Edgar Filing: FORD MOTOR CO

F 06.30.2014 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q



(Mark One)
R	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the quarterly period ended June 30, 2014

	or

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the transition period from __________ to __________

	Commission file number 1-3950

Ford Motor Company

(Exact name of Registrant as specified in its charter)



Delaware	38-0549190
(State of incorporation)	(I.R.S. Employer Identification No.)

One American Road, Dearborn, Michigan	48126
(Address of principal executive offices)	(Zip Code)

313-322-3000

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer R Accelerated filer o Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No R

As of July 24, 2014, Ford had outstanding 3,807,606,113 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit Index begins on page

FORD MOTOR COMPANY

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended June 30, 2014



	Table of Contents	Page
	Part I - Financial Information
Item 1	Financial Statements	1
	Consolidated Income Statement	1
	Consolidated Statement of Comprehensive Income	1
	Sector Income Statement	2
	Consolidated Balance Sheet	3
	Sector Balance Sheet	4
	Condensed Consolidated Statement of Cash Flows	5
	Condensed Sector Statement of Cash Flows	6
	Consolidated Statement of Equity	7
	Notes to the Financial Statements	8
	Report of Independent Registered Public Accounting Firm	39
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
	Results of Operations	40
	Automotive Sector	42
	Financial Services Sector	55
	Liquidity and Capital Resources	60
	Production Volumes	69
	Outlook	70
	Accounting Standards Issued But Not Yet Adopted	73
	Other Financial Information	73
Item 3	Quantitative and Qualitative Disclosures About Market Risk	73
	Automotive Sector	73
	Financial Services Sector	73
Item 4	Controls and Procedures	73

	Part II - Other Information
Item 1	Legal Proceedings	74
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	74
Item 6	Exhibits	74
	Signature	75
	Exhibit Index	76

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENT

(in millions, except per share amounts)



	For the periods ended June 30,
	2014		2013		2014		2013
	Second Quarter				First Half
	(unaudited)
Revenues
Automotive	$	35,365	$	36,079	$	69,241	$	69,937
Financial Services	2,046		1,844		4,046		3,635
Total revenues	37,411		37,923		73,287		73,572

Costs and expenses
Automotive cost of sales	31,247		32,524		62,268		62,529
Selling, administrative, and other expenses	3,476		3,203		6,848		6,327
Financial Services interest expense	683		705		1,361		1,411
Financial Services provision for credit and insurance losses	104		53		143		93
Total costs and expenses	35,510		36,485		70,620		70,360

Automotive interest expense	207		207		415		413

Automotive interest income and other income/(loss), net (Note 15)	270		241		484		486
Financial Services other income/(loss), net (Note 15)	87		74		155		170
Equity in net income of affiliated companies	67		273		486		487
Income before income taxes	2,118		1,819		3,377		3,942
Provision for/(Benefit from) income taxes (Note 17)	803		585		1,073		1,096
Net income	1,315		1,234		2,304		2,846
Less: Income/(Loss) attributable to noncontrolling interests	4		1		4		2
Net income attributable to Ford Motor Company	$	1,311	$	1,233	$	2,300	$	2,844

AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 19)
Basic income	$	0.33	$	0.31	$	0.58	$	0.72
Diluted income	0.32		0.30		0.57		0.70

Cash dividends declared	0.125		0.10		0.25		0.20

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)



	For the periods ended June 30,
	2014			2013			2014			2013
	Second Quarter						First Half
	(unaudited)
Net income	$	1,315		$	1,234		$	2,304		$	2,846
Other comprehensive income/(loss), net of tax (Note 14)
Foreign currency translation	317			(430		)	82			(796		)
Derivative instruments	(287		)	189			(195		)	286
Pension and other postretirement benefits	53			940			236			1,531
Total other comprehensive income/(loss), net of tax	83			699			123			1,021
Comprehensive income	1,398			1,933			2,427			3,867
Less: Comprehensive income/(loss) attributable to noncontrolling interests	4			1			4			2
Comprehensive income attributable to Ford Motor Company	$	1,394		$	1,932		$	2,423		$	3,865

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

SECTOR INCOME STATEMENT

(in millions)



	For the periods ended June 30,
	2014		2013		2014		2013
	Second Quarter				First Half
	(unaudited)
AUTOMOTIVE
Revenues	$	35,365	$	36,079	$	69,241	$	69,937
Costs and expenses
Cost of sales	31,247		32,524		62,268		62,529
Selling, administrative, and other expenses	2,551		2,488		5,027		4,969
Total costs and expenses	33,798		35,012		67,295		67,498

Interest expense	207		207		415		413

Interest income and other income/(loss), net (Note 15)	270		241		484		486
Equity in net income of affiliated companies	59		267		471		476
Income before income taxes — Automotive	1,689		1,368		2,486		2,988

FINANCIAL SERVICES
Revenues	2,046		1,844		4,046		3,635
Costs and expenses
Interest expense	683		705		1,361		1,411
Depreciation on vehicles subject to operating leases	742		558		1,448		1,041
Operating and other expenses	183		157		373		317
Provision for credit and insurance losses	104		53		143		93
Total costs and expenses	1,712		1,473		3,325		2,862

Other income/(loss), net (Note 15)	87		74		155		170
Equity in net income of affiliated companies	8		6		15		11
Income before income taxes — Financial Services	429		451		891		954

COMPANY
Income before income taxes	2,118		1,819		3,377		3,942
Provision for/(Benefit from) income taxes (Note 17)	803		585		1,073		1,096
Net income	1,315		1,234		2,304		2,846
Less: Income/(Loss) attributable to noncontrolling interests	4		1		4		2
Net income attributable to Ford Motor Company	$	1,311	$	1,233	$	2,300	$	2,844

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)



	June 30, 2014			December 31, 2013
	(unaudited)
ASSETS
Cash and cash equivalents	$	11,573		$	14,468
Marketable securities	24,096			22,100
Finance receivables, net (Note 4)	80,026			77,481
Other receivables, net	12,853			9,828
Net investment in operating leases	22,069			19,984
Inventories (Note 6)	9,365			7,708
Equity in net assets of affiliated companies	3,356			3,679
Net property	29,294			27,616
Deferred income taxes	12,596			13,468
Other assets	5,717			5,847
Total assets	$	210,945		$	202,179

LIABILITIES
Payables	$	22,062		$	19,531
Other liabilities and deferred revenue (Note 9)	42,444			40,886
Debt (Note 11)	118,707			114,688
Deferred income taxes	588			598
Total liabilities	183,801			175,703

Redeemable noncontrolling interest (Note 13)	337			331

EQUITY
Capital stock
Common Stock, par value $.01 per share (3,927 million shares issued of 6 billion authorized)	39			39
Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized)	1			1
Capital in excess of par value of stock	21,605			21,422
Retained earnings	24,699			23,386
Accumulated other comprehensive income/(loss) (Note 14)	(18,107		)	(18,230		)
Treasury stock (Note 19)	(1,461		)	(506		)
Total equity attributable to Ford Motor Company	26,776			26,112
Equity attributable to noncontrolling interests	31			33
Total equity	26,807			26,145
Total liabilities and equity	$	210,945		$	202,179

The following table includes assets to be used to settle liabilities of the consolidated variable interest entities (“VIEs”). These assets and liabilities are included in the consolidated balance sheet above. See Note 7 for additional information on our VIEs.



	June 30, 2014		December 31, 2013
	(unaudited)
ASSETS
Cash and cash equivalents	$	2,186	$	4,198
Finance receivables, net	43,085		45,796
Net investment in operating leases	9,012		8,116
Other assets	3		5
LIABILITIES
Other liabilities and deferred revenue	$	40	$	88
Debt	38,322		40,728

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

SECTOR BALANCE SHEET (in millions)



	June 30, 2014			December 31, 2013
ASSETS	(unaudited)
Automotive
Cash and cash equivalents	$	4,736		$	4,959
Marketable securities	21,076			20,157
Total cash and marketable securities	25,812			25,116
Receivables, less allowances of $137 and $132	6,052			5,641
Inventories (Note 6)	9,365			7,708
Deferred income taxes	1,569			1,574
Net investment in operating leases	2,030			1,384
Other current assets	1,169			1,034
Total current assets	45,997			42,457
Equity in net assets of affiliated companies	3,217			3,546
Net property	29,023			27,492
Deferred income taxes	12,928			13,436
Other assets	2,686			2,824
Non-current receivable from Financial Services	706			724
Total Automotive assets	94,557			90,479
Financial Services
Cash and cash equivalents	6,837			9,509
Marketable securities	3,020			1,943
Finance receivables, net (Note 4)	86,015			80,816
Net investment in operating leases	20,039			18,600
Equity in net assets of affiliated companies	139			133
Other assets	3,131			3,149
Receivable from Automotive	457			907
Total Financial Services assets	119,638			115,057
Intersector elimination	(1,163		)	(1,631		)
Total assets	$	213,032		$	203,905
LIABILITIES
Automotive
Payables	$	20,866		$	18,035
Other liabilities and deferred revenue (Note 9)	18,885			16,537
Deferred income taxes	355			267
Debt payable within one year (Note 11)	2,161			1,257
Current payable to Financial Services	457			907
Total current liabilities	42,724			37,003
Long-term debt (Note 11)	13,216			14,426
Other liabilities and deferred revenue (Note 9)	21,514			22,089
Deferred income taxes	456			430
Total Automotive liabilities	77,910			73,948
Financial Services
Payables	1,196			1,496
Debt (Note 11)	103,330			99,005
Deferred income taxes	1,864			1,627
Other liabilities and deferred income (Note 9)	2,045			2,260
Payable to Automotive	706			724
Total Financial Services liabilities	109,141			105,112
Intersector elimination	(1,163		)	(1,631		)
Total liabilities	185,888			177,429

Redeemable noncontrolling interest (Note 13)	337			331

EQUITY
Capital stock
Common Stock, par value $.01 per share (3,927 million shares issued of 6 billion authorized)	39			39
Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized)	1			1
Capital in excess of par value of stock	21,605			21,422
Retained earnings	24,699			23,386
Accumulated other comprehensive income/(loss) (Note 14)	(18,107		)	(18,230		)
Treasury stock (Note 19)	(1,461		)	(506		)
Total equity attributable to Ford Motor Company	26,776			26,112
Equity attributable to noncontrolling interests	31			33
Total equity	26,807			26,145
Total liabilities and equity	$	213,032		$	203,905

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)



	For the periods ended June 30,
	2014			2013
	First Half
	(unaudited)
Cash flows from operating activities of continuing operations
Net cash provided by/(used in) operating activities	$	6,970		$	6,289

Cash flows from investing activities of continuing operations
Capital spending	(3,428		)	(3,077		)
Acquisitions of finance receivables and operating leases	(24,616		)	(21,835		)
Collections of finance receivables and operating leases	18,277			16,665
Purchases of securities	(26,468		)	(69,773		)
Sales and maturities of securities	24,397			66,727
Cash change due to initial consolidation of businesses	—			9
Settlements of derivatives	29			(125		)
Proceeds from sales of retail finance receivables (Note 18)	—			250
Other	124			96
Net cash provided by/(used in) investing activities	(11,685		)	(11,063		)

Cash flows from financing activities of continuing operations
Cash dividends	(987		)	(785		)
Purchases of Common Stock	(862		)	(87		)
Changes in short-term debt	(3,188		)	(4,188		)
Proceeds from issuance of other debt	22,755			20,297
Principal payments on other debt	(15,925		)	(12,712		)
Other	9			150
Net cash provided by/(used in) financing activities	1,802			2,675

Effect of exchange rate changes on cash and cash equivalents	18			(198		)

Net increase/(decrease) in cash and cash equivalents	$	(2,895	)	$	(2,297	)

Cash and cash equivalents at January 1	$	14,468		$	15,659
Net increase/(decrease) in cash and cash equivalents	(2,895		)	(2,297		)
Cash and cash equivalents at June 30	$	11,573		$	13,362

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONDENSED SECTOR STATEMENT OF CASH FLOWS

(in millions)



	For the periods ended June 30,
	2014						2013
	First Half
	Automotive			Financial Services			Automotive			Financial Services
	(Unaudited)
Cash flows from operating activities of continuing operations
Net cash provided by/(used in) operating activities	$	6,108		$	2,553		$	4,404		$	2,349

Cash flows from investing activities of continuing operations
Capital spending	(3,402		)	(26		)	(3,058		)	(19		)
Acquisitions of finance receivables and operating leases (excluding wholesale and other)	—			(23,051		)	—			(20,713		)
Collections of finance receivables and operating leases (excluding wholesale and other)	—			18,277			—			16,665
Net change in wholesale and other receivables	—			(3,256		)	—			(1,586		)
Purchases of securities	(19,465		)	(7,003		)	(52,384		)	(17,389		)
Sales and maturities of securities	18,499			5,898			50,341			16,386
Cash change due to initial consolidation of businesses	—			—			9			—
Settlements of derivatives	91			(62		)	(236		)	111
Proceeds from sales of retail finance receivables (Note 18)	—			—			—			250
Investing activity (to)/from Financial Services	21			—			16			—
Other	40			84			95			1
Net cash provided by/(used in) investing activities	(4,216		)	(9,139		)	(5,217		)	(6,294		)

Cash flows from financing activities of continuing operations
Cash dividends	(987		)	—			(785		)	—
Purchases of Common Stock	(862		)	—			(87		)	—
Changes in short-term debt	192			(3,380		)	(232		)	(3,956		)
Proceeds from issuance of other debt	100			22,655			2,139			18,158
Principal payments on other debt	(656		)	(15,269		)	(1,026		)	(11,686		)
Financing activity to/(from) Automotive	—			(21		)	—			(16		)
Other	75			(66		)	127			23
Net cash provided by/(used in) financing activities	(2,138		)	3,919			136			2,523

Effect of exchange rate changes on cash and cash equivalents	23			(5		)	(95		)	(103		)

Net increase/(decrease) in cash and cash equivalents	$	(223	)	$	(2,672	)	$	(772	)	$	(1,525	)

Cash and cash equivalents at January 1	$	4,959		$	9,509		$	6,247		$	9,412
Net increase/(decrease) in cash and cash equivalents	(223		)	(2,672		)	(772		)	(1,525		)
Cash and cash equivalents at June 30	$	4,736		$	6,837		$	5,475		$	7,887

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

(in millions, unaudited)



	Equity Attributable to Ford Motor Company
	Capital Stock		Cap. in Excess of Par Value of Stock			Retained Earnings			Accumulated Other Comprehensive Income/(Loss) (Note 14)			Treasury Stock			Total			Equity Attributable to Non-controlling Interests			Total Equity
Balance at December 31, 2013	$	40	$	21,422		$	23,386		$	(18,230	)	$	(506	)	$	26,112		$	33		$	26,145
Net income	—		—			2,300			—			—			2,300			4			2,304
Other comprehensive income/(loss), net of tax	—		—			—			123			—			123			—			123
Common stock issued (including share-based compensation impacts)	—		201			—			—			—			201			—			201
Treasury stock/other	—		(18		)	—			—			(955		)	(973		)	(4		)	(977		)
Cash dividends declared	—		—			(987		)	—			—			(987		)	(2		)	(989		)
Balance at June 30, 2014	$	40	$	21,605		$	24,699		$	(18,107	)	$	(1,461	)	$	26,776		$	31		$	26,807

Balance at December 31, 2012	$	40	$	20,976		$	17,778		$	(22,858	)	$	(292	)	$	15,644		$	42		$	15,686
Net income	—		—			2,844			—			—			2,844			2			2,846
Other comprehensive income/(loss), net of tax	—		—			—			1,021			—			1,021			—			1,021
Common stock issued (including share-based compensation impacts)	—		243			—			—			—			243			—			243
Treasury stock/other	—		—			—			—			(87		)	(87		)	(1		)	(88		)
Cash dividends declared	—		—			(785		)	—			—			(785		)	—			(785		)
Balance at June 30, 2013	$	40	$	21,219		$	19,837		$	(21,837	)	$	(379	)	$	18,880		$	43		$	18,923

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents



Footnote		Page
Note 1	Presentation	9
Note 2	Accounting Standards Issued But Not Yet Adopted	12
Note 3	Fair Value Measurements	12
Note 4	Financial Services Sector Finance Receivables	14
Note 5	Financial Services Sector Allowance for Credit Losses	19
Note 6	Inventories	20
Note 7	Variable Interest Entities	20
Note 8	Impairment of Equity in Net Assets of Affiliated Companies	21
Note 9	Other Liabilities and Deferred Revenue	21
Note 10	Retirement Benefits	22
Note 11	Debt	23
Note 12	Derivative Financial Instruments and Hedging Activities	24
Note 13	Redeemable Noncontrolling Interest	29
Note 14	Accumulated Other Comprehensive Income/(Loss)	30
Note 15	Other Income/(Loss)	31
Note 16	Employee Separation Actions and Exit and Disposal Activities	32
Note 17	Income Taxes	32
Note 18	Assets Held for Sale	32
Note 19	Capital Stock and Amounts Per Share	33
Note 20	Segment Information	34
Note 21	Commitments and Contingencies	37

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION

Our financial statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. We show certain of our financial statements on both a consolidated and a sector basis for our Automotive and Financial Services sectors. Intercompany items have been eliminated in both the consolidated and sector balance sheets. Where the presentation of these intercompany eliminations or consolidated adjustments differs between the consolidated and sector financial statements, reconciliations of certain line items are explained below in this Note or in related footnotes.

In the opinion of management, these unaudited financial statements reflect a fair statement of the results of operations and financial condition of Ford Motor Company, its consolidated subsidiaries, and consolidated VIEs of which we are the primary beneficiary for the periods and at the dates presented. The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2013 (“2013 Form 10-K Report”). For purposes of this report, “Ford,” the “Company,” “we,” “our,” “us” or similar references mean Ford Motor Company, our consolidated subsidiaries, and our consolidated VIEs of which we are the primary beneficiary, unless the context requires otherwise.

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

Change in accounting. We provide medical, life, and income benefits to hourly and salary employees when they become disabled. As of January 1, 2014, we changed our accounting policy for these benefits from an event-driven model to a service-accrual model, such that our obligation now includes an estimated cost to be incurred for individuals who are disabled at the time of measurement (which was the amount recorded under our previous policy) as well as an amount that considers the probability that active employees will become disabled in the future. We believe this change in accounting method is preferable because it better aligns the recognition of expense with the periods in which the Company receives the benefit of the employees’ services, and will allow for better comparability with the method used by other companies in our industry.

We have retroactively applied this change in accounting method to all prior period amounts. As of December 31, 2012, the cumulative effect of the change decreased Total equity by $303 million and increased Other liabilities and deferred revenue by $468 million, as well as increased Deferred income taxes by $165 million. As of December 31, 2013, the cumulative effect of the change decreased Total equity by $271 million and increased Other liabilities and deferred revenue by $424 million, as well as increased Deferred income taxes by $153 million. The effect of this change was immaterial on income statement and statement of cash flow amounts for the interim periods ended June 30, 2014, and had no impact for the interim periods ended June 30, 2013.

Adoption of New Accounting Standards

Income Taxes - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. On January 1, 2014, we adopted the new accounting standard that requires an unrecognized tax benefit to be presented as a decrease in a deferred tax asset when a net operating loss, a similar tax loss, or a tax credit carryforward exists, and certain criteria are met. The new accounting standard is consistent with our prior practice, thus the adoption did not impact our consolidated financial statements.

Foreign Currency Matters - Parent’s Accounting for Cumulative Translation Adjustment. On January 1, 2014, we adopted the new accounting standard that clarifies the applicable guidance for a parent company’s accounting for the release of the cumulative translation adjustment into net income upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. The new accounting standard is consistent with our prior practice, thus the adoption did not impact our consolidated financial statements.

Liabilities - Obligations Resulting from Joint and Several Liability Arrangements. On January 1, 2014, we adopted the new accounting standard that provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements. The adoption of this accounting standard did not impact our consolidated financial statements or financial statement disclosures.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION (Continued)

Reconciliations between Consolidated and Sector Financial Statements

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



	June 30, 2014			December 31, 2013
Sector balance sheet presentation of deferred income tax assets
Automotive sector current deferred income tax assets	$	1,569		$	1,574
Automotive sector non-current deferred income tax assets	12,928			13,436
Financial Services sector deferred income tax assets (a)	186			184
Total	14,683			15,194
Reclassification for netting of deferred income taxes	(2,087		)	(1,726		)
Consolidated balance sheet presentation of deferred income tax assets	$	12,596		$	13,468

Sector balance sheet presentation of deferred income tax liabilities
Automotive sector current deferred income tax liabilities	$	355		$	267
Automotive sector non-current deferred income tax liabilities	456			430
Financial Services sector deferred income tax liabilities	1,864			1,627
Total	2,675			2,324
Reclassification for netting of deferred income taxes	(2,087		)	(1,726		)
Consolidated balance sheet presentation of deferred income tax liabilities	$	588		$	598

__________


(a)	Financial Services deferred income tax assets are included in Financial Services Other assets on our sector balance sheet.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION (Continued)

Sector to Consolidated Cash Flow. We present certain cash flows from wholesale and other receivables and interest supplements and residual support differently on our sector and consolidated statements of cash flows. The reconciliation between totals for the sector and consolidated cash flows for the periods ended June 30 was as follows (in millions):



	First Half
	2014			2013
Automotive net cash provided by/(used in) operating activities	$	6,108		$	4,404
Financial Services net cash provided by/(used in) operating activities	2,553			2,349
Total sector net cash provided by/(used in) operating activities	8,661			6,753
Reclassifications between investing and operating cash flows
Purchases/Collections of wholesale receivables (a)	(3,101		)	(1,407		)
Purchases/Collections of other receivables (b)	(155		)	(179		)
Payments of interest supplements and residual support (c)	1,565			1,122
Consolidated net cash provided by/(used in) operating activities	$	6,970		$	6,289

Automotive net cash provided by/(used in) investing activities	$	(4,216	)	$	(5,217	)
Financial Services net cash provided by/(used in) investing activities	(9,139		)	(6,294		)
Total sector net cash provided by/(used in) investing activities	(13,355		)	(11,511		)
Reclassifications between investing and operating cash flows
Purchases/Collections of wholesale receivables (a)	3,101			1,407
Purchases/Collections of other receivables (b)	155			179
Payments of interest supplements and residual support (c)	(1,565		)	(1,122		)
Reclassifications between investing and financing cash flows
Elimination of investing activity to/(from) Financial Services in consolidation	(21		)	(16		)
Consolidated net cash provided by/(used in) investing activities	$	(11,685	)	$	(11,063	)

Automotive net cash provided by/(used in) financing activities	$	(2,138	)	$	136
Financial Services net cash provided by/(used in) financing activities	3,919			2,523
Total sector net cash provided by/(used in) financing activities	1,781			2,659
Reclassifications between investing and financing cash flows
Elimination of investing activity to/(from) Financial Services in consolidation	21			16
Consolidated net cash provided by/(used in) financing activities	$	1,802		$	2,675

__________

(a)

In addition to the cash flows from vehicles sold by us, the cash flow from wholesale finance receivables (being reclassified between investing and operating) includes dealer financing by Ford Credit of used and non-Ford vehicles. One hundred percent of cash flows from these wholesale finance receivables have been reclassified for consolidated presentation as the portion of these cash flows from used and non-Ford vehicles is impracticable to separate.


(b)	Includes cash flows of other receivables purchased/collected by the Financial Services sector from certain divisions and subsidiaries of the Automotive sector.


(c)	Payments from Automotive sector to Ford Credit on behalf of the retail customer that represent interest supplements and residual support.

Venezuelan Operations

On February 13, 2013, the Venezuelan government effected a devaluation of the bolivar, from an exchange rate of 4.3 bolivars to the U.S. dollar to an exchange rate of 6.3 bolivars to the U.S. dollar. This resulted in a remeasurement loss of $186 million in the first quarter of 2013.

Based on changes to Venezuelan currency exchange rate mechanisms in the first quarter of 2014, we changed the exchange rate we used to remeasure the financial statements of our Venezuelan subsidiaries in U.S. dollars. Beginning March 31, 2014, we now use the exchange rate determined by periodic auctions for U.S. dollars conducted under Venezuela’s Complementary System of Foreign Currency Administration (“SICAD I”). The exchange rate we used at March 31, 2014, was 10.8 bolivars to the U.S. dollar and resulted in a remeasurement loss of $316 million in the first quarter of 2014 ($310 million related to our Automotive sector and $6 million related to our Financial Services sector). At June 30, 2014, the SICAD I exchange rate was 10.6 bolivars to the U.S. dollar.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION (Continued)

The operating environment in Venezuela continues to be challenging. Foreign exchange control regulations have affected our Venezuelan operation’s ability to pay dividends and obligations denominated in U.S. dollars and are constraining parts availability and our ability to maintain normal production. At June 30, 2014, our investment in our Venezuelan subsidiaries (which includes undistributed earnings) was $535 million. Also, at June 30, 2014, they had $281 million of U.S. dollar currency exchange requests pending with and in transit to the governmental controlled currency exchanges, including $275 million payable to other Ford consolidated affiliates.

At June 30, 2014, our Venezuelan subsidiaries had a bolivar-denominated net monetary position of $391 million, including $388 million of bolivar-denominated cash and cash equivalents. A further devaluation from an exchange rate of 10.6 bolivars to the U.S. dollar would result in a balance sheet remeasurement loss.

NOTE 2. ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

Revenue - Revenue from Contracts with Customers. In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard that requires recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. The new standard supersedes virtually all present U.S. GAAP guidance on revenue recognition. The new standard requires the use of more estimates and judgments than the present standards and requires additional disclosures. The new accounting standard is effective as of January 1, 2017 and we are assessing the potential impact to our consolidated financial statements and financial statement disclosures.

Transfers and Servicing - Repurchase-to-Maturity Transactions, Repurchase Financings and Disclosures. In June 2014, the FASB issued a new accounting standard that changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements. The new standard also requires additional disclosures for certain transfers of financial assets with agreements that both entitle and obligate the transferor to repurchase the transferred assets from the transferee. The new accounting standard is effective as of January 1, 2015 and we do not expect it to have an impact on our consolidated financial statements.

Stock Compensation - Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. In June 2014, the FASB issued a new accounting standard that requires performance targets that could be achieved after the requisite service period be treated as performance conditions that affect the vesting of the award. The new accounting standard is effective as of January 1, 2016 and we do not expect it to have an impact on our consolidated financial statements.

NOTE 3. FAIR VALUE MEASUREMENTS

Cash equivalents, marketable securities, and derivative financial instruments are presented on our financial statements on a recurring basis at fair value, while other assets and liabilities are measured at fair value on a nonrecurring basis, such as when we have an asset impairment. There have been no changes to the types of inputs used or the valuation techniques since year end. During the second quarter of 2014, we impaired our equity in net assets of Ford Sollers Netherlands B.V. (“Ford Sollers”), which resulted in a fair value measurement on a non-recurring basis. See Note 8 for additional information.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. FAIR VALUE MEASUREMENTS (Continued)

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

The following table categorizes the fair values of items measured at fair value on a recurring basis on our balance sheet (in millions):



	June 30, 2014								December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Automotive Sector
Assets
Cash equivalents – financial instruments
U.S. government and agencies	$	—	$	—	$	—	$	—	$	—	$	33	$	—	$	33
Non-U.S. government and agencies	—		—		—		—		—		200		—		200
Total cash equivalents (a)	—		—		—		—		—		233		—		233
Marketable securities
U.S. government and agencies	2,212		5,815		—		8,027		3,752		6,596		—		10,348
Non-U.S. government and agencies	—		9,689		—		9,689		—		6,538		—		6,538
Corporate debt	—		2,690		—		2,690		—		2,623		—		2,623
Equities	310		—		—		310		341		—		—		341
Other marketable securities	—		360		—		360		—		307		—		307
Total marketable securities	2,522		18,554		—		21,076		4,093		16,064		—		20,157
Derivative financial instruments (b)	—		322		3		325		—		579		1		580
Total assets at fair value	$	2,522	$	18,876	$	3	$	21,401	$	4,093	$	16,876	$	1	$	20,970
Liabilities
Derivative financial instruments (b)	$	—	$	474	—		$	474	$	—	$	416	$	2	$	418
Total liabilities at fair value	$	—	$	474	—		$	474	$	—	$	416	$	2	$	418

Financial Services Sector
Assets
Cash equivalents – financial instruments
U.S. government and agencies	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Non-U.S. government and agencies	—		365		—		365		—		24		—		24
Total cash equivalents (a)	—		365		—		365		—		24		—		24
Marketable securities
U.S. government and agencies	43		862		—		905		418		25		—		443
Non-U.S. government and agencies	—		519		—		519		—		184		—		184
Corporate debt	—		1,558		—		1,558		—		1,273		—		1,273
Other marketable securities	—		38		—		38		—		43		—		43
Total marketable securities	43		2,977		—		3,020		418		1,525		—		1,943
Derivative financial instruments (b)	—		673		—		673		—		585		—		585
Total assets at fair value	$	43	$	4,015	$	—	$	4,058	$	418	$	2,134	$	—	$	2,552
Liabilities
Derivative financial instruments (b)	$	—	$	320	$	—	$	320	$	—	$	506	$	—	$	506
Total liabilities at fair value	$	—	$	320	$	—	$	320	$	—	$	506	$	—	$	506

__________

(a)

Excludes time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value on our balance sheet totaling $3.1 billion and $2.7 billion for Automotive Sector and $4.5 billion and $6.7 billion for Financial Services Sector at June 30, 2014 and December 31, 2013, respectively. In addition to these cash equivalents, we also had cash on hand totaling $1.6 billion and $2 billion for Automotive Sector and $1.9 billion and $2.8 billion for Financial Services Sector at June 30, 2014 and December 31, 2013, respectively.


(b)	See Note 12 for additional information regarding derivative financial instruments.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCIAL SERVICES SECTOR FINANCE RECEIVABLES

Our Financial Services sector finance receivables primarily relate to Ford Credit, but also include the Other Financial Services segment and certain intersector eliminations.

Our Financial Services sector segments our finance receivables into North America and International “consumer” and “non-consumer” portfolios. The receivables are generally secured by the vehicles, inventory, or other property being financed.

Finance receivables are recorded at the time of origination or purchase at fair value and are subsequently reported at amortized cost, net of any allowance for credit losses.

Consumer Portfolio. Receivables in this portfolio include products offered to individuals and businesses that finance the acquisition of Ford and Lincoln vehicles from dealers for personal or commercial use. Retail financing includes retail installment contracts for new and used vehicles and direct financing leases with retail customers, government entities, daily rental companies, and fleet customers.

Non-Consumer Portfolio. Receivables in this portfolio include products offered to automotive dealers. The products include:


•	Dealer financing – includes wholesale loans to dealers to finance the purchase of vehicle inventory, also known as floorplan financing, as well as loans to dealers to finance working capital and improvements to dealership facilities, finance the purchase of dealership real estate, and finance other dealer programs. Wholesale financing is approximately 95% of dealer financing


•	Other – primarily related to the sale of parts and accessories to dealers

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCIAL SERVICES SECTOR FINANCE RECEIVABLES (Continued)

Finance receivables, net were as follows (in millions):



	June 30, 2014									December 31, 2013
	North America			International			Total Finance Receivables			North America			International			Total Finance Receivables
Consumer
Retail financing, gross	$	41,674		$	11,857		$	53,531		$	40,902		$	10,797		$	51,699
Less: Unearned interest supplements	(1,355		)	(252		)	(1,607		)	(1,255		)	(247		)	(1,502		)
Consumer finance receivables	40,319			11,605			51,924			39,647			10,550			50,197
Non-Consumer
Dealer financing	23,372			9,828			33,200			22,072			7,833			29,905
Other	875			343			1,218			732			339			1,071
Non-Consumer finance receivables	24,247			10,171			34,418			22,804			8,172			30,976
Total recorded investment	$	64,566		$	21,776		$	86,342		$	62,451		$	18,722		$	81,173

Recorded investment in finance receivables	$	64,566		$	21,776		$	86,342		$	62,451		$	18,722		$	81,173
Less: Allowance for credit losses	(252		)	(75		)	(327		)	(280		)	(77		)	(357		)
Finance receivables, net (a)	$	64,314		$	21,701		$	86,015		$	62,171		$	18,645		$	80,816

Net finance receivables subject to fair value (b)							$	84,266								$	79,149
Fair value							86,011									80,838

__________

(a)

At June 30, 2014 and December 31, 2013, Finance receivables, net on the consolidated balance sheet were $80 billion and $77.5 billion, respectively. The balance is comprised of Financial Services sector finance receivables of $86 billion and $80.8 billion, respectively, net of $6 billion and $3.3 billion, respectively, of receivables purchased by Financial Services sector from Automotive sector, which are reclassified to Other receivables, net.


(b)	At June 30, 2014 and December 31, 2013, excludes $1.7 billion and $1.7 billion, respectively, of certain receivables (primarily direct financing leases) that are not subject to fair value disclosure requirements.

Excluded from finance receivables at June 30, 2014 and December 31, 2013, was $182 million and $196 million, respectively, of accrued uncollected interest, which we report in Other assets on the balance sheet.

Included in the recorded investment in finance receivables at June 30, 2014 and December 31, 2013 were North America consumer receivables of $20.8 billion and $21.8 billion and non-consumer receivables of $19.3 billion and $18.9 billion, respectively, and International consumer receivables of $5.9 billion and $5.9 billion and non-consumer receivables of $4.2 billion and $5 billion, respectively, that secure certain debt obligations. The receivables are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations of our Financial Services sector or the claims of Ford Credit’s other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions (see Notes 7 and 11).

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCIAL SERVICES SECTOR FINANCE RECEIVABLES (Continued)

Aging

For all finance receivables, we define “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date. The recorded investment of consumer receivables greater than 90 days past due and still accruing interest was $13 million and $14 million at June 30, 2014 and December 31, 2013, respectively. The recorded investment of non-consumer receivables greater than 90 days past due and still accruing interest was $6 million and $21 million at June 30, 2014 and December 31, 2013, respectively.

The aging analysis of our finance receivables balances were as follows (in millions):

June 30, 2014

December 31, 2013