion and Analysis of Financial Condition and Results of Operations
31
Ford Europe Segment. The charts below detail key metrics and the change in 2011 pre-tax operating profit compared
with 2010 by causal factor.
As shown above, full-year wholesale volume and revenue improved in 2011 compared with the prior year. Operating
margin declined in 2011, with higher commodity costs contributing a negative 1.5 points to Europe's full-year margin.
Ford Europe reported a pre-tax operating loss of $27 million, compared with a profit of $182 million a year ago. The
decline in results is more than explained by higher commodity costs and material costs excluding commodities, as well as
unfavorable exchange. These costs were offset partially by higher net pricing and favorable volume and mix. Other
eflects our continued investment in the Craiova facility in Romania in preparation for the production volume ramp-up in
2012, as well as lower parts and accessories profits.
For more information visit www.annualreport.ford.com
32 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
32
Ford Asia Pacific Africa Segment. The charts below detail key metrics and the change in 2011 pre-tax operating profit
compared with 2010 by causal factor.
As shown above, wholesales and revenue increased compared with a year ago, while operating margin declined.
Ford Asia Pacific Africa reported a pre-tax operating loss of $92 million, compared with a profit of $189 million a year
ago. The decline in results reflects higher costs (primarily structural costs in support of Ford Asia Pacific Africa growth
plans), unfavorable volume and mix (which includes the impact of events in Japan and Thailand), and unfavorable
exchange, offset partially by higher net pricing.
Ford Motor Company | 2012 Annual Report 33
Management's Discussion and Analysis of Financial Condition and Results of Operations
33
FINANCIAL SERVICES SECTOR
2012 Compared with 2011
As shown in the total Company discussion above, we present our Financial Services sector results in two segments,
Ford Credit and Other Financial Services. Ford Credit, in turn, has two segments, North America and International.
Ford Credit. The chart below details the change in 2012 pre-tax profit compared with 2011 by causal factor:
The decline in pre-tax profits is more than explained by fewer leases being terminated, which resulted in fewer
vehicles sold at a gain and lower financing margin, as higher yielding assets originated in prior years run off.
Results of Ford Credit's operations and unallocated risk management for the years ended December 31 are shown
elow (in millions):
Income before income taxes 2012 2011
2012
Ove
(Under)
2011
North America segment $ 1,550 $ 2,159 $ (609)
International segment 249 371 (122)
Unallocated risk management (a) (102) (126) 24
Income before income taxes $ 1,697 $ 2,404 $ (707)
__________
(a) Consists of gains and losses related to market valuation adjustments to derivatives primarily related to movements in interest rates.
The full-year decrease in Ford Credit's North America segment pre-tax earnings is more than explained by fewer
lease terminations, which resulted in fewer vehicles sold at a gain, and lower financing margin as higher yielding assets
originated in prior years run off. The full-year decrease in its International segment pre-tax results is more than explained
y the non-recu
ence of 2011 foreign cu
ency translation adjustments related to the discontinuation of financing in
Australia, lower volume, and unfavorable lease residual performance, offset partially by higher financing margin.
For more information visit www.annualreport.ford.com
34 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
34
Ford Credit's receivables, including finance receivables and operating leases at December 31 were as follows (in
illions):
2012 2011 2010
Receivables
Finance receivables - North America segment
Consumer
Retail installment and direct financing leases $ 39.5 $ 38.4 $ 39.1
Non-Consumer
Wholesale 18.1 15.5 13.3
Dealer loan 1.4 1.1 1.1
Other 1.1 1.0 0.8
Total North America segment - finance receivables (a) 60.1 56.0 54.3
Finance receivables - International segment
Consume
Retail installment and direct financing leases 9.0 9.1 10.6
Non-Consume
Wholesale 7.4 8.5 8.7
Dealer loan 0.1 — —
Other 0.4 0.4 0.4
Total International segment - finance receivables (a) 16.9 18.0 19.7
Unearned interest supplements (1.5) (1.6) (1.9)
Allowance for credit losses (0.4) (0.5) (0.8)
Finance receivables, net 75.1 71.9 71.3
Net investment in operating leases (a) 14.7 11.1 10.0
Total receivables (b) $ 89.8 $ 83.0 $ 81.3
Memo:
Total managed receivables (c) $ 91.3 $ 84.6 $ 83.2
__________
(a) At December 31, 2012, 2011 and 2010, includes consumer receivables before allowance for credit losses of $29.3 billion, $36 billion, and
$35.8 billion, respectively, and non-consumer receivables before allowance for credit losses of $21.6 billion, $19.8 billion, and $18.7 billion,
espectively, that have been sold for legal purposes in securitization transactions but continue to be reported in Ford Credit's consolidated financial
statements. In addition, at December 31, 2012, 2011, and 2010, includes net investment in operating leases before allowance for credit losses of
$6.3 billion, $6.4 billion, and $6.2 billion, respectively, that have been included in securitization transactions but continue to be reported in Ford
Credit's financial statements. The receivables are available only for payment of the debt and other obligations issued or arising in the securitization
transactions; they are not available to pay Ford Credit's other obligations or the claims of its other creditors. Ford Credit holds the right to the
excess cash flows not needed to pay the debt and other obligations issued or arising in each of these securitization transactions. See Note 17 of
the Notes to the Financial Statements for more information regarding securitization transactions.
(b) Includes allowance for credit losses of $408 million, $534 million, and $854 million at December 31, 2012, 2011 and 2010, respectively.
(c) Excludes unearned interest supplements related to finance receivables.
Receivables at December 31, 2012 increased from year-end 2011, primarily driven by increases in wholesale
eceivables and net investment in operating leases.
Ford Motor Company | 2012 Annual Report 35
Management's Discussion and Analysis of Financial Condition and Results of Operations
35
Credit Losses. The charts below detail (i) annual trends of charge-offs (credit losses, net of recoveries), (ii) loss-to-
eceivables ("LTR") ratios (charge-offs divided by the average amount of receivables outstanding for the period, excluding
the allowance for credit losses (also refe
ed to as credit loss reserves) and unearned interest supplements related to
finance receivables), (iii) credit loss reserves, and (iv) Ford Credit's credit loss reserves as a percentage of end-of-period
("EOP") receivables:
Ford Credit's charge-offs are down from 2011, primarily reflecting lower repossessions in the United States and lower
losses in all international regions, offset partially by lower recoveries in the United States. The LTR ratio is about one-third
lower than in 2011, and is the lowest since Ford Credit started tracking LTRs more than thirty years ago.
Reserves and reserves as a percent of EOP receivables are both lower than a year ago reflecting the decrease in
charge-offs. The allowance for credit losses is estimated using a combination of models and management judgment, and
is based on such factors as portfolio quality, historical loss performance, and receivable levels.
In purchasing retail finance and lease contracts, Ford Credit uses a proprietary scoring system that classifies contracts
using several factors, such as credit bureau information, credit bureau scores (e.g., FICO score), and contract
characteristics. In addition to Ford Credit's proprietary scoring system, it considers other factors, such as employment
history, financial stability, and capacity to pay. At December 31, 2012 and 2011, Ford Credit classified between 5% - 6%
of the outstanding U.S. retail finance and lease contracts in its portfolio as high risk at contract inception. For additional
discussion, see "Critical Accounting Estimates - Allowance for Credit Losses" below.
Residual Risk. Ford Credit is exposed to residual risk on operating leases and similar balloon payment products where
the customer may return the financed vehicle to Ford Credit. Residual risk is the possibility that the amount Ford Credit
obtains from returned vehicles will be less than its estimate of the expected residual value for the vehicle. Ford Credit
estimates the expected residual value by evaluating recent auction values, return volumes for its leased vehicles,
industry-wide used vehicle prices, marketing incentive plans, and vehicle quality data. For additional discussion, see
"Critical Accounting Estimates - Accumulated Depreciation on Vehicles Subject to Operating Leases" below.
North America Retail Operating Lease Experience
Ford Credit uses various statistics to monitor its residual risk:
• Placement volume measures the number of leases Ford Credit purchases in a given period;
• Termination volume measures the number of vehicles for which the lease has ended in the given period; and
• Return volume reflects the number of vehicles returned to Ford Credit by customers at lease-end.
For more information visit www.annualreport.ford.com
36 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
36
Ford Credit's North America segment accounted for 98% of its total operating leases at December 31, 2012. The
following table shows operating lease placement, termination, and return volumes for this segment for the years ending
December 31 (in thousands, except for percentages):
2012 2011 2010
Placements 257 219 120
Terminations 126 246 408
Returns 76 144 281
Memo:
Return Rates 60% 59% 69%
In 2012, placement volumes were up 38,000 units compared with 2011, primarily reflecting higher industry sales.
Termination volumes decreased by 120,000 units compared with last year, reflecting lower placement volumes in 2009.
Return volumes decreased 68,000 units compared with last year, primarily reflecting lower terminations.
U.S. Ford and Lincoln Brand Operating Lease Experience. The following chart shows annual return volumes and
auction values at incu
ed vehicle mix for vehicles returned in the respective periods. In 2012, Ford Credit's U.S. lease
originations represented about 15% of total U.S. retail sales of Ford and Lincoln
and vehicles, and the U.S. operating
lease portfolio accounted for about 89% of Ford Credit's total investment in operating leases at December 31, 2012.
Ford Credit's lease return volumes in 2012 were about 30% lower than 2011, reflecting primarily the lower lease
placements in 2009. Its 2012 lease return rate was 62%, up 6 percentage points compared with 2011, reflecting a higher
mix of 24 month contracts.
In 2012, Ford Credit's auction values for vehicles subject to 36-month leases continued to increase, up $995 per unit
from 2011. The increase primarily reflects vehicles with higher content, including a higher mix of Lincolns.
Ford Credit's worldwide net investment in operating leases was $14.7 billion at the end of 2012, up from $11.1 billion
in 2011.
Ford Motor Company | 2012 Annual Report 37
Management's Discussion and Analysis of Financial Condition and Results of Operations
37
2011 Compared with 2010
The chart below details the change in 2011 pre-tax profit compared with 2010 by causal factor.
The decline in Ford Credit's pre-tax profit reflects fewer leases being terminated and the related vehicles sold at a
gain, and lower credit loss reserve reductions.
LIQUIDITY AND CAPITAL RESOURCES
Automotive Secto
Our Automotive liquidity strategy includes ensuring that we have sufficient liquidity available with a high degree of
certainty throughout the business cycle by generating cash from operations and maintaining access to other sources of
funding. For a discussion of risks to our liquidity, see "Item 1A. Risk Factors," of our Annual Report on Form 10-K for year
ended December 31, 2012, as well as Note 31 of the Notes to the Financial Statements regarding commitments and
contingencies that could impact our liquidity.
Gross Cash. Automotive gross cash includes cash and cash equivalents and marketable securities, net of any
securities-in-transit. Gross cash at December 31 was as follows (in billions):
2012 2011 2010
Cash and cash equivalents $ 6.2 $ 7.9 $ 6.3
Marketable securities 18.2 15.0 14.2
Total cash, marketable securities and loaned securities 24.4 22.9 20.5
Securities-in-transit (a) (0.1) — —
Gross cash $ 24.3 $ 22.9 $ 20.5
__________
(a) The purchase or sale of marketable securities for which the cash settlement was not made by period-end and for which there was a payable or
eceivable recorded on the balance sheet at period-end.
Our cash, cash equivalents, and marketable securities are held primarily in highly liquid investments, which provide
for anticipated and unanticipated cash needs. Our cash, cash equivalents, and marketable securities primarily include
U.S. Department of Treasury obligations, federal agency securities, bank time deposits with investment-grade institutions,
corporate investment-grade securities, commercial paper rated A-1/P-1 or higher, and debt obligations of a select group of
non-U.S. governments, non-U.S. governmental agencies, and supranational institutions. The average maturity of these
investments ranges from 90 days to up to one year, and is adjusted based on market conditions and liquidity needs. We
monitor our cash levels and average maturity on a daily basis. Within our Automotive gross cash portfolio, we cu
ently do
not hold investments in government obligations of Greece, Ireland, Italy, Portugal, or Spain, nor did we hold any at
December 31, 2012.
In managing our business, we classify changes in Automotive gross cash into operating-related and other items
(which includes the impact of certain special items, contributions to funded pension plans, certain tax-related transactions,
Management's Discussion and Analysis of Financial Condition and Results of Operations
37
2011 Compared with 2010
The chart below details the change in 2011 pre-tax profit compared with 2010 by causal factor.
The decline in Ford Credit's pre-tax profit reflects fewer leases being terminated and the related vehicles sold at a
gain, and lower credit loss reserve reductions.
LIQUIDITY AND CAPITAL RESOURCES
Automotive Secto
Our Automotive liquidity strategy includes ensuring that we have sufficient liquidity available with a high degree of
certainty throughout the business cycle by generating cash from operations and maintaining access to other sources of
funding. For a discussion of risks to our liquidity, see "Item 1A. Risk Factors," of our Annual Report on Form 10-K for year
ended December 31, 2012, as well as Note 31 of the Notes to the Financial Statements regarding commitments and
contingencies that could impact our liquidity.
Gross Cash. Automotive gross cash includes cash and cash equivalents and marketable securities, net of any
securities-in-transit. Gross cash at December 31 was as follows (in billions):
2012 2011 2010
Cash and cash equivalents $ 6.2 $ 7.9 $ 6.3
Marketable securities 18.2 15.0 14.2
Total cash, marketable securities and loaned securities 24.4 22.9 20.5
Securities-in-transit (a) (0.1) — —
Gross cash $ 24.3 $ 22.9 $ 20.5
__________
(a) The purchase or sale of marketable securities for which the cash settlement was not made by period-end and for which there was a payable or
eceivable recorded on the balance sheet at period-end.
Our cash, cash equivalents, and marketable securities are held primarily in highly liquid investments, which provide
for anticipated and unanticipated cash needs. Our cash, cash equivalents, and marketable securities primarily include
U.S. Department of Treasury obligations, federal agency securities, bank time deposits with investment-grade institutions,
corporate investment-grade securities, commercial paper rated A-1/P-1 or higher, and debt obligations of a select group of
non-U.S. governments, non-U.S. governmental agencies, and supranational institutions. The average maturity of these
investments ranges from 90 days to up to one year, and is adjusted based on market conditions and liquidity needs. We
monitor our cash levels and average maturity on a daily basis. Within our Automotive gross cash portfolio, we cu
ently do
not hold investments in government obligations of Greece, Ireland, Italy, Portugal, or Spain, nor did we hold any at
December 31, 2012.
In managing our business, we classify changes in Automotive gross cash into operating-related and other items
(which includes the impact of certain special items, contributions to funded pension plans, certain tax-related transactions,
For more information visit www.annualreport.ford.com
38 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
38
acquisitions and divestitures, capital transactions with the Financial Services sector, dividends paid to shareholders, and
other -- primarily financing-related). Our key liquidity metrics are operating-related cash flow (which best represents the
ability of our Automotive operations to generate cash), Automotive gross cash, and Automotive liquidity. Automotive gross
cash and liquidity as of the dates shown were as follows (in billions):
December 31,
2012
December 31,
2011
Gross cash $ 24.3 $ 22.9
Available credit lines
Revolving credit facility, unutilized portion 9.5 8.8
Local lines available to foreign affiliates, unutilized portion 0.7 0.7
Automotive liquidity $ 34.5 $ 32.4
We believe the cash flow analysis reflected in the table below is useful to investors because it includes in operating-
elated cash flow elements that we consider to be related to our Automotive operating activities (e.g., capital spending)
and excludes cash flow elements that we do not consider to be related to the ability of our operations to generate cash.
This differs from a GAAP cash flow statement and differs from Net cash provided by/(used in) operating activities, the
most directly comparable GAAP financial measure.
Changes in Automotive gross cash are summarized below (in billions):
2012 2011 2010
Gross cash at end of period $ 24.3 $ 22.9 $ 20.5
Gross cash at beginning of period 22.9 20.5 24.9
Total change in gross cash $ 1.4 $ 2.4 $ (4.4)
Automotive income before income taxes (excluding special items) $ 6.3 $ 6.3 $ 5.3
Capital expenditures (5.5) (4.3) (3.9)
Depreciation and special tools amortization 3.7 3.6 3.8
Changes in working capital (a) (2.3) 0.3 (0.1)
Othe
Timing differences (b) 1.2 (0.3) (0.7)
Total operating-related cash flows 3.4 5.6 4.4
Cash impact of personnel-reduction programs accrual (0.4) (0.3) (0.2)
Net receipts from Financial Services sector (c) 0.7 4.2 2.7
Other (d) 1.1 (0.2) (0.8)
Cash flow before other actions 4.8 9.3 6.1
Net proceeds from/(Payments on) Automotive sector debt 0.9 (6.0) (12.1)
Contributions to funded pension plans (3.4) (1.1) (1.0)
Dividends/Other (0.9) 0.2 2.6
Total change in gross cash $ 1.4 $ 2.4 $ (4.4)
_________
(a) Working capital comprised of changes in receivables, inventory, and trade payables.
(b) Primarily expense and payment timing differences for items such as pension and OPEB, compensation, marketing, and wa
anty, as well as
additional factors, such as the impact of tax payments.
(c) Primarily distributions and tax payments received from Ford Credit.
(d) 2012 includes cash and marketable securities resulting from the consolidation of AAI.
With respect to "Changes in working capital," in general we ca
y relatively low trade receivables compared to our
trade payables because the majority of our Automotive wholesales are financed (primarily by Ford Credit) immediately
upon sale of vehicles to dealers, which generally occurs at the time the vehicles are gate-released shortly after being
produced. In addition, our inventories are lean because we build to order, not for inventory. In contrast, our Automotive
trade payables are based primarily on industry-standard production supplier payment terms generally ranging between
30 days to 45 days. As a result, our cash flow tends to improve as wholesale volumes increase, but can deteriorate
significantly when wholesale volumes drop sharply. In addition, these working capital balances generally are subject to
seasonal changes that can impact cash flow. For example, we typically experience cash flow timing differences
associated with inventories and payables due to our annual summer and December shutdown periods, when production,
and therefore inventories and wholesale volumes, are usually at their lowest levels, while payables continue to come due
and be paid. The net impact of this typically results in cash outflows from changes in our working capital balances during
these shutdown periods.
Ford Motor Company | 2012 Annual Report 39
Management's Discussion and Analysis of Financial Condition and Results of Operations
39
Shown below is a reconciliation between financial statement Net cash provided by/(used in) operating activities and
operating-related cash flows (calculated as shown in the table above), as of the dates shown (in billions):
2012 2011 2010
Net cash provided by/(used in) by operating activities $ 6.3 $ 9.4 $ 6.4
Items included in operating-related cash flows
Capital expenditures (5.5) (4.3) (3.9)
Proceeds from the exercise of stock options — 0.1 0.3
Net cash flows from non-designated derivatives (0.8) 0.1 (0.2)
Items not included in operating-related cash flows
Cash impact of Job Security Benefits and personnel-reduction actions 0.4 0.3 0.2
Contributions to funded pension plans 3.4 1.1 1.0
Tax refunds, tax payments, and tax receipts from affiliates (0.1) (1.4) (0.2)
Settlement of outstanding obligation with affiliates (0.3) — —
Other — 0.3 0.8
Operating-related cash flows $ 3.4 $ 5.6 $ 4.4
Credit Agreement. Lenders under our Credit Agreement have commitments totaling $9.3 billion in a revolving credit
facility that will mature on November 30, 2015, and commitments totaling an additional $307 million in a revolving credit
facility that will mature on November 30, 2013. Our Credit Agreement is free of material adverse change clauses,
estrictive financial covenants (for example, debt-to-equity limitations and minimum net worth requirements) and credit
ating triggers that could limit our ability to obtain funding. The Credit Agreement contains a liquidity covenant that
equires us to maintain a minimum of $4 billion in the aggregate of domestic cash, cash equivalents, and loaned and
marketable securities and/or availability under the revolving credit facilities. On May 22, 2012, the collateral securing our
Credit Agreement was automatically released upon our senior, unsecured, long-term debt being upgraded to investment
grade by Fitch and Moody's. If our senior, unsecured, long-term debt does not maintain at least two investment grade
atings, the guarantees of certain subsidiaries will be reinstated.
At December 31, 2012, the utilized portion of the revolving credit facilities was $93 million, representing amounts
utilized as letters of credit. Less than 1% of the commitments in the revolving credit facilities are from financial institutions
that are based in Greece, Ireland, Italy, Portugal, and Spain.
U.S. Department of Energy ("DOE") Advanced Technology Vehicle Manufacturer ("ATVM") Incentive Program. In
September 2009, we entered into a Loan A
angement and Reimbursement Agreement ("A
angement Agreement") with
the DOE, pursuant to which the DOE agreed to (i) a
ange a 13-year multi-draw term loan facility (the "Facility") under the
ATVM Program in the aggregate principal amount of up to $5.9 billion, (ii) designate us as a bo
ower under the ATVM
Program and (iii) cause the Federal Financing Bank to enter into a Note Purchase Agreement for the purchase of notes to
e issued by us evidencing such loans. In August 2012, the Facility was fully drawn with $5.9 billion outstanding. We
egan repayment in September 2012 and at December 31, 2012, an aggregate of $5.6 billion was outstanding. The
proceeds of the ATVM loan have been used to finance certain costs for fuel-efficient, advanced-technology vehicles. The
principal amount of the ATVM loan bears interest at a blended rate based on the U.S. Treasury yield curve at the time
each draw was made (with the weighted-average interest rate on all such draws being about 2.3% per annum). The
ATVM loan is repayable in equal quarterly installments of $148 million, which began in September 2012 and will end in
June 2022.
European Investment Bank ("EIB") Credit Facility. On July 12, 2010, Ford Motor Company Limited, our operating
subsidiary in the United Kingdom ("Ford of Britain"), entered into a credit facility for an aggregate amount of £450 million
(equivalent to $729 million at December 31, 2012) with the EIB. Proceeds of loans drawn under the facility are being
used to fund costs for the research and development of fuel-efficient engines and commercial vehicles with lower
emissions, and related upgrades to an engine manufacturing plant. The facility was fully drawn in the third quarter of
2010, and Ford of Britain had outstanding $729 million of loans at December 31, 2012. The loans are five-year, non-
amortizing loans secured by a guarantee from the U.K. government for 80% of the outstanding principal amount and cash
collateral from Ford of Britain equal to approximately 20% of the outstanding principal amount, and bear interest at a fixed
ate of 3.9% per annum excluding a commitment fee of 0.30% to the U.K. government. Ford of Britain has pledged
substantially all of its fixed assets, receivables and inventory to the U.K. government as collateral, and we have
guaranteed Ford of Britain's obligations to the U.K. government related to the government's guarantee.
For more information visit www.annualreport.ford.com
40 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
40
Export-Import Bank of the United States ("Ex-Im") and Private Export Funding Corporation ("PEFCO") Secured
Revolving Loan. At December 31, 2012, this working capital facility, which supports vehicle exports from the United
States, was fully drawn at $300 million. The facility will renew annually until June 15, 2015, provided that no payment or
ankruptcy default exists and Ex-Im continues to have a perfected security interest in the collateral, which consists of
vehicles in transit in the United States to be exported to Canada, Mexico, and other select markets.
Other Automotive Credit Facilities. At December 31, 2012, we had $901 million of local credit facilities available to
non-U.S. Automotive affiliates, of which $140 million had been utilized. Of the $901 million of committed credit facilities,
$345 million expires in 2013, $196 million expires in 2014, $318 million expires in 2015, and $42 million thereafter.
Net Cash. Our Automotive sector net cash calculation as of the dates shown was as follows (in billions):
December 31,
2012
December 31,
2011
Gross cash $ 24.3 $ 22.9
Less:
Long-term debt 12.9 12.1
Debt payable within one year 1.4 1.0
Total debt 14.3 13.1
Net cash $ 10.0 $ 9.8
Total debt at December 31, 2012 increased by about $1.2 billion from December 31, 2011, primarily reflecting the
additional drawdowns of low-cost loans for advanced technology vehicle development and our renminbi-denominated
debt issuance in Hong Kong.
Not shown in the table above is the $2 billion aggregate principal amount of 4.75% Notes due January 15, 2043 we
issued in January 2013. With this issuance we took advantage of favorable market conditions to issue low-cost, long-term
debt, the proceeds of which have been used, in part, to redeem approximately $600 million principal amount of 7.50%
Notes due June 10, 2043, with the remainder to be contributed to our funded pension plans during 2013 to support our
pension de-risking actions (discussed below). This action is consistent with our mid-decade target of Automotive debt
levels at about $10 billion.
Pension Plan Contributions and Strategy. Worldwide, our defined benefit pension plans were underfunded by
$18.7 billion at December 31, 2012, compared with being underfunded by $15.4 billion at December 31, 2011. The
deterioration is more than explained by sharply lower discount rates, with the U.S. weighted-average discount rate
declining to 3.84% at the end of 2012 from 4.64% at the end of 2011.
Our long-term strategy is to reduce the risk of our funded defined benefit pension plans, including minimizing the
volatility of the value of our pension assets relative to pension liabilities and the need for unplanned use of capital
esources to fund the plans. The strategy will reduce balance sheet, cash flow, and income exposures and, in turn, reduce
our risk profile. The key elements of this strategy include:
• Limiting liability growth in our defined benefit plans by closing participation to new participants;
• Reducing plan deficits through discretionary cash contributions;
• Progressively re-balancing assets to more fixed income investments, with a target asset allocation to be reached
over the next several years of about 80% fixed income investments and 20% growth assets, which will provide a
etter matching of plan assets to the characteristics of the liabilities, thereby reducing our net exposure; and
• Taking other strategic actions to reduce pension liabilities, such as the voluntary lump sum payout program
started in 2012 for U.S. salaried retirees.
In 2012, we contributed $3.4 billion to our worldwide funded pension plans, an increase of $2.3 billion compared with
2011. During 2013, we expect to contribute from Automotive cash and cash equivalents about $5 billion to our worldwide
funded plans (including discretionary contributions of about $3.4 billion, largely to our U.S. plans) and to make
$400 million of benefit payments to participants in unfunded plans, for a total of about $5.4 billion.
The voluntary lump sum payout program we started in 2012 will continue through 2013. To date, eligible retirees have
accepted lump sum offers that have resulted in about $1.2 billion of our pension obligations being settled.
Based on cu
ent assumptions and regulations, we do not expect to have a legal requirement to fund our major
U.S. pension plans in 2013.
Management's Discussion and Analysis of Financial Condition and Results of Operations
40
Export-Import Bank of the United States ("Ex-Im") and Private Export Funding Corporation ("PEFCO") Secured
Revolving Loan. At December 31, 2012, this working capital facility, which supports vehicle exports from the United
States, was fully drawn at $300 million. The facility will renew annually until June 15, 2015, provided that no payment or
ankruptcy default exists and Ex-Im continues to have a perfected security interest in the collateral, which consists of
vehicles in transit in the United States to be exported to Canada, Mexico, and other select markets.
Other Automotive Credit Facilities. At December 31, 2012, we had $901 million of local credit facilities available to
non-U.S. Automotive affiliates, of which $140 million had been utilized. Of the $901 million of committed credit facilities,
$345 million expires in 2013, $196 million expires in 2014, $318 million expires in 2015, and $42 million thereafter.
Net Cash. Our Automotive sector net cash calculation as of the dates shown was as follows (in billions):
December 31,
2012
December 31,
2011
Gross cash $ 24.3 $ 22.9
Less:
Long-term debt 12.9 12.1
Debt payable within one year 1.4 1.0
Total debt 14.3 13.1
Net cash $ 10.0 $ 9.8
Total debt at December 31, 2012 increased by about $1.2 billion from December 31, 2011, primarily reflecting the
additional drawdowns of low-cost loans for advanced technology vehicle development and our renminbi-denominated
debt issuance in Hong Kong.
Not shown in the table above is the $2 billion aggregate principal amount of 4.75% Notes due January 15, 2043 we
issued in January 2013. With this issuance we took advantage of favorable market conditions to issue low-cost, long-term
debt, the proceeds of which have been used, in part, to redeem approximately $600 million principal amount of 7.50%
Notes due June 10, 2043, with the remainder to be contributed to our funded pension plans during 2013 to support our
pension de-risking actions (discussed below). This action is consistent with our mid-decade target of Automotive debt
levels at about $10 billion.
Pension Plan Contributions and Strategy. Worldwide, our defined benefit pension plans were underfunded by
$18.7 billion at December 31, 2012, compared with being underfunded by $15.4 billion at December 31, 2011. The
deterioration is more than explained by sharply lower discount rates, with the U.S. weighted-average discount rate
declining to 3.84% at the end of 2012 from 4.64% at the end of 2011.
Our long-term strategy is to reduce the risk of our funded defined benefit pension plans, including minimizing the
volatility of the value of our pension assets relative to pension liabilities and the need for unplanned use of capital
esources to fund the plans. The strategy will reduce balance sheet, cash flow, and income exposures and, in turn, reduce
our risk profile. The key elements of this strategy include:
• Limiting liability growth in our defined benefit plans by closing participation to new participants;
• Reducing plan deficits through discretionary cash contributions;
• Progressively re-balancing assets to more fixed income investments, with a target asset allocation to be reached
over the next several years of about 80% fixed income investments and 20% growth assets, which will provide a
etter matching of plan assets to the characteristics of the liabilities, thereby reducing our net exposure; and
• Taking other strategic actions to reduce pension liabilities, such as the voluntary lump sum payout program
started in 2012 for U.S. salaried retirees.
In 2012, we contributed $3.4 billion to our worldwide funded pension plans, an increase of $2.3 billion compared with
2011. During 2013, we expect to contribute from Automotive cash and cash equivalents about $5 billion to our worldwide
funded plans (including discretionary contributions of about $3.4 billion, largely to our U.S. plans) and to make
$400 million of benefit payments to participants in unfunded plans, for a total of about $5.4 billion.
The voluntary lump sum payout program we started in 2012 will continue through 2013. To date, eligible retirees have
accepted lump sum offers that have resulted in about $1.2 billion of our pension obligations being settled.
Based on cu
ent assumptions and regulations, we do not expect to have a legal requirement to fund our major
U.S. pension plans in 2013.
Ford Motor Company | 2012 Annual Report 41
Management's Discussion and Analysis of Financial Condition and Results of Operations
41
Based on present planning assumptions for long-term asset returns, a normalization of discount rates and planned
cash contributions, we expect our global funded pension obligations to be fully funded by mid-decade, with variability on a
plan-by-plan basis.
For a detailed discussion of our pension plans, see Note 16 of the Notes to the Financial Statements.
Liquidity Sufficiency. One of the four key priorities of our One Ford plan is to finance our plan and improve our
alance sheet, while at the same time having resources available to grow our business. The actions described above are
consistent with this priority. Based on our planning assumptions, we believe that we have sufficient liquidity and capital
esources to continue to invest in new products that customers want and value, transform and grow our business, pay our
debts and obligations as and when they come due, pay a sustainable dividend, and provide protection within an uncertain
global economic environment. We will continue to look for opportunities to strengthen our balance sheet, primarily by
working to ensure our underlying business generates positive Automotive operating-related cash flow, even as we
continue to invest in the growth of our business.
Financial Services Secto
Ford Credit
Funding Strategy. Ford Credit's funding strategy remains focused on diversification and it plans to continue
accessing a variety of markets, channels, and investors. Ford Credit completed its full-year 2012 funding plan, issuing
over $23 billion of public term funding. Ford Credit's public unsecured issuance was over $9 billion, including more
than $700 million issued under the Ford Credit U.S. Retail Notes program. Ford Credit also issued its first public
investment grade unsecured debt transaction since 2005. Additionally, Ford Credit launched an unsecured
commercial paper program in the United States, which has grown to about $1.7 billion.
Ford Credit's liquidity remains strong and it ended the year with $19.7 billion of available liquidity and $31.5 billion of
committed capacity, compared with about $17 billion and $33 billion at December 31, 2011, respectively.
Ford Credit's funding plan is subject to risks and uncertainties, many of which are beyond its control, including
disruption in the capital markets that could impact both unsecured debt and asset-backed securities issuance and the
effects of regulatory reform efforts on the financial markets. Potential impacts of industry events and regulation on
Ford Credit's ability to access debt and derivatives markets, or renew its committed liquidity programs in sufficient
amounts and at competitive rates, represents another risk to its funding plan. As a result of such events or regulation,
Ford Credit may need to reduce new originations of receivables, thereby reducing its ongoing profits and adversely
affecting its ability to support the sale of our vehicles. Ford Credit is focused on maintaining liquidity levels that meet
its business and funding requirement through economic cycles.
Funding. Ford Credit requires substantial funding in the normal course of business. Its funding requirements are
driven mainly by the need to: (i) purchase retail installment sale contracts and retail lease contracts to support the sale
of Ford products, which are influenced by Ford-sponsored special-rate financing programs that are available
exclusively through Ford Credit, (ii) provide wholesale financing and capital financing for Ford dealers, and (iii) repay
its debt obligations.
Ford Credit's funding sources include primarily securitization transactions (including other structured financings)
and unsecured debt. Ford Credit issues both short- and long-term debt that is held by both institutional and retail
investors, with long-term debt having an original maturity of more than 12 months. Ford Credit sponsors a number of
securitization programs that can be structured to provide both short- and long-term funding through institutional
investors in the United States and international capital markets.
Ford Credit obtains short-term unsecured funding from the sale of floating rate demand notes under its Ford Interest
Advantage program and by issuing unsecured commercial paper in the United States, Europe, Mexico, and other
international markets. At December 31, 2012, the principal amount outstanding of Ford Interest Advantage notes,
which may be redeemed at any time at the option of the holders thereof without restriction, was $4.9 billion. At
December 31, 2012, the principal amount outstanding of Ford Credit's unsecured commercial paper was about
$1.7 billion, which primarily represents issuance under its commercial paper program in the United States. Ford Credit
does not hold reserves specifically to fund the payment of any of its unsecured short-term funding obligations. Instead,
Ford Credit maintains multiple sources of liquidity, including cash, cash equivalents, and marketable securities
(excluding marketable securities related to insurance activities), unused committed liquidity programs, excess
securitizable assets, and committed and uncommitted credit facilities, which should be sufficient to meet Ford Credit's
unsecured short-term funding obligations.
Management's Discussion and Analysis of Financial Condition and Results of Operations
41
Based on present planning assumptions for long-term asset returns, a normalization of discount rates and planned
cash contributions, we expect our global funded pension obligations to be fully funded by mid-decade, with variability on a
plan-by-plan basis.
For a detailed discussion of our pension plans, see Note 16 of the Notes to the Financial Statements.
Liquidity Sufficiency. One of the four key priorities of our One Ford plan is to finance our plan and improve our
alance sheet, while at the same time having resources available to grow our business. The actions described above are
consistent with this priority. Based on our planning assumptions, we believe that we have sufficient liquidity and capital
esources to continue to invest in new products that customers want and value, transform and grow our business, pay our
debts and obligations as and when they come due, pay a sustainable dividend, and provide protection within an uncertain
global economic environment. We will continue to look for opportunities to strengthen our balance sheet, primarily by
working to ensure our underlying business generates positive Automotive operating-related cash flow, even as we
continue to invest in the growth of our business.
Financial Services Secto
Ford Credit
Funding Strategy. Ford Credit's funding strategy remains focused on diversification and it plans to continue
accessing a variety of markets, channels, and investors. Ford Credit completed its full-year 2012 funding plan, issuing
over $23 billion of public term funding. Ford Credit's public unsecured issuance was over $9 billion, including more
than $700 million issued under the Ford Credit U.S. Retail Notes program. Ford Credit also issued its first public
investment grade unsecured debt transaction since 2005. Additionally, Ford Credit launched an unsecured
commercial paper program in the United States, which has grown to about $1.7 billion.
Ford Credit's liquidity remains strong and it ended the year with $19.7 billion of available liquidity and $31.5 billion of
committed capacity, compared with about $17 billion and $33 billion at December 31, 2011, respectively.
Ford Credit's funding plan is subject to risks and uncertainties, many of which are beyond its control, including
disruption in the capital markets that could impact both unsecured debt and asset-backed securities issuance and the
effects of regulatory reform efforts on the financial markets. Potential impacts of industry events and regulation on
Ford Credit's ability to access debt and derivatives markets, or renew its committed liquidity programs in sufficient
amounts and at competitive rates, represents another risk to its funding plan. As a result of such events or regulation,
Ford Credit may need to reduce new originations of receivables, thereby reducing its ongoing profits and adversely
affecting its ability to support the sale of our vehicles. Ford Credit is focused on maintaining liquidity levels that meet
its business and funding requirement through economic cycles.
Funding. Ford Credit requires substantial funding in the normal course of business. Its funding requirements are
driven mainly by the need to: (i) purchase retail installment sale contracts and retail lease contracts to support the sale
of Ford products, which are influenced by Ford-sponsored special-rate financing programs that are available
exclusively through Ford Credit, (ii) provide wholesale financing and capital financing for Ford dealers, and (iii) repay
its debt obligations.
Ford Credit's funding sources include primarily securitization transactions (including other structured financings)
and unsecured debt. Ford Credit issues both short- and long-term debt that is held by both institutional and retail
investors, with long-term debt having an original maturity of more than 12 months. Ford Credit sponsors a number of
securitization programs that can be structured to provide both short- and long-term funding through institutional
investors in the United States and international capital markets.
Ford Credit obtains short-term unsecured funding from the sale of floating rate demand notes under its Ford Interest
Advantage program and by issuing unsecured commercial paper in the United States, Europe, Mexico, and other
international markets. At December 31, 2012, the principal amount outstanding of Ford Interest Advantage notes,
which may be redeemed at any time at the option of the holders thereof without restriction, was $4.9 billion. At
December 31, 2012, the principal amount outstanding of Ford Credit's unsecured commercial paper was about
$1.7 billion, which primarily represents issuance under its commercial paper program in the United States. Ford Credit
does not hold reserves specifically to fund the payment of any of its unsecured short-term funding obligations. Instead,
Ford Credit maintains multiple sources of liquidity, including cash, cash equivalents, and marketable securities
(excluding marketable securities related to insurance activities), unused committed liquidity programs, excess
securitizable assets, and committed and uncommitted credit facilities, which should be sufficient to meet Ford Credit's
unsecured short-term funding obligations.
For more information visit www.annualreport.ford.com
42 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
42
Funding Portfolio. The chart below details the trends in the funding of Ford Credit's managed receivables:
__________
(a) The Ford Interest Advantage program consists of Ford Credit's floating rate demand notes.
(b) Obligations issued in securitization transactions that are payable only out of collections on the underlying securitized assets and
elated enhancements.
(c) Excludes marketable securities related to insurance activities.
At year-end 2012, managed receivables were $91 billion and Ford Credit ended the year with about $11 billion in
cash. Securitized funding was 48% of managed receivables, down from 55% at year-end 2011. This reflects a greater
mix of unsecured debt given Ford Credit's improved credit spreads and the mandatory exchange of $2.5 billion of
asset-backed Ford Upgrade Exchanged Linked ("FUEL") notes for unsecured notes of Ford Credit, which was
triggered by the upgrade to investment grade of Ford Credit's long-term, unsecured debt by two credit rating agencies
during the second quarter of 2012.
Ford Credit is projecting 2013 year-end managed receivables in the range of $95 billion to $105 billion and
securitized funding is expected to represent about 42% to 47% of total managed receivables. It is Ford Credit's
expectation that the securitized funding as a percent of managed receivables will decline going forward.
Public Term Funding Plan. The following table illustrates Ford Credit's planned issuances for full-year 2013, and its
public term funding issuances in 2012, 2011, and 2010 (in billions):
Public Term Funding Plan
2013
Forecast 2012 2011 2010
Unsecured $ 7-10 $ 9 $ 8 $ 6
Securitizations (a) 10-14 14 11 11
Total $ 17-24 $ 23 $ 19 $ 17
__________
(a) Includes Rule 144A offerings.
In 2012, Ford Credit completed over $23 billion of public term funding in the United States, Canada, and Europe,
including over $9 billion of unsecured debt and $14 billion of securitizations.
For 2013, Ford Credit projects full-year public term funding in the range of $17 billion to $24 billion, consisting of
$7 billion to $10 billion of unsecured debt and $10 billion to $14 billion of public securitizations. Through
Fe
uary 18, 2013, Ford Credit completed about $4 billion of public term funding transactions in the United States,
Canada, and Europe, including about $2 billion of unsecured debt and $2 billion of securitizations.
Ford Motor Company | 2012 Annual Report 43
Management's Discussion and Analysis of Financial Condition and Results of Operations
43
Liquidity. The following table illustrates Ford Credit's liquidity programs and utilization (in billions):
December 31,
2012
December 31,
2011
December 31,
2010
Liquidity Sources (a)
Cash (b) $ 10.9 $ 12.1 $ 14.6
Unsecured credit facilities 0.9 0.7 1.1
FCAR bank lines 6.3 7.9 9.0
Conduit / Bank Asset-Backed Securitizations ("ABS") 24.3 24 24.2
Total liquidity sources $ 42.4 $ 44.7 $ 48.9
Utilization of Liquidity
Securitization cash (c) $ (3.0) $ (3.7) $ (4.2)
Unsecured credit facilities (0.1) (0.2) (0.5)
FCAR bank lines (5.8) (6.8) (6.7)
Conduit / Bank ABS (12.3) (14.5) (8.6)
Total utilization of liquidity (21.2) (25.2) (20.0)
Gross liquidity 21.2 19.5 28.9
Capacity in excess of eligible receivables (1.5) (2.4) (6.3)
Liquidity available for use $ 19.7 $ 17.1 $ 22.6
__________
(a) FCAR and conduits subject to availability of sufficient assets and ability to obtain derivatives to manage interest rate risk; FCAR commercial
paper must be supported by bank lines equal to at least 100% of the principal amount; conduits include committed securitization programs.
(b) Cash, cash equivalents, and marketable securities (excludes marketable securities related to insurance activities).
(c) Securitization cash is to be used only to support on-balance sheet securitization transactions.
At December 31, 2012, Ford Credit had $42.4 billion of committed capacity and cash diversified across a variety of
markets and platforms. The utilization of its liquidity totaled $21.2 billion at year-end, compared with $25.2 billion at
year-end 2011. The decrease of $4 billion reflects lower usage of its private conduits, FCAR outstanding commercial
paper balance, and securitized cash.
Ford Credit ended 2012 with gross liquidity of $21.2 billion. Capacity in excess of eligible receivables decreased to
$1.5 billion. This provides a funding source for future originations and flexibility to transfer capacity among markets
and asset classes where most needed. Total liquidity available for use continues to remain strong at $19.7 billion at
year-end 2012, $2.6 billion higher than year-end 2011. Ford Credit is focused on maintaining liquidity levels that meet
its business and funding requirements through economic cycles.
Cash, Cash Equivalents, and Marketable Securities. At December 31, 2012, Ford Credit's cash, cash equivalents,
and marketable securities (excluding marketable securities related to insurance activities) totaled $10.9 billion,
compared with $12.1 billion at year-end 2011. In the normal course of its funding activities, Ford Credit may generate
more proceeds than are required for its immediate funding needs. These excess amounts are maintained primarily as
highly liquid investments, which provide liquidity for its short-term funding needs and give it flexibility in the use of its
other funding programs. Ford Credit's cash, cash equivalents, and marketable securities are held primarily in highly
liquid investments, which provide for anticipated and unanticipated cash needs. Ford Credit's cash, cash equivalents,
and marketable securities (excluding marketable securities related to insurance activities) primarily include
U.S. Treasury obligations, federal agency securities, bank time deposits with investment-grade institutions and non-
U.S. central banks, corporate investment-grade securities, A-1/P-1 (or higher) rated commercial paper, debt obligations
of a select group of non-U.S. governments, non-U.S. government agencies, supranational institutions and money
market funds that ca
y the highest possible ratings. Ford Credit cu
ently does not hold cash, cash equivalents, or
marketable securities consisting of investments in government obligations of Greece, Ireland, Italy, Portugal, or Spain,
nor did it hold any at December 31, 2012. The average maturity of these investments ranges from 90 days to up to
one year, and is adjusted based on market conditions and liquidity needs. Ford Credit monitors its cash levels and
average maturity on a daily basis. Cash, cash equivalents, and marketable securities include amounts to be used only
to support Ford Credit's securitization transactions of $3.0 billion and $3.7 billion at December 31, 2012 and 2011,
espectively.
Ford Credit's substantial liquidity and cash balance have provided the opportunity to selectively call and repurchase
its unsecured and asset-backed debt through market transactions. For full-year 2012, Ford Credit repurchased and
called an aggregate principal amount of $628 million of its unsecured and asset-backed debt.
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44 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
44
Credit Facilities and Committed Liquidity Programs. See Note 17 of the Notes to the Financial Statements for more
information regarding credit facilities and committed liquidity programs for Ford Credit. While there is a risk of non-
enewal of some of Ford Credit's committed liquidity programs, which could lead to a reduction in the size of these
programs and/or higher costs, Ford Credit's capacity in excess of eligible receivables would enable it to abso
some
eductions. Ford Credit's ability to obtain funding under these programs is subject to having a sufficient amount of
assets eligible for these programs as well as its ability to obtain interest rate hedging a
angements for certain
securitization transactions.
Balance Sheet Liquidity Profile. Ford Credit defines its balance sheet liquidity profile as the cumulative maturities,
including the impact of prepayments, of its finance receivables, investment in operating leases, and cash, less the
cumulative debt maturities over upcoming annual periods. The following chart shows its cumulative maturities for the
periods presented at December 31, 2012:
__________
(a) Includes finance receivables net of unearned income, investment in operating leases net of accumulated depreciation, cash and
cash equivalents, and marketable securities (excludes marketable securities related to insurance activities).
(b) Retail and lease ABS are treated as amortizing immediately to match the underlying assets.
(c) Includes all of the wholesale ABS term and conduit maturities of $8 billion that otherwise contractually extend to 2014 and
eyond.
Ford Credit's balance sheet is inherently liquid because of the short-term nature of its finance receivables,
investment in operating leases, and cash. Maturities of investment in operating leases consist primarily of rental
payments attributable to depreciation over the remaining life of the lease and the expected residual value at lease
termination. Maturities of finance receivables and investment in operating leases in the chart above include expected
prepayments for Ford Credit's retail installment sale contracts and investment in operating leases. The 2013 finance
eceivables maturities in the chart above also include all of the wholesale receivables maturities that are otherwise
extending beyond 2013. The chart above also reflects the following adjustments to debt maturities to match all of the
asset-backed debt maturities with the underlying asset maturities:
• The 2013 maturities include all of the wholesale securitization transactions, even if the maturities extend
eyond 2013; and
• Retail securitization transactions under certain committed liquidity programs are assumed to amortize
immediately rather than amortizing after the expiration of the commitment period.
Leverage. Ford Credit uses leverage, or the debt-to-equity ratio, to make various business decisions, including
evaluating and establishing pricing for retail, wholesale, and lease financing, and assessing its capital structure. Ford
Credit refers to its shareholder's interest as equity.
Ford Motor Company | 2012 Annual Report 45
Management's Discussion and Analysis of Financial Condition and Results of Operations
45
The following table shows the calculation of Ford Credit's financial statement leverage (in billions, except for ratios):
December 31,
2012
December 31,
2011
December 31,
2010
Total debt $ 89.3 $ 84.7 $ 82.9
Equity 9.7 8.9 10.3
Financial statement leverage (to 1) 9.2 9.5 8.0
The following table shows the calculation of Ford Credit's managed leverage (in billions, except for ratios):
December 31,
2012
December 31,
2011
December 31,
2010
Total debt $ 89.3 $ 84.7 $ 82.9
Adjustments for cash, cash equivalents, and marketable securities (a) (10.9) (12.1) (14.6)
Adjustments for derivative accounting (b) (0.8) (0.7) (0.3)
Total adjusted debt $ 77.6 $ 71.9 $ 68.0
Equity $ 9.7 $ 8.9 $ 10.3
Adjustments for derivative accounting (b) (0.3) (0.2) (0.1)
Total adjusted equity $ 9.4 $ 8.7 $ 10.2
Managed leverage (to 1) (c) 8.3 8.3 6.7
__________
(a) Excludes marketable securities related to insurance activities.
(b) Primarily related to market valuation adjustments to derivatives due to movements in interest rates. Adjustments to debt are related to
designated fair value hedges and adjustments to equity are related to retained earnings.
(c) Equals total adjusted debt over total adjusted equity.
Ford Credit believes that managed leverage is useful to its investors because it reflects the way Ford Credit
manages its business. Ford Credit deducts cash and cash equivalents, and marketable securities (excluding
marketable securities related to insurance activities) because they generally co
espond to excess debt beyond the
amount required to support its operations and amounts to support on-balance sheet securitization transactions. Ford
Credit makes derivative accounting adjustments to its assets, debt, and equity positions to reflect the impact of interest
ate instruments Ford Credit uses in connection with its term-debt issuances and securitization transactions. The
derivative accounting adjustments related to these instruments vary over the term of the underlying debt and
securitized funding obligations based on changes in market interest rates. Ford Credit generally repays its debt
obligations as they mature. As a result, Ford Credit excludes the impact of these derivative accounting adjustments on
oth the numerator and denominator in order to exclude the interim effects of changes in market interest rates.
Ford Credit plans its managed leverage by considering prevailing market conditions and the risk characteristics of
its business. At December 31, 2012, Ford Credit's managed leverage was 8.3:1, unchanged from December 31, 2011.
Ford Credit's guidance for managed leverage in 2013 is to be within the range of 8:1 to 9:1. In 2012, Ford Credit paid
$600 million in distributions to its parent.
Total Company
Equity. At December 31, 2012, Total equity attributable to Ford Motor Company was $15.9 billion, an increase of
about $900 million compared with December 31, 2011. The increase is more than explained by favorable changes in
Retained earnings, related to full-year 2012 net income attributable to Ford Motor Company of $5.7 billion offset partially
y cash dividends declared of $573 million. The favorable changes in Retained earnings are offset partially by
unfavorable changes in Accumulated other comprehensive income/(loss) of $4.1 billion (more than explained by
unfavorable pension and OPEB adjustments) and treasury stock purchases of $126 million.
Credit Ratings. Our short-term and long-term debt is rated by four credit rating agencies designated as nationally
ecognized statistical rating organizations ("NRSROs") by the U.S. Securities and Exchange Commission:
• DBRS Limited ("DBRS");
• Fitch, Inc. ("Fitch");
• Moody's Investors Service, Inc. ("Moody's"); and
• Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P").
For more information visit www.annualreport.ford.com
46 Ford Motor Company | 2012 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of Operations
46
In several markets, locally-recognized rating agencies also rate us. A credit rating reflects an assessment by the
ating agency of the credit risk associated with a corporate entity or particular securities issued by that entity. Rating
agencies' ratings of us are based on information provided by us and other sources. Credit ratings are not
ecommendations to buy, sell, or hold securities, and are subject to revision or withdrawal at any time by the assigning
ating agency. Each rating agency may have different criteria for evaluating company risk and, therefore, ratings should
e evaluated independently for each rating agency. Lower credit ratings generally result in higher bo
owing costs and
educed access to capital markets.
There have been no ratings actions taken by these NRSROs since the filing of our Quarterly Report on Form 10-Q for
the quarter ended September 30, 2012.
The following chart summarizes certain of the credit ratings and outlook presently assigned by these four NRSROs:
NRSRO RATINGS
Ford Ford Credit
Issuer Default
Corporate
Issuer Rating
Long-Term
Senio
Unsecured
Outlook
Trend
Long-Term
Senio
Unsecured
Short-Term
Unsecured
Outlook
Trend
DBRS BBB (low) BBB (low) Stable BBB (low) R-3 Stable
Fitch BBB- BBB- Stable BBB- F3 Stable
Moody's N/A Baa3 Stable Baa3 P-3 Stable
S&P BB+ BB+ Positive BB+ * NR Positive
__________
* S&P assigns FCE a long-term senior unsecured rating of BBB-, maintaining a one notch differential versus Ford Credit.
OUTLOOK
Our One Ford plan - to aggressively restructure to operate profitably at cu
ent demand and changing model mix,
accelerate development of new products our customers want and value, finance our plan and improve our balance sheet,
and work together effectively as one team leveraging our global assets - continues to be the guiding strategy for our
usiness.
The following summarizes results against planning assumptions and key metrics established at the beginning of 2012:
Full-Year 2012
Full-Year 2011 Results Plan Results
Industry Volume (million units) (a)
–United States 13.0 13.5 – 14.5 14.8
–Europe (b) 15.3 14.0 – 15.0 14.0
Operational Metrics
Compared with prior full year:
–U.S. Market Share 16.5% About Equal 15.2%
–Europe Market Share (b) 8.3% About Equal 7.9%
–Quality Mixed Improve Mixed
Financial Metrics
Compared with prior full year:
–Automotive Pre-Tax Operating Profit (c) $6.3 Billion Higher $6.3 Billion
–Ford Credit Pre-Tax Operating Profit $2.4 Billion Lower $1.7 Billion
–Total Company Pre-Tax Operating Profit (c) $8.8 Billion About Equal $8 Billion
–Automotive Structural Cost Increase (d) $1.4 Billion Less than $2 Billion $1.5 Billion
–Automotive Operating Margin (c) 5.4% Improve 5.3%
Absolute amount:
–Capital Spending $4.3 Billion $5.5 Billion – $6 Billion $5.5 Billion
__________
(a) Includes medium and heavy trucks.
(b) For the 19 markets we track.
(c) Excludes special items; Automotive operating margin equal to Automotive pre-tax results excluding Other Automotive divided by Automotive revenue.
(d) Structural cost changes are measured primarily at present-year exchange, and exclude special items and discontinued operations.
Ford Motor Company | 2012 Annual Report 47
Management's Discussion and Analysis of Financial Condition and Results of Operations
47
Our projected vehicle production is as follows (in thousands):
First Quarter 2013 (a)
Planned Vehicle
Unit Production
Ove
(Under)
First Quarter 2012
Ford North America 770 93
Ford South America 115 18
Ford Europe 405 (13)
Ford Asia Pacific Africa 275 62
Total 1,565 160
__________
(a) Includes production of Ford and JMC
and vehicles to be sold by our unconsolidated affiliates.
The year-over-year increase in first quarter planned production reflects higher volumes in all regions except Europe.
Planned production is consistent with our disciplined strategy to match production to consumer demand.
We expect 2013 global economic growth to be in the range of 2% - 3%, with global industry sales in the 80 million -
85 million unit range. We expect U.S. economic growth in the range of 2% - 2.5% for the year, with industry sales
supported by replacement demand given the higher-than-normal average age of vehicles on the road. In South America,
Brazil's easing of fiscal and monetary policies, such as sales tax reductions and policy interest rate cuts to historic lows,
are setting the stage for renewed economic growth. On the other hand, economic and political uncertainty and risk are
increasing in Venezuela. In Europe, we expect weak economic...