Edgar Filing: FORD MOTOR CO

Document

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 September 30, 2016

	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 October 20, 2016, Ford had outstanding 3,902,862,547 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 September 30, 2016



	Table of Contents	Page
	Part I - Financial Information
Item 1	Financial Statements	1
	Consolidated Income Statement	1
	Consolidated Statement of Comprehensive Income	1
	Consolidated Balance Sheet	2
	Condensed Consolidated Statement of Cash Flows	3
	Consolidated Statement of Equity	4
	Notes to the Financial Statements	5
	Report of Independent Registered Public Accounting Firm	25
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Overview	26
	Results of Operations	27
	Liquidity and Capital Resources	47
	Credit Ratings	56
	Production Volumes	57
	Outlook	58
	GAAP Reconciliations of Non-GAAP Financial Measures	61
	Risk Factors	63
	Accounting Standards Issued But Not Yet Adopted	64
	Other Financial Information	64
Item 3	Quantitative and Qualitative Disclosures About Market Risk	64
	Automotive	64
	Financial Services	65
Item 4	Controls and Procedures	65

	Part II - Other Information
Item 6	Exhibits	66
	Signature	67
	Exhibit Index	68

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 September 30,
	2016		2015		2016		2015
	Third Quarter				First Nine Months
	(unaudited)
Revenues
Automotive	$	33,331	$	35,818	$	105,520	$	102,723
Financial Services	2,612		2,326		7,626		6,584
Total revenues	35,943		38,144		113,146		109,307

Costs and expenses
Cost of sales	30,446		31,213		93,075		90,011
Selling, administrative, and other expenses	2,535		2,386		7,758		7,402
Financial Services interest, operating, and other expenses	2,200		1,905		6,518		5,363
Total costs and expenses	35,181		35,504		107,351		102,776

Interest expense on Automotive debt	238		206		650		561

Non-Financial Services interest income and other income/(loss), net (Note 13)	328		446		1,121		908
Financial Services other income/(loss), net (Note 13)	132		97		305		241
Equity in net income of affiliated companies	403		314		1,342		1,237
Income before income taxes	1,387		3,291		7,913		8,356
Provision for/(Benefit from) income taxes	426		1,099		2,525		2,849
Net income	961		2,192		5,388		5,507
Less: Income/(Loss) attributable to noncontrolling interests	4		—		9		2
Net income attributable to Ford Motor Company	$	957	$	2,192	$	5,379	$	5,505

EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 15)
Basic income	$	0.24	$	0.55	$	1.35	$	1.39
Diluted income	0.24		0.55		1.35		1.38

Cash dividends declared	0.15		0.15		0.70		0.45

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)



	For the periods ended September 30,
	2016			2015			2016			2015
	Third Quarter						First Nine Months
	(unaudited)
Net income	$	961		$	2,192		$	5,388		$	5,507
Other comprehensive income/(loss), net of tax (Note 12)
Foreign currency translation	(184		)	(882		)	(306		)	(816		)
Marketable securities	—			—			6			—
Derivative instruments	99			374			456			208
Pension and other postretirement benefits	14			133			53			1
Total other comprehensive income/(loss), net of tax	(71		)	(375		)	209			(607		)
Comprehensive income	890			1,817			5,597			4,900
Less: Comprehensive income/(loss) attributable to noncontrolling interests	3			1			7			2
Comprehensive income attributable to Ford Motor Company	$	887		$	1,816		$	5,590		$	4,898

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)



	September 30, 2016			December 31, 2015
	(unaudited)
ASSETS
Cash and cash equivalents (Note 4)	$	13,340		$	14,272
Marketable securities (Note 4)	20,825			20,904
Financial Services finance receivables, net (Note 5)	45,550			45,137
Trade and other receivables, less allowances of $359 and $372	10,029			11,042
Inventories (Note 7)	10,219			8,319
Other assets	3,552			2,913
Total current assets	103,515			102,587

Financial Services finance receivables, net (Note 5)	49,614			45,554
Net investment in operating leases	29,196			27,093
Net property	32,257			30,163
Equity in net assets of affiliated companies	3,795			3,224
Deferred income taxes	9,475			11,509
Other assets	7,111			4,795
Total assets	$	234,963		$	224,925

LIABILITIES
Payables	$	22,384		$	20,272
Other liabilities and deferred revenue (Note 8)	19,531			19,089
Automotive debt payable within one year (Note 10)	2,472			1,779
Financial Services debt payable within one year (Note 10)	44,801			41,196
Total current liabilities	89,188			82,336

Other liabilities and deferred revenue (Note 8)	23,652			23,457
Automotive long-term debt (Note 10)	10,675			11,060
Financial Services long-term debt (Note 10)	79,276			78,819
Deferred income taxes	577			502
Total liabilities	203,368			196,174

Redeemable noncontrolling interest	96			94

EQUITY
Common Stock, par value $.01 per share (3,976 million shares issued of 6 billion authorized)	40			40
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	21,598			21,421
Retained earnings	17,013			14,414
Accumulated other comprehensive income/(loss) (Note 12)	(6,046		)	(6,257		)
Treasury stock	(1,122		)	(977		)
Total equity attributable to Ford Motor Company	31,484			28,642
Equity attributable to noncontrolling interests	15			15
Total equity	31,499			28,657
Total liabilities and equity	$	234,963		$	224,925



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.
	September 30, 2016		December 31, 2015
	(unaudited)
ASSETS
Cash and cash equivalents	$	2,318	$	3,949
Financial Services finance receivables, net	47,627		45,902
Net investment in operating leases	9,951		13,309
Other assets	7		85
LIABILITIES
Other liabilities and deferred revenue	$	10	$	19
Debt	39,123		43,086

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 September 30,
	2016			2015
	First Nine Months
	(unaudited)
Cash flows from operating activities
Net cash provided by/(used in) operating activities	$	16,994		$	14,078

Cash flows from investing activities
Capital spending	(4,912		)	(5,358		)
Acquisitions of finance receivables and operating leases	(43,746		)	(43,762		)
Collections of finance receivables and operating leases	30,254			28,632
Purchases of equity and debt securities	(22,049		)	(29,493		)
Sales and maturities of equity and debt securities	22,022			32,874
Settlements of derivatives	330			26
Other	43			417
Net cash provided by/(used in) investing activities	(18,058		)	(16,664		)

Cash flows from financing activities
Cash dividends	(2,780		)	(1,785		)
Purchases of Common Stock	(145		)	(129		)
Net changes in short-term debt	1,200			844
Proceeds from issuance of other debt	31,956			35,876
Principal payments on other debt	(30,019		)	(27,366		)
Other	(44		)	(303		)
Net cash provided by/(used in) financing activities	168			7,137

Effect of exchange rate changes on cash and cash equivalents	(36		)	(622		)

Net increase/(decrease) in cash and cash equivalents	$	(932	)	$	3,929

Cash and cash equivalents at January 1	$	14,272		$	10,757
Net increase/(decrease) in cash and cash equivalents	(932		)	3,929
Cash and cash equivalents at September 30	$	13,340		$	14,686

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 12)			Treasury Stock			Total			Equity Attributable to Non-controlling Interests			Total Equity
Balance at December 31, 2015	$	41	$	21,421	$	14,414		$	(6,257	)	$	(977	)	$	28,642		$	15		$	28,657
Net income	—		—		5,379			—			—			5,379			9			5,388
Other comprehensive income/(loss), net of tax	—		—		—			211			—			211			(2		)	209
Common stock issued (including share-based compensation impacts)	—		177		—			—			—			177			—			177
Treasury stock/other	—		—		—			—			(145		)	(145		)	(2		)	(147		)
Cash dividends declared	—		—		(2,780		)	—			—			(2,780		)	(5		)	(2,785		)
Balance at September 30, 2016	$	41	$	21,598	$	17,013		$	(6,046	)	$	(1,122	)	$	31,484		$	15		$	31,499

Balance at December 31, 2014	$	40	$	21,089	$	9,422		$	(5,265	)	$	(848	)	$	24,438		$	27		$	24,465
Net income	—		—		5,505			—			—			5,505			2			5,507
Other comprehensive income/(loss), net of tax	—		—		—			(607		)	—			(607		)	—			(607		)
Common stock issued (including share-based compensation impacts)	1		265		—			—			—			266			—			266
Treasury stock/other	—		—		—			—			(129		)	(129		)	(4		)	(133		)
Cash dividends declared	—		—		(1,785		)	—			—			(1,785		)	(6		)	(1,791		)
Balance at September 30, 2015	$	41	$	21,354	$	13,142		$	(5,872	)	$	(977	)	$	27,688		$	19		$	27,707

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	6
Note 2	New Accounting Standards	6
Note 3	Segment Information	8
Note 4	Cash, Cash Equivalents, and Marketable Securities	10
Note 5	Financial Services Finance Receivables	12
Note 6	Financial Services Allowance for Credit Losses	15
Note 7	Inventories	16
Note 8	Other Liabilities and Deferred Revenue	16
Note 9	Retirement Benefits	17
Note 10	Debt	18
Note 11	Derivative Financial Instruments and Hedging Activities	19
Note 12	Accumulated Other Comprehensive Income/(Loss)	21
Note 13	Other Income/(Loss)	22
Note 14	Income Taxes	22
Note 15	Capital Stock and Earnings Per Share	22
Note 16	Commitments and Contingencies	23

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION

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.

Our financial statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, instructions to Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X.

In the opinion of management, these unaudited financial statements reflect a fair statement of our results of operations and financial condition 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, 2015 (“2015 Form 10-K Report”).

Change in presentation. Our core Automotive business includes the designing, manufacturing, marketing, and servicing of a full line of Ford cars, trucks, SUVs, and electrified vehicles, as well as Lincoln luxury vehicles. We provide vehicle-related financing and leasing activities through Ford Motor Credit Company LLC (“Ford Credit”). At the same time, we are pursuing emerging opportunities in connectivity, mobility, autonomous vehicles, the customer experience, and data and analytics.

Prior to the second quarter of 2016, we presented our financial statements on both a consolidated basis and on a “sector” basis for our Automotive and Financial Services sectors. With our expansion into mobility services, including the formation in March 2016 of the Ford Smart Mobility LLC subsidiary, we reevaluated our disclosures and concluded we should eliminate our two-sector financial presentation and, reflecting the manner in which our Chief Operating Decision Maker manages our business, changed our segment presentation beginning with the second quarter of 2016 to be Automotive, Financial Services, and All Other. See Note 3 for a description of our segment presentation.

In addition, as a result of the elimination of our two-sector financial presentation, at June 30, 2016 we changed the presentation of our consolidated balance sheet and certain notes to the consolidated financial statements to classify our assets and liabilities as current or non-current. We reclassified certain prior year amounts in our consolidated financial statements to conform to the current year presentation.

NOTE 2. NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards

Accounting Standard Update (“ASU”) 2015-17, Income Taxes - Balance Sheet Classification of Deferred Taxes. On April 1, 2016, we retrospectively adopted the new accounting standard which requires deferred tax assets and liabilities to be classified as non-current in the consolidated balance sheet. The impact of the change resulted in the classification of all deferred taxes as non-current.

We also adopted the following standards during 2016, none of which have a material impact to our financial statements or financial statement disclosures:



Standard		Effective Date
2015-16	Business Combinations - Simplifying the Accounting for Measurement-Period Adjustments	January 1, 2016
2015-09	Insurance - Disclosures about Short-Duration Contracts	January 1, 2016
2015-05	Internal-Use Software - Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement	January 1, 2016
2015-02	Consolidation - Amendments to the Consolidation Analysis	January 1, 2016
2015-01	Extraordinary and Unusual Items - Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items	January 1, 2016
2014-12	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	January 1, 2016

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. NEW ACCOUNTING STANDARDS (Continued)

Accounting Standards Issued But Not Yet Adopted

ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments. In June 2016, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard which replaces the current incurred loss impairment method with a method that reflects expected credit losses. The new standard is effective as of January 1, 2020, and early adoption is permitted as of January 1, 2019. We are assessing the potential impact to our financial statements and disclosures.

ASU 2016-09, Stock Compensation - Improvements to Employee Share-Based Payment Accounting. In March 2016, the FASB issued a new accounting standard which simplifies accounting for share-based payment transactions, including income tax consequences and the classification of the tax impact on the statement of cash flows. We will adopt the standard effective January 1, 2017 by recognizing a one-time adjustment to retained earnings and deferred tax assets related to cumulative excess tax benefits previously unrecognized. We will also change classification of tax-related items on the consolidated statement of cash flows.

ASU 2016-02, Leases. In February 2016, the FASB issued a new accounting standard which provides guidance on the recognition, measurement, presentation, and disclosure of leases. The new standard supersedes present U.S. GAAP guidance on leases and requires substantially all leases to be reported on the balance sheet as right-of-use assets and lease liabilities, as well as additional disclosures. The new standard is effective as of January 1, 2019, and early adoption is permitted. We are assessing the potential impact to our financial statements and disclosures.

ASU 2014-09, Revenue - Revenue from Contracts with Customers. In May 2014, the 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 FASB has also issued several updates to ASU 2014-09. The new standard supersedes U.S. GAAP guidance on revenue recognition and requires the use of more estimates and judgments than the present standards. It also requires additional disclosures. We plan to adopt the new revenue guidance effective January 1, 2017 by recognizing the cumulative effect of initially applying the new standard as an adjustment to the opening balance of equity. We do not expect a material impact to our financial statements or disclosures.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. SEGMENT INFORMATION

In conjunction with our expanded business model to become an automotive, financial services, and mobility company, beginning with the second quarter of 2016, we changed our reportable segment disclosures. Reflecting the manner in which our Chief Operating Decision Maker manages our businesses, including resource allocation and performance assessment, we have four operating segments that represent the primary businesses reported in our consolidated financial statements. These operating segments are: Automotive, Financial Services, Ford Smart Mobility LLC, and Central Treasury Operations.

Automotive and Financial Services comprise separate reportable segments. Ford Smart Mobility LLC and Central Treasury Operations did not meet the quantitative thresholds in this reporting period to qualify as reportable segments; therefore, these operating segments are combined and disclosed below as All Other. Prior-period amounts were adjusted retrospectively to reflect the change to our reportable segments.

Below is a description of our reportable segments and the business activities included in All Other.

Automotive Segment

Our Automotive segment primarily includes the sale of Ford and Lincoln brand vehicles, service parts, and accessories worldwide, together with the associated costs to develop, manufacture, distribute, and service the vehicles, parts, and accessories. The segment includes 5 regional business units: North America, South America, Europe, Middle East & Africa, and Asia Pacific.

Financial Services Segment

The Financial Services segment primarily includes our vehicle-related financing and leasing activities at Ford Credit.

All Other

All Other is a combination of operating segments that did not meet the quantitative thresholds in this reporting period to qualify as reportable segments. All Other consists of our Central Treasury Operations (formerly Other Automotive) and Ford Smart Mobility LLC. The Central Treasury Operations segment is primarily engaged in decision making for investments, risk management activities, and providing financing for the Automotive segment. Interest income (excluding interest earned on our extended service contract portfolio that is included in our Automotive segment), interest expense, gains and losses on cash equivalents and marketable securities, and foreign exchange derivatives associated with intercompany lending, are included in the results of Central Treasury Operations. The underlying assets and liabilities, primarily cash and cash equivalents, marketable securities, debt, and derivatives, remain with the Automotive segment.

Ford Smart Mobility LLC is a new subsidiary formed to design, build, grow, and invest in emerging mobility services. Designed to compete like a start-up company, Ford Smart Mobility LLC will design and build mobility services on its own, and collaborate with start-ups and tech companies.

Special Items

In addition, our results include Special Items that consist of (i) pension and other postretirement employee benefits (“OPEB”) remeasurement gains and losses, (ii) significant personnel and dealer-related costs stemming from our efforts to match production capacity and cost structure to market demand and changing model mix, and (iii) certain infrequent significant items that we generally do not consider to be indicative of our ongoing operating activities. Our management excludes these items from its review of the results of the operating segments for purposes of measuring segment profitability and allocating resources. Special items are presented as a separate reconciling item.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. SEGMENT INFORMATION (Continued)

Key operating data for our business segments for the periods ended or at September 30 were as follows (in millions):



	Automotive			Financial Services		All Other			Special Items			Adjustments				Total
Third Quarter 2016
Revenues	$	33,331		$	2,612	$	—		$	—		$	—			$	35,943
Pre-tax results - income/(loss)	1,084			552		(223		)	(26		)	—				1,387
Equity in net income/(loss) of affiliated companies	395			8		—			—			—				403
Cash, cash equivalents, and marketable securities	24,300			9,855		10			—			—				34,165
Total assets	97,269			142,979		67			—			(5,352		)	(a)	234,963
Debt	13,147			124,077		—			—			—				137,224
Operating cash flows	(1,954		)	5,953		—			—			1,161			(b)	5,160

Third Quarter 2015
Revenues	$	35,818		$	2,326	$	—		$	—		$	—			$	38,144
Pre-tax results - income/(loss)	2,762			526		(163		)	166			—				3,291
Equity in net income/(loss) of affiliated companies	306			8		—			—			—				314
Cash, cash equivalents, and marketable securities	22,177			9,670		—			—			—				31,847
Total assets	92,873			130,626		—			—			(3,921		)	(a)	219,578
Debt	12,798			113,627		—			—			—				126,425
Operating cash flows	2,787			2,167		—			—			1,501			(b)	6,455

	Automotive			Financial Services		All Other			Special Items			Adjustments				Total
First Nine Months 2016
Revenues	$	105,520		$	7,626	$	—		$	—		$	—			$	113,146
Pre-tax results - income/(loss)	7,380			1,436		(573		)	(330		)	—				7,913
Equity in net income/(loss) of affiliated companies	1,319			23		—			—			—				1,342
Operating cash flows	4,917			8,761		—			—			3,316			(b)	16,994

First Nine Months 2015
Revenues	$	102,723		$	6,584	$	—		$	—		$	—			$	109,307
Pre-tax results - income/(loss)	7,246			1,486		(542		)	166			—				8,356
Equity in net income/(loss) of affiliated companies	1,213			24		—			—			—				1,237
Operating cash flows	5,199			5,329		—			—			3,550			(b)	14,078

__________


(a)	Includes eliminations of intersegment transactions occurring in the ordinary course of business and deferred tax netting.

(b)

We measure and evaluate our Automotive segment operating cash flow on a different basis than Net cash provided by/(used in) operating activities in our consolidated statement of cash flows. Automotive segment operating cash flow includes additional elements management considers to be related to our Automotive operating activities, primarily capital spending and non-designated derivatives, and excludes outflows for funded pension contributions, separation payments, and other items that are considered operating cash flows under U.S. GAAP. The table below quantifies these reconciling adjustments to Net cash provided by/(used in) operating activities for the periods ended September 30 (in millions):



	Third Quarter						First Nine Months
	2016			2015			2016			2015
Automotive capital spending	$	1,696		$	1,819		$	4,879		$	5,324
Net cash flows from non-designated derivatives	(246		)	119			(322		)	90
Funded pension contributions	(246		)	(89		)	(835		)	(942		)
Separation payments	(40		)	(90		)	(198		)	(600		)
Other	(3		)	(258		)	(208		)	(322		)
Total operating cash flow adjustments	$	1,161		$	1,501		$	3,316		$	3,550

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

The following tables categorize the fair values of cash, cash equivalents, and marketable securities measured at fair value on a recurring basis on our balance sheet (in millions):



		September 30, 2016
	Fair Value Level	Automotive		Financial Services		All Other		Consolidated
Cash and cash equivalents
U.S. government	1	$	599	$	—	$	—	$	599
U.S. government agencies	2	—		4		—		4
Non-U.S. government and agencies	2	551		280		—		831
Corporate debt	2	60		50		—		110
Total marketable securities classified as cash equivalents		1,210		334		—		1,544
Cash, time deposits, and money market funds		6,445		5,341		10		11,796
Total cash and cash equivalents		$	7,655	$	5,675	$	10	$	13,340

Marketable securities
U.S. government	1	$	3,982	$	1,724	$	—	$	5,706
U.S. government agencies	2	3,284		1,354		—		4,638
Non-U.S. government and agencies	2	5,423		520		—		5,943
Corporate debt	2	3,709		540		—		4,249
Equities	1	198		—		—		198
Other marketable securities	2	49		42		—		91
Total marketable securities		$	16,645	$	4,180	$	—	$	20,825

		December 31, 2015
	Fair Value Level	Automotive		Financial Services		All Other		Consolidated
Cash and cash equivalents
U.S. government	1	$	115	$	—	$	—	$	115
U.S. government agencies	2	22		—		—		22
Non-U.S. government and agencies	2	173		266		—		439
Corporate debt	2	20		—		—		20
Total marketable securities classified as cash equivalents		330		266		—		596
Cash, time deposits, and money market funds		5,056		8,620		—		13,676
Total cash and cash equivalents		$	5,386	$	8,886	$	—	$	14,272

Marketable securities
U.S. government	1	$	1,623	$	298	$	—	$	1,921
U.S. government agencies	2	5,240		1,169		—		6,409
Non-U.S. government and agencies	2	7,451		832		—		8,283
Corporate debt	2	3,279		384		—		3,663
Equities	1	240		—		—		240
Other marketable securities	2	348		40		—		388
Total marketable securities		$	18,181	$	2,723	$	—	$	20,904

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

The following tables present cash equivalents and marketable securities accounted for as available-for-sale (“AFS”) securities on our balance sheet (in millions):



	September 30, 2016
										Fair Value of Securities with Contractual Maturities:
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Less than 1 Year		1-5 Years
Automotive
U.S. government	$	447	$	—	$	—		$	447	$	—	$	447
U.S. government agencies	100		—		—			100		—		100
Non-U.S. government and agencies	77		—		—			77		—		77
Corporate debt	337		—		—			337		247		90
Total	$	961	$	—	$	—		$	961	$	247	$	714

	December 31, 2015
										Fair Value of Securities with Contractual Maturities:
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Less than 1 Year		1-5 Years
Automotive
U.S. government	$	—	$	—	$	—		$	—	$	—	$	—
U.S. government agencies	—		—		—			—		—		—
Non-U.S. government and agencies	82		—		(12		)	70		—		70
Corporate debt	—		—		—			—		—		—
Total	$	82	$	—	$	(12	)	$	70	$	—	$	70

Sales proceeds for investments classified as AFS and sold prior to maturity were $69 million and $0 for the nine months ended September 30, 2016 and 2015, respectively. Gross realized gains from the sale of AFS securities were $1 million and $0 for the nine months ended September 30, 2016 and 2015, respectively. There were no gross realized losses from the sale of AFS securities for the nine months ended September 30, 2016 and 2015.

We determine other-than-temporary impairments on cash equivalents and marketable securities using a specific identification method. During the nine months ended September 30, 2016 and 2015, we did not recognize any other-than-temporary impairment loss.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 5. FINANCIAL SERVICES FINANCE RECEIVABLES

Our Financial Services, primarily Ford Credit, manages finance receivables as “consumer” and “non-consumer” portfolios. The receivables are generally secured by the vehicles, inventory, or other property being financed.

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



	September 30, 2016			December 31, 2015
Consumer
Retail financing, gross	$	67,894		$	62,068
Unearned interest supplements	(2,785		)	(2,119		)
Consumer finance receivables	65,109			59,949
Non-Consumer
Dealer financing	30,533			31,115
Non-Consumer finance receivables	30,533			31,115
Total recorded investment	$	95,642		$	91,064

Recorded investment in finance receivables	$	95,642		$	91,064
Allowance for credit losses	(478		)	(373		)
Finance receivables, net	$	95,164		$	90,691

Current portion	$	45,550		$	45,137
Non-current portion	49,614			45,554
Finance receivables, net	$	95,164		$	90,691

Net finance receivables subject to fair value (a)	$	93,033		$	88,876
Fair value	94,327			90,048

__________


(a)	At September 30, 2016 and December 31, 2015, excludes $2.1 billion and $1.8 billion, respectively, of certain receivables (primarily direct financing leases) that are not subject to fair value disclosure requirements. The fair value of finance receivables is categorized within Level 3 of the fair value hierarchy.

Excluded from finance receivables at September 30, 2016 and December 31, 2015, was $206 million and $209 million, respectively, of accrued uncollected interest, which are reported as Other assets in the current assets section of our consolidated balance sheet.

Included in the recorded investment in finance receivables at September 30, 2016 and December 31, 2015 were consumer receivables of $29.9 billion and $27.6 billion, respectively, and non-consumer receivables of $23.3 billion and $26.1 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. 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 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.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 5. FINANCIAL SERVICES 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 $24 million and $16 million at September 30, 2016 and December 31, 2015, respectively. The recorded investment of non-consumer receivables greater than 90 days past due and still accruing interest was de minimis and $1 million at September 30, 2016 and December 31, 2015, respectively.

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



	September 30, 2016		December 31, 2015
Consumer
31-60 days past due	$	652	$	708
61-90 days past due	112		108
91-120 days past due	36		27
Greater than 120 days past due	39		38
Total past due	839		881
Current	64,270		59,068
Consumer finance receivables	65,109		59,949

Non-Consumer
Total past due	71		116
Current	30,462		30,999
Non-Consumer finance receivables	30,533		31,115
Total recorded investment	$	95,642	$	91,064

Credit Quality

Consumer Portfolio. Credit quality ratings for consumer receivables are based on aging. Refer to the aging table above.

Consumer receivables credit quality ratings are as follows:


•	Pass – current to 60 days past due


•	Special Mention – 61 to 120 days past due and in intensified collection status


•	Substandard – greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged off, as measured using the fair value of collateral less costs to sell

Non-Consumer Portfolio. Dealers are assigned to one of four groups according to risk ratings as follows:


•	Group I – strong to superior financial metrics


•	Group II – fair to favorable financial metrics


•	Group III – marginal to weak financial metrics


•	Group IV – poor financial metrics, including dealers classified as uncollectible

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 5. FINANCIAL SERVICES FINANCE RECEIVABLES (Continued)

The credit quality analysis of our dealer financing receivables was as follows (in millions):



	September 30, 2016		December 31, 2015
Dealer Financing
Group I	$	23,162	$	22,146
Group II	5,847		7,175
Group III	1,399		1,683
Group IV	125		111
Total recorded investment	$	30,533	$	31,115

Impaired Receivables

Impaired consumer receivables include accounts that have been rewritten or modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code that are considered to be troubled debt restructurings (“TDRs”), as well as all accounts greater than 120 days past due. Impaired non-consumer receivables represent accounts with dealers that have weak or poor financial metrics or dealer financing that has been modified in TDRs. The recorded investment of consumer receivables that were impaired at September 30, 2016 and December 31, 2015 was $366 million, or 0.6% of consumer receivables, and $375 million, or 0.6% of consumer receivables, respectively. The recorded investment of non-consumer receivables that were impaired at September 30, 2016 and December 31, 2015 was $140 million, or 0.5% of non-consumer receivables, and $134 million, or 0.4% of non-consumer receivables, respectively. Impaired finance receivables are evaluated both collectively and specifically.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. FINANCIAL SERVICES ALLOWANCE FOR CREDIT LOSSES

An analysis of the allowance for credit losses related to finance receivables for the periods ended September 30 was as follows (in millions):



	Third Quarter 2016									First Nine Months 2016
	Consumer			Non-Consumer			Total			Consumer			Non-Consumer			Total
Allowance for credit losses
Beginning balance	$	432		$	17		$	449		$	357		$	16		$	373
Charge-offs	(108		)	(5		)	(113		)	(304		)	(7		)	(311		)
Recoveries	29			1			30			89			4			93
Provision for credit losses	112			1			113			323			1			324
Other (a)	(1		)	—			(1		)	(1		)	—			(1		)
Ending balance (b)	$	464		$	14		$	478		$	464		$	14		$	478

Analysis of ending balance of allowance for credit losses
Collective impairment allowance										$	445		$	12		$	457
Specific impairment allowance										19			2			21
Ending balance (b)										464			14			478

Analysis of ending balance of finance receivables
Collectively evaluated for impairment										64,743			30,393			95,136
Specifically evaluated for impairment										366			140			506
Recorded investment										65,109			30,533			95,642

Ending balance, net of allowance for credit losses										$	64,645		$	30,519		$	95,164

__________


(a)	Primarily represents amounts related to translation adjustments.


(b)	Total allowance, including reserves for operating leases, was $541 million.



	Third Quarter 2015									First Nine Months 2015
	Consumer			Non-Consumer			Total			Consumer			Non-Consumer			Total
Allowance for credit losses
Beginning balance	$	322		$	13		$	335		$	305		$	16		$	321
Charge-offs	(85		)	(2		)	(87		)	(235		)	(3		)	(238		)
Recoveries	29			1			30			90			4			94
Provision for credit losses	80			2			82			190			(2		)	188
Other (a)	(4		)	—			(4		)	(8		)	(1		)	(9		)
Ending balance (b)	$	342		$	14		$	356		$	342		$	14		$	356

Analysis of ending balance of allowance for credit losses
Collective impairment allowance										$	323		$	12		$	335
Specific impairment allowance										19			2			21
Ending balance (b)										342			14			356

Analysis of ending balance of finance receivables
Collectively evaluated for impairment										58,749			26,311			85,060
Specifically evaluated for impairment										375			129			504
Recorded investment										59,124			26,440			85,564

Ending balance, net of allowance for credit losses										$	58,782		$	26,426		$	85,208

__________


(a)	Primarily represents amounts related to translation adjustments.


(b)	Total allowance, including reserves for operating leases, was $403 million.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. INVENTORIES

All inventories are stated at the lower of cost and net realizable value. Cost for a substantial portion of U.S. inventories is determined on a last-in, first-out (“LIFO”) basis. LIFO was used for 32% and 27% of total inventories at September 30, 2016 and December 31, 2015, respectively. Cost of other inventories is determined by costing methods that approximate a first-in, first-out (“FIFO”) basis.

Inventories were as follows (in millions):



	September 30, 2016			December 31, 2015
Raw materials, work-in-process, and supplies	$	4,335		$	4,005
Finished products	6,823			5,254
Total inventories under FIFO	11,158			9,259
LIFO adjustment	(939		)	(940		)
Total inventories	$	10,219		$	8,319

NOTE 8. OTHER LIABILITIES AND DEFERRED REVENUE

Other liabilities and deferred revenue were as follows (in millions):



	September 30, 2016		December 31, 2015
Current
Dealer and dealers’ customer allowances and claims	$	9,050	$	8,122
Deferred revenue	4,715		4,675
Employee benefit plans	1,505		1,562
Accrued interest	761		840
OPEB	357		354
Pension (a)	268		249
Other	2,875		3,287
Total current other liabilities and deferred revenue	$	19,531	$	19,089
Non-current
Pension (a)	$	9,024	$	9,543
OPEB	5,362		5,347
Dealer and dealers’ customer allowances and claims	3,146		2,731
Deferred revenue	3,639		3,285
Employee benefit plans	1,112		1,041
Other	1,369		1,510
Total non-current other liabilities and deferred revenue	$	23,652	$	23,457

__________

(a)

Balances at September 30, 2016 reflect pension liabilities at December 31, 2015, updated for service and interest cost, expected return on assets, separation expense, actual benefit payments, and cash contributions. The discount rate and rate of expected return assumptions are unchanged from year-end 2015. Included in Other assets are pension assets of $2.3 billion and $1.6 billion at September 30, 2016 and December 31, 2015, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. RETIREMENT BENEFITS

Defined Benefit Plans - Expense

The pre-tax expense for our defined benefit pension and OPEB plans for the periods ended September 30 was as follows (in millions):



	Third Quarter
	Pension Benefits
	U.S. Plans				Non-U.S. Plans				Worldwide OPEB
	2016		2015		2016		2015		2016		2015
Service cost	$	128	$	147	$	116	$	133	$	13	$	15
Interest cost	381		454		190