F O R D M O T O R C O M P A N Y
2 0 1 6 A N N U A L R E P O R T
As Ford Motor Company
continues to expand from an
auto company to an auto and a
mobility company, the company
remains focused on building on
its global leadership in trucks,
vans, commercial vehicles and
performance vehicles, while
growing its global strength
in utility vehicles.
At the same time, Ford is
transforming underperforming
parts of its business, including
luxury, small vehicles and
emerging markets.
In addition, Ford is driving
for leadership in three
emerging opportunity areas –
electrification, autonomy
and mobility.
On the Cover
Pictured on the front cover,
clockwise from top left:
Ford Super Duty, Chariot
(a crowd-sourced ride-sharing
service), Ford GT supercar,
Ford Fusion Energi plug-in
hybrid, Ford Explorer, Lincoln
interior, next-generation Ford
Fusion Hybrid autonomous
development vehicle, Ford Ka+
and Ford Mustang.
Pictured on back cover:
A selection of Ford’s milestones
and exciting announcements
from 2016. The back cover
features a selection of those
announcements that correspond
to an image on the front cover.
FINANCIAL HIGHLIGHTS
(in billions, except for percentages)
2015
2016
Automotive Segment
Revenue
Operating margin
Operating cash flow
Ford Credit
Pre-tax profit
Total Company
$ 140.6
$ 141.5
6.8%
6.7%
$ 7.3
$ 6.4
$ 2.1
$ 1.9
Net income attributable to Ford Motor Company
$ 7.4
$ 4.6
Adjusted pre-tax profit (a)
$ 10.8
$ 10.4
(a) See pages 25 and 82 of Ford’s 2016 Form 10-K for definition and reconciliation to GAAP.
CREATING VALUE
GROWTH
Revenue growth that drives
profit growth
RISK
Optimized risk profile
Visit our Annual Report online
for detailed company information
and visual content:
annualreport.ford.com
RETURNS
REWARDS
ROIC > Cost of Capital and Margins
8%+ Core, 20% New
Top quartile
shareholder returns
Our financial objectives are focused on the drivers of value
LETTER FROM OUR
EXECUTIVE CHAIRMAN
William Clay Ford, Jr.
While our industry is changing faster than it has in the last 100
years, we know that our fundamental mission of making people’s
lives better remains the same. For us, that means continuing to
make great cars, SUVs and trucks, but also embracing emerging
opportunities to move people in new ways.
In 2016, we made significant progress toward that goal.
We delivered a substantial profit and achieved our seventh
consecutive year of solid earnings and positive operating-related
cash flow.
In our core automotive business, we maintained our strong
momentum by launching 11 new vehicles in 2016. We also
announced that we will be adding 13 new electrified vehicle
nameplates globally to our product portfolio in the next five years.
As the auto industry enters a new era of connectivity and smart
mobility, we also are developing new ways to move people and
things. That’s because mobility can impact every facet of our lives.
For many of us, traffic jams are an inconvenience, but the lack
of mobility has a much more profound impact on the most
vulnerable members of our society.
Take, for instance, the ability to get to work. Not having reliable
transportation is what makes a person leave a good job or limits
their job search because they cannot get to certain locations. Just
imagine the possibilities if we can provide new mobility solutions
that could help people get to better jobs and, by extension, create
economic opportunity.
When you start to lose the ability to move around quickly, easily
and safely, it can become a human rights issue. Mobility is as
essential to our well-being as is access to things like health care,
clean drinking water and food, or a safe place to live.
To address this and other challenges, we launched Ford Smart
Mobility LLC, a new subsidiary formed to design, build, grow and
invest in emerging mobility services. Our crowd-sourced shuttle
service, Chariot, also is providing new transportation options in
select U.S. cities and will continue to expand.
We also strengthened our leadership in bringing self-driving
vehicles to market by announcing our next-generation Fusion
Hybrid autonomous development vehicle and expanding our
autonomous vehicle test fleet. This year we plan to further expand
the fleet and begin testing in Europe.
“As the auto industry enters a
new era of connectivity and smart
mobility we also are developing new
ways to move people and things.
That’s because mobility can impact
every facet of our lives.”
We know, however, that meeting these challenges takes more
than just launching new products. That is why we established our
City Solutions team, the only one of its kind in the auto industry,
to work with municipalities to propose, pilot and develop mobility
solutions tailored to individual communities.
These, and all our other smart mobility efforts, will help us
preserve and promote mobility by solving transportation
challenges worldwide for future generations. We view it as both
an exciting opportunity and a big responsibility.
Our Board of Directors and entire leadership team continue to
focus on delivering business results in the present, while creating
value and opportunity for the future. Through our products and
services, investments and philanthropy, and the contributions of
our employees, we are strengthening communities and improving
people’s lives around the world.
Thank you for your continued support of our efforts.
Mobility solutions include Chariot
shuttle service and Ford GoBike
William Clay Ford, Jr.
Executive Chairman
2018 Ford EcoSport
2017 Ford C-MAX Energi plug-in hybrid
Ford ExxonMobil’s Speedpass+
LETTER FROM OUR
PRESIDENT AND CEO
Mark Fields
It is a very exciting and transformational time for everyone
associated with the Ford Motor Company.
We are continuing to deliver consistently strong results in our core
automotive business, and, at the same time, rapidly developing
and investing in new mobility platforms that will help make
people’s lives better while growing our business profitability.
Our plan for creating value going forward is simple and
straightforward: continue our expansion from an auto company to
an auto and a mobility company.
To do this, we are making choices on where to play, where not to
play and how to win, focusing on three sets of strategic priorities,
which include:
• Fortifying the strengths in our core business;
• Transforming the traditionally underperforming parts of our core
(cid:1)(cid:1)(cid:1)business; and
• Growing in emerging opportunities, including leading in(cid:1)(cid:1)
(cid:1)(cid:1)(cid:1)electrification, autonomy and mobility.
Our core business is a strength we are building on, including
growing our global leadership in trucks, vans, commercial and
performance vehicles, while establishing an even stronger
position in SUVs.
“Our plan for creating value
going forward is simple and
straightforward: continue our
expansion from an auto company to
an auto and a mobility company.”
Globally, we launched 11 new vehicles in 2016 – like the all-new
Super Duty and the new Escape. Our plan is to launch 11 more in
2017 – including a new F-150, EcoSport, Focus Electric, all-new
Fiesta and Expedition, as well as an all-new Lincoln Navigator.
Our vehicle leadership comes because we know our customers and
what they want.
At the same time, we understand priorities are changing. The
world is moving from just owning vehicles to owning and accessing
shared vehicles. This is causing us to think very differently. It’s
not just about selling vehicles but also providing transportation
services at the same time.
As we move forward in our business expansion, we are working to
use that understanding as we pursue emerging opportunities.
In electrification, we are focusing on our strengths – trucks,
commercial vehicles, utilities and performance vehicles – to give
our customers more of what they love about our products today,
like greater capability, more productivity and better fuel economy.
In the next five years, we will launch 13 new electrified vehicles,
including hybrid versions of the F-150 and Mustang, and an all-new
fully electric SUV that will deliver an estimated range of at least
300 miles. Plus, we are testing wireless charging technology that
charges a car simply by parking over a charging pad.
In autonomy, our intent is to have an SAE level 4 fully autonomous
vehicle – with no steering wheel, brake or gas pedal – in
commercial operation in 2021. On the way to achieving that
milestone, we recently introduced our next-generation Fusion
Hybrid autonomous development vehicle and expanded our
autonomous test fleet.
2017 Ford F-Series Super Duty
2018 Ford Expedition
Next-generation Ford Fusion Hybrid autonomous development vehicle
2018 Ford Mustang
In mobility, Ford Smart Mobility LLC, our new subsidiary, is focused
on building technology platforms to support connectivity for
both our shared- and owned-business models, while aggressively
developing new products and services. For example, we acquired
Chariot, an app-based, crowd-sourced shuttle service. It currently is
available in San Francisco and Austin, and we have plans to expand
to eight cities by the end of 2017 – including at least one globally.
In addition to fortifying our core business and growing emerging
opportunities, we also remain focused on transforming
underperforming businesses. This includes generating appropriate
returns on Lincoln, small vehicles and emerging markets. Recent
progress includes Lincoln sales and satisfaction gains, resourcing
small vehicle sourcing to low-cost countries and discontinuing
sales operations in Japan and Indonesia and manufacturing
operations in Australia.
“In mobility, Ford Smart Mobility
LLC, our new subsidiary, is focused
on building technology platforms
to support connectivity for both our
shared- and owned-business models”
2017 Ford Edge Vignale
Satisfying customers – a top priority
2017 Lincoln Continental
FordPass
How are these efforts paying off?
In 2016, we achieved our second-best year ever, with a full-year
adjusted pre-tax profit of $10.4 billion, following our all-time record
set in 2015.
We also achieved a solid net income of $4.6 billion, down from last
year due to a $3 billion pre-tax pension remeasurement loss.
Ford Credit also delivered another year of solid performance with a
$1.9 billion pre-tax profit.
Our continued success enabled us to reward our shareholders by
distributing $3.5 billion to shareholders in 2016, including our first
supplemental dividend of $1 billion.
Overall, we maintained a strong cash and liquidity profile, including
automotive cash of $27.5 billion and net cash of $11.6 billion.
Looking ahead, we anticipate another good year for our company
and our shareholders in 2017. We expect our full-year results to
be strong, but lower than 2016, driven primarily by increased
investments in emerging opportunities. We expect profitability to
improve in 2018.
The bottom line: The biggest strategic shift in the history of our
company is well under way and gaining momentum. Even as we make
this business-model expansion, we continue to deliver historically
high financial results.
We have come a long way, and we are eager to Go Further with
everyone associated with Ford.
Mark Fields
President and Chief Executive Officer
Ford Transit Custom plug-in hybrid
BOARD OF DIRECTORS
SENIOR LEADERSHIP TEAM
William Clay Ford, Jr.
Executive Chairman and
Chairman of the Board
Stephen G. Butler
Kimberly A. Casiano
Anthony F. Earley, Jr.
Mark Fields
Edsel B. Ford II
James H. Hance, Jr.
William W. Helman IV
Jon M. Huntsman, Jr.
William E. Kennard
John C. Lechleiter
Ellen R. Marram
Lead Independent Director
Gerald L. Shaheen
John L. Thornton
Lynn M. Vojvodich
John S. Weinberg
Pictured from left to right (front row):
John Casesa
Group Vice President, Global Strategy
Bradley M. Gayton
Group Vice President and General Counsel
Ray Day
Group Vice President, Communications
Ziad S. Ojakli
Group Vice President,
Government and Community Relations
(back row):
Hau Thai-Tang
Group Vice President, Global Purchasing
Kimberly L. Pittel
Group Vice President, Sustainability,
Environment and Safety Engineering
Kumar A. Galhotra
Vice President and President, Lincoln
Bennie Fowler
Group Vice President,
Quality and New Model Launch
Bruce Hettle
Group Vice President,
Manufacturing and Labor Affairs
Joy Falotico
Group Vice President, Chairman and Chief
Executive Officer, Ford Motor Credit Company
James D. Farley, Jr.
Executive Vice President and
President, Europe, Middle East & Africa
Mark Fields
President and Chief Executive Officer
Joseph R. Hinrichs
Executive Vice President and
President, The Americas
Dave Schoch
Group Vice President and President,
Asia Pacific
Raj Nair
Executive Vice President and Chief Technical
Officer, Global Product Development
Bob Shanks
Executive Vice President and
Chief Financial Officer
Stephen T. Odell
Executive Vice President, Global Marketing,
Sales and Service
Marcy S. Klevorn
Group Vice President, Information Technology
and Chief Information Officer
Felicia Fields
Group Vice President, Human Resources
and Corporate Services
James P. Hackett
Chairman, Ford Smart Mobility LLC
VICE PRESIDENTS
Steven R. Armstrong
Vice President and Chief Operating Officer,
Ford of Europe
Peter D. Fleet
Vice President, Marketing, Sales and Service,
Asia Pacific
Joseph Bakaj
Vice President, Product Development,
Ford of Europe
Birgit A. Behrendt
Vice President, Global Programs and
Purchasing Operations
Elena A. Ford
Vice President, Global Dealer and Consumer
Experience
Nigel C. Harris
Vice President and President, Changan Ford
Automobile Corporation Ltd.
Stephen E. Biegun
Vice President, International Governmental
Affairs
James P. Holland
Vice President, Vehicle Component and
Systems Engineering
Moray S. Callum
Vice President, Design
Linda G. Cash
Vice President, Manufacturing, Ford of Europe
Roelant de Waard
Vice President, Marketing, Sales and Service,
Ford of Europe
William P. Dirksen
Vice President, Labor Affairs
Robert J. Fascetti
Vice President, Powertrain Engineering
Gary A. Johnson
Vice President, North America Manufacturing
Burt R. Jordan
Vice President, Global Vehicle and Powertrain
Purchasing and Supplier Diversity
Mark LaNeve
Vice President, U.S. Marketing, Sales
and Service
John Lawler
Vice President and Controller
Stuart J. Rowley
Vice President, Strategy
William P. Russo
Vice President, Manufacturing, Asia Pacific
Neil M. Schloss
Vice President and Treasurer
Musa Tariq
Vice President and Chief Brand Officer
Frederiek Toney
Vice President and President, Global Ford
Customer Service Division
Kenneth E. Washington
Vice President, Research and Advanced
Engineering
Lyle A. Watters
Vice President and
President, Ford South America
Trevor Worthington
Vice President, Product Development,
Asia Pacific
CORPORATE GOVERNANCE
Ford has a long history of operating under sound corporate
governance practices. Our corporate officers and board of directors
are dedicated to serving the interests of our shareholders and
creating long-term value. Our creating value roadmap is designed to
ensure that our business manages risk and continues to operate in a
transparent and accountable way.
• We were the only automaker named to Ethisphere Institute’s list
of 2016 World’s Most Ethical Companies, an honor we have been
awarded for seven consecutive years.
• Our optimized leadership structure allows the CEO to focus
on leading the organization while the chairman focuses on
leading the board. This, combined with a lead independent director,
ensures management adequately addresses matters identified
by the board. Our board includes a diverse range of international
experience in finance, technology, manufacturing, marketing and
government.
• Our global leadership team meets at least weekly in business plan
and special attention review meetings to monitor the business
environment. This process includes a review of the status
of the business, risks and opportunities and specific plans to
address them.
• Our executives’ compensation is tied to performance against
defined metrics that are aligned with our strategic objectives to
incentivize focus on strengthening our business for the long term.
• Our shareholders are asked to approve executive compensation
with an annual say-on-pay vote; investors supported the
compensation of named executives with 97 percent of votes cast
“for” in 2015 and 2016.
• We promote a culture of compliance and ethics across our business
and around the world, formalized in company policies and
reinforced by management. Our communication campaign builds
on our brand promise to Go Further – The Right Way and we provide
on-line training and certification for all employees.
To read our latest proxy statement, visit corporate.ford.com
SUSTAINABILITY
High standards of governance are key to maintaining the trust
of investors and all of our stakeholders.
Ford is committed to acting responsibly in the interests of our
shareholders, and that includes accountability for our wider impact
on the world around us. We integrate sustainability into everything
we do. Our dedicated sustainability, environment and safety
engineering function reports directly to the CEO.
Each June, we release our Sustainability Report, which details our
performance and progress toward our sustainability and corporate
responsibility goals. Since 2000, we have reported on how we
are working to improve our business, our supply chain and our
communities. In our 2015-2016 report, we highlighted several areas
we are focused on to help make people’s lives better around the
world:
• In the U.S. to date, we have sold more than 500,000 electrified
vehicles including hybrid, plug-in hybrid and full battery electric
powertrains. We are investing $4.5 billion in electrified vehicle
solutions, adding 13 new electrified vehicles to our global portfolio
within the next five years.
• We are the only North American consumer discretionary company
to earn CDP’s highest honor for corporate water stewardship.
• We reduced our manufacturing CO2 emissions by 26.5 percent per
vehicle produced between 2010 and 2015, and our average energy
use by 25 percent.
• We trained or retrained 3,156 total supplier sites in sustainability
management since 2005.
• We celebrated the 10-year anniversary of the Ford Volunteers Corps
in 2016. Since 2005, more than 265,000 Ford volunteer participants
have provided more than 1.2 million hours of work on 11,325 global
community service projects in 48 countries.
• We launched Thirty Under 30, a program dedicated to developing
the next generation of philanthropic leaders within the company.
To read our latest Sustainability Report, visit sustainability.ford.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2016
or
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
(State of incorporation)
38-0549190
(I.R.S. Employer Identification No.)
One American Road, Dearborn, Michigan
(Address of principal executive offices)
48126
(Zip Code)
313-322-3000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered*
Common Stock, par value $.01 per share
New York Stock Exchange
__________
* In addition, shares of Common Stock of Ford are listed on certain stock exchanges in Europe.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Y
Y
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. Y
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).
Y
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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
Non-accelerated
Accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Y
As of June 30, 2016, Ford had outstanding 3,902,375,117 shares of Common Stock and 70,852,076 shares of Class
B Stock. Based on the New York Stock Exchange Composite Transaction closing price of the Common Stock on that date
($12.57 per share), the aggregate market value of such Common Stock was $49,052,855,221. Although there is no
quoted market for our Class B Stock, shares of Class B Stock may be converted at any time into an equal number of
shares of Common Stock for the purpose of effecting the sale or other disposition of such shares of Common Stock. The
shares of Common Stock and Class B Stock outstanding at June 30, 2016 included shares owned by persons who may
be deemed to be “affiliates” of Ford. We do not believe, however, that any such person should be considered to be an
affiliate. For information concerning ownership of outstanding Common Stock and Class B Stock, see the Proxy
Statement for Ford’s Annual Meeting of Stockholders currently scheduled to be held on May 11, 2017 (our “Proxy
Statement”), which is incorporated by reference under various Items of this Report as indicated below.
As of January 31, 2017, Ford had outstanding 3,903,445,093 shares of Common Stock and 70,852,076 shares of
Class B Stock. Based on the New York Stock Exchange Composite Transaction closing price of the Common Stock on
that date ($12.36 per share), the aggregate market value of such Common Stock was $48,246,581,349.
DOCUMENTS INCORPORATED BY REFERENCE
Document
Proxy Statement*
Where Incorporated
Part III (Items 10, 11, 12, 13, and 14)
__________
*
As stated under various Items of this Report, only certain specified portions of such document are incorporated by
reference in this Report.
Exhibit Index begins on page 102
FORD MOTOR COMPANY
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2016
Table of Contents
Page
Item 1
Part I
Business
Overview
Automotive Segment
Financial Services Segment
Governmental Standards
Employment Data
Engineering, Research, and Development
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2
Item 3
Item 4
Item 4A Executive Officers of Ford
Properties
Legal Proceedings
Mine Safety Disclosures
Item 5
Item 6
Item 7
Part II
Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Results of Operations - 2016
Automotive Segment
Financial Services Segment
All Other
Special Items
Taxes
Results of Operations - 2015
Automotive Segment
Financial Services Segment
All Other
Special Items
Taxes
Liquidity and Capital Resources
Credit Ratings
2017 Industry and GDP Planning Assumptions
Production Volumes
Outlook
Non-GAAP Financial Measure Reconciliations
2016 Supplemental Financial Information
Critical Accounting Estimates
Accounting Standards Issued But Not Yet Adopted
Aggregate Contractual Obligations
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9
i
1
2
2
5
6
10
11
11
17
18
20
21
22
23
24
25
25
31
33
45
49
50
50
51
53
64
65
66
66
67
76
77
78
79
82
84
88
94
95
96
99
99
Table of Contents
(continued)
Item 9A Controls and Procedures
Item 9B Other Information
Part III
Item 10 Directors, Executive Officers of Ford, and Corporate Governance
Item 11
Item 12
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13 Certain Relationships and Related Transactions, and Director Independence
Item 14
Principal Accounting Fees and Services
Part IV
Item 15
Exhibits and Financial Statement Schedules
Item 16
Form 10-K Summary
Signatures
Ford Motor Company and Subsidiaries Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Equity
Notes to the Financial Statements
Schedule II — Valuation and Qualifying Accounts
100
100
101
101
101
101
101
102
105
106
FS-1
FS-2
FS-2
FS-3
FS-4
FS-5
FS-6
FSS-1
ii
ITEM 1. Business.
PART I.
Ford Motor Company was incorporated in Delaware in 1919. We acquired the business of a Michigan company, also
known as Ford Motor Company, which had been incorporated in 1903 to produce and sell automobiles designed and
engineered by Henry Ford. We are a global automotive and mobility company based in Dearborn, Michigan. With about
201,000 employees and 62 plants worldwide, our core business includes designing, manufacturing, marketing, and
servicing a full line of Ford cars, trucks, and SUVs, as well as Lincoln luxury vehicles. To expand our business model, we
are aggressively pursuing emerging opportunities with investments in electrification, autonomy, and mobility. We provide
financial services through Ford Motor Credit Company LLC (“Ford Credit”).
In addition to the information about Ford and our subsidiaries contained in this Annual Report on Form 10-K for the
year ended December 31, 2016 (“2016 Form 10-K Report” or “Report”), extensive information about our Company can be
found at http://corporate.ford.com, including information about our management team, our brands and products, and our
corporate governance principles.
The corporate governance information on our website includes our Corporate Governance Principles, Code of Ethics
for Senior Financial Personnel, Code of Ethics for the Board of Directors, Code of Corporate Conduct for all employees,
and the Charters for each of the Committees of our Board of Directors. In addition, any amendments to our Code of
Ethics or waivers granted to our directors and executive officers will be posted on our corporate website. All of these
documents may be accessed by going to our corporate website, or may be obtained free of charge by writing to our
Shareholder Relations Department, Ford Motor Company, One American Road, P.O. Box 1899, Dearborn, Michigan
48126-1899.
Our recent periodic reports filed with the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge at http://shareholder.ford.com.
This includes recent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K,
as well as any amendments to those Reports. Recent Section 16 filings made with the SEC by the Company or any of
our executive officers or directors with respect to our Common Stock also are made available free of charge through our
website. We post each of these documents on our website as soon as reasonably practicable after it is electronically filed
with the SEC. Our reports filed with the SEC also may be found on the SEC’s website at www.sec.gov.
The foregoing information regarding our website and its content is for convenience only and not deemed to be
incorporated by reference into this Report nor filed with the SEC.
1
Item 1. Business (Continued)
OVERVIEW
Segments. We have four operating segments that represent the primary businesses reported in our consolidated
financial statements: Automotive, Financial Services, Ford Smart Mobility LLC, and Central Treasury Operations.
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 five 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 Motor Credit Company LLC (“Ford Credit”).
All Other. Ford Smart Mobility LLC and Central Treasury Operations are combined in All Other. See Note 4 of the
Notes to the Financial Statements for more information regarding All Other.
AUTOMOTIVE SEGMENT
General
Our vehicle brands are Ford and Lincoln. In 2016, we sold approximately 6,651,000 vehicles at wholesale throughout
the world. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” (“Item 7”) for discussion of our calculation of wholesale unit volumes.
Substantially all of our vehicles, parts, and accessories are sold through distributors and dealers (collectively,
“dealerships”), the substantial majority of which are independently owned. At December 31, 2016, the approximate
number of dealerships worldwide distributing our vehicle brands was as follows:
Brand
Ford
Ford-Lincoln (combined)
Lincoln
Total
Number of Dealerships
at December 31, 2016
10,608
915
214
11,737
We do not depend on any single customer or a few customers to the extent that the loss of such customers would
have a material adverse effect on our business.
In addition to the products we sell to our dealerships for retail sale, we also sell vehicles to our dealerships for sale to
fleet customers, including commercial fleet customers, daily rental car companies, and governments. We also sell parts
and accessories, primarily to our dealerships (which in turn sell these products to retail customers) and to authorized parts
distributors (which in turn primarily sell these products to retailers). We also offer extended service contracts.
The worldwide automotive industry is affected significantly by general economic conditions over which we have little
control. Vehicles are durable goods, and consumers have latitude in determining whether and when to replace an existing
vehicle. The decision whether to purchase a vehicle may be affected significantly by slowing economic growth,
geopolitical events, and other factors (including the cost of purchasing and operating cars and trucks and the availability
and cost of financing and fuel). As we have seen in the United States and Europe, in particular, the number of cars and
trucks sold may vary substantially from year to year. Further, the automotive industry is a highly competitive business that
has a wide and growing variety of product offerings from a growing number of manufacturers.
Our wholesale unit volumes vary with the level of total industry demand and our share of that industry demand. Our
wholesale unit volumes also are influenced by the level of dealer inventory. Our share is influenced by how our products
are perceived in comparison to those offered by other manufacturers based on many factors, including price, quality,
styling, reliability, safety, fuel efficiency, functionality, and reputation. Our share also is affected by the timing and
frequency of new model introductions. Our ability to satisfy changing consumer preferences with respect to type or size of
vehicle, as well as design and performance characteristics, affects our sales and earnings significantly.
2
Item 1. Business (Continued)
As with other manufacturers, the profitability of our business is affected by many factors, including:
• Wholesale unit volumes
• Margin of profit on each vehicle sold - which in turn is affected by many factors, such as:
Market factors - volume and mix of vehicles and options sold, and net pricing (reflecting, among other factors,
incentive programs)
Costs of components and raw materials necessary for production of vehicles
Costs for customer warranty claims and additional service actions
Costs for safety, emissions, and fuel economy technology and equipment
A high proportion of relatively fixed structural costs, so that small changes in wholesale unit volumes can
significantly affect overall profitability
•
Our industry has a very competitive pricing environment, driven in part by industry excess capacity, which is
concentrated in Europe and Asia but affects other markets because much of this capacity can be redirected to other
markets. The decline in the value of the yen during the past four years also has contributed significantly to competitive
pressures in many of our markets. For the past several decades, manufacturers typically have given price discounts and
other marketing incentives to maintain market share and production levels. A discussion of our strategies to compete in
this pricing environment is set forth in the “Overview” section in Item 7.
Competitive Position. The worldwide automotive industry consists of many producers, with no single dominant
producer. Certain manufacturers, however, account for the major percentage of total sales within particular countries,
especially their countries of origin. Key competitors with global presence include Fiat Chrysler Automobiles, General
Motors Company, Honda Motor Company, Hyundai-Kia Automotive Group, PSA Peugeot Citroen, Renault-Nissan B.V.,
Suzuki Motor Corporation, Toyota Motor Corporation, and Volkswagen AG Group.
Seasonality. We generally record the sale of a vehicle (and recognize revenue) when it is produced and shipped or
delivered to our customer (i.e., the dealership). See the “Overview” section in Item 7 for additional discussion of revenue
recognition practices.
We manage our vehicle production schedule based on a number of factors, including retail sales (i.e., units sold by
our dealerships to their customers at retail) and dealer stock levels (i.e., the number of units held in inventory by our
dealerships for sale to their customers). Historically, we have experienced some seasonal fluctuation in the business, with
production in many markets tending to be higher in the first half of the year to meet demand in the spring and summer
(typically the strongest sales months of the year).
Backlog Orders. We generally produce and ship our products on average within approximately 20 days after an order
is deemed to become firm. Therefore, no significant amount of backlog orders accumulates during any period.
Raw Materials. We purchase a wide variety of raw materials from numerous suppliers around the world for use in
production of our vehicles. These materials include base metals (e.g., steel, iron castings, and aluminum), precious
metals (e.g., palladium), energy (e.g., natural gas), and plastics/resins (e.g., polypropylene). We believe we have
adequate supplies or sources of availability of raw materials necessary to meet our needs. There always are risks and
uncertainties with respect to the supply of raw materials, however, which could impact availability in sufficient quantities to
meet our needs. See the “Overview” section of Item 7 for a discussion of commodity and energy price trends, and
“Item 7A. Quantitative and Qualitative Disclosures about Market Risk” (“Item 7A”) for a discussion of commodity price
risks.
Intellectual Property. We own or hold licenses to use numerous patents, copyrights, and trademarks on a global
basis. Our policy is to protect our competitive position by, among other methods, filing U.S. and international patent
applications to protect technology and improvements that we consider important to the development of our business. We
have generated a large number of patents, and expect this portfolio to continue to grow as we actively pursue additional
technological innovation. We have approximately 48,000 active patents and pending patent applications globally, with an
average age for patents in our active patent portfolio of just over five years. In addition to this intellectual property, we
also rely on our proprietary knowledge and ongoing technological innovation to develop and maintain our competitive
position. Although we believe these patents, patent applications, and know-how, in the aggregate, are important to the
conduct of our business, and we obtain licenses to use certain intellectual property owned by others, none is individually
considered material to our business. We also own numerous trademarks and service marks that contribute to the identity
and recognition of our Company and its products and services globally. Certain of these marks are integral to the conduct
of our business, a loss of any of which could have a material adverse effect on our business.
3
Item 1. Business (Continued)
Warranty Coverage, Field Service Actions, and Customer Satisfaction Actions. We provide warranties on vehicles we
sell. Warranties are offered for specific periods of time and/or mileage, and vary depending upon the type of product and
the geographic location of its sale. Pursuant to these warranties, we will repair, replace, or adjust all parts on a vehicle
that are defective in factory-supplied materials or workmanship during the specified warranty period. In addition to the
costs associated with this warranty coverage provided on our vehicles, we also incur costs as a result of field service
actions (i.e., safety recalls, emission recalls, and other product campaigns), and for customer satisfaction actions.
For additional information regarding warranty and related costs, see “Critical Accounting Estimates” in Item 7 and
Note 24 of the Notes to the Financial Statements.
Industry Volume, Market Share, and Wholesales
Our industry volume, market share, and wholesale unit volume in each region and in certain key markets within each
region during the past three years were as follows:
Industry Volume (a)
(in millions of units)
Market Share (b)
(as a percentage)
Wholesales (c)
(in thousands of units)
2014
2015
2016
2014
2015
2016
2014
2015
2016
United States
Canada
Mexico
North America
Brazil
Argentina
South America
United Kingdom
Germany
Russia
Turkey
Europe
Middle East & Africa
China
Australia
India
ASEAN (d)
Asia Pacific (e)
Global
Total Company
16.8
1.9
1.2
20.2
3.5
0.7
5.3
2.8
3.4
2.5
0.8
18.6
4.3
24.0
1.1
3.2
3.2
39.7
88.1
N/A
17.8
1.9
1.4
21.5
2.6
0.6
4.2
3.1
3.5
1.6
1.0
19.2
4.3
23.5
1.2
3.5
3.1
39.1
88.2
N/A
17.9
2.0
1.6
21.8
2.1
0.7
3.7
3.1
3.7
1.5
1.0
20.1
3.6
26.4
1.2
3.7
3.1
42.1
91.4
N/A
14.7%
14.7%
14.6%
2,457
2,677
2,588
15.5
6.9
14.2
14.4
6.4
14.0
15.4
6.2
13.9
288
77
285
93
313
103
2,842
3,073
3,019
9.4%
10.4%
9.2%
14.1
8.9
14.9
9.6
13.6
8.8
14.4%
14.3%
14.0%
7.1
2.6
11.7
7.2
4.6%
4.5%
7.2
2.4
3.1
3.5
7.1%
N/A
7.3
2.4
12.6
7.7
4.4%
4.8%
6.1
2.1
3.3
3.6
7.4%
N/A
320
94
463
425
237
57
91
250
94
381
447
261
38
128
182
101
325
428
283
45
116
1,387
1,530
1,539
7.6
2.9
11.4
7.7
4.5%
192
187
161
4.8%
1,116
1,160
1,267
6.9
2.4
3.7
3.8
80
77
94
71
78
94
1,439
1,464
7.3%
N/A
N/A
6,323
N/A
6,635
82
86
115
1,607
N/A
6,651
______________
(a)
Industry volume is an internal estimate based on publicly-available data collected from various government, private, and public sources around the
globe and is based, in part, on estimated vehicle registrations; includes medium and heavy trucks.
(b) Market share represents reported retail sales of our brands as a percent of total industry volume in the relevant market or region. Market share is
based, in part, on estimated vehicle registrations; includes medium and heavy trucks.
(c) Wholesale unit volume includes sales of medium and heavy trucks. Wholesale unit volume includes all Ford and Lincoln badged units (whether
produced by Ford or by an unconsolidated affiliate) that are sold to dealerships, units manufactured by Ford that are sold to other manufacturers,
units distributed for other manufacturers, and local brand units produced by our unconsolidated Chinese joint venture Jiangling Motors Corporation,
Ltd. (“JMC”) that are sold to dealerships. Vehicles sold to daily rental car companies that are subject to a guaranteed repurchase option (i.e., rental
repurchase), as well as other sales of finished vehicles for which the recognition of revenue is deferred (e.g., consignments), also are included in
wholesale unit volume. Revenue from certain vehicles in wholesale unit volume (specifically, Ford badged vehicles produced and distributed by our
unconsolidated affiliates, as well as JMC brand vehicles) are not included in our revenue.
(d) ASEAN includes Indonesia, Philippines, Thailand, Vietnam, and Malaysia.
(e) Asia Pacific market share includes Ford brand and JMC brand vehicles produced and sold by our unconsolidated affiliates.
4
Item 1. Business (Continued)
FINANCIAL SERVICES SEGMENT
Ford Motor Credit Company LLC
Our wholly-owned subsidiary Ford Credit offers a wide variety of automotive financing products to and through
automotive dealers throughout the world. The predominant share of Ford Credit’s business consists of financing our
vehicles and supporting our dealers. Ford Credit earns its revenue primarily from payments made under retail installment
sale and lease contracts that it originates and purchases; interest rate supplements and other support payments from us
and our subsidiaries; and payments made under dealer financing programs.
As a result of these financing activities, Ford Credit has a large portfolio of finance receivables and operating leases
which it classifies into two portfolios— “consumer” and “non-consumer.” Finance receivables and operating leases in the
consumer portfolio include products offered to individuals and businesses that finance the acquisition of our vehicles from
dealers for personal and commercial use. Retail financing includes retail installment sale contracts for new and used
vehicles and direct financing leases for new vehicles to retail and commercial customers including leasing companies,
government entities, daily rental companies, and fleet customers. Finance receivables in the non-consumer portfolio
include products offered to automotive dealers. Ford Credit makes wholesale loans to dealers to finance the purchase of
vehicle inventory (i.e., 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 vehicle programs. Ford
Credit also purchases receivables generated by us and our subsidiaries, primarily related to the sale of parts and
accessories to dealers, Ford-related loans, and certain used vehicles from daily rental fleet companies.
Ford Credit does business in the United States and Canada through business centers. Outside of the United States,
Europe is Ford Credit’s largest operation. Ford Credit’s European operations are managed through its United Kingdom-
based subsidiary, FCE Bank plc (“FCE”). Within Europe, FCE’s largest markets are the United Kingdom and Germany,
representing 65% of FCE’s finance receivables and operating leases at year-end 2016.
The following table shows Ford Credit’s financing shares of new Ford and Lincoln vehicle retail sales in the United
States and new Ford vehicles sold in Europe, as well as its wholesale financing shares of new Ford and Lincoln vehicles
acquired by dealers in the United States (excluding fleet) and new Ford vehicles acquired by dealers in Europe:
United States - Financing Share
Retail installment and lease share of Ford retail sales
Wholesale
Europe - Financing Share
Retail installment and lease share of total Ford sales
Wholesale
Years Ended December 31,
2014
2015
2016
63%
77
36%
98
65%
76
37%
98
56%
76
37%
98
See Item 7 and Notes 6, 7, and 8 of the Notes to the Financial Statements for a detailed discussion of Ford Credit’s
receivables, credit losses, allowance for credit losses, loss-to-receivables ratios, funding sources, and funding strategies.
See Item 7A for discussion of how Ford Credit manages its financial market risks.
We routinely sponsor special retail and lease incentives to dealers’ customers who choose to finance or lease our
vehicles from Ford Credit. In order to compensate Ford Credit for the lower interest or lease payments offered to the retail
customer, we pay the value of the incentive directly to Ford Credit when it originates the retail finance or lease contract.
These programs increase Ford Credit’s financing volume and share. See Note 2 of the Notes to the Financial Statements
for information about our accounting for these programs.
We have an Amended and Restated Relationship Agreement with Ford Credit, pursuant to which, if Ford Credit’s
managed leverage for a calendar quarter were to be higher than 11.5:1 (as reported in its most recent periodic report),
Ford Credit could require us to make or cause to be made a capital contribution to it in an amount sufficient to have
caused such managed leverage to have been 11.5:1. No capital contributions have been made pursuant to this
agreement. The agreement also allocates to Ford Credit $3 billion of commitments under our corporate credit facility. In a
separate agreement with FCE, Ford Credit also has agreed to maintain FCE’s net worth in excess of $500 million; no
payments have been made pursuant to that agreement.
5
Item 1. Business (Continued)
GOVERNMENTAL STANDARDS
Many governmental standards and regulations relating to safety, fuel economy, emissions control, noise control,
vehicle recycling, substances of concern, vehicle damage, and theft prevention are applicable to new motor vehicles,
engines, and equipment manufactured for sale in the United States, Europe, and elsewhere. In addition, manufacturing
and other automotive assembly facilities in the United States, Europe, and elsewhere are subject to stringent standards
regulating air emissions, water discharges, and the handling and disposal of hazardous substances. The most significant
of the standards and regulations affecting us are discussed below:
Vehicle Emissions Control
U.S. Requirements – Federal and California Emission Standards. The federal Clean Air Act imposes stringent limits
on the amount of regulated pollutants that lawfully may be emitted by new vehicles and engines produced for sale in the
United States. In 2014, the U.S. Environmental Protection Agency (“EPA”) finalized new “Tier 3” regulations that phase in
increasingly stringent motor vehicle emission standards beginning with the 2017 model year. Pursuant to the Clean Air
Act, California may establish its own vehicle emission standards, which can then be adopted by other states. The
California Air Resources Board (“CARB”) has adopted “LEV III” standards, which took effect with the 2015 model year and
impose increasingly stringent tailpipe and evaporative emissions requirements for light and medium duty vehicles.
Thirteen states, primarily located in the Northeast and Northwest, have adopted the LEV III standards. Compliance with
both the Tier 3 and LEV III standards could be challenging.
Both federal and California regulations require motor vehicles to be equipped with on-board diagnostic (“OBD”)
systems that monitor emission-related systems and components. As OBD requirements become more complex and
challenging over time, they could lead to increased vehicle recalls and warranty costs. Compliance with automobile
emission standards depends in part on the widespread availability of high-quality and consistent automotive fuels that the
vehicles were designed to use. Fuel variables that can affect vehicle emissions include ethanol content, octane ratings,
and the use of metallic-based fuel additives, among other things. There are various ongoing regulatory and judicial
proceedings related to fuel quality at the national and state level, and the outcome of these proceedings could affect
vehicle manufacturers’ warranty costs as well as their ability to comply with vehicle emission standards.
The California vehicle emissions program also includes requirements for manufacturers to produce and deliver for
sale zero-emission vehicles (“ZEVs”). The current ZEV regulations mandate substantial annual increases in the
production and sale of battery-electric, fuel cell, and plug-in hybrid vehicles, particularly for the 2018–2025 model years.
By the 2025 model year, approximately 15% of a manufacturer’s total California sales volume will need to be made up of
such vehicles. Compliance with ZEV rules could have a substantial adverse effect on our sales volumes and profits. We
are concerned that the market and infrastructure in California may not support the large volume of advanced-technology
vehicles that manufacturers will be required to produce, especially if gasoline prices remain relatively low. We also are
concerned about enforcement of the ZEV mandate in other states that have adopted California’s ZEV program, where the
existence of a market for such vehicles is even less certain. CARB conducts periodic reviews of its upcoming ZEV
requirements, taking into account factors such as technology developments and market acceptance. Ford and the
industry will be active participants in such reviews, with the goal of ensuring that ZEV requirements are feasible and not
excessively burdensome.
European Requirements. European Union (“EU”) directives and related legislation limit the amount of regulated
pollutants that may be emitted by new motor vehicles and engines sold in the EU. Stringent new Stage 6 emission
standards took effect for vehicle registrations starting in September 2014, with a second phase beginning in
September 2017. These standards will drive the need for additional diesel exhaust after-treatment, which will add cost
and potentially impact the diesel CO2 advantage. The European Commission has also proposed new Real Driving
Emission (“RDE”) rules, which will require manufacturers to conduct on-road emission tests using portable emission
analyzers. These on-road emission tests will complement the laboratory-based tests. During the initial phase, which
started in January 2016, the RDE tests are used for monitoring purposes. Beginning in September 2017, manufacturers
will have to reduce the divergence between the regulatory limit that is tested in laboratory conditions and the values of
RDE tests (“conformity factors”). The additional costs associated with conducting the RDE tests and complying with the
conformity factors are expected to be significant. Europe is in process of drafting the RDE in-use surveillance rules with
proposals to allow third parties to conduct testing and to define a process to challenge the product compliance with
Authorities. On a longer term approach, the WVTA (Whole Vehicle Type Approval) Regulations are being adapted to
cover market surveillance, which is further expected to increase testing by Authorities across Europe from 2020+.
6
Item 1. Business (Continued)
Other National Requirements. Many countries, in an effort to address air quality concerns, are adopting previous
versions of European or United Nations Economic Commission for Europe (“UN-ECE”) mobile source emission
regulations. Some countries have adopted more advanced regulations based on the most recent version of European or
U.S. regulations; for example, China adopted emission regulations based on European Stage VI emission standards and
U.S. evaporative emissions and on-board diagnostic requirements. Korea and Taiwan have adopted very stringent U.S.-
based standards for gasoline vehicles and European-based standards for diesel vehicles. Although these countries have
adopted regulations based on UN-ECE or U.S. standards, there may be some unique testing provisions that require
emission-control systems to be redesigned for these markets. Canadian criteria emissions regulations are aligned with
U.S. Tier 2 requirements. In July 2015, the Canadian federal government amended the On-Road Vehicle and Engine
Emission Regulations and the Sulphur in Gasoline Regulations to align Canadian emission standards with the U.S. Tier 3
regulations discussed above.
In October 2016, the Canadian Province of Quebec passed legislation enabling regulation of a ZEV mandate.
Regulations are still under development but Quebec has signaled that they plan to follow California and Northeast States’
regulations.
Not all countries have adopted appropriate fuel quality standards to accompany the stringent emission standards
adopted. This could lead to compliance problems, particularly if on-board diagnostic or in-use surveillance requirements
are implemented.
Brazil and Chile have introduced stringent emission and on-board diagnostic standards based on the European
Stage 5 standards for light duty vehicles and Stage V standards for heavy duty vehicles. In Brazil, all light duty vehicles
are required to meet U.S.-based Proconve L6 standards and more stringent on-board diagnostic standards for diesel light
duty vehicles were introduced in 2017. Argentina is phasing in European Stage 5 standards for all new light duty vehicle
registrations by 2017 and European Stage V standards for heavy duty vehicles by 2018.
Global Developments. Since September 2015, the EPA and CARB have pursued enforcement actions against a
major competitor in connection with its use of “defeat devices” in hundreds of thousands of light-duty diesel vehicles.
These actions have resulted in settlements involving billions of dollars for environmental remediation and civil penalties,
as well as indictments of several employees on charges of committing federal crimes. The competitor continues to face
various class action suits, as well as numerous claims and investigations by various U.S. states and other nations. Defeat
devices are elements of design (typically embedded in software) that improperly cause the emission control system to
function less effectively during normal on-road driving than during an official laboratory emissions test, without justification.
They are prohibited by law in many jurisdictions, including the United States and Europe. We do not use defeat devices in
our vehicles.
The investigations by EPA and CARB of our competitor have led to increased scrutiny of automakers’ emission testing
by regulators around the world. EPA began carrying out additional non-standard tests as part of its vehicle certification
program, following an announcement in September 2015. The EU accelerated efforts to finalize its RDE testing program
as described above. In 2016, several European countries, including France and Germany, conducted non-standard
emission tests and published the results. In some cases, this supplemental testing has triggered investigations of other
manufacturers for possible defeat devices. Testing is expected to continue on an ongoing basis.
Vehicle Fuel Economy and Greenhouse Gas Standards
U.S. Requirements – Light Duty Vehicles. Federal law requires that light duty vehicles meet minimum corporate
average fuel economy (“CAFE”) standards set by the National Highway Traffic Safety Administration (“NHTSA”).
Manufacturers are subject to substantial civil penalties if they fail to meet the CAFE standard in any model year, after
taking into account all available credits for the preceding three model years and expected credits for the five succeeding
model years. The law requires NHTSA to promulgate and enforce separate CAFE standards applicable to each
manufacturer’s fleet of domestic passenger cars, imported passenger cars, and light duty trucks.
EPA also regulates vehicle greenhouse gas (“GHG”) emissions under the Clean Air Act. Because the vast majority of
GHGs emitted by a vehicle are the result of fuel combustion, GHG emission standards effectively are fuel economy
standards. Thus, it is necessary for NHTSA and EPA to coordinate with each other on their fuel economy and GHG
standards, respectively, to avoid potential inconsistencies.
In 2010, EPA and NHTSA jointly promulgated regulations establishing the “One National Program” of CAFE and GHG
regulations for light duty vehicles for the 2012-2016 model years. In 2012, EPA and NHTSA jointly promulgated
regulations extending the One National Program framework through the 2025 model year. These rules require
7
Item 1. Business (Continued)
manufacturers to achieve, across the industry, a light duty fleet average fuel economy of approximately 35.5 mpg by the
2016 model year, 45 mpg by the 2021 model year, and 51.4 mpg by the 2025 model year. Each manufacturer’s specific
task depends on the mix of vehicles it sells. The rules include the opportunity for manufacturers to earn credits for
technologies that achieve real-world CO2 reductions, and fuel economy improvements that are not captured by the EPA
fuel economy test procedures. Manufacturers also can earn credits for GHG reductions not specifically tied to fuel
economy, such as improvements in air conditioning systems.
The One National Program standards become increasingly stringent over time, and they will be difficult to meet if fuel
prices remain relatively low and market conditions do not drive consumers to purchase electric vehicles and other highly
fuel-efficient vehicles in large numbers. We are concerned about the commercial feasibility of meeting future model year
GHG and CAFE standards, particularly the 2022-2025 standards, because of the many unknowns regarding technology
development, market conditions, and other factors so far into the future.
The One National Program rules provided for a midterm evaluation process under which, by April 2018, EPA and
NHTSA would re-evaluate their standards for model years 2022-2025 in order to ensure that those standards are feasible
and optimal in light of intervening events. Shortly before President Obama left office in January 2017, EPA announced an
accelerated decision to maintain the GHG standards originally set for those model years. NHTSA is continuing to conduct
its evaluation with respect to the model year 2022-2025 standards. It remains to be seen whether the EPA determination
will be reconsidered under President Trump’s administration, and whether the EPA and NHTSA determinations will
ultimately be harmonized with each other.
If the agencies seek to impose and enforce fuel economy and GHG standards that are misaligned with market
conditions, we likely would be forced to take various actions that could have substantial adverse effects on our sales
volume and profits. Such actions likely would include restricting offerings of selected engines and popular options;
increasing market support programs for our most fuel-efficient cars and light trucks; and ultimately curtailing the
production and sale of certain vehicles such as high-performance cars, utilities, and/or full-size light trucks, in order to
maintain compliance.
California has asserted the right to regulate motor vehicle GHG emissions, and other states have asserted the right to
adopt the California standards. With the adoption of the federal One National Program standards discussed above,
California and the other states have agreed that compliance with the federal program would satisfy compliance with any
purported state GHG requirements for the 2012–2025 model years. This avoids a patchwork of potentially conflicting
federal and state GHG standards. Should California and other states ever renew their efforts to enforce state-specific
motor vehicle GHG rules, this would impose significant costs on automotive manufacturers.
U.S. Requirements – Heavy Duty Vehicles. EPA and NHTSA have jointly promulgated GHG and fuel economy
standards on heavy duty vehicles (generally, vehicles over 8,500 pounds gross vehicle weight rating). In our case, the
standards primarily affect our heavy duty pickup trucks and vans, plus vocational vehicles such as shuttle buses and
delivery trucks. In 2016, EPA and NHTSA finalized GHG and fuel economy standards for these vehicles, covering model
years 2019–2027. As the heavy-duty standards increase in stringency, it may become more difficult to comply while
continuing to offer a full lineup of heavy duty trucks.
European Requirements. In December 2008, the EU approved regulation of passenger car CO2 emissions
beginning in 2012 that limits the industry fleet average to a maximum of 130 grams per kilometer (“g/km”), using a sliding
scale based on vehicle weight. This regulation provides different targets for each manufacturer based on the respective
average vehicle weight for its fleet of vehicles. Limited credits are available for CO2 off-cycle actions (“eco-innovations”),
certain alternative fuels, and vehicles with CO2 emissions below 50 g/km. A penalty system will apply for manufacturers
failing to meet targets. Pooling agreements between different manufacturers are possible, although it is not clear that
these will be of much practical benefit under the regulations. Starting in 2020, an industry target of 95 g/km has been set,
for which 95% of a manufacturer’s fleet has to comply; by 2021, 100% of a manufacturer’s fleet has to comply. Other non-
EU European countries are likely to follow with similar regulations. For example, Switzerland has introduced similar rules,
which began phasing-in starting in July 2012 with the same targets (which include a 2020 target of 95 g/km, with
conditions still to be defined), although the industry average emission target is significantly higher. We face the risk of
advance premium payment requirements if, for example, unexpected market fluctuation within a quarter negatively impact
our average fleet performance.
In separate legislation, “complementary measures” have been mandated, including requirements related to fuel
economy indicators, and more-efficient low-CO2 mobile air conditioning systems. The EU Commission, Council and
Parliament have approved a target for commercial light duty vehicles to be at an industry average of 175 g/km (with
phase-in from 2014–2017), and 147 g/km in 2020. It is likely that other European countries, will implement similar rules
8
Item 1. Business (Continued)
but under even more difficult conditions. For instance, Switzerland will implement the same 147 g/km target in 2020 but
under more difficult conditions. This regulation also provides different targets for each manufacturer based on its
respective average vehicle weight in its fleet of vehicles. The final mass and CO2 requirements for “multi-stage
vehicles” (e.g., our Transit chassis cabs) are fully allocated to the base manufacturer (e.g., Ford) so that the base
manufacturer is fully responsible for the CO2 performance of the final up-fitted vehicles. The EU proposal also includes a
penalty system, “super-credits” for vehicles below 50 g/km, and limited credits for CO2 off-cycle eco-innovations, pooling,
etc., similar to the passenger car CO2 regulation.
The United Nations developed a new technical regulation for passenger car emissions and CO2. This new world light
duty test procedure (“WLTP”) is focused primarily on better aligning laboratory CO2 and fuel consumption figures with
customer-reported figures. The introduction of WLTP in Europe is likely to require updates to CO2 labeling as early as
2018 and will increase certain consumer label values, thereby impacting taxes in countries with a CO2 tax scheme. Costs
associated with new or incremental testing for WLTP could be significant. The European Commission requires mandatory
WLTP testing for regulated emissions and CO2 starting in September 2017. The European Commission has assured
comparable stringency to the existing fleet average rules for each automobile manufacturer if the 2021 fleet average
targets are required to be measured on WLTP instead of under the current European New European Driving Cycle
(“NEDC”) requirements. The legislative framework and process for the target translation is currently under development.
The European Commission confirmed in October 2016 that there would be a delay in the introduction of a timetable for a
post-2020 CO2 proposal. The proposal is now expected to be released during the second half of 2017.
Some European countries have implemented or are considering other initiatives for reducing CO2 vehicle emissions,
including fiscal measures and CO2 labeling. For example, the United Kingdom, France, Germany, Spain, Portugal, and
the Netherlands, among others, have introduced taxation based on CO2 emissions. The EU CO2 requirements are likely
to trigger further measures. To limit GHG emissions, the EU directive on mobile air conditioning currently requires the
replacement of the current refrigerant with a lower “global warming potential” refrigerant for new vehicle types, and for all
newly registered vehicles starting in January 2017. A refrigerant change adds considerable costs along the whole
manufacturing chain.
Other National Requirements. The Canadian federal government has regulated vehicle GHG emissions under the
Canadian Environmental Protection Act, beginning with the 2011 model year. In October 2014, the Canadian federal
government published the final changes to the regulation for light duty vehicles, which maintain alignment with U.S. EPA
vehicle GHG standards for the 2017–2025 model years. The final regulation for 2014–2018 heavy duty vehicles was
published in February 2013. In October 2014, the Canadian federal government published the Notice of Intent to regulate
heavy duty vehicles and engines for model year 2019 and beyond, which tracks U.S. EPA standards.
Mexico adopted fuel economy/CO2 standards, based on the U.S. One National Program framework, that took effect in
2014.
Many Asia Pacific countries (such as Australia, China, India, South Korea, Taiwan, and Vietnam) are developing or
enforcing fuel efficiency or labeling targets. For example, South Korea has set fuel efficiency targets for 2020, with
incentives for early adoption. China published standards for Stage IV fuel efficiency targets for 2016–2020. The fuel
efficiency targets will impact the cost of vehicle technology in the future.
In South America, Brazil introduced a voluntary vehicle energy-efficiency labeling program, indicating fuel
consumption rates for all light-duty vehicles. Brazil has required inclusion of emission classification on fuel economy
labels since January 2016. Brazil also published a new automotive regime establishing a minimum absolute CAFE
value as a function of Fleet Corporate Average Mass for 2017 light duty vehicles with a spark ignition engine in order
to qualify for industrialized products tax reduction. Additional tax reductions are available if further fuel efficiency
improvements are achieved. A severe penalty system will apply to qualified manufacturers failing to meet fuel
efficiency requirements for the 2013–2017 sales period. Brazil reduced import tax on electric and hybrid cars. The
tax rate, which was 35%, will vary from zero to 7%, depending on a vehicle’s energy efficiency. Discussion on new
fuel efficiency requirements has started. Chile introduced a tax based on urban fuel consumption and NOx emission
for light and medium vehicles beginning in late 2014. In general, fuel efficiency targets may impact the cost of
technology of our models in the future.
In the Middle East, the Kingdom of Saudi Arabia introduced new light duty vehicle fuel economy standards, which
are patterned after the U.S. CAFE standard structure, with fuel economy targets following the design of the U.S.
2012–2016 fuel economy standards. The standards became effective on January 1, 2016 and will be fully phased in
by the end of 2017.
9
Item 1. Business (Continued)
Vehicle Safety
U.S. Requirements. The National Traffic and Motor Vehicle Safety Act of 1966 (the “Safety Act”) regulates vehicles
and vehicle equipment in two primary ways. First, the Safety Act prohibits the sale in the United States of any new vehicle
or equipment that does not conform to applicable vehicle safety standards established by NHTSA. Meeting or exceeding
many safety standards is costly, in part because the standards tend to conflict with the need to reduce vehicle weight in
order to meet emission and fuel economy standards. Second, the Safety Act requires that defects related to motor vehicle
safety be remedied through safety recall campaigns. A manufacturer is obligated to recall vehicles if it determines the
vehicles do not comply with a safety standard. Should we or NHTSA determine that either a safety defect or
noncompliance issue exists with respect to any of our vehicles, the cost of such recall campaigns could be substantial.
Other National Requirements. The EU and many countries have established vehicle safety standards and
regulations, and are likely to adopt additional or more stringent requirements in the future. The European General Safety
Regulation introduced United Nations Economic Commission for Europe (“UN-ECE”) regulations, which will be required
for the European Type Approval process. EU regulators also are focusing on active safety features such as lane
departure warning systems, electronic stability control, and automatic brake assist. Globally, governments generally have
been adopting UN-ECE based regulations with minor variations to address local concerns. Any difference between North
American and UN-ECE based regulations can add complexity and costs to the development of global platform vehicles,
and we continue to support efforts to harmonize regulations to reduce vehicle design complexity while providing a
common level of safety performance; several recently launched bilateral negotiations on free trade can potentially
contribute to this goal. New safety and recall requirements in China, India, and Gulf Cooperation Council countries also
may add substantial costs and complexity to our global recall practice. In South America, additional safety requirements
are being introduced or proposed in Argentina, Brazil, Chile, Colombia, Ecuador, and Uruguay, influenced by The New Car
Assessment Program for Latin America and the Caribbean (“Latin NCAP”), which may be a driver for similar actions in
other countries. In Canada, regulatory requirements are currently aligned with U.S. regulations. However, recent
amendments to the Canadian Motor Vehicle Safety Act have introduced broad powers to the Minister of Transport to order
manufacturers to submit a notice of defect or non-compliance when the Minister considers it would be in the interest of
safety.
New Car Assessment Programs. Organizations around the globe rate and compare motor vehicles in New Car
Assessment Programs (“NCAPs”) to provide consumers with additional information about the safety of new vehicles.
NCAPs use crash tests and other evaluations that are different than what is required by applicable regulations, and use
stars to rate vehicle safety, with five stars awarded for the highest rating and one for the lowest. Achieving high NCAP
ratings can add complexity and cost to vehicles.
EMPLOYMENT DATA
The approximate number of individuals employed by us and entities that we consolidated as of December 31, 2015
and 2016 was as follows (in thousands):
Automotive
North America
South America
Europe
Middle East & Africa
Asia Pacific
Financial Services
Ford Credit
Total
2015
2016
96
15
53
3
25
7
199
101
15
52
3
23
7
201
Substantially all of the hourly employees in our Automotive operations are represented by unions and covered by
collective bargaining agreements. In the United States, approximately 99% of these unionized hourly employees in our
Automotive segment are represented by the International Union, United Automobile, Aerospace and Agricultural
Implement Workers of America (“UAW” or “United Auto Workers”). At December 31, 2016, approximately 57,000 hourly
employees in the United States were represented by the UAW, an increase of about 3,000 employees since
December 31, 2015. Approximately 1.5% of our U.S. salaried employees are represented by unions. Many non-
management salaried employees at our operations outside of the United States also are represented by unions.
10
Item 1. Business (Continued)
In 2016, we entered into collective bargaining agreements (covering wages, benefits and/or other employment
provisions) with unions in Argentina, Brazil, Canada, France, Germany, Italy, Mexico, Romania, Russia, South Africa,
Taiwan and Thailand.
In 2017, we will negotiate collective bargaining agreements (covering wages, benefits and/or other employment
provisions) with unions in Argentina, Australia, Brazil, Britain, France, India, Mexico, Romania, Russia, and Thailand.
ENGINEERING, RESEARCH, AND DEVELOPMENT
We engage in engineering, research, and development primarily to improve the performance (including fuel
efficiency), safety, and customer satisfaction of our products, and to develop new products and services (including for
emerging opportunities). Engineering, research, and development expenses for 2014, 2015, and 2016 were $6.7 billion,
$6.7 billion, and $7.3 billion, respectively.
ITEM 1A. Risk Factors.
We have listed below (not necessarily in order of importance or probability of occurrence) the most significant risk
factors applicable to us:
Decline in industry sales volume, particularly in the United States, Europe, or China, due to financial crisis,
recession, geopolitical events, or other factors. Because we, like other manufacturers, have a high proportion of
relatively fixed structural costs, relatively small changes in industry sales volume can have a substantial effect on our
cash flow and profitability. If industry vehicle sales were to decline to levels significantly below our planning
assumption, particularly in the United States, Europe, or China, due to financial crisis, recession, geopolitical events, or
other factors, the decline could have a substantial adverse effect on our financial condition, results of operations, and
cash flow. For discussion of economic trends, see the “Overview” section of Item 7.
Lower-than-anticipated market acceptance of Ford’s new or existing products or services, or failure to
achieve expected growth. Although we conduct extensive market research before launching new or refreshed
vehicles and introducing new services, many factors both within and outside our control affect the success of new or
existing products and services in the marketplace. Offering vehicles and services that customers want and value can
mitigate the risks of increasing price competition and declining demand, but products and services that are perceived
to be less desirable (whether in terms of price, quality, styling, safety, overall value, fuel efficiency, or other attributes)
can exacerbate these risks. With increased consumer interconnectedness through the internet, social media, and
other media, mere allegations relating to quality, safety, fuel efficiency, corporate social responsibility, or other key
attributes can negatively impact our reputation or market acceptance of our products or services, even where such
allegations prove to be inaccurate or unfounded. Further, our ability to successfully grow through investments in the
area of emerging opportunities depends on many factors, including advancements in technology, regulatory changes,
and other factors that are difficult to predict, that may significantly affect the future of electrification, autonomy, and
mobility.
Market shift away from sales of larger, more profitable vehicles beyond Ford’s current planning
assumption, particularly in the United States. A shift in consumer preferences away from larger, more profitable
vehicles at levels beyond our current planning assumption—whether because of spiking fuel prices, a decline in the
construction industry, government actions or incentives, or other reasons—could result in an immediate and substantial
adverse effect on our financial condition and results of operations.
Continued or increased price competition resulting from industry excess capacity, currency fluctuations,
or other factors. The global automotive industry is intensely competitive, with manufacturing capacity far exceeding
current demand. According to the December 2016 report issued by IHS Automotive, the global automotive industry is
estimated to have had excess capacity of about 32 million units in 2016. Industry overcapacity has resulted in many
manufacturers offering marketing incentives on vehicles in an attempt to maintain and grow market share; these
incentives historically have included a combination of subsidized financing or leasing programs, price rebates, and
other incentives. As a result, we are not necessarily able to set our prices to offset higher costs of marketing
incentives, commodity or other cost increases, or the impact of adverse currency fluctuations, including pricing
advantages foreign competitors may have because of their weaker home market currencies. Continuation of or
increased excess capacity could have a substantial adverse effect on our financial condition and results of operations.
11
Item 1A. Risk Factors (Continued)
Fluctuations in foreign currency exchange rates, commodity prices, and interest rates. As a resource-
intensive manufacturing operation, we are exposed to a variety of market and asset risks, including the effects of
changes in foreign currency exchange rates, commodity prices, and interest rates. We monitor and manage these
exposures as an integral part of our overall risk management program, which recognizes the unpredictability of
markets and seeks to reduce potentially adverse effects on our business. Nevertheless, changes in currency
exchange rates, commodity prices, and interest rates cannot always be predicted or hedged. In addition, because of
intense price competition and our high level of fixed costs, we may not be able to address such changes even if
foreseeable. As a result, substantial unfavorable changes in foreign currency exchange rates, commodity prices, or
interest rates could have a substantial adverse effect on our financial condition and results of operations. See
“Overview” to Item 7 and Item 7A for additional discussion of currency, commodity price, and interest rate risks.
Adverse effects resulting from economic, geopolitical, protectionist trade policies, or other events. With
the increasing interconnectedness of global economic and financial systems, a financial crisis, natural disaster,
geopolitical crisis, or other significant event in one area of the world can have an immediate and material adverse
impact on markets around the world. Concerns persist regarding the overall stability of the European Union, given the
diverse economic and political circumstances of individual European currency area (“euro area”) countries. These
concerns have been exacerbated by Brexit, which, among other things, has resulted in a weaker sterling versus U.S.
dollar and euro. We have a sterling revenue exposure and a euro cost exposure; a sustained weakening of sterling
against euro may have an adverse effect on our profitability. Further, the United Kingdom may be at risk of losing
access to free trade agreements for goods and services with the European Union and other countries, which may
result in increased tariffs on U.K. imports and exports that could have an adverse effect on our profitability.
FCE Bank plc (“FCE”), our subsidiary, is a bank authorized by the U.K. government to carry on a range of
regulated activities within the United Kingdom and through a branch network in 11 other European countries through a
passporting system, which allows it to establish or provide its services in the EU27 without further authorization
requirements. If passporting arrangements cease to be effective as a result of Brexit, FCE could be required to
reconsider its structure or seek additional authorizations to continue to do business in the EU27, which may be time-
consuming and costly.
The economic and policy uncertainty on-going in the euro area highlights potential longer-term risks regarding
its sustainability. This uncertainty could cause financial and capital markets within and outside Europe to constrict,
thereby negatively impacting our ability to finance our business or, if a country within the euro area were to default on
its debt or withdraw from the euro currency, or-—in a more extreme circumstance—the euro currency were to be
dissolved entirely, the impact on markets around the world, and on Ford’s global business, could be immediate and
significant.
In addition, we have operations in various markets with volatile economic or political environments and are
pursuing growth opportunities in a number of newly developed and emerging markets. These investments may
expose us to heightened risks of economic, geopolitical, or other events, including governmental takeover
(i.e., nationalization) of our manufacturing facilities or intellectual property, restrictive exchange or import controls,
disruption of operations as a result of systemic political or economic instability, outbreak of war or expansion of
hostilities, and acts of terrorism, each of which could have a substantial adverse effect on our financial condition and
results of operations. Further, the U.S. government, other governments, and international organizations could impose
additional sanctions that could restrict us from doing business directly or indirectly in or with certain countries or
parties, which could include affiliates.
Work stoppages at Ford or supplier facilities or other limitations on production (whether as a result of labor
disputes, natural or man-made disasters, tight credit markets or other financial distress, production
constraints or difficulties, or other factors). A work stoppage or other limitation on production could occur at Ford
or supplier facilities for any number of reasons, including as a result of disputes under existing collective bargaining
agreements with labor unions or in connection with negotiation of new collective bargaining agreements, or as a result
of supplier financial distress or other production constraints or difficulties, or for other reasons. A work stoppage or
other limitations on production at Ford or supplier facilities for any reason (including but not limited to labor disputes,
natural or man-made disasters, tight credit markets or other financial distress, or production constraints or difficulties)
could have a substantial adverse effect on our financial condition and results of operations.
12
Item 1A. Risk Factors (Continued)
Single-source supply of components or materials. Many components used in our vehicles are available only
from a single supplier and cannot be re-sourced quickly or inexpensively to another supplier (due to long lead times,
new contractual commitments that may be required by another supplier before ramping up to provide the components
or materials, etc.). In addition to the general risks described above regarding interruption of supplies, which are
exacerbated in the case of single-source suppliers, the exclusive supplier of a key component potentially could exert
significant bargaining power over price, quality, warranty claims, or other terms relating to a component.
Labor or other constraints on Ford’s ability to maintain competitive cost structure. Substantially all of the
hourly employees in our Automotive operations in the United States and Canada are represented by unions and
covered by collective bargaining agreements. These agreements provide guaranteed wage and benefit levels
throughout the contract term and some degree of income security, subject to certain conditions. As a practical matter,
these agreements may restrict our ability to close plants and divest businesses. A substantial number of our
employees in other regions are represented by unions or government councils, and legislation or custom promoting
retention of manufacturing or other employment in the state, country, or region may constrain as a practical matter our
ability to sell or close manufacturing or other facilities.
Substantial pension and other postretirement liabilities impairing liquidity or financial condition. We have
defined benefit retirement plans in the United States that cover many of our hourly and salaried employees. We also
provide pension benefits to non-U.S. employees and retirees, primarily in Europe. In addition, we and certain of our
subsidiaries sponsor plans to provide other postretirement benefits (“OPEB”) for retired employees (primarily health
care and life insurance benefits). See Note 13 of the Notes to the Financial Statements for more information about
these plans. These benefit plans impose significant liabilities on us and could require us to make additional cash
contributions, which could impair our liquidity. If our cash flows and capital resources were insufficient to meet any
pension or OPEB obligations, we could be forced to reduce or delay investments and capital expenditures, suspend
dividend payments, seek additional capital, or restructure or refinance our indebtedness.
Worse-than-assumed economic and demographic experience for pension and other postretirement benefit
plans (e.g., discount rates or investment returns). The measurement of our obligations, costs, and liabilities
associated with benefits pursuant to our pension and other postretirement benefit plans requires that we estimate the
present value of projected future payments to all participants. We use many assumptions in calculating these
estimates, including assumptions related to discount rates, investment returns on designated plan assets, and
demographic experience (e.g., mortality and retirement rates). We generally remeasure these estimates at each year
end, and recognize any gains or losses associated with changes to our plan assets and liabilities in the year incurred.
To the extent actual results are less favorable than our assumptions, we may recognize a substantial remeasurement
loss in our results. For discussion of our assumptions, see “Critical Accounting Estimates” in Item 7 and Note 13 of the
Notes to the Financial Statements.
Restriction on use of tax attributes from tax law “ownership change.” Section 382 of the U.S. Internal
Revenue Code restricts the ability of a corporation that undergoes an ownership change to use its tax attributes,
including net operating losses and tax credits (“Tax Attributes”). For these purposes, an ownership change occurs if
5 percent shareholders of an issuer’s outstanding common stock, collectively, increase their ownership percentage by
more than 50 percentage points over a rolling three-year period. At December 31, 2016, we had Tax Attributes that
would offset more than $15 billion of taxable income. In 2015, we renewed for an additional three-year period our tax
benefit preservation plan (the “Plan”) to reduce the risk of an ownership change under Section 382. Under the Plan,
shares held by any person who acquires, without the approval of our Board of Directors, beneficial ownership of 4.99%
or more of our outstanding Common Stock could be subject to significant dilution. Our shareholders approved the
renewal at our annual meeting in May 2016.
13
Item 1A. Risk Factors (Continued)
The discovery of defects in vehicles resulting in delays in new model launches, recall campaigns, or
increased warranty costs. Government safety standards require manufacturers to remedy defects related to vehicle
safety through safety recall campaigns, and a manufacturer is obligated to recall vehicles if it determines that the
vehicles do not comply with a safety standard. NHTSA’s enforcement strategy has shifted to a significant increase in
civil penalties levied and the use of consent orders requiring direct oversight by NHTSA of certain manufacturers’
safety processes, a trend that could continue. Should we or government safety regulators determine that a safety or
other defect or a noncompliance exists with respect to certain of our vehicles prior to the start of production, the launch
of such vehicle could be delayed until such defect is remedied. The costs associated with any protracted delay in new
model launches necessary to remedy such defects, or the cost of recall campaigns or warranty costs to remedy such
defects in vehicles that have been sold, could be substantial. Such recall and customer satisfaction actions may relate
to defective components we receive from suppliers. The cost to complete a recall or customer satisfaction action could
be exacerbated to the extent such action relates to a global platform. Furthermore, launch delays or recall actions
could adversely affect our reputation or market acceptance of our products as discussed above under “Lower-than-
anticipated market acceptance of Ford’s new or existing products or services, or failure to achieve expected growth.”
Increased safety, emissions, fuel economy, or other regulations resulting in higher costs, cash
expenditures, and/or sales restrictions. The worldwide automotive industry is governed by a substantial amount of
government regulation, which often differs by state, region, and country. Government regulation has arisen, and
proposals for additional regulation are advanced, primarily out of concern for the environment (including concerns
about the possibility of global climate change and its impact), vehicle safety, and energy independence. For example,
as discussed above under “Item 1. Business - Governmental Standards,” in the United States the CAFE standards for
light duty vehicles increase sharply to 51.4 mpg by the 2025 model year; EPA’s parallel CO2 emission regulations
impose similar standards. California’s ZEV rules also mandate steep increases in the sale of electric vehicles and
other advanced technology vehicles beginning in the 2018 model year. In addition, many governments regulate local
product content and/or impose import requirements as a means of creating jobs, protecting domestic producers, and
influencing the balance of payments.
In recent years, we have made significant changes to our product cycle plan to improve the overall fuel economy of
vehicles we produce, thereby reducing their GHG emissions. There are limits on our ability to achieve fuel economy
improvements over a given time frame, however, primarily relating to the cost and effectiveness of available
technologies, consumer acceptance of new technologies and changes in vehicle mix, willingness of consumers to
absorb the additional costs of new technologies, the appropriateness (or lack thereof) of certain technologies for use in
particular vehicles, the widespread availability (or lack thereof) of supporting infrastructure for new technologies, and
the human, engineering, and financial resources necessary to deploy new technologies across a wide range of
products and powertrains in a short time. The current fuel economy, CO2, and ZEV standards will be difficult to meet if
fuel prices remain relatively low and market conditions do not drive consumers to purchase electric vehicles and other
highly fuel-efficient vehicles in large numbers.
The U.S. government has pursued an enforcement action against a major competitor in connection with its alleged
use of “defeat devices” in hundreds of thousands of light duty diesel vehicles, collecting billions of dollars for
environmental remediation projects and civil penalties. Several of the competitor’s employees have been indicted on
charges of committing federal crimes. The competitor also faces various class action suits, as well as numerous
claims and investigations by various U.S. states and other nations. The emergence of this issue has led to increased
scrutiny of automaker emission testing by regulators around the world, which in turn has triggered investigations of
other manufacturers. These events may lead to new regulations, more stringent enforcement programs, requests for
field actions, and/or delays in regulatory approvals. The cost to comply with existing government regulations is
substantial and additional regulations or changes in consumer preferences that affect vehicle mix could have a
substantial adverse impact on our financial condition and results of operations. For more discussion of the impact of
such standards on our global business, see the “Governmental Standards” discussion in “Item 1. Business” above. In
addition, a number of governments, as well as non-governmental organizations, publicly assess vehicles to their own
protocols. The protocols could change aggressively, and any negative perception regarding the performance of our
vehicles subjected to such tests could reduce future sales.
14
Item 1A. Risk Factors (Continued)
Unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged
defects in products, perceived environmental impacts, or otherwise. We spend substantial resources ensuring
that we comply with governmental safety regulations, mobile and stationary source emissions regulations, and other
standards. Compliance with governmental standards, however, does not necessarily prevent individual or class
actions, which can entail significant cost and risk. In certain circumstances, courts may permit tort claims even where
our vehicles comply with federal and/or other applicable law. Furthermore, simply responding to actual or threatened
litigation or government investigations of our compliance with regulatory standards, whether related to our products or
business or commercial relationships, may require significant expenditures of time and other resources. Litigation also
is inherently uncertain, and we could experience significant adverse results. In addition, adverse publicity surrounding
an allegation may cause significant reputational harm that could have a significant adverse effect on our sales.
Adverse effects on results from a decrease in or cessation or clawback of government incentives related to
investments. We receive economic benefits from national, state, and local governments in various regions of the
world in the form of incentives designed to encourage manufacturers to establish, maintain, or increase investment,
workforce, or production. These incentives may take various forms, including grants, loan subsidies, and tax
abatements or credits. The impact of these incentives can be significant in a particular market during a reporting
period. For example, most of our manufacturing facilities in South America are located in Brazil, where the state or
federal governments have historically offered, and continue to offer, significant incentives to manufacturers to
encourage capital investment, increase manufacturing production, and create jobs. As a result, the performance of our
South American operations has been impacted favorably by government incentives to a substantial extent. In Brazil,
however, the federal government has levied assessments against us concerning our calculation of federal incentives
we received, and certain states have challenged the grant to us of tax incentives by the state of Bahia, including a
constitutional challenge of state incentives that is pending in Brazil’s Supreme Court. A decrease in, expiration without
renewal of, or other cessation or clawback of government incentives for any of our business units, as a result of
administrative decision or otherwise, could have a substantial adverse impact on our financial condition and results of
operations. See Note 2 of the Notes to the Financial Statements for discussion of our accounting for government
incentives, and “Item 3. Legal Proceedings” for a discussion of tax proceedings in Brazil and the potential requirement
for us to post collateral.
Cybersecurity risks to operational systems, security systems, or infrastructure owned by Ford, Ford Credit,
or a third-party vendor or supplier. We are at risk for interruptions, outages, and breaches of: (i) operational
systems (including business, financial, accounting, product development, consumer receivables, data processing, or
manufacturing processes); (ii) facility security systems; and/or (iii) in-vehicle systems or mobile devices. Such cyber
incidents could materially disrupt operational systems; result in loss of trade secrets or other proprietary or
competitively sensitive information; compromise personally identifiable information of customers, employees, or others;
jeopardize the security of our facilities; and/or affect the performance of in-vehicle systems. A cyber incident could be
caused by malicious third parties using sophisticated, targeted methods to circumvent firewalls, encryption, and other
security defenses, including hacking, fraud, trickery, or other forms of deception. The techniques used by third parties
change frequently and may be difficult to detect for long periods of time. A significant cyber incident could impact
production capability, harm our reputation and/or subject us to regulatory actions or litigation.
Failure of financial institutions to fulfill commitments under committed credit and liquidity facilities. Under
our corporate credit facility), we are able to borrow, repay, and then re-borrow up to $13.4 billion. Certain of our
subsidiaries have standby or revolving credit facilities on which they depend for liquidity. If the financial institutions that
provide commitments under the corporate credit facility, our subsidiaries’ standby or revolving credit facilities, or other
committed credit facilities were to default on their obligation to fund the commitments, these facilities would not be
available to us, which could substantially adversely affect our liquidity and financial condition. For discussion of our
Credit Agreement, see “Liquidity and Capital Resources” in Item 7 and Note 14 of the Notes to the Financial
Statements.
15
Item 1A. Risk Factors (Continued)
Inability of Ford Credit to access debt, securitization, or derivative markets around the world at competitive
rates or in sufficient amounts, due to credit rating downgrades, market volatility, market disruption, regulatory
requirements, or other factors. Ford Credit’s ability to obtain unsecured funding at a reasonable cost is dependent
on its credit ratings or its perceived creditworthiness. Ford Credit’s ability to obtain securitized funding under its
committed asset-backed liquidity programs and certain other asset-backed securitization transactions is subject to
having a sufficient amount of assets eligible for these programs, as well as Ford Credit’s ability to obtain appropriate
credit ratings and, for certain committed programs, derivatives to manage the interest rate risk. Over time, and
particularly in the event of any credit rating downgrades, market volatility, market disruption, or other factors, Ford
Credit may reduce the amount of receivables it purchases or originates because of funding constraints. In addition,
Ford Credit may be limited in the amount of receivables it purchases or originates in certain countries or regions if the
local capital markets, particularly in developing countries, do not exist or are not adequately developed. Similarly, Ford
Credit may reduce the amount of receivables it purchases or originates if there is a significant decline in the demand
for the types of securities it offers or Ford Credit is unable to obtain derivatives to manage the interest rate risk
associated with its securitization transactions. A significant reduction in the amount of receivables Ford Credit
purchases or originates would significantly reduce its ongoing profits and could adversely affect its ability to support the
sale of Ford vehicles.
Higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return
volumes for leased vehicles. Credit risk is the possibility of loss from a customer’s or dealer’s failure to make
payments according to contract terms. Credit risk (which is heavily dependent upon economic factors including
unemployment, consumer debt service burden, personal income growth, dealer profitability, and used car prices) has a
significant impact on Ford Credit’s business. The level of credit losses Ford Credit may experience could exceed its
expectations and adversely affect its financial condition and results of operations. In addition, Ford Credit projects
expected residual values (including residual value support payments from Ford) and return volumes for the vehicles it
leases. Actual proceeds realized by Ford Credit upon the sale of returned leased vehicles at lease termination may be
lower than the amount projected, which would reduce the profitability of the lease transaction. Among the factors that
can affect the value of returned lease vehicles are the volume of vehicles returned, economic conditions, and quality or
perceived quality, safety, fuel efficiency, or reliability of the vehicles. Actual return volumes may be higher than
expected and can be influenced by contractual lease-end values relative to auction values, marketing programs for
new vehicles, and general economic conditions. Each of these factors, alone or in combination, has the potential to
adversely affect Ford Credit’s profitability if actual results were to differ significantly from Ford Credit’s projections. See
“Critical Accounting Estimates” in Item 7 for additional discussion.
Increased competition from banks, financial institutions, or other third parties seeking to increase their
share of financing Ford vehicles. No single company is a dominant force in the automotive finance industry. Most
of Ford Credit’s competitors in the United States use credit aggregation systems that permit dealers to send, through
standardized systems, retail credit applications to multiple finance sources to evaluate financing options offered by
these sources. Also, direct on-line or large dealer group financing options provide consumers with alternative finance
sources and/or increased pricing transparency. All of these financing alternatives drive greater competition based on
financing rates and terms. Competition from such institutions and alternative finance sources could adversely affect
Ford Credit’s profitability and the volume of its retail business. In addition, Ford Credit may face increased competition
on wholesale financing for Ford dealers.
New or increased credit regulations, consumer or data protection regulations, or other regulations
resulting in higher costs and/or additional financing restrictions. As a finance company, Ford Credit is highly
regulated by governmental authorities in the locations in which it operates, which can impose significant additional
costs and/or restrictions on its business. In the United States, for example, Ford Credit’s operations are subject to
regulation, supervision, and licensing under various federal, state, and local laws and regulations, including the federal
Truth-in-Lending Act, Consumer Leasing Act, Equal Credit Opportunity Act, and Fair Credit Reporting Act.
The Dodd-Frank Act directs federal agencies to adopt rules to regulate the consumer finance industry and the
capital markets and gives the Consumer Financial Protection Bureau (“CFPB”) broad rule-making and enforcement
authority for a wide range of consumer financial protection laws that regulate consumer finance businesses, such as
Ford Credit’s retail automotive financing business. Exercise of these powers by the CFPB may increase the costs of,
impose additional restrictions on, or otherwise adversely affect companies in the automotive finance business. The
CFPB has authority to supervise and examine the largest nonbank automotive finance companies, such as Ford
Credit, for compliance with consumer financial protection laws.
16
Item 1A. Risk Factors (Continued)
In some countries outside the United States, some of Ford Credit’s subsidiaries are regulated banking institutions
and are required, among other things, to maintain minimum capital and liquidity. In many other locations,
governmental authorities require companies to have licenses in order to conduct financing businesses. Compliance
with these laws and regulations imposes additional costs on Ford Credit and affects the conduct of its business.
Additional regulation could add significant cost or operational constraints that might impair Ford Credit’s profitability.
ITEM 1B. Unresolved Staff Comments.
None.
17
ITEM 2. Properties.
Our principal properties include manufacturing and assembly facilities, distribution centers, warehouses, sales or
administrative offices, and engineering centers.
We own substantially all of our U.S. manufacturing and assembly facilities. Our facilities are situated in various
sections of the country and include assembly plants, engine plants, casting plants, metal stamping plants, transmission
plants, and other component plants. About half of our distribution centers are leased (we own approximately 47% of the
total square footage, and lease the balance). A substantial amount of our warehousing is provided by third-party providers
under service contracts. Because the facilities provided pursuant to third-party service contracts need not be dedicated
exclusively or even primarily to our use, these spaces are not included in the number of distribution centers/warehouses
listed in the table below. The majority of the warehouses that we operate are leased, although many of our manufacturing
and assembly facilities contain some warehousing space. Substantially all of our sales offices are leased space.
Approximately 98% of the total square footage of our engineering centers and our supplementary research and
development space is owned by us.
In addition, we maintain and operate manufacturing plants, assembly facilities, parts distribution centers, and
engineering centers outside of the United States. We own substantially all of our non-U.S. manufacturing plants,
assembly facilities, and engineering centers. The majority of our parts distribution centers outside of the United States are
either leased or provided by vendors under service contracts.
We and the entities that we consolidated as of December 31, 2016 use nine regional engineering, research, and
development centers, and 62 manufacturing plants as shown in the table below:
Automotive Business Units
North America
South America
Europe
Middle East & Africa
Asia Pacific
Total
Plants
29
8
16
2
7
62
Included in the number of plants shown above are plants that are operated by us or our consolidated joint ventures
that support our Automotive segment. The significant consolidated joint ventures and the number of plants each owns are
as follows:
•
•
•
Ford Lio Ho Motor Company Ltd. (“FLH”) — a joint venture in Taiwan among Ford (70% partner), the Lio Ho
Group (25% partner), and individual shareholders (5% ownership in aggregate) that assembles a variety of Ford
and Mazda vehicles sourced from Ford as well as Mazda. In addition to domestic assembly, FLH imports Ford
brand built-up vehicles from the Asia Pacific region, Europe, and the United States. The joint venture operates
one plant in Taiwan.
Ford Sollers Netherlands B.V. (“Ford Sollers”) — a 50/50 joint venture between Ford and Sollers OJSC (“Sollers”),
in which Ford has control. The joint venture primarily is engaged in manufacturing a range of Ford passenger
cars and light commercial vehicles for sale in Russia, and has an exclusive right to manufacture, assemble, and
distribute certain Ford vehicles in Russia through the licensing of certain trademarks and intellectual property
rights. The joint venture has been approved to participate in Russia’s industrial assembly regime, which qualifies
it for reduced import duties for parts imported into Russia. In addition to its three existing manufacturing facilities
in Russia, Ford Sollers launched an engine plant in Russia in 2015.
Ford Vietnam Limited — a joint venture between Ford (75% partner) and Diesel Song Cong One Member Limited
Liability Company (a subsidiary of the Vietnam Engine and Agricultural Machinery Corporation, which in turn is
majority owned (87.43%) by the State of Vietnam represented by the Ministry of Industry and Trade)
(25% partner). Ford Vietnam Limited assembles and distributes a variety of Ford passenger and commercial
vehicle models. The joint venture operates one plant in Vietnam.
18
Item 2. Properties (Continued)
In addition to the plants that we operate directly or that are operated by our consolidated joint ventures, additional
plants that support our Automotive segment are operated by unconsolidated joint ventures of which we are a
partner. These plants are not included in the number of plants shown in the table above. The most significant of the
automotive unconsolidated joint ventures are as follows:
•
•
•
•
AutoAlliance (Thailand) Co., Ltd. (“AAT”) — a 50/50 joint venture between Ford and Mazda that owns and
operates a manufacturing plant in Rayong, Thailand. AAT produces Ford and Mazda products for domestic and
export sales.
Changan Ford Automobile Corporation, Ltd. (“CAF”) — a 50/50 joint venture between Ford and Chongqing
Changan Automobile Co., Ltd. (“Changan”). CAF currently operates five assembly plants, an engine plant, and a
transmission plant in China where it produces and distributes an expanding variety of Ford passenger vehicle
models.
Changan Ford Mazda Engine Company, Ltd. (“CFME”) — a joint venture among Ford (25% partner), Mazda
(25% partner), and Changan (50% partner). CFME is located in Nanjing, and produces engines for Ford and
Mazda vehicles manufactured in China.
Ford Otomotiv Sanayi Anonim Sirketi (“Ford Otosan”) — a joint venture in Turkey among Ford (41% partner), the
Koc Group of Turkey (41% partner), and public investors (18%) that is a major supplier to us of the Transit, Transit
Custom, and Transit Courier commercial vehicles and is our sole distributor of Ford vehicles in Turkey. Ford
Otosan also manufactures the Cargo truck for the Turkish and certain export markets and certain engines and
transmissions, most of which are under license from us. The joint venture owns three plants, a parts distribution
depot, and a new research and development center in Turkey.
• Getrag Ford Transmissions GmbH (“GFT”) — a 50/50 joint venture with Getrag International GmbH, a German
company belonging to Magna Powertrain GmbH. GFT operates plants in Halewood, England; Cologne,
Germany; Bordeaux, France; and Kechnec, Slovakia to produce, among other things, manual transmissions for
our Europe business unit.
•
JMC — a publicly-traded company in China with Ford (32% shareholder) and Jiangling Holdings, Ltd.
(41% shareholder) as its controlling shareholders. Jiangling Holdings, Ltd. is a 50/50 joint venture between
Changan and Jiangling Motors Company Group. The public investors in JMC own 27% of its total outstanding
shares. JMC assembles Ford Transit, Ford Everest, Ford engines, and non-Ford vehicles and engines for
distribution in China and in other export markets. JMC operates two assembly plants and one engine plant in
Nanchang. In 2015, JMC opened a new plant in Taiyuan to assemble heavy duty trucks and engines.
The facilities described above are, in the opinion of management, suitable and adequate for the manufacture and
assembly of our and our joint ventures’ products.
The furniture, equipment, and other physical property owned by our Financial Services operations are not material in
relation to the operations’ total assets.
19
ITEM 3. Legal Proceedings.
The litigation process is subject to many uncertainties, and the outcome of individual matters is not predictable with
assurance. See Note 24 of the Notes to the Financial Statements for discussion of loss contingencies. Following is a
discussion of our significant pending legal proceedings:
PRODUCT LIABILITY MATTERS
We are a defendant in numerous actions in state and federal courts within and outside of the United States alleging
damages from injuries resulting from (or aggravated by) alleged defects in our vehicles. In many, no monetary amount of
damages is specified, or the specific amount alleged is the jurisdictional minimum. Our experience with litigation alleging
a specific amount of damages suggests that such amounts, on average, bear little relation to the actual amount of
damages, if any, that we will pay in resolving such matters.
In addition to pending actions, we assess the likelihood of incidents that likely have occurred but not yet been reported
to us; we also take into consideration specific matters that have been raised as claims but have not yet proceeded to
litigation. Individual product liability matters which, if resolved unfavorably to the Company, likely would involve a
significant cost would be described herein. Currently there are no such matters to report.
ASBESTOS MATTERS
Asbestos was used in some brakes, clutches, and other automotive components from the early 1900s. Along with
other vehicle manufacturers, we have been the target of asbestos litigation and, as a result, are a defendant in various
actions for injuries claimed to have resulted from alleged exposure to Ford parts and other products containing asbestos.
Plaintiffs in these personal injury cases allege various health problems as a result of asbestos exposure, either from
component parts found in older vehicles, insulation or other asbestos products in our facilities, or asbestos aboard our
former maritime fleet. We believe that we are being targeted more aggressively in asbestos suits because many
previously-targeted companies have filed for bankruptcy, or emerged from bankruptcy relieved of liability for such claims.
Most of the asbestos litigation we face involves individuals who claim to have worked on the brakes of our vehicles.
We are prepared to defend these cases, and believe that the scientific evidence confirms our long-standing position that
there is no increased risk of asbestos-related disease as a result of exposure to the type of asbestos formerly used in the
brakes on our vehicles. The extent of our financial exposure to asbestos litigation remains very difficult to estimate and
could include both compensatory and punitive damage awards. The majority of our asbestos cases do not specify a
dollar amount for damages; in many of the other cases the dollar amount specified is the jurisdictional minimum, and the
vast majority of these cases involve multiple defendants, sometimes more than one hundred. Many of these cases also
involve multiple plaintiffs, and often we are unable to tell from the pleadings which plaintiffs are making claims against us
(as opposed to other defendants). Annual payout and defense costs may become significant in the future.
ENVIRONMENTAL MATTERS
We have received notices under various federal and state environmental laws that we (along with others) are or may
be a potentially responsible party for the costs associated with remediating numerous hazardous substance storage,
recycling, or disposal sites in many states and, in some instances, for natural resource damages. We also may have
been a generator of hazardous substances at a number of other sites. The amount of any such costs or damages for
which we may be held responsible could be significant.
We have two environmental legal proceedings to which a governmental authority is a party and in which we believe
there is the possibility of monetary sanctions in excess of $100,000:
Notices of Violation to Ford Chicago Assembly Plant and Dearborn Truck Plant. On August 17, 2015, the U.S.
Environmental Protection Agency (“EPA”) issued a notice of violation to our Chicago Assembly Plant and on
December 26, 2015, EPA issued a notice of violation to our Dearborn Truck Plant. EPA alleges that the plants violated
several requirements related to their air permits. Monetary sanctions, if any, have not yet been determined.
20
Item 3. Legal Proceedings (Continued)
CLASS ACTIONS
In light of the fact that very few of the purported class actions filed against us in the past have ever been certified by
the courts as class actions, in general we list those actions that (i) have been certified as a class action by a court of
competent jurisdiction (and any additional purported class actions that raise allegations substantially similar to an existing
and certified class), and (ii) likely would involve a significant cost if resolved unfavorably to the Company. At this time, we
have no such purported class actions filed against us.
OTHER MATTERS
Brazilian Tax Matters. Two Brazilian states and the Brazilian federal tax authority currently have outstanding
substantial tax assessments against Ford Brazil related to state and federal tax incentives Ford Brazil receives for its
operations in the Brazilian state of Bahia. All assessments have been appealed to the relevant administrative court of
each jurisdiction. For each assessment, if we do not prevail at the administrative level, we plan to appeal to the relevant
state or federal judicial court, which would likely require us to post significant collateral in order to proceed. Our appeals
with one state and the federal tax authority remain at the administrative level. In the other state, where three cases are
pending, one remains at the administrative level and two have been appealed to the judicial court. To date we have not
been required to post any collateral.
Transit Connect Customs Ruling. On March 8, 2013, U.S. Customs and Border Protection (“CBP”) ruled that Transit
Connects imported as passenger wagons and later converted into cargo vans are subject to the 25% duty applicable to
cargo vehicles, rather than the 2.5% duty applicable to passenger vehicles. As a result of the ruling, CBP is requiring
Ford to pay the 25% duty upon importation of Transit Connects that will be converted to cargo vehicles, and is seeking the
difference in duty rates for prior imports. Our protest of the ruling within CBP was denied and we filed a challenge in the
U.S. Court of International Trade (“CIT”). A decision by CIT may be appealed to the U.S. Court of Appeals for the Federal
Circuit. If we prevail, we will receive a refund of the contested amounts paid, plus interest. If we do not prevail, CBP
would recover the increased duties for prior imports, plus interest, and might assert a claim for penalties.
ITEM 4. Mine Safety Disclosures.
Not applicable.
21
ITEM 4A. Executive Officers of Ford.
Our executive officers are as follows, along with each executive officer’s position and age at February 1, 2017:
Name
Position
William Clay Ford, Jr. (a)
Executive Chairman and Chairman of the Board
Mark Fields (b)
President and Chief Executive Officer
James D. Farley, Jr.
Executive Vice President – President, Europe, Middle East & Africa
Joseph R. Hinrichs
Executive Vice President – President, The Americas
Stephen T. Odell
Executive Vice President – Global Marketing, Sales and Service
Position
Held Since
Age
September 2006
July 2014
January 2015
December 2012
January 2015
Raj Nair
Executive Vice President – Product Development and Chief Technical Officer
December 2015
Bob Shanks
Executive Vice President and Chief Financial Officer
John Casesa
Group Vice President – Global Strategy
Ray Day
Group Vice President – Communications
April 2012
March 2015
March 2013
Joy Falotico
Group Vice President – Chairman and Chief Executive Officer, Ford Motor Credit Co.
October 2016
Felicia Fields
Group Vice President – Human Resources and Corporate Services
Bennie Fowler
Group Vice President – Quality and New Model Launch
Bradley M. Gayton
Group Vice President and General Counsel
Bruce Hettle
Group Vice President – Manufacturing and Labor Affairs
April 2008
April 2008
January 2016
January 2016
Marcy Klevorn
Group Vice President – Information Technology and Chief Information Officer
January 2017
Ziad S. Ojakli
Group Vice President – Government and Community Relations
Kimberly Pittel
Group Vice President – Sustainability, Environment & Safety Engineering
Dave Schoch
Group Vice President – President, Asia Pacific
Hau Thai-Tang
Group Vice President – Global Purchasing
John Lawler
Vice President and Controller
January 2004
January 2017
December 2012
August 2013
June 2016
59
56
54
50
61
52
64
54
50
49
51
60
53
55
57
49
57
65
50
50
____________
(a) Also a Director, Chair of the Office of the Chairman and Chief Executive, Chair of the Finance Committee, and a member of the Sustainability
Committee of the Board of Directors.
(b) Also a Director and member of the Office of the Chairman and Chief Executive and the Finance Committee of the Board of Directors.
Each of the officers listed above, except for John Casesa, has been employed by Ford or its subsidiaries in one or
more capacities during the past five years. Prior to joining Ford in March 2015, John Casesa was Senior Managing
Director of Guggenheim Partners, where he led the firm’s automotive investment banking activities since 2010.
Under our by-laws, executive officers are elected by the Board of Directors at an annual meeting of the Board held for
this purpose or by a resolution to fill a vacancy. Each officer is elected to hold office until a successor is chosen or as
otherwise provided in the by-laws.
22
PART II.
ITEM 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our Common Stock is listed on the New York Stock Exchange in the United States.
The table below shows the high and low sales prices for our Common Stock, and the dividends we paid per share of
Common and Class B Stock, for each quarterly period in 2015 and 2016:
2015
2016
Ford Common Stock price
per share (a)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
High
Low
$
16.74
$
16.16
$
15.30
$
15.84
$
14.00
$
14.22
$
14.04
$
14.30
14.78
10.44
13.40
11.02
12.00
11.90
Dividends per share of Ford
Common and Class B Stock
0.15
0.15
0.15
0.15
0.40
0.15
0.15
13.20
11.07
0.15
__________
(a) New York Stock Exchange composite intraday prices as listed in the price history database available at www.NYSEnet.com.
As of January 31, 2017, stockholders of record of Ford included approximately 125,465 holders of Common Stock
and 34 holders of Class B Stock.
In the first quarter of 2016, we repurchased shares of Ford Common Stock from our employees or directors related to
certain exercises of stock options, in accordance with our various compensation plans. We also completed a modest anti-
dilutive share repurchase program to offset the dilutive effect of share-based compensation granted during 2016. The
plan authorized repurchases of up to 10.7 million shares of Ford Common Stock.
23
ITEM 6. Selected Financial Data.
The following table sets forth selected financial data for each of the last five years (dollar amounts in millions, except
for per share amounts):
SUMMARY OF INCOME
Total revenues
Income before income taxes
Provision for/(Benefit from) income taxes
Net income
Less: Income/(Loss) attributable to noncontrolling interests
$
$
2012
2013
2014
2015
2016
133,559
$
146,917
$
144,077
$
149,558
$
151,800
2,005
$
14,371
$
1,234
$
10,252
$
89
1,916
(1)
2,425
11,946
(7)
4
1,230
(1)
2,881
7,371
(2)
6,796
2,189
4,607
11
Net income attributable to Ford Motor Company
$
1,917
$
11,953
$
1,231
$
7,373
$
4,596
Earnings Per Share Attributable to Ford Motor Company Common and Class B Stock
Average number of shares of Ford Common and Class B Stock outstanding
(in millions)
Basic income
Diluted income
Cash dividends declared
Common Stock price range (NYSE Composite Intraday)
High
Low
BALANCE SHEET DATA AT YEAR-END
Total assets
Automotive debt
Financial Services debt
Total equity
3,815
3,935
3,912
3,969
3,973
$
0.50
0.49
$
3.04
2.94
$
0.31
0.31
$
1.86
1.84
0.15
0.40
0.50
0.60
1.16
1.15
0.85
13.08
8.82
18.02
12.10
18.12
13.26
16.74
10.44
14.22
11.02
189,800
$
202,204
$
208,615
$
224,925
$
237,951
14,256
$
15,683
$
13,824
$
12,839
$
15,907
90,802
99,005
105,347
120,015
127,063
$
$
$
$
15,924
$
26,173
$
24,465
$
28,657
$
29,187
24
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW
Beginning with the second quarter of 2016, we changed our reportable segments. Prior-period amounts have been
adjusted retrospectively to reflect the reportable segment change. See Note 4 of the Notes to the Financial Statements
for additional information.
Non-GAAP Financial Measures That Supplement GAAP Measures
We use both generally accepted accounting principles (“GAAP”) and non-GAAP financial measures for operational
and financial decision making, and to assess Company and segment business performance. The non-GAAP measures
listed below are intended to be considered by users as supplemental information to their equivalent GAAP measures, to
aid investors in better understanding our financial results. We believe that these non-GAAP measures provide useful
perspective on underlying business results and trends, and a means to assess our period-over-period results. These non-
GAAP measures should not be considered as a substitute for, or superior to measures of financial performance prepared
in accordance with GAAP. These non-GAAP measures may not be the same as similarly titled measures used by other
companies due to possible differences in method and in items or events being adjusted.
•
•
•
•
•
Total Company Adjusted Pre-tax Profit (Most Comparable GAAP Measure: Net Income Attributable to Ford) – The
non-GAAP measure is useful to management and investors because it allows users to evaluate our pre-tax results
excluding pre-tax special items. Pre-tax special items consist of (i) pension and other postretirement employee
benefits (“OPEB”) remeasurement gains and losses that are not reflective of our underlying business results,
(ii) significant restructuring actions related to our efforts to match production capacity and cost structure to market
demand and changing model mix, and (iii) other items that we do not necessarily consider to be indicative of earnings
from ongoing operating activities. When we provide guidance for adjusted pre-tax profit, we do not provide guidance
on a net income basis because the GAAP measure will include potentially significant special items that have not yet
occurred and are difficult to predict with reasonable certainty prior to year-end, specifically pension and OPEB
remeasurement gains and losses.
Adjusted Earnings Per Share (Most Comparable GAAP Measure: Earnings Per Share) – Measure of Company’s
diluted net earnings per share adjusted for impact of pre-tax special items (described above) and tax special items.
The measure provides investors with useful information to evaluate performance of our business excluding items not
indicative of the underlying run rate of our business. When we provide guidance for adjusted earnings per share, we
do not provide guidance on an earnings per share basis because the GAAP measure will include potentially
significant special items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-
end, specifically pension and OPEB remeasurement gains and losses.
Adjusted Effective Tax Rate (Most Comparable GAAP Measure: Effective Tax Rate) – Measure of Company’s tax rate
excluding pre-tax special items (described above) and tax special items. The measure provides an ongoing effective
rate which investors find useful for historical comparisons and for forecasting. When we provide guidance for
adjusted effective tax rate, we do not provide guidance on an effective tax rate basis because the GAAP measure will
include potentially significant special items that have not yet occurred and are difficult to predict with reasonable
certainty prior to year-end, specifically pension and OPEB remeasurement gains and losses.
Ford Credit Managed Receivables (Most Comparable GAAP Measure: Net Finance Receivables plus Net Investment
in Operating Leases) – Measure of Ford Credit’s total net receivables, excluding unearned interest supplements and
residual support, allowance for credit losses, and other (primarily accumulated supplemental depreciation). The
measure is useful to management and investors as it closely approximates the customer’s outstanding balance on the
receivables, which is the basis for earning revenue.
Ford Credit Managed Leverage (Most Comparable GAAP Measure: Financial Statement Leverage) – Ford Credit’s
debt-to-equity ratio adjusted (i) to exclude cash, cash equivalents, and marketable securities (other than amounts
related to insurance activities), and (ii) for derivative accounting. The measure is useful to investors because it
reflects the way Ford Credit manages its business. Cash, cash equivalents, and marketable securities are deducted
because they generally correspond to excess debt beyond the amount required to support operations and on-balance
sheet securitization transactions. Derivative accounting adjustments are made to asset, debt, and equity positions to
reflect the impact of interest rate instruments used with Ford Credit’s term-debt issuances and securitization
transactions. Ford Credit generally repays its debt obligations as they mature, so the interim effects of changes in
market interest rates are excluded in the calculation of managed leverage.
25
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Revenue
Our Automotive segment 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 transferred 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. Proceeds from
the sale of vehicles at auction are recognized in revenue at the time of sale.
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 Automotive legal entity 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 segment revenue is generated primarily from interest on finance receivables, net of certain
deferred 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 is recognized on a straight-line
basis over the term of the lease. Income is generated to the extent revenues exceed expenses, most of which are
interest, depreciation, and operating expenses.
Transactions between our Automotive and Financial Services segments 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 both
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 retail finance contracts as an
element of financing revenue and over the life of lease contracts as a reduction to depreciation. See Note 1 of the Notes
to the Financial Statements for a more detailed discussion of transactions between our Automotive and Financial Services
segments.
Costs and Expenses
Our income statement classifies our Automotive segment 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; warranty, 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.
As a result, we analyze the profit impact of certain cost changes holding constant present-year volume and mix and
currency exchange, in order to evaluate our cost trends absent the impact of varying production and currency exchange
levels. We analyze these cost changes in the following categories:
Contribution Costs – these costs typically vary with production volume. These costs include material, commodity,
warranty, and freight and duty costs.
•
Structural Costs – these costs typically do not have a directly proportionate relationship to production volume.
These costs include manufacturing, engineering, spending-related, advertising and sales promotion,
administrative and selling, and pension and OPEB costs.
26
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
While contribution 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.
Cost of sales and Selling, administrative, and other expenses for full-year 2016 were $138.8 billion. Our Automotive
segment’s material and commodity costs make up the largest portion of these costs and expenses, representing in 2016
about two-thirds of the total amount. Structural costs are the largest piece of the remaining balance. 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
Currency Exchange Rate Volatility. The U.S. Federal Reserve raised its policy interest rate in December 2016, a
move which has been accompanied by an upward shift in longer term interest rates since November 2016. The related
shifts in capital flows have contributed to downward pressure on both developed and emerging market currencies globally.
In some emerging markets, that pressure is aggravated by low commodity prices, high inflation, or unstable policy
environments. Additionally, the yen, euro and pound have depreciated as a result of monetary policy easing by the
central banks in those markets, as well as ongoing Brexit negotiations in Europe. The weak yen, in particular, adds
significant potential downward pressure on vehicle pricing across many markets globally. 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. However, in some markets, exchange rates are heavily influenced or controlled by governments.
Excess Capacity. According to IHS Automotive, an automotive research firm, the estimated automotive industry
global production capacity for light vehicles of about 125 million units exceeded global production by about 32 million units
in 2016. In North America and Europe, two regions where a significant share of industry revenue is earned, excess
capacity as a percent of production was an estimated 7% and 21%, respectively, in 2016. In China, the auto industry also
witnessed excess capacity at 48% of production in 2016, as manufacturers compete to capitalize on China’s future market
potential. According to production capacity data projected by IHS Automotive, global excess capacity conditions could
continue for several years at an average of about 39 million units per year during the period from 2017 to 2021.
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. Over the long term,
intense competition and 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 exacerbated by weakening demand and the lack of reductions in existing
capacity, such that negative pricing pressure is expected to continue for the foreseeable future.
Commodity and Energy Price Changes. The price of oil has increased since late 2016 as oil producing nations
agreed to modest output reductions, although the average oil price for the year was below the 2015 level. Other
commodity prices have begun to increase as well, with continued volatility likely. Over the longer term, commodity prices
are likely to trend higher given expectations for global demand growth.
27
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
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 135% of our total average contribution margin across all
vehicles, whereas our smaller vehicles had significantly lower contribution margins. In addition, government regulations
aimed at reducing emissions and increasing fuel efficiency may increase the cost of vehicles by more than the perceived
benefit to the consumer. Given the backdrop of excess capacity, these regulations could dampen contribution margins.
Trade Policy. To the extent governments in various regions erect or intensify barriers to imports, or implement
currency 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, 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 currency 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 barriers. We will continue to monitor
and address developing issues around trade policy.
Other Economic Factors. During 2016, mature market government bond yields and inflation were lower than
expected. Although in recent months interest rates have risen, and deflation risks have receded somewhat, this is
occurring against a backdrop of loose monetary policy, particularly in Europe and Japan. At the same time, government
deficits and debt remain at high levels in many major markets. The eventual implications of higher government deficits
and debt, with potentially higher long-term interest rates, may 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.
For additional information on our assessment of the business environment, refer to the “Outlook” section below.
28
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Trends and Strategies
In 2016, we updated our vision and strategy to reflect our expansion to be an automotive and mobility company. Our
strategy is to deliver top quartile shareholder returns through automotive and high-growth mobility businesses. We are
doing this by focusing on the strategic priorities in both our core business and emerging opportunities that will fortify,
transform, and grow our business.
Fortifying the Profit Pillars
The profit pillars are the foundation and underlying strength of Ford. We are focused on keeping these areas strong
and we intend to strengthen them further through new innovations that will continue to address the needs of our
customers.
Trucks, Vans, and Commercial Vehicles. F-Series has been the U.S. truck leader for 40 years. We plan to strengthen
our truck leadership with the 2018 model year new F-150, which will feature new powertrains, including our first diesel for
F-150, and will be equipped with advanced connectivity to provide even more productivity for our customers. In 2020,
F-150 will be available in a hybrid version that will improve capability, productivity, and fuel efficiency. The new Super
Duty is off to a strong start, with high average transaction price and mix. And for the second year in a row, we are the
commercial vehicle leader in Europe. We saw strong performance around the world in 2016 from our Ranger mid-size
pickup. In 2019, Ranger will be joining F-150 and Super Duty in North America, expanding our pickup portfolio in our
largest market.
Utilities. We will introduce an all-new aluminum-body Expedition in 2017 with new capability. We also plan to
introduce five other all-new utilities through 2020, including an all-new Bronco and an all-new fully electric utility vehicle
that will have an expected range of at least 300 miles.
Performance Vehicles. We are on track to deliver 12 new performance vehicles by the end of the decade, including
the all-new Raptor and Ford GT. Mustang will be available in a hybrid version by 2020, delivering V-8 equivalent power
with greater low-end torque.
Ford Credit. Ford Credit remains a strategic asset to our automotive business around the world, delivering class-
leading services.
Ford Customer Service Division. Our parts and service business continues to grow, including a significant expansion
of Quick Lane globally, adding to customer satisfaction and owner loyalty.
29
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Transforming the Underperforming Parts of the Business
In addition to fortifying our profit pillars, we are transforming the underperforming parts of our business.
Luxury. Sales for Lincoln were up 24% globally and tripled in China in 2016, and Lincoln is being recognized for
product appeal, quality, and customer satisfaction. We are strengthening the Lincoln product portfolio with the Continental
flagship launched in 2016 and the all-new aluminum-body Navigator to be launched in 2017. We will continue to evaluate
further opportunities to improve returns on capital in the Lincoln business.
Small Vehicles. Small vehicles in developed markets is an area of challenge. We have repositioned and capped
capacity for the next generation Fiesta in Europe and underpinned it with an attractive value entry, our KA+, made in India
from a low-cost operation. We are producing the EcoSport mini utility for Europe and North America in low-cost
manufacturing locations. To match capacity with demand, we have cancelled our plans to build a new plant in Mexico and
will instead build the next-generation Focus at an existing plant in Mexico.
Emerging Markets. We exited Indonesia and Japan in 2016, given the lack of a clear path to sustained profitability in
these markets. In ASEAN, we returned to a profit in 2016, while in Russia, the business improved substantially in 2016,
with further improvement expected in 2017. Similarly, in South America, we expect results to improve in 2017 as
economic conditions begin to turn around. In our Middle East & Africa operations, we also expect results to improve in
2017 as we work to strengthen our distribution, particularly in the Middle East. We achieved significant year-over-year
growth in production in India in 2016, driven primarily by strong exports. Despite the growth, India remains a significant
challenge; we will continue to work this year to evaluate alternative business models for this large and growing emerging
market.
Growing with Investments in Emerging Opportunities
We are driving for leadership in three key emerging opportunity areas—electrification, autonomy, and mobility. In
each area, we are leveraging the strengths of our core business, as well as synergies across the three areas.
Electrification. In the area of electrification, we are focusing on our profit pillars of trucks, vans, commercial vehicles,
utilities, and performance vehicles to provide more to our customers—more capability, more productivity, and more
performance—in addition to better fuel economy. We have 13 new electrified products we plan to bring to market by
2020. These include hybrid versions of the F-150 and Mustang, a new Transit Custom plug-in hybrid in Europe, an all-
new fully electric small SUV with an estimated range of at least 300 miles, and two new electrified police vehicles.
Autonomy. We continue to make progress in the area of autonomy. We announced in 2016 our intention to produce
a high-volume, dedicated, level 4 autonomous vehicle in 2021 for ride sharing applications in a “geo-fenced” area. We
have made progress toward this objective with a new-generation Fusion Hybrid autonomous development vehicle. It
demonstrates the advancement of Ford’s in-house hardware and software engineering efforts. In 2016, we expanded our
autonomous test fleet from 10 to 30 vehicles. In 2017, we plan to further expand the fleet and begin testing in Europe.
Mobility. We are developing mobility services and related business models that are designed to reduce transportation
congestion and increase transportation capacity in crowded cities. These cities need more flow, but, at the same time,
they need to reduce congestion and they need to reduce pollution. We are moving quickly to develop partnerships with
major cities to co-create solutions for congestion. The Ford Smart Mobility team is deploying innovative solutions to
support both shared and owned business models, while aggressively developing new products and services. In 2016,
Ford Smart Mobility LLC acquired Chariot, a demand responsive shuttle company that operates in two U.S. cities and has
plans to expand to eight cities by the end of 2017, including a city outside the United States.
30
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
RESULTS OF OPERATIONS - 2016
TOTAL COMPANY
Net income attributable to Ford. The chart below shows our net income attributable to Ford for full year 2016:
Net income attributable to Ford for full year 2016 was $4.6 billion or $1.15 diluted earnings per share of Common and
Class B Stock, a decrease of $2.8 billion or $0.69 per share compared with 2015. Full year 2016 pre-tax results of our
Automotive segment, Financial Services segment, All Other, and Special Items, as well as Taxes are discussed in the
following sections in “Results of Operations.”
Revenue. Company revenue for full year 2016 was $151.8 billion, $2.2 billion higher than a year ago.
Cost of sales and Selling, administrative, and other expenses for the full year 2016 were $138.8 billion, an increase of
about $4.2 billion compared with 2015. The detail for the change is shown below (in billions):
Volume and mix, exchange, and other
Contribution costs
Material excluding commodities
Commodities
Warranty and other
Structural costs
Special items
Total
31
2016
Lower/(Higher)
2015
$
$
(0.1)
(0.3)
0.9
(0.4)
(1.5)
(2.8)
(4.2)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Equity. At December 31, 2016, total equity attributable to Ford was $29.2 billion, an increase of $0.5 billion compared
with December 31, 2015. The detail for this change is shown below (in billions):
Net income
Dividends
Other comprehensive income
Compensation-related equity issuances
Treasury stock share repurchases
Total
Increase/(Decrease)
$
$
4.6
(3.4)
(0.8)
0.2
(0.1)
0.5
The chart below shows our full year 2016 total Company adjusted pre-tax results and pre-tax results of our
Automotive segment by regional business unit, our Financial Services segment, and All Other, which is mainly net interest
expense.
Our total Company adjusted pre-tax profit for full year 2016 was $10.4 billion, or $1.76 of adjusted earnings per share
of Common and Class B Stock, a decrease of $425 million or $0.17 per share compared with 2015. Our total Company
adjusted pre-tax profit consisted of our second-best Automotive segment profit of $9.4 billion, a solid profit of $1.8 billion in
the Financial Services segment, and a loss of $867 million in All Other.
Automotive results were driven by North America, a record profit in Europe, and the second-best profit in Asia Pacific.
In total, our Automotive operations outside North America delivered a full year profit of $421 million, $198 million
higher than in 2015.
32
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
AUTOMOTIVE SEGMENT
In general, we measure year-over-year change in Automotive segment pre-tax results using the causal factors listed
below, with net pricing 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
contribution 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, special lease offers, and stock
adjustments on dealer inventory
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), warranty expense, and freight
and duty costs
Structural Costs – primarily measures profit variance driven by absolute change in cost categories that typically do not
have a directly proportionate relationship to production volume. Structural costs include the following cost categories:
Manufacturing, Including Volume Related – consists primarily of costs for hourly and salaried manufacturing
personnel, plant overhead (such as utilities and taxes), and new product launch expense. These costs could be
affected by volume for operating pattern actions such as overtime, line-speed, and shift schedules
Engineering – consists primarily of costs for engineering personnel, prototype materials, testing, 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, brand 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 costs and other postretirement employee benefit
costs
Exchange – primarily measures profit variance driven by one or more of the following: (i) transactions denominated in
currencies other than the functional currencies of the relevant entities, (ii) effects of converting functional currency
income to U.S. dollars, (iii) effects of remeasuring monetary assets and liabilities of the relevant entities in currencies
other than their functional currency, or (iv) results of our foreign currency hedging
•
•
•
• Other – includes a variety of items, such as parts and services profits, royalties, government incentives and
compensation-related changes
In addition, definitions and calculations used in this report include:
• Wholesales and Revenue – wholesale unit volumes include all Ford and Lincoln badged units (whether produced by
Ford or by an unconsolidated affiliate) that are sold to dealerships, units manufactured by Ford that are sold to other
manufacturers, units distributed by Ford for other manufacturers, and local brand units produced by our China
joint venture, Jiangling Motors Corporation, Ltd. (“JMC”), that are sold to dealerships. Vehicles sold to daily rental car
companies that are subject to a guaranteed repurchase option (i.e., rental repurchase), as well as other sales of
finished vehicles for which the recognition of revenue is deferred (e.g., consignments), also are included in wholesale
unit volumes. Revenue from certain vehicles in wholesale unit volumes (specifically, Ford badged vehicles produced
and distributed by our unconsolidated affiliates, as well as JMC brand vehicles) are not included in our revenue
•
•
Automotive Segment Operating Margin – defined as Automotive segment pre-tax profit divided by Automotive
segment revenue
Industry Volume and Market Share – based, in part, on estimated vehicle registrations; includes medium and heavy
duty trucks
33
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
•
Automotive Cash – includes cash, cash equivalents, and marketable securities
References to Automotive records for operating cash flow, operating margin, and business units are since at least
2000.
The charts on the following pages detail full year 2016 key metrics and the change in full year 2016 pre-tax results
compared with full year 2015 by causal factor for our Automotive segment and its business units — North America, South
America, Europe, Middle East & Africa, and Asia Pacific.
Shown above are the key financial metrics for our Automotive segment for full year 2016. Wholesales and revenue
were about the same as a year ago with all other metrics down, consistent with our expectations for the year.
Global industry volume, estimated at 91.4 million units, was up 3.2 million units or 4%. The increase was driven by
industry gains in Asia Pacific, Europe, and North America.
Global market share was down one-tenth of a percentage point driven by lower market share in North America and
South America. Market share was flat in Europe and higher in Middle East & Africa and Asia Pacific.
Our Automotive operating margin was 6.7% and pre-tax profit was $9.4 billion. Both metrics were the second-best for
a full year and only slightly lower than our record performance in 2015.
34
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Shown above are the factors that contributed to the $146 million decline in full year Automotive segment pre-tax profit.
The lower profit was more than explained by higher warranty costs, including about $600 million for the door latch recall
we announced in the third quarter of 2016.
Market factors were favorable, driven by strong mix in all regions except South America. This more than offset
unfavorable dealer stock changes which reflected stock reductions this year compared to increases in 2015 in North
America, Europe, and Asia Pacific.
35
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
North America generated a full year pre-tax profit of $9 billion with an operating margin of 9.7%.
North America industry, at 21.8 million units, was up 300,000 units, reflecting increases in Mexico, United States, and
Canada. U.S. industry, at 17.9 million units, was up 100,000 units.
Our North America market share was down one-tenth of a percentage point, with U.S. share down by one-tenth of a
point to 14.6%. The decrease was driven by lower retail sales, mainly cars. F-Series retail share was a partial offset,
improving two-tenths from a year ago.
Included in North America’s profit is about $600 million for the door latch recall we announced in the third quarter,
which negatively impacted North America’s operating margin by six-tenths of a percentage point.
36
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
North America’s full year pre-tax profit was $344 million lower than a year ago driven by unfavorable stock changes
and higher recall costs.
The unfavorable stock changes reflect decreases in dealer stock this year compared to increases a year ago when we
were building F-150 stock after the Kansas City plant launch. It also reflects actions to align production to demand for
several vehicles.
The higher product costs reflect primarily the impact of our first major refresh of the Super Duty.
The non-repeat of last year’s one-time ratification bonus related to the UAW agreement was a partial offset.
Within the United States, average retail transaction prices were $1,300 per vehicle higher compared to a year ago,
more than double the industry average increase. Our incentives were up as a percent of revenue, but less than the
industry average.
For 2017, we expect our North America operating margin and profit to be strong but lower than in 2016, mainly due to
unfavorable volume and mix, and increased investments in emerging opportunities.
37
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
All full year key metrics were lower than a year ago, reflecting the difficult external environment.
Industry volume for the region, at 3.7 million units, was 500,000 units lower than 2015 due to Brazil.
Our market share for the region, at 8.8%, was down eight-tenths of a percentage point, reflecting our continued focus
on optimizing more profitable share amid higher industry discounting.
38
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
South America’s full year loss was $277 million greater than in 2015. This was more than explained by the
unfavorable effects of high local inflation and weaker local currencies exceeding higher net pricing and favorable cost
performance.
For 2017, we expect South America’s loss to improve as a result of improving market conditions as the economy
begins to recover.
39
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Europe delivered a record full year profit of $1.2 billion and a record operating margin of 4.2%, both up sharply from a
year ago.
Europe industry volume, at 20.1 million units, was 5% higher than a year ago.
Europe’s market share, at 7.7%, was flat from a year ago.
In 2016, Ford remained Europe’s best-selling commercial vehicle brand and improved its share in the commercial
vehicle market, reflecting the strength of the Transit line and Ranger.
40
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Europe’s full year pre-tax profit improved $946 million from a year ago. This was driven by favorable mix, reflecting
increasing demand for our higher trim series across all major vehicle lines, and improved cost performance, reflecting our
continued focus on material cost reductions. Improved results in Russia also contributed to Europe’s favorable year-over-
year profit improvement.
For 2017, we expect Europe to remain profitable, although at levels below 2016 due mainly to a weaker sterling
resulting from Brexit and higher costs associated with continued investment in the business, including the launch of Fiesta
and Ecosport. Net pricing is expected to be a partial offset. We also expect continued improvements from our business in
Russia.
41
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Middle East & Africa’s operating margin and pre-tax results were down sharply, reflecting difficult external conditions
resulting in lower volume and unfavorable exchange, primarily the South African rand.
Industry volume for the region, at 3.6 million units, was down 700,000 units from 2015. Lower industry volume was
the primary driver in the 14% reduction in our wholesale volume. Our market share for the region was 4.5%, up one-tenth
of a percentage point.
For 2017, we expect results in Middle East & Africa to improve due to lower costs, higher net pricing, and favorable
exchange.
42
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
In 2016, Asia Pacific generated its second-best full year pre-tax profit.
Wholesale volume increased by 10% while revenue from consolidated operations was up 12%.
Asia Pacific industry was 42.1 million units, up 3.0 million units from 2015, primarily explained by a 2.9 million unit
increase in China industry volume, estimated at 26.4 million units. The increase was driven by the government purchase
tax incentive for vehicles with engine displacements of 1.6 liters or lower.
Our Asia Pacific market share was 3.8%, up two-tenths of a percentage point. The improvement in share was driven
by new product introductions, including Taurus, Edge, Lincoln MKX, and Lincoln MKZ.
Our China joint ventures contributed $1.4 billion to Asia Pacific’s pre-tax profit, reflecting our equity share of the
unconsolidated JVs’ after-tax earnings; this was $75 million lower than in 2015. Our China joint ventures’ net income
margin was 14.6%, a reduction of 1 percentage point from 2015. The decline in margin reflects negative industry pricing
in China and a higher mix of vehicles with engine displacement of 1.6 liters or lower.
43
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Asia Pacific’s full year profit was $627 million, down $138 million from 2015, reflecting lower net pricing, adverse
exchange effects (mainly a weaker Chinese renminbi), and unfavorable cost performance.
Lower net pricing compared to a year ago reflects continued negative pricing trends in China.
Unfavorable cost performance was driven by cost increases to support higher volumes and continued investment for
future product and regulatory actions. The investments in structural cost were offset partially by our continued focus on
material cost efficiencies.
Volume and mix were up reflecting higher industry volume in China and improved mix from new product launches.
For 2017, we expect Asia Pacific’s profit to improve due to favorable volume and mix. This will be offset, in part, by
lower net pricing which will be lower due to continued negative China industry pricing and unfavorable exchange, mainly
the Chinese renminbi.
44
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FINANCIAL SERVICES SEGMENT
In general, we measure year-over-year changes in Ford Credit’s pre-tax results using the causal factors listed below:
•
Volume and Mix:
Volume primarily measures changes in net financing margin driven by changes in average managed receivables
at prior period financing margin yield (defined below in financing margin) at prior period exchange rates. Volume
changes are primarily driven by the volume of new and used vehicle sales and leases, the extent to which Ford
Credit purchases retail installment sale and lease contracts, the extent to which Ford Credit provides wholesale
financing, the sales price of the vehicles financed, the level of dealer inventories, Ford-sponsored special
financing programs available exclusively through Ford Credit, and the availability of cost-effective funding for the
purchase of retail installment sale and lease contracts and to provide wholesale financing
Mix primarily measures changes in net financing margin driven by period over period changes in the composition
of Ford Credit’s average managed receivables by product and by country or region
•
Financing Margin:
Financing margin variance is the period-to-period change in financing margin yield multiplied by the present
period average managed receivables at prior period exchange rates. This calculation is performed at the product
and country level and then aggregated. Financing margin yield equals revenue, less interest expense and
scheduled depreciation for the period, divided by average managed receivables for the same period
Financing margin changes are driven by changes in revenue and interest expense. Changes in revenue are
primarily driven by the level of market interest rates, cost assumptions in pricing, mix of business, and competitive
environment. Changes in interest expense are primarily driven by the level of market interest rates, borrowing
spreads, and asset-liability management
•
Credit Loss:
Credit loss is the change in the provision for credit losses at prior period exchange rates. For analysis purposes,
management splits the provision for credit losses into net charge-offs and the change in the allowance for credit
losses
Net charge-off changes are primarily driven by the number of repossessions, severity per repossession, and
recoveries. Changes in the allowance for credit losses are primarily driven by changes in historical trends in
credit losses and recoveries, changes in the composition and size of Ford Credit’s present portfolio, changes in
trends in historical used vehicle values, and changes in economic conditions. For additional information on the
allowance for credit losses, refer to the “Critical Accounting Estimates - Allowance for Credit Losses” section
below
•
Lease Residual:
Lease residual measures changes to residual performance at prior period exchange rates. For analysis
purposes, management splits residual performance primarily into residual gains and losses, and the change in
accumulated supplemental depreciation
Residual gain and loss changes are primarily driven by the number of vehicles returned to Ford Credit and sold,
and the difference between the auction value and the depreciated value (which includes both base and
accumulated supplemental depreciation) of the vehicles sold. Changes in accumulated supplemental
depreciation are primarily driven by changes in Ford Credit’s estimate of the expected auction value at the end of
the lease term, and changes in the estimate of the number of vehicles that will be returned to it and sold. For
additional information on accumulated supplemental depreciation, refer to the “Critical Accounting Estimates -
Accumulated Depreciation on Vehicles Subject to Operating Leases” section below
•
Exchange:
Reflects changes in pre-tax results driven by the effects of converting functional currency income to U.S. dollars
• Other:
Primarily includes operating expenses, other revenue, and insurance expenses at prior period exchange rates
Changes in operating expenses are primarily driven by salaried personnel costs, facilities costs, and costs
associated with the origination and servicing of customer contracts
In general, other revenue changes are primarily driven by changes in earnings related to market valuation
adjustments to derivatives (primarily related to movements in interest rates) and other miscellaneous items
45
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford Credit’s receivables were higher than a year ago, in line with expectations, and while full year pre-tax profit was
lower, it remained solid at $1.9 billion. Portfolio performance remained robust, despite higher LTRs. Origination,
servicing, and collection practices remained disciplined and consistent.
46
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford Credit’s lower full year pre-tax profit is primarily explained by unfavorable lease residual performance and credit
losses. Favorable volume and mix, driven by growth in consumer and non-consumer finance receivables globally and
operating leases in North America, was a partial offset. Lease residual performance primarily reflects higher depreciation
in North America as we expect lower auction values in the future. Credit loss performance primarily reflects higher
charge-offs in North America.
For 2017, we continue to expect Ford Credit’s full year pre-tax profit to be about $1.5 billion, which is lower compared
with 2016 due to the impact of increased accumulated depreciation driven by expected lower residual values for Ford
Credit’s lease portfolio in North America.
47
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Over the last several years, we have seen industry lease share grow. As a result, the supply of off-lease vehicles is
higher, and will continue to grow for the next several years. The increased supply of used vehicles is resulting in lower
auction values, and we expect this trend to continue. Ford Credit’s off-lease vehicle auction performance reflects industry
trends. In 2016, Ford Credit’s off-lease auction values were lower than 2015, primarily reflecting higher return volume and
lower auction values on smaller vehicles.
Ford Credit’s 2016 full year lease share was flat compared with 2015 and remains below the industry, reflecting the
parameters of our leasing strategy which focuses on supporting sales, protecting residual values, and managing the trade
cycle. Industry off-lease volume is expected to continue to grow. Ford Credit continues to plan for lower auction values.
The average placement terms and average FICO score have remained stable for several years, reflecting Ford
Credit’s disciplined and consistent underwriting practices.
48
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
ALL OTHER
All Other is a combination of Central Treasury Operations (formerly Other Automotive) and Ford Smart Mobility LLC,
two operating segments that did not meet the quantitative thresholds in this reporting period to qualify as reportable
segments.
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 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.
In 2016, pre-tax results for All Other were a loss of $867 million, a $71 million higher loss compared with a year ago.
This increase is more than explained by higher net interest expense, offset partially by lower net losses on cash
equivalents and marketable securities.
49
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
SPECIAL ITEMS
As detailed in Note 4 of the Notes to the Financial Statements, special items are reflected as a separate reconciling
item, as opposed to being allocated among the Automotive segment, Financial Services segment, and All Other. This
reflects the fact that management excludes these items from its review of operating segment results for purposes of
measuring segment profitability and allocating resources.
Our pre-tax and tax special items were as follows:
TAXES
Our provision for income taxes for full year 2016 was $2.2 billion, resulting in an effective tax rate of 32.2%.
Our full year 2016 adjusted effective tax rate, which excludes special items, was 31.9%.
50
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
RESULTS OF OPERATIONS - 2015
TOTAL COMPANY
Net income attributable to Ford. The chart below shows our net income attributable to Ford for full year 2015:
Net income attributable to Ford for full year 2015 was $7.4 billion or $1.84 diluted earnings per share of Common and
Class B Stock, an increase of $6.1 billion or $1.53 per share compared with 2014. Full year 2015 pre-tax results of our
Automotive segment, Financial Services segment, All Other, Special Items, and Taxes are discussed in the following
sections in “Results of Operations.”
Revenue. Company revenue for full year 2015 was $149.6 billion, $5.5 billion higher than 2014.
Cost of sales and Selling, administrative, and other expenses for full year 2015 were $134.5 billion, a decrease of
$2.3 billion compared with 2014. The detail for the change is shown below (in billions):
Volume and mix, exchange, and other
Contribution costs
Material excluding commodities
Commodities
Warranty, freight, and other
Structural costs
Special items
Total
51
2015
Lower/(Higher)
2014
$
$
1.4
(3.7)
0.9
1.4
(1.8)
4.1
2.3
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Equity. At December 31, 2015, total equity attributable to Ford was $28.6 billion, an increase of $4.2 billion compared
with December 31, 2014. The detail for this change is shown below (in billions):
Net income
Dividends
Other comprehensive income
Compensation-related equity issuances
Treasury stock share repurchases
Total
Increase/(Decrease)
$
$
7.4
(2.4)
(1.0)
0.3
(0.1)
4.2
The chart below shows our full year 2015 total Company adjusted pre-tax results and pre-tax results of our
Automotive segment by regional business unit, our Financial Services segment, and All Other, which is mainly net interest
expense.
We achieved a record Company full-year adjusted pre-tax profit of $10.8 billion in 2015. Collectively, our operations
outside of North America were profitable and every business unit, with the exception of South America, was profitable in
2015. In Europe, we earned $259 million, reflecting the progress of our Transformation Plan announced in 2012. Asia
Pacific had its best-ever annual profit. North America and Ford Credit continued to deliver benchmark profitability. And as
shown below the chart, all business units improved compared with 2014.
52
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
AUTOMOTIVE SEGMENT
The charts on the following pages detail 2015 key metrics and the change in 2015 pre-tax results compared with 2014
by causal factor for our Automotive segment and its business units —North America, South America, Europe, Middle East
& Africa, and Asia Pacific.
Shown above are the key market factors and financial metrics for our Automotive segment for full year 2015. Our
Automotive operating margin of 6.8 percent was the highest since at least the 1990s. Each of the key metrics improved
compared to 2014:
• Wholesale volume was up 5%,
•
•
•
Automotive revenue was up 4%, or 9% at constant exchange,
Automotive operating margin was up 2.2 points or nearly 50%, and
Record full year Automotive pre-tax profit, at $9.6 billion, was up 53%.
Global industry volume, estimated at 88.2 million units, was up 0.1 million units from a year ago. Our global market
share, at 7.4%, was up three-tenths of a percentage point with gains in South America and Europe.
53
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
As shown above, our full year Automotive segment pre-tax profit improved by $3.3 billion. The improvement was
driven by $7.4 billion of favorable market factors, reflecting the success of our new product launches, our Asia Pacific
growth strategy, as well as industry growth in North America and Europe. Cost increases were mainly product-related
costs and manufacturing and engineering expense that supported our growth in 2015, and will support further growth in
2016 and beyond.
54
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
North America had an outstanding year. We delivered substantial top-line growth, operating margin at 10.2%, and full
year pre-tax profit of $9.3 billion—up 26%.
The North America industry volume improved compared with a year ago; the U.S. industry volume totaled 17.8 million
units, up 1 million units. U.S. market share was flat compared to last year. In addition, although not shown above, U.S.
retail share increased one-tenth of a percentage point to 13.0% driven by strong demand for our newest products,
including F-150 and Mustang.
55
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Favorable volume and mix and higher net pricing drove North America’s pre-tax profit higher than a year ago. Higher
costs, including a one-time ratification bonus in Other related to the UAW agreement in the fourth quarter, and unfavorable
exchange were partial offsets.
We achieved our highest annual sales in the United States since 2005. Ford remained the best-selling vehicle brand
in the United States and Ford F-Series was the best-selling vehicle in the United States for the 34th straight year.
56
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Wholesale volume, revenue, and operating margin were each lower than a year ago, reflecting the continued
deterioration of the business environment in South America. Despite the tough conditions, South America’s pre-tax loss
for the full year was reduced by $332 million, or 29%, compared to a year ago.
The South America industry volume, at 4.2 million units, was down 1.1 million units. Most of this was in Brazil.
Ford’s market share in South America, at 9.6%, was up seven-tenths of a percentage point reflecting our strong
performance in Brazil with the all-new Ka.
57
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
The full year pre-tax loss in South America was less severe than a year ago, reflecting higher net pricing and market
share, partially offset by lower industry.
Our team in the region continued to work on all areas of the business to counter the effects of the difficult business
environment and position ourselves to be able to recover quickly once conditions begin to improve.
58
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
With the exception of revenue, which was impacted adversely by the strong U.S. dollar, all metrics for the full year
were better than a year ago.
The Europe industry volume was 600,000 units higher compared to a year ago, more than explained by the
improvement in the Europe 20 markets. Our total Europe market share in the region was up five-tenths of a percentage
point to 7.7%, reflecting the strength of EcoSport and Mondeo and geographic mix.
In 2015, Ford became Europe’s best-selling commercial vehicle brand, reflecting the strength of our renewed Transit
line-up and Ranger as well as our dedicated dealer network support.
59
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
In Europe, our full year pre-tax profit was $259 million, up over $850 million compared to a year ago. The
improvement in Europe reflects favorable market factors and improved costs flowing through to the bottom line, partially
offset by unfavorable exchange and the consolidation of Ford Sollers, our joint venture in Russia. Returning to profitability
in 2015 reflected the progress of our Transformation Plan announced in 2012.
60
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Our pre-tax results and operating margin improved from a year ago, reflecting higher net pricing offset by lower
volume. Wholesale volume and revenue declined compared to a year ago.
The industry volume for the region was flat and our market share declined two-tenths of a percentage point due to
industry growth in markets in which we do not participate. Market share was higher compared to 2014 in the major
markets in which we do participate.
61
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
In Asia Pacific, we had our best year yet as we continued to execute our growth strategy.
Asia Pacific achieved record volume, revenue, operating margin, and pre-tax profit in 2015, mainly reflecting the
strength of our new products, including the all-new three-row Edge, Figo, Everest, Lincoln MKX, Taurus, and new Ranger.
Our China joint ventures contributed $1.5 billion to pre-tax profit in 2015, reflecting our equity share of the
unconsolidated joint ventures’ after-tax earnings; this was $234 million higher than last year.
The industry volume for the region was 39.1 million units, down 600,000 units from a year ago, primarily explained by
a decrease in the China industry volume. For the full year, both our Asia Pacific regional market share of 3.6% and our
China market share of 4.8% were higher than a year ago.
62
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Asia Pacific delivered an outstanding year with a record pre-tax profit of $765 million, up 29% from a year ago.
Favorable volume was driven by strong industry in China, where we were able to leverage the government incentive
program with our strong line-up of vehicles with 1.6L or smaller engines. Higher mix reflected the strength of our new
products, highlighted by the performance of the locally produced all-new three-row Edge. Higher structural cost was a
partial offset to the improvement, as we continued to invest for further growth in the region.
63
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
FINANCIAL SERVICES SEGMENT
Ford Credit earned a pre-tax profit of $2.1 billion in 2015, up $232 million from 2014, and its receivables were
higher than 2014.
64
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford Credit’s 2015 pre-tax profit improved compared with 2014. The improvement is more than explained by
favorable volume and mix, driven by growth in all products globally. Higher credit losses and the adverse effect of the
stronger U.S. dollar were partial offsets. The higher credit losses, primarily in North America, reflect reserve increases
in 2015 compared with reserve releases in 2014. Charge-offs were also higher.
ALL OTHER
Our full year 2015 All Other pre-tax results were a loss of $796 million, a $41 million higher loss compared with a year
ago. This increase primarily reflects higher net interest expense.
65
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
SPECIAL ITEMS
Our pre-tax and tax special items were as follows:
TAXES
Our tax provision for full year 2015 was $2.9 billion, resulting in an effective tax rate of 28.1%.
Our full year 2015 adjusted effective tax rate, which excludes special items, was 28.6%.
66
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Automotive Segment
Liquidity. One of our key priorities is to maintain a strong balance sheet, while at the same time having resources
available to grow our core business and invest in emerging opportunities. Based on our planning assumptions, we
believe we have sufficient liquidity and capital resources to continue to invest in new products and services 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.
Our key balance sheet metrics include total cash, cash equivalents, and marketable securities (collectively
“Automotive cash”), Automotive liquidity, which includes Automotive cash and total available committed credit lines, and
cash net of debt.
At December 31, 2016, we had $27.5 billion of Automotive cash, of which about 89% was held by consolidated
entities domiciled in the United States. We target to have an average ongoing Automotive cash balance of about
$20 billion. We expect to have periods when we will be above or below this amount due to (i) future cash flow
expectations, such as for pension contributions, debt maturities, capital investments, investments in emerging
opportunities, or restructuring requirements, (ii) short-term timing differences, and (iii) changes in the global economic
environment.
Our Automotive cash investments 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 is approximately one year, and is
adjusted based on market conditions and liquidity needs. We monitor our Automotive cash levels and average maturity
on a daily basis.
67
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
In addition to our target Automotive cash balance, we also target to maintain a corporate credit facility for our
Automotive business of about $10 billion to protect against exogenous shocks. Our corporate credit facility is discussed
below. We assess the appropriate long-term target for total Automotive liquidity, comprised of Automotive cash and the
corporate credit facility, to be about $30 billion, which is an amount we believe is sufficient to support our business
priorities and to protect our business. At December 31, 2016, we had $38.3 billion of Automotive liquidity. Our Automotive
cash and Automotive liquidity targets could be reduced over time based on improved operating performance and changes
in our risk profile.
Changes in Automotive Cash. Changes in Automotive segment cash are summarized below (in billions):
In managing our Automotive business, we classify changes in Automotive cash into operating and other items.
Operating items include: Automotive segment pre-tax profits, capital spending, depreciation and tooling amortization,
changes in working capital, and All Other and timing differences. Non-operating items include: separation payments,
transactions with other segments, acquisitions and divestitures, changes in Automotive debt, contributions to funded
pension plans, and dividends paid to shareholders.
Automotive operating cash flow was $6.4 billion in 2016, more than explained by Automotive segment pre-tax profits.
Automotive total cash flow of $3.9 billion in 2016 includes $2.8 billion in proceeds from our unsecured debt issuance in the
United States.
Capital spending was $6.9 billion in 2016, and is projected to be about $7 billion in 2017. Based on expected cash
flows and the identification of additional opportunities for profitable growth, the ongoing amount of capital spending to
support product development, growth, restructuring, and infrastructure is expected to be between $8 billion and $9 billion
per year through 2020.
68
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
With respect to “Changes in working capital,” in general we carry relatively low Automotive segment trade receivables
compared with 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. 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.
Available Credit Lines. Total committed Automotive credit lines at December 31, 2016 were $11.9 billion, consisting of
$10.4 billion of our corporate credit facility and $1.5 billion of local credit facilities available to non-U.S. Automotive
affiliates. At December 31, 2016, the amount available under the corporate credit facility was about $10.4 billion with
about $35 million utilized for letters of credit. At December 31, 2016, the amount available under local credit facilities was
about $500 million with about $1 billion utilized.
Lenders under our corporate credit facility have commitments to us totaling $13.4 billion, with 75% of the
commitments maturing on April 30, 2021 and 25% of the commitments maturing on April 30, 2019. We have
allocated $3 billion of commitments to Ford Credit on an irrevocable and exclusive basis to support its growth and liquidity.
Any borrowings by Ford Credit under the corporate credit facility would be guaranteed by us.
The corporate credit facility is unsecured and free of material adverse change conditions to borrowing, restrictive
financial covenants (for example, interest or fixed charge coverage ratio, debt-to-equity ratio, and minimum net worth
requirements), and credit rating triggers that could limit our ability to obtain funding. The corporate credit facility contains
a liquidity covenant that requires us to maintain a minimum of $4 billion in aggregate of domestic cash, cash equivalents,
and loaned and marketable securities and/or availability under the facility. If our senior, unsecured, long-term debt does
not maintain at least two investment grade ratings from Fitch, Moody’s, and S&P (each as defined under “Credit Ratings”
below), the guarantees of certain subsidiaries will be required.
Debt. Total Automotive debt at December 31, 2016 was $15.9 billion, which is about $3.1 billion higher than at
December 31, 2015. The increase primarily reflects our unsecured debt issuance in the United States, local funding in
international markets and foreign currency exchange, offset partially by debt repayments, including repayments to the
U.S. Department of Energy.
U.S. Department of Energy (“DOE”) Advanced Technology Vehicle Manufacturer (“ATVM”) Incentive Program. See
Note 14 of the Notes to the Financial Statements for information regarding the ATVM loan.
Leverage. We manage Automotive debt levels with a leverage framework to maintain strong, investment grade credit
ratings through a normal business cycle. The leverage framework includes a ratio of Automotive debt, underfunded
pension liabilities, operating leases, and other adjustments, divided by Automotive income before income tax, adjusted for
depreciation, amortization, interest expense on Automotive debt, and other adjustments. Ford Credit’s leverage is
calculated as a separate business as described in the Liquidity - Financial Services section of Item 7. Ford Credit is self-
funding and its debt, which is used to fund its operations, is separate from our Automotive debt.
69
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Financial Services Segment
Ford Credit
Funding Overview. Ford Credit’s primary funding and liquidity objective is to maintain a strong investment grade
balance sheet with ample liquidity to support its financing activities and growth under a variety of market conditions,
including short-term and long-term market disruptions. Ford Credit’s funding strategy remains focused on diversification,
and it plans to continue accessing a variety of markets, channels, and investors.
Ford Credit’s liquidity profile continues to be diverse, robust, and focused on maintaining liquidity levels that meet its
business and funding requirements. Ford Credit annually stress tests its balance sheet and liquidity to ensure that it
continues to meet its financial obligations through economic cycles.
Funding Sources. Ford Credit’s funding sources include primarily unsecured debt and securitization transactions
(including other structured financings). Ford Credit issues both short-term 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-term 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 and other international markets. At
December 31, 2016, 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 $6 billion. At December 31, 2016, the principal amount
outstanding of Ford Credit’s unsecured commercial paper was $4.5 billion, which primarily represents issuance under its
commercial paper program in the United States. Ford Credit maintains multiple sources of readily available liquidity to
fund the payment of its unsecured short-term debt obligations.
Funding Portfolio. The chart below shows the trends in funding for Ford Credit’s managed receivables:
Managed receivables of $137 billion at the end of 2016 were funded primarily with term debt and term asset-backed
securities. Securitized funding as a percent of managed receivables was 37%.
70
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford Credit expects the mix of securitized funding to trend lower over time. The calendarization of the funding plan
may result in quarterly fluctuations of the securitized funding percentage.
Public Term Funding Plan. The chart below shows Ford Credit’s issuances for full-year 2014, 2015, and 2016, and its
planned issuances for full-year 2017, excluding short-term funding programs:
In 2016, Ford Credit completed $28 billion of public term funding.
For 2017, Ford Credit projects full-year public term funding in the range of $24 billion to $30 billion. Through
February 8, 2017, Ford Credit has completed over $5 billion of public term issuances.
71
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Liquidity. The chart below shows Ford Credit’s liquidity sources and utilization:
Ford Credit’s liquidity available for use will fluctuate quarterly based on factors including near-term debt maturities,
receivable growth, and timing of funding transactions. Ford Credit targets liquidity of at least $25 billion. At
December 31, 2016, Ford Credit’s liquidity available for use was $27 billion, $3.5 billion higher than year-end 2015.
Ford Credit’s sources of liquidity include cash, committed asset-backed facilities, unsecured credit facilities, and the
corporate credit facility allocation.
Ford Credit’s balance sheet is inherently liquid because of the short-term nature of its finance receivables, investment
in operating leases, and cash. Ford Credit ensures its cumulative debt maturities have a longer tenor than its cumulative
asset maturities. This positive maturity profile is intended to provide Ford Credit with additional liquidity after all of its
assets have been funded.
72
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Leverage. Ford Credit uses leverage, or the debt-to-equity ratio, to make various business decisions, including
evaluating and establishing pricing for finance receivable and operating lease financing, and assessing its capital
structure.
The chart below shows the calculation of Ford Credit’s financial statement leverage and managed leverage:
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, cash equivalents, and marketable securities (excluding amounts related to
insurance activities) because they generally correspond 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 rate 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 both 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, 2016, Ford Credit’s financial statement leverage was 9.9:1, and managed leverage was 9.2:1.
Ford Credit targets managed leverage in the range of 8:1 to 9:1. Managed leverage is above the targeted range reflecting
growth in receivables and the continued impact of a strong U.S. dollar, but it continues to trend toward the target range.
73
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Total Company
Pension Plan Contributions and Strategy. Our 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 resources to fund the plans. The strategy reduces balance sheet, cash flow, and income
exposures and, in turn, reduces 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 of about 80%
fixed income investments and 20% growth assets, which will provide a better matching of plan assets to the
characteristics of the liabilities, thereby reducing our net exposure; and
Taking other strategic actions to reduce pension liabilities.
Worldwide, our defined benefit pension plans were underfunded by $8.9 billion at December 31, 2016, a deterioration
of $700 million from December 31, 2015, due to lower discount rates partially offset by asset returns and contributions. Of
the $8.9 billion underfunded status at year-end 2016, $5.9 billion, or about 66%, is associated with our unfunded plans.
The U.S. weighted-average discount rate decreased 24 basis points to 4.03% at year-end 2016 from 4.27% at year-
end 2015. The non-U.S. weighted average discount rate decreased 76 basis points to 2.44% at year-end 2016 from
3.20% at year-end 2015.
Asset returns in 2016 for our U.S. plans were 8.6% reflecting fixed income gains as interest rates fell. The fixed
income mix in our U.S. plans at year-end 2016 was 75%, two percentage points lower than year-end 2015. Asset returns
for our non-U.S. plans were 14%, reflecting fixed income gains and favorable exchange. The fixed income mix in our non-
U.S. plans at year-end 2016 was 76%, two percentage points higher than year-end 2015.
74
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
In 2016, consistent with our plan, we contributed $1.2 billion to our global funded pension plans (most of which were
mandatory contributions), an increase of $100 million compared with 2015. During 2017, we expect to contribute
$1 billion from Automotive cash to our global funded pension plans (most of which are mandatory contributions). We also
expect to make about $300 million of benefit payments to participants in unfunded plans, for a combined total of
$1.3 billion. Based on current assumptions and regulations, we do not expect to have a legal requirement to fund our
major U.S. plans in 2017. After 2017, we expect contributions to our global funded plans of about $1 billion per year,
limited to ongoing service cost. While full funding and de-risking will be dependent on many factors, including future
global interest rates, based on our present assumptions we expect our global funded pension plans will be fully funded in
2018.
For a detailed discussion of our pension plans, see Note 13 of the Notes to the Financial Statements.
Return on Invested Capital. We analyze total company performance using a Return on Invested Capital (“ROIC”)
financial metric based on an after-tax rolling five-year average basis, which we believe is appropriate given our industry’s
product and investment cycles. The following table contains the calculation of our ROIC for the years shown:
75
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
CREDIT RATINGS
Our short-term and long-term debt is rated by four credit rating agencies designated as nationally recognized
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 McGraw Hill Financial (“S&P”).
In several markets, locally-recognized rating agencies also rate us. A credit rating reflects an assessment by the
rating 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
recommendations to buy, sell, or hold securities, and are subject to revision or withdrawal at any time by the assigning
rating agency. Each rating agency may have different criteria for evaluating company risk and, therefore, ratings should
be evaluated independently for each rating agency.
In the first half of 2016, Ford and Ford Credit received rating upgrades from each of these NRSROs. The following
chart summarizes certain of the credit ratings and outlook presently assigned by these four NRSROs:
Issuer
Default /
Corporate /
Issuer Rating
Ford
Long-Term
Senior
Unsecured
NRSRO RATINGS
Ford Credit
Outlook /
Trend
Long-Term
Senior
Unsecured
Short-Term
Unsecured
Outlook /
Trend
DBRS
Fitch
Moody’s
S&P
BBB
BBB
N/A
BBB
BBB
BBB
Baa2
BBB
Stable
Stable
Stable
Stable
BBB
BBB
Baa2
BBB
R-2M
F2
P-2
A-2
Stable
Stable
Stable
Stable
NRSROs
Minimum
Long-Term
Investment
Grade Rating
BBB (low)
BBB-
Baa3
BBB-
76
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
2017 INDUSTRY AND GDP PLANNING ASSUMPTIONS
Based on the current environment, our industry and GDP planning assumptions for 2017 include the following:
Overall, we expect growth in GDP globally and in all major markets shown above. Similarly, we expect growth in
industry volume globally and in all major markets shown above, except the United States. Industry volume in the United
States is expected to decline but remain strong.
77
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
PRODUCTION VOLUMES
Our full year 2016 production volumes and first quarter 2017 forecast production volumes for our Automotive business
units are as follows (in thousands):
78
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
OUTLOOK
2017 Company Guidance
Based on the current economic environment, our Company guidance for 2017 includes the following:
After a strong 2016, we expect to deliver another good year in 2017. The total Company outlook shown above is in
line with expectations set out at our Investor Day in September 2016.
We are making substantial progress on expanding our business, from a strong, healthy automotive company to one
that will be even stronger and bigger as we become an auto and mobility company in the future.
79
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Our 2017 outlook by business unit is as follows:
We expect profits in North America and Europe to be lower than 2016, while we expect to see improvements in results
in South America, Middle East & Africa, and Asia Pacific. Results for Ford Credit and All Other are expected to be lower
than 2016.
80
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Risk Factors
Statements included or incorporated by reference herein may constitute “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations,
forecasts, and assumptions by our management and involve a number of risks, uncertainties, and other factors that could
cause actual results to differ materially from those stated, including, without limitation:
• Decline in industry sales volume, particularly in the United States, Europe, or China, due to financial crisis, recession,
geopolitical events, or other factors;
• Lower-than-anticipated market acceptance of Ford’s new or existing products or services, or failure to achieve expected
growth;
• Market shift away from sales of larger, more profitable vehicles beyond Ford’s current planning assumption, particularly
in the United States;
• Continued or increased price competition resulting from industry excess capacity, currency fluctuations, or other factors;
• Fluctuations in foreign currency exchange rates, commodity prices, and interest rates;
• Adverse effects resulting from economic, geopolitical, protectionist trade policies, or other events;
• Work stoppages at Ford or supplier facilities or other limitations on production (whether as a result of labor disputes,
natural or man-made disasters, tight credit markets or other financial distress, production constraints or difficulties, or
other factors);
• Single-source supply of components or materials;
• Labor or other constraints on Ford’s ability to maintain competitive cost structure;
• Substantial pension and other postretirement liabilities impairing liquidity or financial condition;
• Worse-than-assumed economic and demographic experience for pension and other postretirement benefit plans
(e.g., discount rates or investment returns);
• Restriction on use of tax attributes from tax law “ownership change;”
• The discovery of defects in vehicles resulting in delays in new model launches, recall campaigns, or increased warranty
costs;
• Increased safety, emissions, fuel economy, or other regulations resulting in higher costs, cash expenditures, and/or
sales restrictions;
• Unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in
products, perceived environmental impacts, or otherwise;
• Adverse effects on results from a decrease in or cessation or clawback of government incentives related to investments;
• Cybersecurity risks to operational systems, security systems, or infrastructure owned by Ford, Ford Credit, or a third-
party vendor or supplier;
• Failure of financial institutions to fulfill commitments under committed credit and liquidity facilities;
• Inability of Ford Credit to access debt, securitization, or derivative markets around the world at competitive rates or in
sufficient amounts, due to credit rating downgrades, market volatility, market disruption, regulatory requirements, or
other factors;
• Higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for
leased vehicles;
• Increased competition from banks, financial institutions, or other third parties seeking to increase their share of financing
Ford vehicles; and
• New or increased credit regulations, consumer or data protection regulations, or other regulations resulting in higher
costs and/or additional financing restrictions.
We cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will
prove accurate, or that any projection will be realized. It is to be expected that there may be differences between
projected and actual results. Our forward-looking statements speak only as of the date of their initial issuance, and we do
not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new
information, future events, or otherwise. For additional discussion, see “Item 1A. Risk Factors” above.
81
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS
The following charts show our Non-GAAP financial measure reconciliations for: Adjusted Pre-Tax Profit, Adjusted
Earnings Per Share, Adjusted Effective Tax Rate, and Ford Credit Managed Receivables. The GAAP reconciliation for
Ford Credit Managed Leverage can be found in the Financial Services Segment section of “Liquidity and Capital
Resources.”
82
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
83
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
2016 SUPPLEMENTAL FINANCIAL INFORMATION
The tables below provide supplemental consolidating financial information. The data is presented by our reportable
segments, Automotive and Financial Services. All Other, Special Items, and Adjustments include our operating segments
that did not meet the quantitative threshold to qualify as a reportable segment, special items (which primarily consists of
our pension and OPEB remeasurement gains and losses), eliminations of intersegment transactions, and deferred tax
netting.
Selected Income Statement Information. The following table provides supplemental income statement information, by
segment (in millions):
Revenues
Total costs and expenses
Interest expense on Automotive debt
Other income/(loss), net
Equity in net income of affiliated companies
Income/(loss) before income taxes
Provision for/(Benefit from) income taxes
Net income/(loss)
For the year ended December 31, 2016
Automotive
Financial
Services
All Other,
Special Items,
& Adjustments Consolidated
$
141,546
$
10,253
$
1
$
135,158
—
1,287
1,747
9,422
3,109
8,904
—
438
33
1,820
505
3,622
894
69
—
(4,446)
(1,425)
$
6,313
$
1,315
$
(3,021) $
151,800
147,684
894
1,794
1,780
6,796
2,189
4,607
84
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Selected Balance Sheet Information. The following tables provide supplemental balance sheet information, by
segment (in millions):
Assets
Cash and cash equivalents
Marketable securities
Financial Services finance receivables, net
Trade and other receivables, less allowances
Inventories
Other assets
Receivable from other segments
Total current assets
Financial Services finance receivables, net
Net investment in operating leases
Net property
Equity in net assets of affiliated companies
Deferred income taxes
Other assets
Receivable from other segments
Total assets
Liabilities
Payables
Other liabilities and deferred revenue
Automotive debt payable within one year
Financial Services debt payable within one year
Payable to other segments
Total current liabilities
Other liabilities and deferred revenue
Automotive long-term debt
Financial Services long-term debt
Deferred income taxes
Payable to other segments
Total liabilities
December 31, 2016
Automotive
Financial
Services
All Other,
Special Items,
& Adjustments Consolidated
$
7,820
$
8,077
$
19,642
—
4,457
8,898
2,328
7
43,152
—
1,620
31,916
3,136
13,112
3,993
—
3,280
46,266
6,645
—
1,040
784
66,092
49,924
27,209
156
153
206
1,617
895
$
8
—
—
—
—
—
(791)
(783)
—
—
—
15
(3,613)
46
(895)
15,905
22,922
46,266
11,102
8,898
3,368
—
108,461
49,924
28,829
32,072
3,304
9,705
5,656
—
$
$
96,929
$
146,252
$
(5,230) $
237,951
20,239
$
1,057
$
— $
18,193
2,685
—
784
41,901
23,414
13,222
—
199
895
1,120
—
46,984
—
49,161
972
—
80,079
4,105
—
3
—
—
(784)
(781)
9
—
—
(3,613)
(895)
21,296
19,316
2,685
46,984
—
90,281
24,395
13,222
80,079
691
—
$
79,631
$
134,317
$
(5,280) $
208,668
85
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Selected Cash Flow Information. The following tables provide supplemental cash flow information, by segment (in
millions):
Cash flows from operating activities
Net income
Depreciation and tooling amortization
Other amortization
Provision for credit and insurance losses
Pension and OPEB expense
Equity investment (earnings)/losses in excess of dividends
received
Foreign currency adjustments
Net (gain)/loss on changes in investments in affiliates
Stock compensation
Net Change in wholesale and other receivables
Provision for deferred income taxes
Decrease/(Increase) in intersegment receivables/payables
Decrease/(Increase) in accounts receivable and other assets
Decrease/(Increase) in inventory
Increase/(Decrease) in accounts payable and accrued and
other liabilities
Other
For the year ended December 31, 2016
Automotive
Financial
Services
All Other,
Special Items,
& Adjustments
Consolidated
$
6,313
$
1,315
$
(3,021) $
4,667
175
—
2,667
(148)
297
(139)
200
—
634
540
(2,516)
(815)
6,176
(2,934)
4,356
(481)
672
—
(30)
(14)
—
10
(1,449)
844
(543)
(339)
—
414
(73)
—
—
—
—
—
—
—
—
—
—
3
—
—
5
3,006
—
4,607
9,023
(306)
672
2,667
(178)
283
(139)
210
(1,449)
1,478
—
(2,855)
(815)
6,595
(1)
—
Interest supplements and residual value support to Financial
Services
(4,072)
4,072
Net cash provided by/(used in) operating activities
11,045
$
8,754
$
(7) $
19,792
Reconciling Adjustments to Automotive Segment Operating Cash Flows*
Automotive capital spending
Net cash flows from non-designated derivatives
Funded pension contributions
Separation payments
Other
(6,947)
610
1,155
336
186
Automotive Segment Operating Cash Flows
$
6,385
_________
* 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 above quantifies the
reconciling adjustments to Net cash provided by/(used in) operating activities for the period ended December 31, 2016.
86
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Cash flows from investing activities
Capital spending
Acquisitions of finance receivables and operating leases
Collections of finance receivables and operating leases
Purchases of equity and debt securities
Sales and maturities of equity and debt securities
Settlements of derivatives
Other
Investing activity (to)/from other segments
Net cash provided by/(used in) investing activities
Cash flows from financing activities
Cash dividends
Purchases of Common Stock
Net changes in short-term debt
Proceeds from issuance of other debt
Principal payments on other debt
Other
Financing activity to/(from) other segments
Net cash provided by/(used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
For the year ended December 31, 2016
Automotive
Financial
Services
All Other,
Special Items,
& Adjustments
Consolidated
$
(6,947) $
(45) $
— $
—
—
(24,133)
22,598
610
171
80
(56,007)
38,834
(7,289)
6,756
215
(60)
—
—
—
(6)
—
—
(49)
(80)
(6,992)
(56,007)
38,834
(31,428)
29,354
825
62
—
(7,621) $
(17,596) $
(135) $
(25,352)
(3,376) $
(145)
404
3,153
(1,053)
53
—
— $
—
3,460
42,808
(37,744)
(102)
(150)
(964) $
8,272
$
— $
—
—
—
—
—
150
150
(3,376)
(145)
3,864
45,961
(38,797)
(49)
—
$
7,458
(26) $
(239) $
— $
(265)
$
$
$
$
87
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
CRITICAL ACCOUNTING ESTIMATES
We consider an accounting estimate to be critical if: 1) the accounting estimate requires us to make assumptions
about matters that were highly uncertain at the time the accounting estimate was made, and 2) changes in the estimate
that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used
in the current period, would have a material impact on our financial condition or results of operations.
Management has discussed the development and selection of these critical accounting estimates with the Audit
Committee of our Board of Directors. In addition, there are other items within our financial statements that require
estimation, but are not deemed critical as defined above. Changes in estimates used in these and other items could have
a material impact on our financial statements.
Warranty and Field Service Actions
Nature of Estimates Required. We provide warranties on the products we sell. Separately, we also periodically
perform field service actions related to safety recalls, emission recalls, and other product campaigns. Pursuant to these
warranties and field service actions, we will repair, replace or adjust all parts on a vehicle that are defective in factory-
supplied materials or workmanship. We accrue the estimated cost of both basic warranty coverages and field service
actions at the time of sale.
Assumptions and Approach Used. We establish estimates for warranty and field service action obligations using a
patterned estimation model. We use historical information regarding the nature, frequency, and average cost of claims for
each vehicle line by model year. We reevaluate our estimate of warranty and field service obligations on a regular basis.
Experience has shown that initial data for any given model year may be volatile; therefore, our process relies on long-term
historical averages until sufficient data are available. As actual experience becomes available, we use the data to modify
the historical averages in order to ensure that the estimate is within the range of likely outcomes. We then compare the
resulting accruals with present spending rates to ensure that the balances are adequate to meet expected future
obligations. Based on this data, we revise our estimates as necessary. Warranty coverages vary; therefore, our warranty
accruals vary depending upon the type of product and the geographic location of its sale for specific periods of time and/or
mileage. Field service actions are distinguishable from warranties in that they may occur in periods beyond the basic
warranty coverage period. Our best estimate of the obligation related to field service actions includes expected future
payments.
Due to the uncertainty and potential volatility of these factors, changes in our assumptions could materially affect our
financial condition and results of operations. See Note 24 of the Notes to the Financial Statements for information
regarding warranty and product recall related costs.
Pensions and Other Postretirement Employee Benefits
Nature of Estimates Required. The estimation of our defined benefit pension and OPEB plan obligations and expenses
requires that we make use of estimates of the present value of the projected future payments to all participants, taking into
consideration the likelihood of potential future events such as demographic experience and health care cost increases. Plan
obligations and expenses are based on existing retirement plan provisions. No assumption is made regarding any potential
future changes to benefit provisions beyond those to which we are presently committed (e.g., in existing labor contracts).
Assumptions and Approach Used. The assumptions used in developing the required estimates include the following
key factors:
•
Discount rates. Our discount rate assumption is based primarily on the results of a cash flow matching analysis,
which matches the future cash outflows for each major plan to a yield curve based on high-quality bonds specific
to the country of the plan. Benefit payments are discounted at the rates on the curve to determine the year-end
obligations.
Beginning in 2016, we changed the approach used to estimate the service and interest components of net
periodic benefit cost for pension and OPEB for plans that utilize a yield curve approach. With this refinement, we
measure service and interest costs by applying the specific spot rates along that yield curve to the relevant
projected cash flows for each component. We believe this approach provides a more precise measurement of
service and interest costs. This refinement has no effect on the measurement of our plan obligations or on full
year pension and OPEB expense as lower service and interest costs recorded quarterly are offset in the fourth
quarter remeasurement. We have accounted for this as a change in accounting estimate and accordingly, have
accounted for it on a prospective basis.
88
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
•
•
•
•
•
Expected long-term rate of return on plan assets. Our expected long-term rate of return considers various
sources, primarily inputs from a range of advisors for capital market returns, inflation, bond yields, and other
variables, adjusted for specific aspects of our investment strategy by plan. Historical returns also are considered
where appropriate. The assumption is based on consideration of all inputs, with a focus on long-term trends to
avoid short-term market influences.
Salary growth. Our salary growth assumption reflects our actual experience, long-term outlook, and assumed
inflation.
Inflation. Our inflation assumption is based on an evaluation of external market indicators, including real gross
domestic product growth and central bank inflation targets.
Expected contributions. Our expected amount and timing of contributions are based on an assessment of
minimum requirements, cash availability, and other considerations (e.g., funded status, avoidance of regulatory
premiums and levies, and tax efficiency).
Retirement rates. Retirement rates are developed to reflect actual and projected plan experience.
• Mortality rates. Mortality rates are developed to reflect actual and projected plan experience.
•
Health care cost trends. Our health care cost trend assumptions are developed based on historical cost data, the
near-term outlook, and an assessment of likely long-term trends.
Assumptions are set at each year-end and are generally not changed during the year unless there is a major plan
event such as a significant curtailment or settlement that would trigger a plan remeasurement.
See Note 13 of the Notes to the Financial Statements for more information regarding pension and OPEB costs and
assumptions.
Pension Plans
Effect of Actual Results. The year-end 2016 weighted average discount rate was 4.03% for U.S. plans and 2.44% for
non-U.S. plans, reflecting decreases of 24 and 76 basis points, respectively, compared with year-end 2015. In 2016, the
U.S. actual return on assets was 8.6%, which was higher than the expected long-term rate of return of 6.75%. Non-U.S.
actual return on assets was 14%, which was higher than the expected long-term rate of return of 5.56%. In total, these
differences, in addition to demographic and other updates, resulted in a net loss of $2.8 billion which has been recognized
within net periodic benefit cost and reported as a special item.
For 2017, the expected long-term rate of return on assets is 6.75% for U.S. plans unchanged from 2016, and 5.19%
for non-U.S. plans, down 37 basis points compared with a year ago, primarily reflecting lower consensus on capital
market return expectations from advisors.
De-risking Strategy. We employ a broad global de-risking strategy which increases the matching characteristics of
our assets relative to our obligation as funded status improves. Changes in interest rates (which directly influence
changes in discount rates), in addition to other factors, have a significant impact on the value of our pension obligation
and fixed income asset portfolio. As we de-risk our plans and increase the allocation to fixed income investments over
time, we expect the funded status sensitivity to changes in interest rates will be significantly reduced. Changes in interest
rates should result in offsetting effects in the value of our pension obligation and the value of the fixed income asset
portfolio.
89
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Sensitivity Analysis. The December 31, 2016 pension funded status and 2017 expense are affected by year-end
2016 assumptions. Sensitivities to these assumptions may be asymmetric and are specific to the time periods noted.
The effects of changes in the factors which generally have the largest impact on year-end funded status and pension
expense are discussed below.
Discount rates and interest rates have the largest impact on our obligations and fixed income assets. The table below
estimates the impact on our funded status of an increase/decrease in discount rates and interest rates (in millions):
Factor
Discount rate - obligation
Interest rate - fixed income assets
Net impact on funded status
Basis
Point
Change
+/- 100 bps.
+/- 100
Increase/(Decrease) in
December 31, 2016 Funded Status
Non-U.S. Plans
$4,500/$(5,900)
(2,700)/3,500
$1,800/$(2,400)
U.S. Plans
$4,700/$(5,700)
(4,100)/5,000
$600/$(700)
The fixed income asset sensitivity shown excludes other fixed income return components (e.g., changes in credit
spreads, bond coupon and active management excess returns), and growth asset returns. Other factors that impact net
funded status (e.g., contributions) are not reflected.
Interest rates and the expected long-term rate of return on assets have the largest impact on pension expense.
These assumptions are generally set at each year-end for expense recorded throughout the following year. The table
below estimates the impact on pension expense of a higher/lower assumption for these factors (in millions):
Factor
Interest rate - service cost and interest cost
Expected long-term rate of return on assets
Basis
Point
Change
+/- 25 bps.
+/- 25
Increase/(Decrease) in
2016 Expense
U.S. Plans
$30/$(30)
(100)/100
Non-U.S. Plans
$10/$(10)
(60)/60
The impact of changing multiple factors simultaneously cannot be calculated by combining the individual sensitivities.
The sensitivity of pension expense to an increase in discount rates assumptions may not be linear.
Other Postretirement Employee Benefits
Effect of Actual Results. The weighted average discount rate used to determine the benefit obligation for worldwide
OPEB plans at December 31, 2015 was 4.23%, compared with 4% at December 31, 2016, resulting in a worldwide loss of
about $200 million which has been recognized within net periodic benefit cost and reported as a special item.
Sensitivity Analysis. Discount rates and interest rates have the largest impact on our OPEB obligation and expense.
The table below estimates the impact on 2017 pension expense of higher/lower assumptions for these factors (in
millions):
Factor
Discount rate - obligation
Interest rate - service cost and interest cost
Income Taxes
Worldwide OPEB
Basis
Point
Change
(Increase)/
Decrease
2016 YE
Obligation
+/- 100 bps.
$600/$(800)
+/- 25
N/A
Increase/
(Decrease)
2017 Expense
N/A
$5/$(5)
Nature of Estimates Required. We must make estimates and apply judgment in determining the provision for income
taxes for financial reporting purposes. We make these estimates and judgments primarily in the following areas: (i) the
calculation of tax credits, (ii) the calculation of differences in the timing of recognition of revenue and expense for tax and
financial statement purposes that will ultimately be reported in tax returns, as well as (iii) the calculation of interest and
penalties related to uncertain tax positions. Changes in these estimates and judgments may result in a material increase
or decrease to our tax provision, which would be recorded in the period in which the change occurs.
90
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Assumptions and Approach Used. We are subject to the income tax laws and regulations of the many jurisdictions in
which we operate. These tax laws and regulations are complex and involve uncertainties in the application to our facts
and circumstances that may be open to interpretation. We recognize benefits for these uncertain tax positions based
upon a process that requires judgment regarding the technical application of the laws, regulations, and various related
judicial opinions. If, in our judgment, it is more likely than not that the uncertain tax position will be settled favorably to us,
we estimate an amount that ultimately will be realized. This process is inherently subjective, since it requires our
assessment of the probability of future outcomes. We evaluate these uncertain tax positions on a quarterly basis,
including consideration of changes in facts and circumstances, such as new regulations or recent judicial opinions, as well
as the status of audit activities by taxing authorities. Changes to our estimate of the amount to be realized are recorded in
our provision for income taxes during the period in which the change occurred.
We must also assess the likelihood that we will be able to recover our deferred tax assets against future sources of
taxable income. GAAP requires a reduction of the carrying amount of deferred tax assets by recording a valuation
allowance if, based on all available evidence, it is more likely than not (defined as a likelihood of more than 50%) that all
or a portion of such assets will not be realized.
We presently believe that a valuation allowance of $909 million is required, primarily related to deferred tax assets in
various non-U.S. operations. We believe that we ultimately will recover the remaining $9 billion of deferred tax assets.
We have assessed recoverability of these assets, and concluded that no valuation allowance is required.
For additional information regarding income taxes, see Note 21 of the Notes to the Financial Statements.
Allowance for Credit Losses
The allowance for credit losses represents Ford Credit’s estimate of the probable credit loss inherent in finance
receivables and operating leases as of the balance sheet date. The adequacy of Ford Credit’s allowance for credit losses
is assessed quarterly and the assumptions and models used in establishing the allowance are evaluated regularly.
Because credit losses can vary substantially over time, estimating credit losses requires a number of assumptions about
matters that are uncertain. See Note 8 of the Notes to the Financial Statements for more information regarding allowance
for credit losses.
Nature of Estimates Required. Ford Credit estimates the probable credit losses inherent in finance receivables and
operating leases based on several factors.
Consumer Portfolio. Ford Credit estimates the allowance for credit losses on consumer receivables and on operating
leases using a combination of measurement models and management judgment. The models consider factors such as
historical trends in credit losses and recoveries (including key metrics such as delinquencies, repossessions, and
bankruptcies), the composition of Ford Credit’s present portfolio (including vehicle brand, term, risk evaluation, and new/
used vehicles), trends in historical used vehicle values, and economic conditions. Estimates from these models rely on
historical information and may not fully reflect losses inherent in the present portfolio. Therefore, Ford Credit may adjust
the estimate to reflect management judgment regarding observable changes in recent economic trends and conditions,
portfolio composition, and other relevant factors.
Assumptions Used. Ford Credit’s allowance for credit losses is based on assumptions regarding:
•
•
Frequency. The number of finance receivables and operating lease contracts that are expected to default over
the loss emergence period, measured as repossessions; repossession ratio reflects the number of finance
receivables and operating lease contracts that we expect will default over a period of time divided by the average
number of contracts outstanding; and
Loss severity. The expected difference between the amount a customer owes when the finance contract is
charged off and the amount received, net of expenses, from selling the repossessed vehicle.
Collective Allowance for Credit Losses. The collective allowance is evaluated primarily using a collective loss-to-
receivables (“LTR”) model that, based on historical experience, indicates credit losses have been incurred in the portfolio
even though the particular accounts that are uncollectible cannot be specifically identified. The LTR model is based on
the most recent years of history. Each LTR is calculated by dividing credit losses by average finance receivables or
average operating leases, excluding unearned interest supplements and allowance for credit losses. An average LTR is
calculated for each product and multiplied by the end-of-period balances for that given product.
91
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford Credit’s largest markets also use a loss projection model to estimate losses inherent in the portfolio. The loss
projection model applies recent monthly performance metrics, stratified by contract type (retail or lease), contract term
(e.g., 60-month), and risk rating to Ford Credit’s active portfolio to estimate the losses that have been incurred.
The loss emergence period (“LEP”) is an assumption within Ford Credit’s models and represents the average amount
of time between when a loss event first occurs to when it is charged off. This time period starts when the consumer
begins to experience financial difficulty. It is evidenced, typically through delinquency, before eventually resulting in a
charge-off. The LEP is a multiplier in the calculation of the collective consumer allowance for credit losses.
For accounts greater than 120 days past due, the uncollectible portion is charged off, such that the remaining
recorded investment is equal to the estimated fair value of the collateral less costs to sell.
Specific Allowance for Impaired Receivables. Consumer receivables involved in Troubled Debt Restructurings are
specifically assessed for impairment. A specific allowance is estimated based on the present value of the expected future
cash flows of the receivable discounted at the contract’s original effective interest rate or the fair value of any collateral
adjusted for estimated costs to sell.
After establishing the collective and specific allowance for credit losses, if Ford Credit management believes the
allowance does not reflect all losses inherent in the portfolio due to changes in recent economic trends and conditions, or
other relevant factors, an adjustment is made based on management judgment.
Sensitivity Analysis. Changes in the assumptions used to derive frequency and severity would affect the allowance
for credit losses. The effect of the indicated increase/decrease in the assumptions for Ford Credit’s U.S. Ford and Lincoln
brand retail financing and operating lease portfolio is as follows (in millions, except for percentages):
Assumption
Frequency - repossession ratio
Loss severity per unit
Change
Increase/
(Decrease)
+/- 0.1 pct. pt.
$49/$(49)
+/- 1.0%
5/(5)
Non-Consumer Portfolio. Ford Credit estimates the allowance for credit losses for non-consumer receivables based
on historical LTR ratios, expected future cash flows, and the fair value of collateral.
Collective Allowance for Credit Losses. Ford Credit estimates an allowance for non-consumer receivables that are
not specifically identified as impaired using a LTR model for each financing product based on historical experience. This
LTR is an average of the most recent historical experience and is calculated consistent with the consumer receivables
LTR approach. All accounts that are specifically identified as impaired are excluded from the calculation of the non-
specific or collective allowance.
Specific Allowance for Impaired Receivables. Dealer financing is evaluated by segmenting individual loans by the risk
characteristics of the loan (such as the amount of the loan, the nature of the collateral, and the financial status of the
debtor). The loans are analyzed to determine whether individual loans are impaired, and a specific allowance is
estimated based on the present value of the expected future cash flows of the receivable discounted at the loan’s original
effective interest rate or the fair value of the collateral adjusted for estimated costs to sell.
After establishing the collective and specific allowance for credit losses, if Ford Credit management believes the
allowance does not reflect all losses inherent in the portfolio due to changes in recent economic trends and conditions, or
other relevant factors, an adjustment is made based on management judgment.
Changes in Ford Credit’s assumptions affect the Financial Services interest, operating, and other expenses on our
income statement and the allowance for credit losses contained within Financial Services finance receivables, net and Net
investment in operating leases on our balance sheet.
92
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Accumulated Depreciation on Vehicles Subject to Operating Leases
Accumulated depreciation on vehicles subject to operating leases reduces the value of the leased vehicles in Ford
Credit’s operating lease portfolio from their original acquisition value to their expected residual value at the end of the
lease term.
Ford Credit monitors residual values each month, and it reviews the adequacy of accumulated depreciation on a
quarterly basis. If Ford Credit believes that the expected residual values for its vehicles have changed, it revises
depreciation to ensure that net investment in operating leases (equal to the acquisition value of the vehicles less
accumulated depreciation) will be adjusted to reflect Ford Credit’s revised estimate of the expected residual value at the
end of the lease term. Such adjustments to depreciation expense would result in a change in the depreciation rates of the
vehicles subject to operating leases and are recorded prospectively on a straight-line basis.
Each lease customer has the option to buy the leased vehicle at the end of the lease or to return the vehicle to the
dealer.
Nature of Estimates Required. Each operating lease in Ford Credit’s portfolio represents a vehicle it owns that has
been leased to a customer. At the time Ford Credit purchases a lease, it establishes an expected residual value for the
vehicle. Ford Credit estimates the expected residual value by evaluating recent auction values, return volumes for its
leased vehicles, industrywide used vehicle prices, marketing incentive plans, and vehicle quality data.
Assumptions Used. Ford Credit’s accumulated depreciation on vehicles subject to operating leases is based on
assumptions regarding:
•
•
Auction value. Ford Credit’s projection of the market value of the vehicles when sold at the end of the lease; and
Return volume. Ford Credit’s projection of the number of vehicles that will be returned at lease-end.
See Note 7 of the Notes to the Financial Statements for more information regarding accumulated depreciation on
vehicles subject to operating leases.
Sensitivity Analysis. For returned vehicles, Ford Credit faces a risk that the amount it obtains from the vehicle sold at
auction will be less than its estimate of the expected residual value for the vehicle. The effect of the indicated increase/
decrease in the assumptions for Ford Credit’s U.S. Ford and Lincoln brand operating lease portfolio is as follows (in
millions, except for percentages):
Assumption
Future auction values
Return volumes
Percentage
Change
+/- 1.0
+/- 1.0
Increase/
(Decrease)
$(120)/$120
15/(15)
The impact of the change in assumptions on future auction values and return volumes would increase or decrease
accumulated supplemental depreciation and depreciation expense over the remaining terms of the operating leases.
Adjustments to the amount of accumulated supplemental depreciation on operating leases would be reflected on our
balance sheet as Net investment in operating leases and on the income statement in Financial Services interest,
operating, and other expenses.
93
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED
The Financial Accounting Standards Board (“FASB”) has issued the following standards, which are not expected to
have a material impact (with the exception of standards 2016-02, 2016-09, and 2016-13) to our financial statements or
financial statement disclosures:
Standard
2017-03
Accounting Changes and Error Corrections and Investments - Equity Method and Joint Ventures
2016-17
Consolidation - Interests Held through Related Parties That Are under Common Control
2016-09
Stock Compensation - Improvements to Employee Share-Based Payment Accounting
2016-07
Equity Method and Joint Ventures - Simplifying the Transition to the Equity Method of Accounting
2016-06
Derivatives and Hedging - Contingent Put and Call Options in Debt Instruments
Effective Date (a)
January 1, 2017
January 1, 2017
January 1, 2017 (b)
January 1, 2017
January 1, 2017
2016-05
Derivatives and Hedging - Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships
January 1, 2017
2017-01
Business Combinations - Clarifying the Definition of a Business
2016-18
Statement of Cash Flows - Restricted Cash
2016-16
Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory
2016-15
Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments
2016-04
Extinguishments of Liabilities - Recognition of Breakage for Certain Prepaid Stored-Value Products
2016-01
Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities
2014-09
Revenue - Revenue from Contracts with Customers
2016-02
Leases
2017-04
Goodwill and Other - Simplifying the Test for Goodwill Impairment
2016-13
Credit Losses - Measurement of Credit Losses on Financial Instruments
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018 (b) (c)
January 1, 2019 (b)
January 1, 2020
January 1, 2020 (b)
__________
(a) Early adoption for each of the standards, except standard 2016-01, is permitted.
(b) For additional information, see Note 3 of the Notes to the Financial Statements.
(c) The FASB has issued the following updates to the Revenue from Contracts with Customers standard: Accounting Standard Update (“ASU”)
2015-14 (Deferral of the Effective Date), ASU 2016-08 (Principal versus Agent Considerations (Reporting Revenue Gross versus Net)), ASU
2016-10 (Identifying Performance Obligations and Licensing), and ASU 2016-12 (Narrow-Scope Improvements and Practical Expedients). We will
adopt the new revenue guidance effective January 1, 2017.
94
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
AGGREGATE CONTRACTUAL OBLIGATIONS
We are party to many contractual obligations involving commitments to make payments to third parties. Most of these
are debt obligations incurred by our Financial Services segment. Long-term debt may have fixed or variable interest
rates. For long-term debt with variable-rate interest, we estimate the future interest payments based on projected market
interest rates for various floating-rate benchmarks received from third parties. In addition, as part of our normal business
practices, we enter into contracts with suppliers for purchases of certain raw materials, components, and services to
facilitate adequate supply of these materials and services. These arrangements may contain fixed or minimum quantity
purchase requirements. “Purchase obligations” are defined as off-balance sheet agreements to purchase goods or
services that are enforceable and legally binding on the Company and that specify all significant terms.
The table below summarizes our contractual obligations as of December 31, 2016 (in millions):
Non-Financial Services
On-balance sheet
Long-term debt (a)
Interest payments relating to long-term debt
Capital leases (b)
Pension funding (c)
Off-balance sheet
Purchase obligations
Operating leases
Total Non-Financial Services
Financial Services
On-balance sheet
Long-term debt (a)
Interest payments relating to long-term debt
Off-balance sheet
Purchase obligations
Operating leases
Total Financial Services
Total Company
Payments Due by Period
2017
2018 - 2019
2020 - 2021
2022 and
Thereafter
Total
$
1,389
$
2,241
$
1,682
$
9,573
$
738
32
511
1,535
335
4,540
31,655
2,543
13
7
1,276
103
663
1,387
467
6,137
45,363
3,394
9
10
1,154
8,321
17
344
761
219
8
—
527
332
4,177
18,761
23,485
1,730
2
6
11,176
1,176
—
8
34,218
48,776
25,223
12,360
$
38,758
$
54,913
$
29,400
$
31,121
$
14,885
11,489
160
1,518
4,210
1,353
33,615
111,679
8,843
24
31
120,577
154,192
__________
(a) Excludes unamortized debt discounts/premiums, debt issuance costs, and fair value adjustments.
(b) Includes interest payments of $9 million.
(c) Amounts represent our estimate of contractually obligated deficit contributions to U.K. and Ford-Werke plans. See Note 13 for further information
regarding our expected 2017 pension contributions and funded status.
The amount of unrecognized tax benefits for 2016 of $1.6 billion (see Note 21 of the Notes to the Financial
Statements for additional discussion) is excluded from the table above. Final settlement of a significant portion of these
obligations will require bilateral tax agreements among us and various countries, the timing of which cannot reasonably be
estimated.
For additional information regarding operating lease obligations, pension and OPEB obligations, and long-term debt,
see Notes 7, 13, and 14, respectively, of the Notes to the Financial Statements.
95
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
OVERVIEW
We are exposed to a variety of market and other risks, including the effects of changes in foreign currency exchange
rates, commodity prices, and interest rates, as well as risks to availability of funding sources, hazard events, and specific
asset risks.
These risks affect our Automotive and Financial Services segments differently. We monitor and manage these
exposures as an integral part of our overall risk management program, which includes regular reports to a central
management committee, the Global Risk Management Committee (“GRMC”). The GRMC is chaired by our Chief
Financial Officer, and its members include our Treasurer, our Corporate Controller, and other members of senior
management.
Our Automotive and Financial Services segments are exposed to liquidity risk, including the possibility of having to
curtail business or being unable to meet financial obligations as they come due because funding sources may be reduced
or become unavailable. Our plan is to maintain funding sources to ensure liquidity through a variety of economic or
business cycles. As discussed in greater detail in Item 7, our funding sources include sales of receivables in
securitizations and other structured financings, unsecured debt issuances, equity and equity-linked issuances, and bank
borrowings.
We are exposed to a variety of insurable risks, such as loss or damage to property, liability claims, and employee
injury. We protect against these risks through the purchase of commercial insurance that is designed to protect us above
our self-insured retentions against events that could generate significant losses.
Direct responsibility for the execution of our market risk management strategies resides with our Treasurer’s Office
and is governed by written policies and procedures. Separation of duties is maintained between the development and
authorization of derivative trades, the transaction of derivatives, and the settlement of cash flows. Regular audits are
conducted to ensure that appropriate controls are in place and that they remain effective. In addition, our market risk
exposures and our use of derivatives to manage these exposures are approved by the GRMC, and reviewed by the Audit
Committee of our Board of Directors.
In accordance with our corporate risk management policies, we use derivative instruments, when available, such as
forward contracts, swaps and options that economically hedge certain exposures (foreign currency, commodity, and
interest rates). We do not use derivative contracts for trading, market-making, or speculative purposes. In certain
instances, we forgo hedge accounting, and in certain other instances, our derivatives do not qualify for hedge accounting.
Either situation results in unrealized gains and losses that are recognized in income. For additional information on our
derivatives, see Note 17 of the Notes to the Financial Statements.
The market and counterparty risks of our Automotive segment and Ford Credit are discussed and quantified below.
AUTOMOTIVE MARKET RISK
Our Automotive segment frequently has expenditures and receipts denominated in foreign currencies, including the
following: purchases and sales of finished vehicles and production parts, debt and other payables, subsidiary dividends,
and investments in foreign operations. These expenditures and receipts create exposures to changes in exchange rates.
We also are exposed to changes in prices of commodities used in our Automotive segment and changes in interest rates.
Foreign currency risk, commodity risk, and interest rate risk are measured and quantified using a model to evaluate
the sensitivity of market value to instantaneous, parallel shifts in rates and/or prices.
Foreign Currency Risk. Foreign currency risk is the possibility that our financial results could be better or worse than
planned because of changes in currency exchange rates. Accordingly, our normal practice is to use derivative
instruments, when available, to hedge our economic exposure with respect to forecasted revenues and costs, assets,
liabilities, and firm commitments denominated in foreign currencies. In our hedging actions, we use derivative instruments
commonly used by corporations to reduce foreign exchange risk (e.g., forward contracts).
The net fair value of foreign exchange forward contracts (including adjustments for credit risk), as of
December 31, 2015, was an asset of $322 million compared with an asset of $528 million as of December 31, 2016. The
potential decrease in fair value from a 10% adverse change in the underlying exchange rates, in U.S. dollar terms, would
have been $2.2 billion at December 31, 2015, compared with $2.7 billion at December 31, 2016. The sensitivity analysis
96
Item 7A. Quantitative and Qualitative Disclosures About Market Risk (Continued)
presented is hypothetical and assumes foreign exchange rate changes are instantaneous and adverse across all
currencies. In reality, foreign exchange rates move in different magnitudes and at different times, and any changes in fair
value would generally be offset by changes in the underlying exposure. See Note 17 of the Notes to the Financial
Statements for more information regarding our foreign currency exchange contracts.
Commodity Price Risk. Commodity price risk is the possibility that our financial results could be better or worse than
planned because of changes in the prices of commodities used in the production of motor vehicles, such as base metals
(e.g., steel, copper, and aluminum), precious metals (e.g., palladium), energy (e.g., natural gas and electricity), and
plastics/resins (e.g., polypropylene). Accordingly, our normal practice is to use derivative instruments, when available, to
hedge the price risk with respect to forecasted purchases of those commodities that we can economically hedge (primarily
base metals and precious metals). In our hedging actions, we use derivative instruments commonly used by corporations
to reduce commodity price risk (e.g., financially settled forward contracts).
The net fair value of commodity forward contracts (including adjustments for credit risk) as of December 31, 2015 was
a liability of $24 million compared with an asset of $5 million as of December 31, 2016. The potential decrease in fair
value from a 10% adverse change in the underlying commodity prices, in U.S. dollar terms, would be $62 million at
December 31, 2015, compared with $54 million at December 31, 2016.
In addition, our purchasing organization (with guidance from the GRMC as appropriate) negotiates contracts to ensure
continuous supply of raw materials. In some cases, these contracts stipulate minimum purchase amounts and specific
prices, and, therefore, play a role in managing price risk.
Interest Rate Risk.
Interest rate risk relates to the gain or loss we could incur in our Automotive segment investment
portfolios due to a change in interest rates. Our interest rate sensitivity analysis on the investment portfolios includes
cash and cash equivalents and net marketable securities. At December 31, 2015, we had $23.6 billion in our Automotive
segment investment portfolios, compared to $27.5 billion at December 31, 2016. We invest the portfolios in securities of
various types and maturities, the value of which are subject to fluctuations in interest rates. The investment strategy is
based on clearly defined risk and liquidity guidelines to maintain liquidity, minimize risk, and earn a reasonable return on
the short-term investments. In investing our Automotive cash, safety of principal is the primary objective and risk-adjusted
return is the secondary objective.
At any time, a rise in interest rates could have a material adverse impact on the fair value of our portfolios. Assuming
a hypothetical increase in interest rates of one percentage point, the value of our portfolios would be reduced by about
$186 million, as calculated as of December 31, 2015. This compares to $243 million, as calculated as of
December 31, 2016. While these are our best estimates of the impact of the specified interest rate scenario, actual
results could differ from those projected. The sensitivity analysis presented assumes interest rate changes are
instantaneous, parallel shifts in the yield curve. In reality, interest rate changes of this magnitude are rarely instantaneous
or parallel.
COUNTERPARTY RISK
Counterparty risk relates to the loss we could incur if an obligor or counterparty defaulted on an investment or a
derivative contract. We enter into master agreements with counterparties that allow netting of certain exposures in order
to manage this risk. Exposures primarily relate to investments in fixed income instruments and derivative contracts used
for managing interest rate, foreign currency exchange rate, and commodity price risk. We, together with Ford Credit,
establish exposure limits for each counterparty to minimize risk and provide counterparty diversification.
Our approach to managing counterparty risk is forward-looking and proactive, allowing us to take risk mitigation
actions before risks become losses. Exposure limits are established based on our overall risk tolerance and estimated
loss projections which are calculated from ratings-based historical default probabilities and market-based credit default
swap (“CDS”) spreads. The exposure limits are lower for lower-rated counterparties, counterparties that have relatively
higher CDS spreads, and for longer-dated exposures. Our exposures are monitored on a regular basis and included in
periodic reports to our Treasurer.
Substantially all of our counterparty exposures are with counterparties that have an investment grade rating.
Investment grade is our guideline for counterparty minimum long-term ratings.
97
Item 7A. Quantitative and Qualitative Disclosures About Market Risk (Continued)
FORD CREDIT MARKET RISK
Market risk for Ford Credit is the possibility that changes in interest and currency exchange rates will adversely affect
cash flow and economic value.
Interest Rate Risk. Generally, Ford Credit’s assets and the related debt have different re-pricing periods, and
consequently, respond differently to changes in interest rates.
Ford Credit’s assets consist primarily of fixed-rate retail installment sale and operating lease contracts and floating-
rate wholesale receivables. Fixed-rate retail installment sale and operating lease contracts generally require customers to
make equal monthly payments over the life of the contract. Wholesale receivables are originated to finance new and used
vehicles held in dealers’ inventory and generally require dealers to pay a floating rate.
Debt consists primarily of short- and long-term unsecured debt and securitization debt. Ford Credit’s unsecured term
debt instruments are principally fixed-rate and require fixed and equal interest payments over the life of the instrument and
a single principal payment at maturity.
Ford Credit’s interest rate risk management objective is to reduce volatility in its cash flows and volatility in its
economic value from changes in interest rates based on an established risk tolerance that may vary by market.
Ford Credit uses economic value sensitivity analysis and re-pricing gap analysis to evaluate potential long-term
effects of changes in interest rates. It then enters into interest rate swaps to convert portions of its floating-rate debt to
fixed or its fixed-rate debt to floating to ensure that Ford Credit’s exposure falls within the established tolerances. Ford
Credit also uses pre-tax cash flow sensitivity analysis to monitor the level of near-term cash flow exposure. The pre-tax
cash flow sensitivity analysis measures the changes in expected cash flows associated with Ford Credit’s interest-rate-
sensitive assets, liabilities, and derivative financial instruments from hypothetical changes in interest rates over a twelve-
month horizon. Ford Credit’s Asset-Liability Committee reviews the re-pricing mismatch and exposure every month and
approves interest rate swaps required to maintain exposure within approved thresholds prior to execution.
To provide a quantitative measure of the sensitivity of its pre-tax cash flow to changes in interest rates, Ford Credit
uses interest rate scenarios that assume a hypothetical, instantaneous increase or decrease of one percentage point in all
interest rates across all maturities (a “parallel shift”), as well as a base case that assumes that all interest rates remain
constant at existing levels. In reality, interest rate changes are rarely instantaneous or parallel and rates could move more
or less than the one percentage point assumed in Ford Credit’s analysis. As a result, the actual impact to pre-tax cash
flow could be higher or lower than the results detailed in the table below. These interest rate scenarios are purely
hypothetical and do not represent Ford Credit’s view of future interest rate movements.
Under these interest rate scenarios, Ford Credit expects more assets than debt and liabilities to re-price in the next
twelve months. Other things being equal, this means that during a period of rising interest rates, the interest earned on
Ford Credit’s assets will increase more than the interest paid on Ford Credit’s debt, thereby initially increasing Ford
Credit’s pre-tax cash flow. During a period of falling interest rates, Ford Credit would expect its pre-tax cash flow to
initially decrease. Ford Credit’s pre-tax cash flow sensitivity to interest rate movement is highlighted in the table below.
Pre-tax cash flow sensitivity at December 31 was as follows (in millions):
Pre-Tax Cash Flow Sensitivity
One percentage point instantaneous increase in interest rates
One percentage point instantaneous decrease in interest rates (a)
2015
2016
$
7
$
(7)
21
(21)
_____
(a) Pre-tax cash flow sensitivity given a one percentage point decrease in interest rates requires an assumption of negative interest rates in markets
where existing interest rates are below one percent.
While the sensitivity analysis presented is Ford Credit’s best estimate of the impacts of the specified assumed interest
rate scenarios, its actual results could differ from those projected. The model Ford Credit uses to conduct this analysis is
heavily dependent on assumptions. Embedded in the model are assumptions regarding the reinvestment of maturing
asset principal, refinancing of maturing debt, replacement of maturing derivatives, exercise of options embedded in debt
and derivatives, and predicted repayment of retail installment sale and lease contracts ahead of contractual maturity.
Ford Credit’s repayment projections ahead of contractual maturity are based on historical experience. If interest rates or
other factors change, Ford Credit’s actual prepayment experience could be different than projected.
98
Item 7A. Quantitative and Qualitative Disclosures About Market Risk (Continued)
Foreign Currency Risk. Ford Credit’s policy is to minimize exposure to changes in currency exchange rates. To meet
funding objectives, Ford Credit borrows in a variety of currencies, principally U.S. dollars, Canadian dollars, euros, pound
sterling, and renminbi. Ford Credit faces exposure to currency exchange rates if a mismatch exists between the currency
of receivables and the currency of the debt funding those receivables. When possible, receivables are funded with debt in
the same currency, minimizing exposure to exchange rate movements. When a different currency is used, Ford Credit
may use foreign currency swaps and foreign currency forwards to convert substantially all of its foreign currency debt
obligations to the local country currency of the receivables. As a result of this policy, Ford Credit believes its market risk
exposure, relating to changes in currency exchange rates at December 31, 2016, is insignificant.
Derivative Fair Values. The net fair value of Ford Credit’s derivative financial instruments at December 31, 2015 was
an asset of $681 million, compared to an asset of $743 million at December 31, 2016.
ITEM 8. Financial Statements and Supplementary Data.
The Report of Independent Registered Public Accounting Firm, our Financial Statements, the accompanying Notes to
the Financial Statements, and the Financial Statement Schedule that are filed as part of this Report are listed under
“Item 15. Exhibits and Financial Statement Schedules” and are set forth beginning on page FS-1 immediately following
the signature pages of this Report.
Selected quarterly financial data for 2015 and 2016 are provided in Note 23 of the Notes to the Financial Statements.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
99
ITEM 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. Mark Fields, our Chief Executive Officer (“CEO”), and Bob
Shanks, our Chief Financial Officer (“CFO”), have performed an evaluation of the Company’s disclosure controls and
procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange
Act”), as of December 31, 2016, and each has concluded that such disclosure controls and procedures are effective to
ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified by SEC rules and forms, and that such information
is accumulated and communicated to the CEO and CFO to allow timely decisions regarding required disclosures.
Management’s Report on Internal Control Over Financial Reporting. Our management is responsible for establishing
and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).
The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or because the degree of compliance with policies or procedures may
deteriorate.
Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an
assessment of the effectiveness of our internal control over financial reporting as of December 31, 2016. The assessment
was based on criteria established in the framework Internal Control - Integrated Framework (2013), issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management
concluded that our internal control over financial reporting was effective as of December 31, 2016.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2016 has been
audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report
included herein.
Changes in Internal Control over Financial Reporting. There were no changes in internal control over financial
reporting during the quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
ITEM 9B. Other Information.
None.
100
ITEM 10. Directors, Executive Officers of Ford, and Corporate Governance.
PART III.
The information required by Item 10 regarding our directors is incorporated by reference from the information under
the captions “Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “Beneficial Stock
Ownership” in our Proxy Statement. The information required by Item 10 regarding our executive officers appears as
Item 4A under Part I of this Report. The information required by Item 10 regarding an audit committee financial expert is
incorporated by reference from the information under the caption “Corporate Governance – Audit Committee Financial
Expert and Auditor Rotation” in our Proxy Statement. The information required by Item 10 regarding the members of our
Audit Committee of the Board of Directors is incorporated by reference from the information under the captions “Proxy
Summary,” “Corporate Governance – Board Committee Functions,” “Audit Committee Financial Expert and Auditor
Rotation,” and “Proposal 1 – Election of Directors” in our Proxy Statement. The information required by Item 10 regarding
the Audit Committee’s review and discussion of the audited financial statements is incorporated by reference from
information under the caption “Audit Committee Report” in our Proxy Statement. The information required by Item 10
regarding our codes of ethics is incorporated by reference from the information under the caption “Corporate Governance
– Codes of Ethics” in our Proxy Statement. In addition, we have included in Item 1 instructions for how to access our
codes of ethics on our website and our Internet address. Amendments to, and waivers granted under, our Code of Ethics
for Senior Financial Personnel, if any, will be posted to our website as well.
ITEM 11. Executive Compensation.
The information required by Item 11 is incorporated by reference from the information under the following captions in
our Proxy Statement: “Director Compensation in 2016,” “Compensation Discussion and Analysis,” “Compensation
Committee Report,” “Compensation Committee Interlocks and Insider Participation,” “Compensation of Executive
Officers,” “Summary Compensation Table,” “Grants of Plan-Based Awards in 2016,” “Outstanding Equity Awards at 2016
Fiscal Year-End,” “Option Exercises and Stock Vested in 2016,” “Pension Benefits in 2016,” “Nonqualified Deferred
Compensation in 2016,” and “Potential Payments Upon Termination or Change in Control.”
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by Item 12 is incorporated by reference from the information under the captions “Equity
Compensation Plan Information” and “Corporate Governance – Beneficial Stock Ownership” in our Proxy Statement.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by Item 13 is incorporated by reference from the information under the captions “Certain
Relationships and Related Party Transactions” and “Corporate Governance – Independence of Directors and Relevant
Facts and Circumstances” in our Proxy Statement.
ITEM 14. Principal Accounting Fees and Services.
The information required by Item 14 is incorporated by reference from the information under the caption “Audit
Committee Fees” in our Proxy Statement.
101
PART IV.
ITEM 15. Exhibits and Financial Statement Schedules.
(a) 1. Financial Statements – Ford Motor Company and Subsidiaries
The following are contained in this 2016 Form 10-K Report:
•
•
•
•
•
•
•
Report of Independent Registered Public Accounting Firm.
Consolidated Income Statement for the years ended December 31, 2014, 2015, and 2016.
Consolidated Statement of Comprehensive Income for the years ended December 31, 2014, 2015, and 2016.
Consolidated Balance Sheet at December 31, 2015 and 2016.
Consolidated Statement of Cash Flows for the years ended December 31, 2014, 2015, and 2016.
Consolidated Statement of Equity for the years ended December 31, 2014, 2015, and 2016.
Notes to the Financial Statements.
The Report of Independent Registered Public Accounting Firm, the Consolidated Financial Statements, and the Notes
to the Financial Statements listed above are filed as part of this Report and are set forth beginning on page FS-1
immediately following the signature pages of this Report.
(a) 2. Financial Statement Schedules
Designation
Schedule II
Description
Valuation and Qualifying Accounts
Schedule II is filed as part of this Report and is set forth on page FSS-1 immediately following the Notes to the
Financial Statements referred to above. The other schedules are omitted because they are not applicable, the information
required to be contained in them is disclosed elsewhere on our Consolidated Financial Statements or the amounts
involved are not sufficient to require submission.
(a) 3. Exhibits
Designation
Description
Method of Filing
Exhibit 3-A
Restated Certificate of Incorporation, dated August 2, 2000.
Filed as Exhibit 3-A to our Annual Report on Form 10-K for the
year ended December 31, 2000.*
Exhibit 3-A-1
Certificate of Designation of Series A Junior Participating
Preferred Stock filed on September 11, 2009.
Filed as Exhibit 3.1 to our Current Report on Form 8-K filed
September 11, 2009.*
Exhibit 3-B
By-laws.
Exhibit 4-A
Tax Benefit Preservation Plan (“TBPP”) dated
September 11, 2009 between Ford Motor Company and
Computershare Trust Company, N.A.
Exhibit 4-A-1
Amendment No. 1 to TBPP dated September 11, 2012.
Exhibit 4-A-2
Amendment No. 2 to TBPP dated September 9, 2015.
Filed as Exhibit 3.2 to our Form 8-A/A filed on
September 11, 2015.*
Filed as Exhibit 4.1 to our Current Report on Form 8-K filed
September 11, 2009.*
Filed as Exhibit 4 to our Current Report on Form 8-K filed
September 12, 2012.*
Filed as Exhibit 4.3 to our Current Report on Form 8-K filed
September 11, 2015.*
Exhibit 10-A
Exhibit 10-B
Executive Separation Allowance Plan as amended and
restated effective as of January 1, 2012**
Filed as Exhibit 10-A to our Annual Report on Form 10-K for the
year ended December 31, 2012.*
Deferred Compensation Plan for Non-Employee Directors,
as amended and restated as of January 1, 2012.**
Filed as Exhibit 10-B to our Annual Report on Form 10-K for the
year ended December 31, 2011.*
Exhibit 10-C
2014 Stock Plan for Non-Employee Directors**
Filed as Exhibit 10-C to our Annual Report on Form 10-K for the
year ended December 31, 2013.*
Exhibit 10-D
Exhibit 10-E
Benefit Equalization Plan, as amended and restated as of
January 1, 2012.**
Filed as Exhibit 10-C to our Annual Report on Form 10-K for the
year ended December 31, 2012.*
Description of financial counseling services provided to
certain executives.**
Filed as Exhibit 10-F to our Annual Report on Form 10-K for the
year ended December 31, 2002.*
102
Designation
Description
Method of Filing
Exhibit 10-F
Exhibit 10-F-1
Supplemental Executive Retirement Plan, amended and
restated effective as of January 1, 2013.**
Filed as Exhibit 10-E to our Annual Report on Form 10-K for the
year ended December 31, 2012.*
Defined Contribution Supplemental Executive Retirement
Plan, effective January 1, 2013.**
Filed as Exhibit 10-E-1 to our Annual Report on Form 10-K for
the year ended December 31, 2012.*
Exhibit 10-G
Description of Director Compensation as of July 13, 2006.**
Filed as Exhibit 10-G-3 to our Quarterly Report on Form 10-Q
for the quarter ended September 30, 2006.*
Exhibit 10-G-1
Exhibit 10-G-2
Exhibit 10-G-3
Amendment to Description of Director Compensation as of
February 8, 2012.**
Filed as Exhibit 10-F-3 to our Annual Report on Form 10-K for
the year ended December 31, 2011.*
Amendment to Description of Director Compensation as of
July 1, 2013.**
Amendment to Description of Director Compensation as of
January 1, 2017.**
Filed as Exhibit 10-G-2 to our Annual Report on Form 10-K for
the year ended December 31, 2013.*
Filed with this Report.
Exhibit 10-H
2008 Long-Term Incentive Plan.**
Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for
the quarter ended June 30, 2008.*
Exhibit 10-I
Exhibit 10-J
Exhibit 10-K
Description of Matching Gift Program and Vehicle
Evaluation Program for Non-Employee Directors.**
Filed as Exhibit 10-I to our Annual Report on Form 10-K/A for
the year ended December 31, 2005.*
Non-Employee Directors Life Insurance and Optional
Retirement Plan as amended and restated as of
December 31, 2010.**
Description of Non-Employee Directors Accidental Death,
Dismemberment and Permanent Total Disablement
Indemnity.**
Filed as Exhibit 10-I to our Annual Report on Form 10-K for the
year ended December 31, 2010.*
Filed as Exhibit 10-S to our Annual Report on Form 10-K for the
year ended December 31, 1992.*
Exhibit 10-K-1
Description of Amendment to Basic Life Insurance and
Accidental Death & Dismemberment Insurance.**
Filed as Exhibit 10-K-1 to our Annual Report on Form 10-K for
the year ended December 31, 2013.*
Exhibit 10-L
Exhibit 10-M
Exhibit 10-N
Exhibit 10-N-1
Exhibit 10-O
Exhibit 10-O-1
Description of Compensation Arrangements for Mark
Fields.**
Filed as Exhibit 10-L to our Annual Report on Form 10-K for the
year ended December 31, 2014.*
Select Retirement Plan, amended and restated effective as
of January 1, 2014.**
Filed as Exhibit 10-M to our Annual Report on Form 10-K for the
year ended December 31, 2013.*
Deferred Compensation Plan, as amended and restated as
of December 31, 2010.**
Filed as Exhibit 10-M to our Annual Report on Form 10-K for the
year ended December 31, 2010.*
Suspension of Open Enrollment in Deferred Compensation
Plan.**
Filed as Exhibit 10-M-1 to our Annual Report on Form 10-K for
the year ended December 31, 2009.*
Annual Incentive Compensation Plan, as amended and
restated as of March 1, 2008.**
Filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q for
the quarter ended June 30, 2008.*
Amendment to the Ford Motor Company Annual Incentive
Compensation Plan (effective as of December 31, 2008).**
Filed as Exhibit 10-N-1 to our Annual Report on Form 10-K for
the year ended December 31, 2008.*
Exhibit 10-O-2
Annual Incentive Compensation Plan Metrics for 2015.**
Exhibit 10-O-3
Annual Incentive Compensation Plan Metrics for 2016.**
Filed as Exhibit 10-O-5 to our Annual Report on Form 10-K for
the year ended December 31, 2014.*
Filed as Exhibit 10-O-4 to our Annual Report on Form 10-K for
the year ended December 31, 2015.*
Exhibit 10-O-4
Annual Incentive Compensation Plan Metrics for 2017.**
Filed with this Report.
Exhibit 10-O-5
Exhibit 10-O-6
Exhibit 10-O-7
Exhibit 10-O-8
Exhibit 10-O-9
Performance-Based Restricted Stock Unit Metrics for
2012.**
Filed as Exhibit 10-N-9 to our Annual Report on Form 10-K for
the year ended December 31, 2011.*
Performance-Based Restricted Stock Unit Metrics for
2013.**
Filed as Exhibit 10-N-9 to our Annual Report on Form 10-K for
the year ended December 31, 2012.*
Performance-Based Restricted Stock Unit Metrics for
2014.**
Filed as Exhibit 10-O-9 to our Annual Report on Form 10-K for
the year ended December 31, 2013.*
Performance-Based Restricted Stock Unit Metrics for
2015.**
Filed as Exhibit 10-O-11 to our Annual Report on Form 10-K for
the year ended December 31, 2014.*
Performance-Based Restricted Stock Unit Metrics for
2016.**
Filed as Exhibit 10-O-9 to our Annual Report on Form 10-K for
the year ended December 31, 2015.*
Exhibit 10-O-10
Performance-Based Restricted Stock Unit Metrics for
2017.**
Filed with this Report.
Exhibit 10-O-11
Executive Compensation Recoupment Policy.**
Exhibit 10-O-12
Incremental Bonus Description.**
Filed as Exhibit 10-N-8 to our Annual Report on Form 10-K for
the year ended December 31, 2010.*
Filed as Exhibit 10-N-9 to our Annual Report on Form 10-K for
the year ended December 31, 2010.*
Exhibit 10-P
Exhibit 10-P-1
Exhibit 10-P-2
Exhibit 10-P-3
Exhibit 10-P-4
1998 Long-Term Incentive Plan, as amended and restated
effective as of January 1, 2003.**
Filed as Exhibit 10-R to our Annual Report on Form 10-K for the
year ended December 31, 2002.*
Amendment to Ford Motor Company 1998 Long-Term
Incentive Plan (effective as of January 1, 2006).**
Filed as Exhibit 10-P-1 to our Annual Report on Form 10-K/A
for the year ended December 31, 2005.*
Form of Stock Option Agreement (NQO) with Terms and
Conditions.**
Filed as Exhibit 10-P-2 to our Annual Report on Form 10-K/A
for the year ended December 31, 2005.*
Form of Stock Option (NQO) Terms and Conditions for
2008 Long-Term Incentive Plan.**
Filed as Exhibit 10-O-3 to our Annual Report on
Form 10-K for the year ended December 31, 2008.*
Form of Stock Option (NQO) Agreement for 2008 Long-
Term Incentive Plan.**
Filed as Exhibit 10-O-4 to our Annual Report on Form 10-K for
the year ended December 31, 2008.*
103
Designation
Description
Method of Filing
Exhibit 10-P-5
Exhibit 10-P-6
Exhibit 10-P-7
Exhibit 10-P-8
Exhibit 10-P-9
Form of Stock Option Agreement (ISO) with Terms and
Conditions.**
Filed as Exhibit 10-P-3 to our Annual Report on Form 10-K/A
for the year ended December 31, 2005.*
Form of Stock Option (ISO) Terms and Conditions for 2008
Long-Term Incentive Plan.**
Filed as Exhibit 10-O-6 to our Annual Report on Form 10-K for
the year ended December 31, 2008.*
Form of Stock Option Agreement (ISO) for 2008 Long-Term
Incentive Plan.**
Filed as Exhibit 10-O-7 to our Annual Report on Form 10-K for
the year ended December 31, 2008.*
Form of Stock Option Agreement (U.K. NQO) with Terms
and Conditions.**
Filed as Exhibit 10-P-4 to our Annual Report on Form 10-K/A
for the year ended December 31, 2005.*
Form of Stock Option (U.K.) Terms and Conditions for 2008
Long-Term Incentive Plan.**
Filed as Exhibit 10-O-9 to our Annual Report on Form 10-K for
the year ended December 31, 2009.*
Exhibit 10-P-10
Form of Stock Option Agreement (U.K.) for 2008 Long-Term
Incentive Plan.**
Filed as Exhibit 10-O-10 to our Annual Report on Form 10-K for
the year ended December 31, 2009.*
Exhibit 10-P-11
Form of Restricted Stock Grant Letter.**
Filed as Exhibit 10-O-14 to our Annual Report on Form 10-K for
the year ended December 31, 2008.*
Exhibit 10-P-12
Exhibit 10-P-13
Exhibit 10-P-14
Exhibit 10-P-15
Exhibit 10-P-16
Exhibit 10-P-17
Exhibit 10-P-18
Exhibit 10-P-19
Exhibit 10-Q
Exhibit 10-Q-1
Exhibit 10-Q-2
Exhibit 10-R
Exhibit 10-S
Exhibit 10-T
Exhibit 10-U
Exhibit 10-V
Exhibit 10-W
Exhibit 10-W-1
Exhibit 10-X
Exhibit 10-X-1
Exhibit 10-X-2
Exhibit 10-X-3
Form of Restricted Stock Grant Letter as of
January 1, 2011.**
Filed as Exhibit 10-O-12 to our Annual Report on Form 10-K for
the year ended December 31, 2010.*
Form of Final Award Notification Letter for Performance-
Based Restricted Stock Units.**
Filed as Exhibit 10-P-13 to our Annual Report on Form 10-K for
the year ended December 31, 2015.*
Form of Performance-Based Restricted Stock Unit
Opportunity Letter (2008 Long-Term Incentive Plan).**
Filed as Exhibit 10-P-14 to our Annual Report on Form 10-K for
the year ended December 31, 2015.*
2008 Long-Term Incentive Plan Restricted Stock Unit
Agreement.**
Filed as Exhibit 10-O-22 to our Annual Report on Form 10-K for
the year ended December 31, 2008.*
2008 Long-Term Incentive Plan Restricted Stock Unit Terms
and Conditions.**
Filed as Exhibit 10-P-16 to our Annual Report on Form 10-K for
the year ended December 31, 2015.*
Form of Final Award Agreement for Performance-Based
Restricted Stock Units under 2008 Long-Term Incentive
Plan.**
Form of Final Award Terms and Conditions for
Performance-Based Restricted Stock Units under 2008
Long-Term Incentive Plan.**
Filed as Exhibit 10-O-26 to our Annual Report on Form 10-K for
the year ended December 31, 2008.*
Filed as Exhibit 10-P-18 to our Annual Report on Form 10-K for
the year ended December 31, 2015.*
Form of Notification Letter for Time-Based Restricted Stock
Units.**
Filed as Exhibit 10-P-19 to our Annual Report on Form 10-K for
the year ended December 31, 2015.*
Agreement dated January 13, 1999 between Ford Motor
Company and Edsel B. Ford II.**
Filed as Exhibit 10-X to our Annual Report on Form 10-K for the
year ended December 31, 1998.*
Amendment dated May 5, 2010 to the Consulting
Agreement between Ford Motor Company and
Edsel B. Ford II.**
Amendment dated January 1, 2012 to the Consulting
Agreement between Ford Motor Company and
Edsel B. Ford II.**
Amended and Restated Relationship Agreement dated April
30, 2015 between Ford Motor Company and Ford Motor
Credit Company LLC.
Form of Trade Secrets/Non-Compete Statement between
Ford and certain of its Executive Officers.**
Filed as Exhibit 10.3 to our Quarterly Report on Form 10-Q for
the quarter ended March 31, 2010.*
Filed as Exhibit 10-P-2 to our Annual Report on Form 10-K for
the year ended December 31, 2011.*
Filed as Exhibit 10.2 to our Current Report on Form 8-K filed
May 1, 2015.*
Filed as Exhibit 10-V to our Annual Report on Form 10-K for the
year ended December 31, 2003.*
Arrangement between Ford Motor Company and
William C. Ford, Jr., dated February 25, 2009.**
Filed as Exhibit 10-V to our Annual Report on Form 10-K for the
year ended December 31, 2008.*
2015 Incentive Compensation Grants - Exclusion of
Pension & OPEB Accounting Change.**
Filed as Exhibit 10-U to our Annual Report on Form 10-K for the
year ended December 31, 2015.*
Description of Company Practices regarding Club
Memberships for Executives.**
Filed as Exhibit 10-BB to our Annual Report on Form 10-K for
the year ended December 31, 2006.*
Accession Agreement between Ford Motor Company and
James D. Farley, Jr. as of October 9, 2007.**
Filed as Exhibit 10-W to our Annual Report on Form 10-K for the
year ended December 31, 2012.*
Form of James D. Farley, Jr. Agreement Amendment,
effective as of October 12, 2008.**
Filed as Exhibit 10-W-1 to our Annual Report on Form 10-K for
the year ended December 31, 2012.*
Amended and Restated Credit Agreement dated as of
November 24, 2009.
Filed as Exhibit 99.2 to our Current Report on Form 8-K filed
November 25, 2009.*
Seventh Amendment dated as of March 15, 2012 to our
Credit Agreement dated as of December 15, 2006, as
amended and restated as of November 24, 2009, and as
further amended.
Ninth Amendment dated as of April 30, 2013 to our Credit
Agreement dated as of December 15, 2006, as amended
and restated as of November 24, 2009, and as further
amended.
Tenth Amendment dated as of April 30, 2014 to our Credit
Agreement dated as of December 15, 2006, as amended
and restated as of November 24, 2009, and as further
amended.
104
Filed as Exhibit 99.2 to our Current Report on Form 8-K filed
March 15, 2012.*
Filed as Exhibit 10 to our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2013.*
Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for
the quarter ended March 31, 2014.*
Designation
Description
Method of Filing
Exhibit 10-X-4
Exhibit 10-X-5
Exhibit 10-Y
Exhibit 10-Z
Exhibit 12
Exhibit 21
Exhibit 23
Exhibit 24
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Eleventh Amendment dated as of April 30, 2015 to our
Credit Agreement dated as of December 15, 2006, as
amended and restated as of November 24, 2009, as
amended and restated as of April 30, 2014, and as further
amended, including the Third Amended and Restated
Credit Agreement.
Twelfth Amendment dated as of April 29, 2016 to our Credit
Agreement dated as of December 15, 2006, as amended
and restated as of November 24, 2009, as amended and
restated as of April 30, 2014, and as further amended and
restated as of April 30, 2015.
Loan Arrangement and Reimbursement Agreement
between Ford Motor Company and the U.S. Department of
Energy dated as of September 16, 2009.
Note Purchase Agreement dated as of September 16, 2009
among the Federal Financing Bank, Ford Motor Company,
and the U.S. Secretary of Energy.
Filed as Exhibit 10.1 to our Current Report on Form 8-K filed
May 1, 2015.*
Filed as Exhibit 10 to our Current Report on Form 8-K filed
April 29, 2016.*
Filed as Exhibit 10.1 to our Current Report on Form 8-K filed
September 22, 2009.*
Filed as Exhibit 10.2 to our Current Report on Form 8-K filed
September 22, 2009.*
Calculation of Ratio of Earnings to Fixed Charges.
Filed with this Report.
List of Subsidiaries of Ford as of January 31, 2017.
Filed with this Report.
Consent of Independent Registered Public Accounting
Firm.
Powers of Attorney.
Rule 15d-14(a) Certification of CEO.
Rule 15d-14(a) Certification of CFO.
Section 1350 Certification of CEO.
Section 1350 Certification of CFO.
Filed with this Report.
Filed with this Report.
Filed with this Report.
Filed with this Report.
Furnished with this Report.
Furnished with this Report.
Exhibit 101.INS
XBRL Instance Document.
Exhibit 101.SCH
XBRL Taxonomy Extension Schema Document.
Exhibit 101.CAL
XBRL Taxonomy Extension Calculation Linkbase
Document.
Exhibit 101.LAB
XBRL Taxonomy Extension Label Linkbase Document.
Exhibit 101.PRE
XBRL Taxonomy Extension Presentation Linkbase
Document.
***
***
***
***
***
Exhibit 101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.
***
Incorporated by reference as an exhibit to this Report (file number reference 1-3950, unless otherwise indicated).
__________
*
** Management contract or compensatory plan or arrangement.
*** Submitted electronically with this Report in accordance with the provisions of Regulation S-T.
Instruments defining the rights of holders of certain issues of long-term debt of Ford and of certain consolidated subsidiaries
and of any unconsolidated subsidiary, for which financial statements are required to be filed with this Report, have not been
filed as exhibits to this Report because the authorized principal amount of any one of such issues does not exceed 10% of
the total assets of Ford and our subsidiaries on a consolidated basis. Ford agrees to furnish a copy of each of such instrument
to the Securities and Exchange Commission upon request.
ITEM 16. Form 10-K Summary.
None.
105
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Ford has
duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURE
FORD MOTOR COMPANY
By:
/s/ John Lawler
John Lawler, Vice President and Controller
(principal accounting officer)
Date:
February 9, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed
below by the following persons on behalf of Ford and in the capacities on the date indicated:
Signature
Title
Date
WILLIAM CLAY FORD, JR.*
William Clay Ford, Jr.
Director, Chairman of the Board, Executive Chairman,
Chair of the Office of the Chairman and Chief Executive,
and Chair of the Finance Committee
February 9, 2017
MARK FIELDS*
Mark Fields
Director, President and Chief Executive Officer
(principal executive officer)
February 9, 2017
STEPHEN G. BUTLER*
Stephen G. Butler
Director and Chair of the Audit Committee
February 9, 2017
KIMBERLY A. CASIANO*
Kimberly A. Casiano
Director
February 9, 2017
ANTHONY F. EARLEY, JR.*
Anthony F. Earley, Jr.
Director and Chair of the Compensation Committee
February 9, 2017
EDSEL B. FORD II*
Edsel B. Ford II
JAMES H. HANCE, JR.*
James H. Hance, Jr.
Director
Director
February 9, 2017
February 9, 2017
WILLIAM W. HELMAN IV*
William W. Helman IV
Director and Chair of the Sustainability and Innovation
Committee
February 9, 2017
JON M. HUNTSMAN, JR.*
Jon M. Huntsman, Jr.
WILLIAM E. KENNARD*
William E. Kennard
JOHN C. LECHLEITER*
John C. Lechleiter
Director
Director
Director
106
February 9, 2017
February 9, 2017
February 9, 2017
Signature
Title
Date
ELLEN R. MARRAM*
Ellen R. Marram
Director
February 9, 2017
GERALD L. SHAHEEN*
Gerald L. Shaheen
Director and Chair of the Nominating and Governance
Committee
February 9, 2017
JOHN L. THORNTON*
John L. Thornton
JOHN S. WEINBERG*
John S. Weinberg
Director
Director
February 9, 2017
February 9, 2017
BOB SHANKS*
Bob Shanks
Executive Vice President and Chief Financial Officer
(principal financial officer)
February 9, 2017
JOHN T. LAWLER*
John T. Lawler
Vice President and Controller
(principal accounting officer)
*By: /s/ JONATHAN E. OSGOOD
Jonathan E. Osgood
Attorney-in-Fact
February 9, 2017
February 9, 2017
107
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108
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Ford Motor Company
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income,
comprehensive income, equity and cash flows present fairly, in all material respects, the financial position of Ford Motor
Company and its subsidiaries at December 31, 2016 and December 31, 2015, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in
the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and the
financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over
Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on
the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated
audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Detroit, Michigan
February 9, 2017
FS-1
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(in millions, except per share amounts)
Revenues
Automotive
Financial Services
Other
Total revenues
Costs and expenses
Cost of sales
Selling, administrative, and other expenses
Financial Services interest, operating, and other expenses
Total costs and expenses
Interest expense on Automotive debt
Non-Financial Services interest income and other income/(loss), net (Note 19)
Financial Services other income/(loss), net (Note 19)
Equity in net income of affiliated companies
Income before income taxes
Provision for/(Benefit from) income taxes (Note 21)
Net income
Less: Income/(Loss) attributable to noncontrolling interests
For the years ended December 31,
2014
2015
2016
$
135,782
$
140,566
$
8,295
—
8,992
—
141,546
10,253
1
144,077
149,558
151,800
125,025
11,842
6,878
143,745
797
76
348
1,275
1,234
4
1,230
(1)
124,041
10,502
7,368
141,911
773
1,188
372
1,818
10,252
2,881
7,371
(2)
Net income attributable to Ford Motor Company
$
1,231
$
7,373
$
EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 22)
Basic income
Diluted income
Cash dividends declared
$
$
0.31
0.31
0.50
$
1.86
1.84
0.60
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
Net income
Other comprehensive income/(loss), net of tax (Note 18)
Foreign currency translation
Marketable securities
Derivative instruments
Pension and other postretirement benefits
Total other comprehensive income/(loss), net of tax
Comprehensive income
Less: Comprehensive income/(loss) attributable to noncontrolling interests
For the years ended December 31,
2014
2015
2016
$
1,230
$
7,371
$
4,607
(36)
—
(182)
(23)
(241)
989
—
(1,132)
(6)
227
(81)
(992)
6,379
(2)
Comprehensive income attributable to Ford Motor Company
$
989
$
6,381
$
The accompanying notes are part of the financial statements.
FS-2
126,584
12,196
8,904
147,684
894
1,356
438
1,780
6,796
2,189
4,607
11
4,596
1.16
1.15
0.85
(1,024)
(8)
219
56
(757)
3,850
10
3,840
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
ASSETS
Cash and cash equivalents (Note 5)
Marketable securities (Note 5)
Financial Services finance receivables, net (Note 6)
Trade and other receivables, less allowances of $372 and $392
Inventories (Note 9)
Other assets
Total current assets
Financial Services finance receivables, net (Note 6)
Net investment in operating leases (Note 7)
Net property (Note 11)
Equity in net assets of affiliated companies (Note 10)
Deferred income taxes (Note 21)
Other assets
Total assets
LIABILITIES
Payables
Other liabilities and deferred revenue (Note 12)
Automotive debt payable within one year (Note 14)
Financial Services debt payable within one year (Note 14)
Total current liabilities
Other liabilities and deferred revenue (Note 12)
Automotive long-term debt (Note 14)
Financial Services long-term debt (Note 14)
Deferred income taxes (Note 21)
Total liabilities
Redeemable noncontrolling interest (Note 15)
EQUITY
Capital stock (Note 22)
Common Stock, par value $.01 per share (3,976 million shares issued of 6 billion authorized)
Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized)
Capital in excess of par value of stock
Retained earnings
Accumulated other comprehensive income/(loss) (Note 18)
Treasury stock
Total equity attributable to Ford Motor Company
Equity attributable to noncontrolling interests
Total equity
Total liabilities and equity
December 31,
2015
December 31,
2016
$
$
$
14,272
20,904
45,137
11,042
8,319
2,913
102,587
45,554
27,093
30,163
3,224
11,509
4,795
224,925
$
$
20,272
$
19,089
1,779
41,196
82,336
23,457
11,060
78,819
502
15,905
22,922
46,266
11,102
8,898
3,368
108,461
49,924
28,829
32,072
3,304
9,705
5,656
237,951
21,296
19,316
2,685
46,984
90,281
24,395
13,222
80,079
691
196,174
208,668
94
40
1
21,421
14,414
(6,257)
(977)
28,642
15
28,657
$
224,925
$
96
40
1
21,630
15,634
(7,013)
(1,122)
29,170
17
29,187
237,951
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 16 for additional information on our VIEs.
ASSETS
Cash and cash equivalents
Financial Services finance receivables, net
Net investment in operating leases
Other assets
LIABILITIES
Other liabilities and deferred revenue
Debt
The accompanying notes are part of the financial statements.
FS-3
December 31,
2015
December 31,
2016
$
$
3,949
$
45,902
13,309
85
$
19
43,086
3,047
50,857
11,761
25
5
43,730
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
For the years ended December 31,
2014
2015
2016
Cash flows from operating activities
Net income
Depreciation and tooling amortization
Other amortization
Provision for credit and insurance losses
Pension and other postretirement employee benefits (“OPEB”) expense
Equity investment (earnings)/losses in excess of dividends received
Foreign currency adjustments
Net (gain)/loss on changes in investments in affiliates
Stock compensation
Net change in wholesale and other receivables
Provision for deferred income taxes
Decrease/(Increase) in accounts receivable and other assets
Decrease/(Increase) in inventory
Increase/(Decrease) in accounts payable and accrued and other liabilities
Other
Net cash provided by/(used in) operating activities
Cash flows from investing activities
Capital spending
Acquisitions of finance receivables and operating leases
Collections of finance receivables and operating leases
Purchases of equity and debt securities
Sales and maturities of equity and debt securities
Change related to Venezuelan operations
Settlements of derivatives
Other
$
1,230
$
7,371
$
7,385
38
305
4,429
189
825
798
180
(2,208)
(94)
(2,896)
(936)
5,729
(467)
14,507
(7,463)
(51,673)
36,497
(48,694)
50,264
(477)
281
141
7,993
(27)
418
512
(333)
710
(42)
199
(5,090)
2,120
(3,563)
(1,155)
7,758
(701)
16,170
(7,196)
(57,217)
38,130
(41,279)
40,766
—
134
500
4,607
9,023
(306)
672
2,667
(178)
283
(139)
210
(1,449)
1,478
(2,855)
(815)
6,595
(1)
19,792
(6,992)
(56,007)
38,834
(31,428)
29,354
—
825
62
Net cash provided by/(used in) investing activities
(21,124)
(26,162)
(25,352)
Cash flows from financing activities
Cash dividends
Purchases of Common Stock
Net changes in short-term debt
Proceeds from issuance of other debt
Principal payments on other debt
Other
Net cash provided by/(used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at January 1
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at December 31
(1,952)
(1,964)
(3,870)
40,043
(28,859)
25
3,423
(517)
(3,711) $
14,468
$
(3,711)
(2,380)
(129)
1,646
48,860
(33,358)
(317)
14,322
(815)
3,515
10,757
3,515
$
$
10,757
$
14,272
$
(3,376)
(145)
3,864
45,961
(38,797)
(49)
7,458
(265)
1,633
14,272
1,633
15,905
$
$
$
The accompanying notes are part of the financial statements.
FS-4
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
(in millions)
Equity Attributable to Ford Motor Company
Cap. in
Excess
of
Par
Value
of
Stock
Capital
Stock
Retained
Earnings/
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Income/(Loss)
(Note 18)
Treasury
Stock
Total
Equity
Attributable
to Non-
controlling
Interests
Total
Equity
Balance at December 31, 2013
Net income
Other comprehensive income/(loss), net
of tax
Common stock issued (including share-
based compensation impacts)
Treasury stock/other
Cash dividends declared
Balance at December 31, 2014
Balance at December 31, 2014
Net income
Other comprehensive income/(loss), net
of tax
Common stock issued (including share-
based compensation impacts)
Treasury stock/other
Cash dividends declared
Balance at December 31, 2015
Balance at December 31, 2015
Net income
Other comprehensive income/(loss), net
of tax
Common stock issued (including share-
based compensation impacts)
Treasury stock/other
Cash dividends declared
Balance at December 31, 2016
$
$
$
$
$
$
40
—
—
—
—
—
40
40
—
—
1
—
—
41
41
—
—
—
—
—
41
$ 21,422
—
$
10,208
1,231
$
(5,024) $
—
(506) $ 26,140
1,231
—
$
33
(1)
$ 26,173
1,230
—
314
(647)
—
$ 21,089
$ 21,089
—
—
332
—
—
$ 21,421
$ 21,421
—
—
209
—
—
$ 21,630
$
$
$
$
$
—
—
(65)
(1,952)
9,422
9,422
7,373
—
—
(1)
(2,380)
14,414
14,414
4,596
—
—
$
$
$
$
—
(3,376)
15,634
$
(241)
—
—
—
(241)
314
—
—
(5,265) $
(342)
—
(1,054)
(1,952)
(848) $ 24,438
(5,265) $
—
(848) $ 24,438
7,373
—
(992)
—
—
—
(992)
333
—
—
(6,257) $
(129)
—
(130)
(2,380)
(977) $ 28,642
(6,257) $
—
(977) $ 28,642
4,596
—
(756)
—
—
—
(756)
209
—
—
(145)
(3,376)
(7,013) $ (1,122) $ 29,170
(145)
—
1
(240)
—
(4)
(2)
27
314
(1,058)
(1,954)
$ 24,465
27
(2)
$ 24,465
7,371
—
—
(4)
(6)
15
15
11
(1)
—
(3)
(5)
17
(992)
333
(134)
(2,386)
$ 28,657
$ 28,657
4,607
(757)
209
(148)
(3,381)
$ 29,187
$
$
$
$
$
The accompanying notes are part of the financial statements.
FS-5
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Table of Contents
Footnote
Note 1
Note 2
Note 3
Note 4
Note 5
Note 6
Note 7
Note 8
Note 9
Note 10
Note 11
Note 12
Note 13
Note 14
Note 15
Note 16
Note 17
Note 18
Note 19
Note 20
Note 21
Note 22
Note 23
Note 24
Presentation
Summary of Significant Accounting Policies
New Accounting Standards
Segment Information
Cash, Cash Equivalents, and Marketable Securities
Financial Services Finance Receivables
Net Investment in Operating Leases
Financial Services Allowance for Credit Losses
Inventories
Equity in Net Assets of Affiliated Companies
Net Property and Lease Commitments
Other Liabilities and Deferred Revenue
Retirement Benefits
Debt and Commitments
Redeemable Noncontrolling Interest
Variable Interest Entities
Derivative Financial Instruments and Hedging Activities
Accumulated Other Comprehensive Income/(Loss)
Other Income/(Loss)
Share-Based Employee Compensation
Income Taxes
Capital Stock and Earnings Per Share
Selected Quarterly Financial Data (unaudited)
Commitments and Contingencies
Page
FS-7
FS-8
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FS-14
FS-18
FS-21
FS-25
FS-26
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FS-29
FS-31
FS-32
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FS-46
FS-47
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FS-51
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FS-6
NOTE 1. PRESENTATION
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
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”).
Effective December 31, 2014, we began reporting the results of our wholly-owned Venezuelan subsidiary using the
cost method of accounting. This change resulted in a fourth quarter 2014 one-time pre-tax charge of $800 million in Non-
Financial Services interest income and other income/(loss), net.
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 4 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.
Certain Transactions Between Automotive Segment and Financial Services Segment
Intersegment transactions occur in the ordinary course of business. Additional detail regarding certain transactions
and the effect on each segment at December 31 was as follows (in billions):
Trade and other receivables (a)
Unearned interest supplements and residual support (b)
Dealer financing and other financing receivables (c)
Net investment in operating leases (d)
Intersegment receivables/(payables) (e)
Automotive
2015
$
$
(1.1)
Financial
Services
Automotive
2016
$
Financial
Services
6.1
(5.3)
0.7
0.9
1.7
5.4
(4.5)
0.8
0.7
1.1
$
(1.7)
__________
(a) Automotive receivables (generated primarily from vehicle and parts sales to third parties) sold to Ford Credit.
(b) Automotive segment pays amounts to Ford Credit at the point of retail financing or lease origination which represent interest supplements and
residual support.
(c) Receivables with entities that are consolidated subsidiaries of Ford.
(d) Sale-leaseback agreement between Automotive and Financial Services relating primarily to vehicles that we lease to our employees.
(e) Reflects amounts owed to Financial Services by Automotive (these amounts include the balances related to the Dealer financing and other
financing receivables described above).
FS-7
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For each accounting topic that is addressed in its own note, the description of the accounting policy may be found in
the related note. Other significant accounting policies are described below.
Use of Estimates
The preparation of financial statements requires us to make estimates and assumptions that affect our results.
Estimates are used to account for certain items such as marketing accruals, warranty costs, employee benefit programs,
etc. Estimates are based on assumptions that we believe are reasonable under the circumstances. Due to the inherent
uncertainty involved with estimates, actual results may differ.
Foreign Currency
We remeasure monetary assets and liabilities denominated in a currency that is different than a reporting entity’s
functional currency from the transactional currency to the legal entity’s functional currency. The effect of this
remeasurement process, and the results of our foreign currency hedging activities are reported in Cost of sales and
Financial Services other income/(loss), net and were $(510) million, $(524) million, and $307 million, for the years ended
2014, 2015, and 2016, respectively.
Generally, our foreign subsidiaries use the local currency as their functional currency. We translate the assets and
liabilities of our foreign subsidiaries from their respective functional currencies to U.S. dollars using end-of-period
exchange rates. Changes in the carrying value of these assets and liabilities attributable to fluctuations in exchange rates
are recognized in Foreign currency translation, a component of Other comprehensive income/(Ioss), net of tax. Upon sale
or upon complete or substantially complete liquidation of an investment in a foreign subsidiary, the amount of accumulated
foreign currency translation related to the entity is reclassified to income and recognized as part of the gain or loss on the
investment.
Restricted Cash
Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual
agreements are recorded in Other assets in the non-current assets section of our consolidated balance sheet. Our
Automotive segment restricted cash balances primarily include various escrow agreements related to legal, insurance,
customs, and environmental matters. Our Financial Services segment restricted cash balances primarily include cash
held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain
contractual agreements. Restricted cash does not include required minimum balances or cash securing debt issued
through securitization transactions. The balance at December 31, 2015 and 2016 was immaterial.
Trade Receivables
Trade and other receivables consists primarily of Automotive segment receivables from contracts with customers for
the sale of vehicles, parts, and accessories. Trade receivables initially are recorded at the transaction amount and are
typically outstanding for less than 30 days. Each reporting period, we evaluate the collectability of the receivables and
record an allowance for doubtful accounts representing our estimate of the probable losses. Additions to the allowance
for doubtful accounts are made by recording charges to bad debt expense reported in Selling, administrative, and other
expenses.
Net Intangible Assets
We capitalize and amortize our finite-lived intangible assets over their estimated useful lives. Indefinite-lived
intangible assets are not amortized, but are tested for impairment annually or more frequently if events or circumstances
indicate the assets may be impaired. Our intangible assets are comprised primarily of license and advertising
agreements, land rights, patents, customer contracts, and technology. Our indefinite-lived intangibles were tested for
impairment in 2015 and 2016 and no impairment was required.
The net carrying amount of our intangible assets was $124 million and $198 million at December 31, 2015 and 2016,
respectively, and are reported in Other assets in the non-current assets section of our consolidated balance sheet.
FS-8
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Long-Lived Asset Impairment
We test long-lived asset groups for recoverability when changes in circumstances indicate the carrying value may not
be recoverable. Events that trigger a test for recoverability include material adverse changes in projected revenues and
expenses, significant underperformance relative to historical and projected future operating results, significant negative
industry or economic trends, and a significant adverse change in the manner in which an asset group is used or in its
physical condition. When a triggering event occurs, a test for recoverability is performed, comparing projected
undiscounted future cash flows to the carrying value of the asset group. If the test for recoverability identifies a possible
impairment, the asset group’s fair value is measured relying primarily on a discounted cash flow method. An impairment
charge is recognized for the amount by which the carrying value of the asset group exceeds its estimated fair value.
When an impairment loss is recognized for assets to be held and used, the adjusted carrying amount of those assets is
depreciated over their remaining useful life. No impairment of long-lived assets was recorded in 2015 or 2016.
Goodwill
We perform annual testing of goodwill during the fourth quarter to determine whether any impairment has occurred.
Goodwill impairment testing is also performed following an allocation of goodwill to a business to be disposed, or following
a triggering event for the long-lived asset impairment test. To test for goodwill impairment, we assess qualitative factors to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the
qualitative assessment indicates a possible impairment, the carrying value of each reporting unit is compared with its fair
value. Fair value is measured relying primarily on the income approach by applying a discounted cash flow method. Our
goodwill balances were $6 million and $50 million at December 31, 2015 and 2016, respectively, and are reported in
Other assets in the non-current assets section of our consolidated balance sheet. For the periods presented, we have not
recorded any impairment.
Fair Value Measurements
Cash equivalents, marketable securities, and derivative financial instruments are remeasured and 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.
In measuring fair value, we use various valuation methods and prioritize the use of observable inputs. The use of
observable and unobservable inputs and their significance in measuring fair value are reflected in our fair value hierarchy.
•
•
•
Level 1 - inputs include quoted prices for identical instruments and are the most observable
Level 2 - inputs include quoted prices for similar instruments and observable inputs such as interest rates,
currency exchange rates, and yield curves
Level 3 - inputs include data not observable in the market and reflect management judgment about the
assumptions market participants would use in pricing the instruments
Transfers into and transfers out of the hierarchy levels are recognized as if they had taken place at the end of the
reporting period.
Valuation Method
Cash and Cash Equivalents.
Included in Cash and cash equivalents are highly liquid investments that are readily
convertible to known amounts of cash and are subject to an insignificant risk of change in value due to interest rate,
quoted price, or penalty on withdrawal. A debt security is classified as a cash equivalent if it meets these criteria and if it
has a remaining time to maturity of three months or less from the date of acquisition. Amounts on deposit and available
upon demand, or negotiated to provide for daily liquidity without penalty, are classified as Cash and cash equivalents.
Time deposits, certificates of deposit, and money market accounts that meet the above criteria are reported at par value
on our balance sheet.
FS-9
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Marketable Securities. Investments in securities with a maturity date greater than three months at the date of
purchase and other securities for which there is more than an insignificant risk of change in value due to interest rate,
quoted price, or penalty on withdrawal are classified as Marketable securities. We generally measure fair value using
prices obtained from pricing services. Pricing methods and inputs to valuation models used by the pricing services
depend on the security type (i.e., asset class). Where possible, fair values are generated using market inputs including
quoted prices (the closing price in an exchange market), bid prices (the price at which a buyer stands ready to purchase),
and other market information. For fixed income securities that are not actively traded, the pricing services use alternative
methods to determine fair value for the securities, including quotes for similar fixed-income securities, matrix pricing,
discounted cash flow using benchmark curves, or other factors. In certain cases, when market data are not available, we
may use broker quotes to determine fair value.
An annual review is performed on the security prices received from our pricing services, which includes discussion
and analysis of the inputs used by the pricing services to value our securities. We also compare the price of certain
securities sold close to the quarter end to the price of the same security at the balance sheet date to ensure the reported
fair value is reasonable.
Realized gains and losses and interest income on all of our marketable securities, and unrealized gains and losses on
securities not classified as available for sale are recorded in Non-Financial Services interest income and other income/
(loss), net and Financial Services other income/(loss), net. Unrealized gains and losses on available for sale securities
are recognized in Unrealized gains and losses on securities, a component of Other comprehensive income/(loss), net of
tax. Realized gains and losses and reclassifications of accumulated other comprehensive income into net income are
measured using the specific identification method.
On a quarterly basis, we review our available for sale securities for impairment. If we conclude that any of these
investments are impaired, we determine whether such impairment is other-than-temporary. Factors we consider to make
such determination include the duration and severity of the impairment, the reason for the decline in value, and the
potential recovery period and our intent to sell. If any impairment is considered other-than-temporary, we will write down
the asset to its fair value and record the corresponding charge in Non-Financial Services interest income and other
income/(loss), net.
Derivative Financial Instruments. Our derivatives are over-the-counter customized derivative transactions and are not
exchange traded. We estimate the fair value of these instruments using industry-standard valuation models such as a
discounted cash flow. These models project future cash flows and discount the future amounts to a present value using
market-based expectations for interest rates, foreign exchange rates, commodity prices, and the contractual terms of the
derivative instruments. The discount rate used is the relevant interbank deposit rate (e.g., LIBOR) plus an adjustment for
non-performance risk. The adjustment reflects the full credit default swap (“CDS”) spread applied to a net exposure, by
counterparty, considering the master netting agreements and any posted collateral. We use our counterparty’s CDS
spread when we are in a net asset position and our own CDS spread when we are in a net liability position. In certain
cases, market data is not available and we use broker quotes and models (e.g., Black-Scholes) to determine fair value.
This includes situations where there is lack of liquidity for a particular currency or commodity, or when the instrument is
longer dated.
Finance Receivables. We measure finance receivables at fair value for purposes of disclosure (see Note 6) using
internal valuation models. These models project future cash flows of financing contracts based on scheduled contract
payments (including principal and interest). The projected cash flows are discounted to present value based on
assumptions regarding credit losses, pre-payment speed, and applicable spreads to approximate current rates. Our
assumptions regarding pre-payment speed and credit losses are based on historical performance. The fair value of
finance receivables is categorized within Level 3 of the hierarchy.
On a nonrecurring basis, we also measure at fair value retail contracts greater than 120 days past due or deemed to
be uncollectible, and individual dealer loans probable of foreclosure. We use the fair value of collateral, adjusted for
estimated costs to sell, to determine the fair value of our receivables. The collateral for a retail receivable is the vehicle
financed, and for dealer loans is real estate or other property.
FS-10
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
The fair value of collateral for retail receivables is calculated by multiplying the outstanding receivable balances by the
average recovery value percentage. The fair value of collateral for dealer loans is determined by reviewing various
appraisals, which include total adjusted appraised value of land and improvements, alternate use appraised value,
broker’s opinion of value, and purchase offers.
Debt. We measure debt at fair value for purposes of disclosure (see Note 14) using quoted prices for our own debt
with approximately the same remaining maturities. Where quoted prices are not available, we estimate fair value using
discounted cash flows and market-based expectations for interest rates, credit risk, and the contractual terms of the debt
instruments. For certain short-term debt with an original maturity date of one year or less, we assume that book value is a
reasonable approximation of the debt’s fair value. The fair value of debt is categorized within Level 2 of the hierarchy.
Employee Separation Actions and Exit and Disposal Activities
We record costs associated with voluntary separations at the time of employee acceptance, unless the acceptance
requires explicit approval by the Company. We record costs associated with involuntary separation programs when
management has approved the plan for separation, the affected employees are identified, and it is unlikely that actions
required to complete the separation plan will change significantly. When a plan of separation requires approval by or
consultation with the relevant labor organization or government, the costs are recorded after the required approval or
consultation process is complete. Costs associated with benefits that are contingent on the employee continuing to
provide service are accrued over the required service period.
Additionally, under certain labor agreements, we are required to pay transitional benefits to our employees who are
idled. For employees who are temporarily idled, we expense the benefits on an as-incurred basis. For employees who
are permanently idled, we expense all of the expected future benefit payments in the period when it is probable that the
employees will be permanently idled. Our reserve balance for these future benefit payments to permanently idled
employees takes into account several factors: the demographics of the population at each affected facility, redeployment
alternatives, estimate of benefits to be paid, and recent experience relative to voluntary redeployments.
Revenue Recognition — Automotive Segment
Automotive revenue is generated primarily by sales of vehicles, parts, and accessories. Revenue is recorded when
all risks and rewards of ownership are transferred to our customers (generally dealers and distributors). For the majority
of our sales, this occurs when products are shipped from our manufacturing facilities. When we give our dealers the right
to return eligible parts for credit, we reduce the related revenue for expected returns.
We sell vehicles to fleet customers, primarily daily rental car companies, subject to guaranteed repurchase options.
These vehicles are accounted for as operating leases. At the time of sale, the proceeds are recorded as deferred revenue
in Other liabilities and deferred revenue in the non-current liabilities section of our consolidated balance sheet. The
difference between the proceeds and the guaranteed repurchase amount is recognized in Automotive revenues over the
term of the lease using a straight line method. On average, leases remain outstanding for approximately one year. The
cost of the vehicle is recorded in Net investment in operating leases on our consolidated balance sheet and the difference
between the cost of the vehicle and the estimated auction value is depreciated in Cost of sales over the term of the lease.
Proceeds from the sale of the vehicle at auction are recognized in Automotive revenues at the time of sale.
Revenue Recognition — Financial Services Segment
Financial Services revenue is generated primarily from interest on finance receivables (including direct financing
leases). Interest is recognized using the interest method and includes the amortization of certain direct origination costs.
Revenue from payments received on operating leases is recognized on a straight-line basis over the term of the lease.
Revenue from interest on finance receivables and operating leases is discontinued at the time a receivable or account is
determined to be uncollectible.
FS-11
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Finance and Lease Incentives
We offer special financing and lease incentives to customers who choose to finance or lease Ford or Lincoln brand
vehicles with Ford Credit. The estimated cost for these incentives is recorded as a reduction to Automotive revenues
when the vehicle is sold to the dealer. Ford Credit records a reduction to the finance receivable or reduces the cost of the
vehicle operating lease when it records the underlying finance contract and we transfer to it the amount of the incentive on
behalf of the dealer’s customer. See Note 1 for additional information regarding transactions between Automotive and
Financial Services. The Financial Services segment recognized interest revenue of $1.4 billion, $1.3 billion, and
$1.6 billion in 2014, 2015, and 2016, respectively, and lower depreciation of $1.3 billion, $1.5 billion, and $1.9 billion in
2014, 2015, and 2016, respectively associated with these incentives.
Sales and Marketing Incentives
Sales and marketing incentives generally are recognized as reductions in Automotive revenues. The incentives
generally take the form of cash payments to dealers and dealers’ customers. The reduction to revenue is accrued at the
later of the date the related vehicle is sold or the date the incentive program is both approved and communicated. We
generally estimate these accruals using incentive programs that are approved as of the balance sheet date and are
expected to be effective at the beginning of the subsequent period.
Supplier Price Adjustments
We frequently negotiate price adjustments with our suppliers throughout a production cycle, even after receiving
production material. These price adjustments relate to changes in design specification or other commercial terms such as
economics, productivity, and competitive pricing. We recognize price adjustments when we reach final agreement with
our suppliers. In general, we avoid direct price changes in consideration of future business; however, when these occur,
our policy is to defer the financial statement impact of any such price change given explicitly in consideration of future
business where guaranteed volumes are specified.
Raw Material Arrangements
We may, at times, negotiate prices for and facilitate the purchase of raw materials on behalf of our suppliers. These
raw material arrangements, which take place independently of any purchase orders issued to our suppliers, are
negotiated at arms’ length and do not involve volume guarantees. When we pass the risks and rewards of ownership to
our suppliers, including inventory risk, market price risk, and credit risk for the raw material, we record both the cost of the
raw material and the income from the subsequent sale to the supplier in Cost of sales.
Government Incentives
We receive incentives from U.S. and non-U.S. governmental entities in the form of tax rebates or credits, grants, and
loans. Government incentives are recorded in the financial statements in accordance with their purpose, either as a
reduction of expense, a reduction of the cost of the capital investment, or other income. The benefit is recorded when all
conditions attached to the incentive have been met and there is reasonable assurance of receipt.
Selected Other Costs
Engineering, research, and development expenses, primarily salaries, materials, and associated costs, are reported in
Cost of sales; advertising costs are reported in Selling, administrative, and other expenses. Engineering, research, and
development costs are expensed as incurred when performed internally or when performed by a supplier if we guarantee
reimbursement. Advertising costs are expensed as incurred. Engineering, research, development, and advertising
expenses for the years ended December 31 were as follows (in billions):
Engineering, research, and development
Advertising
2014
2015
2016
$
$
6.7
4.3
$
6.7
4.3
7.3
4.3
FS-12
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Presentation of Sales and Sales-Related Taxes
We collect and remit taxes required by various governmental authorities that are both imposed on and concurrent with
revenue-producing transactions between us and our customers. These taxes may include, but are not limited to, sales,
use, value-added, and excise taxes. We report the collection of these taxes on a net basis (excluded from revenues).
NOTE 3. 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 had a material impact to our financial statements
or financial statement disclosures:
Standard
2015-16
2015-09
2015-05
2015-02
2015-01
Business Combinations - Simplifying the Accounting for Measurement-Period Adjustments
Insurance - Disclosures about Short-Duration Contracts
Internal-Use Software - Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement
Consolidation - Amendments to the Consolidation Analysis
Extraordinary and Unusual Items - Simplifying Income Statement Presentation by Eliminating the Concept
of Extraordinary Items
Effective Date
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
January 1, 2016
2014-12
Stock Compensation - Accounting for Share-Based Payments When the Terms of an Award Provide That a
January 1, 2016
Performance Target Could Be Achieved after the Requisite Service Period
2014-15
Going Concern - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
December 31, 2016
Accounting Standards Issued But Not Yet Adopted
The following represent the standards that will, or are expected to, result in a significant change in practice and/or
have a significant financial impact to Ford.
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 increase of about $500 million to retained earnings and
deferred tax assets related to cumulative excess tax benefits previously unrecognized. We will also reclassify tax-related
items from operating activities to financing activities 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.
FS-13
NOTE 3. NEW ACCOUNTING STANDARDS (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
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 will adopt the new revenue guidance effective January 1, 2017, by recognizing the cumulative effect of
initially applying the new standard as an increase to the opening balance of retained earnings. We expect this adjustment
to be less than $100 million, with an immaterial impact to our net income on an ongoing basis. Adoption of the new
standard will also result in changes in classification between Revenues, Cost of sales, Non-Financial Services interest
income and other income/(loss), net, and Financial Services other income/(loss), net.
NOTE 4. 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 five 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 two 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 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.
FS-14
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 4. SEGMENT INFORMATION (Continued)
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.
FS-15
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 4. SEGMENT INFORMATION (Continued)
Key operating data for our business segments for the years ended or at December 31 were as follows (in millions):
Automotive
Financial
Services
All Other
Special
Items
Adjustments
Total
2014
Revenues
Pre-tax results - income/(loss)
Depreciation and tooling amortization
Interest expense
Investment-related interest income
Equity in net income/(loss) of affiliated
companies
Cash outflow for capital spending
Cash, cash equivalents, and marketable
securities
Total assets
Debt
Operating cash flows
2015
Revenues
Pre-tax results - income/(loss)
Depreciation and tooling amortization
Interest expense
Investment-related interest income
Equity in net income/(loss) of affiliated
companies
Cash outflow for capital spending
Cash, cash equivalents, and marketable
securities
Total assets
Debt
Operating cash flows
2016
Revenues
Pre-tax results - income/(loss)
Depreciation and tooling amortization
Interest expense
Investment-related interest income
Equity in net income/(loss) of affiliated
companies
Cash outflow for capital spending
Cash, cash equivalents, and marketable
$
$
$
$
$
$
135,782
6,254
4,252
—
53
1,575
7,360
21,702
90,167
13,824
3,563
140,566
9,568
4,332
—
42
1,786
7,147
23,567
91,959
12,839
7,285
141,546
9,422
4,667
—
75
1,747
6,947
8,295
1,794
3,133
2,699
51
29
103
9,448
121,388
105,347
5,743
8,992
2,028
3,661
2,454
76
32
49
11,609
137,026
120,015
3,876
10,253
1,820
4,356
2,808
74
33
45
$
— $
— $
(755)
—
797
140
—
—
—
—
—
—
(6,059)
—
—
—
(329)
—
—
—
—
—
$
— $
— $
(548)
—
—
—
—
—
—
—
—
—
(796)
—
773
191
—
—
—
—
—
—
1
(867)
—
894
142
—
—
$
—
—
—
—
—
—
—
—
(2,940) (a)
—
5,201 (b)
—
—
—
—
—
—
—
—
(4,060) (a)
—
5,009 (b)
$
$
$
144,077
1,234
7,385
3,496
244
1,275
7,463
31,150
208,615
119,171
14,507
149,558
10,252
7,993
3,227
309
1,818
7,196
35,176
224,925
132,854
16,170
151,800
6,796
9,023
3,702
291
1,780
6,992
$
— $
(3,579)
—
—
—
—
—
—
—
—
—
—
—
—
securities
Total assets
Debt
Operating cash flows
__________
(a)
(b) We measure and evaluate our Automotive segment operating cash flow on a different basis than Net cash provided by/(used in) operating activities
Includes deferred tax netting and eliminations of intersegment transactions occurring in the ordinary course of business.
(5,299) (a)
—
4,660 (b)
237,951
142,970
19,792
146,252
127,063
8,754
96,929
15,907
6,385
69
—
(7)
—
—
—
27,462
11,357
38,827
—
—
8
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 years ended December 31 (in millions):
Automotive capital spending
Net cash flows from non-designated derivatives
Funded pension contributions
Separation payments
Other
Total operating cash flow adjustments
2014
2015
2016
7,360
$
7,147
$
(247)
(1,466)
(223)
(223)
76
(1,115)
(613)
(486)
5,201
$
5,009
$
6,947
(610)
(1,155)
(336)
(186)
4,660
$
$
FS-16
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 4. SEGMENT INFORMATION (Continued)
Geographic Information
We report revenue on a “where-sold” basis, which reflects the revenue within the country in which the ultimate sale or
financing is made to our external customer.
Total Company revenues and long-lived assets, split geographically by our country of domicile, the United States, and
other countries where our major subsidiaries are domiciled, for the years ended December 31 were as follows
(in millions):
United States
United Kingdom
Canada
Germany
All Other
Total Company
2014
2015
2016
Revenues
Long-Lived
Assets (a)
Revenues
Long-Lived
Assets (a)
Revenues
Long-Lived
Assets (a)
$
82,665
$
34,645
$
93,142
$
39,853
$
93,433
$
42,946
11,742
9,409
7,487
32,774
1,491
4,008
2,510
10,689
11,451
8,978
6,950
29,037
1,490
3,814
2,203
9,896
10,041
10,028
7,322
30,976
$
144,077
$
53,343
$
149,558
$
57,256
$
151,800
$
1,302
4,264
2,254
10,135
60,901
__________
(a)
Includes Net property and Net investment in operating leases from our consolidated balance sheet.
FS-17
NOTE 5. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
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):
Cash and cash equivalents
U.S. government
U.S. government agencies
Non-U.S. government and agencies
Corporate debt
Total marketable securities classified as cash
equivalents
Cash, time deposits, and money market funds
Total cash and cash equivalents
Marketable securities
U.S. government
U.S. government agencies
Non-U.S. government and agencies
Corporate debt
Equities
Other marketable securities
Total marketable securities
Cash and cash equivalents
U.S. government
U.S. government agencies
Non-U.S. government and agencies
Corporate debt
Total marketable securities classified as cash
equivalents
Cash, time deposits, and money market funds
Total cash and cash equivalents
Marketable securities
U.S. government
U.S. government agencies
Non-U.S. government and agencies
Corporate debt
Equities
Other marketable securities
Total marketable securities
Fair Value
Level
Automotive
December 31, 2015
Financial
Services
All
Other
Consolidated
1
2
2
2
1
2
2
2
1
2
$
115
$
— $
— $
$
$
22
173
20
330
5,056
—
266
—
266
8,620
—
—
—
—
—
5,386
$
8,886
$
— $
1,623
$
298
$
— $
5,240
7,451
3,279
240
348
1,169
832
384
—
40
—
—
—
—
—
115
22
439
20
596
13,676
14,272
1,921
6,409
8,283
3,663
240
388
$
18,181
$
2,723
$
— $
20,904
Fair Value
Level
Automotive
December 31, 2016
Financial
Services
All
Other
Consolidated
1
2
2
2
1
2
2
2
1
2
$
888
$
924
$
— $
1,812
$
$
—
200
100
1,188
6,632
—
142
—
1,066
7,011
7,820
$
8,077
$
—
—
—
—
8
8
$
8,099
$
1,634
$
— $
2,244
4,751
4,329
165
54
505
632
475
—
34
—
—
—
—
—
—
342
100
2,254
13,651
15,905
9,733
2,749
5,383
4,804
165
88
$
19,642
$
3,280
$
— $
22,922
FS-18
NOTE 5. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
The following tables include cash equivalents and marketable securities accounted for as available for sale (“AFS”)
securities (in millions):
December 31, 2015
Fair Value of Securities with
Contractual Maturities
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Within 1 Year
After 1 Year
through 5
Years
After 5 Years
through 10
Years
$
$
— $
—
82
—
82
$
— $
—
—
—
— $
— $
—
(12)
—
(12) $
— $
—
70
—
70
$
— $
—
—
—
— $
— $
—
70
—
70
$
—
—
—
—
—
December 31, 2016
Fair Value of Securities with
Contractual Maturities
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Within 1 Year
After 1 Year
through 5
Years
After 5 Years
through 10
Years
$
3,703
$
308
1,443
1,079
6,533
$
$
2
—
1
—
3
$
$
(14) $
(2)
(11)
—
(27) $
3,691
306
1,433
1,079
6,509
$
$
727
—
148
1,031
1,906
$
$
2,776
306
1,285
48
4,415
$
$
188
—
—
—
188
Automotive
U.S. government
U.S. government agencies
Non-U.S. government and agencies
Corporate debt
Total
Automotive
U.S. government
U.S. government agencies
Non-U.S. government and agencies
Corporate debt
Total
During the years ended December 31, 2015 and 2016, sales proceeds for investments classified as AFS and sold
prior to maturity were $1 million and $69 million, respectively. During the years ended December 31, 2015 and 2016,
gross realized gains from the sale of AFS securities were $0 and $1 million, respectively.
FS-19
NOTE 5. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
The following tables present fair values and gross unrealized losses for cash equivalents and marketable securities
accounted for as AFS securities that were in an unrealized loss position, aggregated by investment category and the
length of time that individual securities have been in a continuous loss position (in millions):
Automotive
U.S. government
U.S. government agencies
Non-U.S. government and agencies
Corporate debt
Total
Automotive
U.S. government
U.S. government agencies
Non-U.S. government and agencies
Corporate debt
Total
December 31, 2015
Less than 1 year
1 Year or Greater
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
$
$
$
$
— $
—
70
—
70
$
— $
—
(12)
—
(12) $
— $
—
—
—
— $
— $
—
—
—
— $
Less than 1 year
December 31, 2016
1 Year or Greater
—
—
(12)
—
(12)
— $
—
70
—
70
$
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
1,474
$
261
1,137
—
2,872
$
(14) $
(2)
(11)
—
(27) $
— $
— $
1,474
$
—
—
—
—
—
—
— $
— $
261
1,137
—
2,872
$
(14)
(2)
(11)
—
(27)
We determine other-than-temporary impairments on cash equivalents and marketable securities using a specific
identification method. During the years ended December 31, 2015 and 2016, we did not recognize any other-than-
temporary impairment loss.
Other Securities
Investments in entities that we do not control and over which we do not have the ability to exercise significant
influence are recorded at cost and reported in Other assets in the non-current assets section of our consolidated balance
sheet. These cost method investments were $20 million and $219 million at December 31, 2015 and 2016, respectively.
FS-20
NOTE 6. FINANCIAL SERVICES FINANCE RECEIVABLES
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Our Financial Services segment, 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 are recorded at 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. 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 92% of our
dealer financing.
Finance receivables, net at December 31 were as follows (in millions):
Consumer
Retail financing, gross
Unearned interest supplements
Consumer finance receivables
Non-Consumer
Dealer financing
Non-Consumer finance receivables
Total recorded investment
Recorded investment in finance receivables
Allowance for credit losses
Finance receivables, net (a)
Current portion
Non-current portion
Finance receivables, net
Net finance receivables subject to fair value (a)
Fair value
2015
2016
$
62,068
$
(2,119)
59,949
31,115
31,115
91,064
91,064
(373)
$
$
90,691
$
45,137
$
45,554
90,691
$
88,876
$
90,048
$
$
$
$
$
$
68,121
(2,783)
65,338
31,336
31,336
96,674
96,674
(484)
96,190
46,266
49,924
96,190
94,066
94,785
__________
(a) At December 31, 2015 and 2016, Finance receivables, net includes $1.8 billion and $2.1 billion, respectively, of net investment in 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 December 31, 2015 and 2016, was $209 million and $223 million, respectively,
of accrued uncollected interest, which is reported as Other assets in the current assets section of our consolidated
balance sheet.
FS-21
NOTE 6. FINANCIAL SERVICES FINANCE RECEIVABLES (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Included in the recorded investment in finance receivables at December 31, 2015 and 2016 were consumer
receivables of $27.6 billion and $32.5 billion, respectively, and non-consumer receivables of $26.1 billion and $26 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 (see Note 16).
Contractual maturities of total finance receivables outstanding at December 31, 2016 reflect contractual repayments
due from customers or borrowers as follows (in millions):
Consumer
Retail financing, gross (a)
Non-Consumer
Dealer financing
Total finance receivables
$
$
Due in Year Ending December 31,
2017
2018
2019
Thereafter
Total
19,460
$
17,550
$
14,185
$
16,926
$
68,121
27,823
854
141
2,518
47,283
$
18,404
$
14,326
$
19,444
$
31,336
99,457
__________
(a) Contractual maturities of retail financing, gross include $183 million of estimated unguaranteed residual values related to direct finance leases.
Our finance receivables are generally pre-payable without penalty, so prepayments may cause actual maturities to
differ from contractual maturities. The above table, therefore, is not to be regarded as a forecast of future cash
collections. For wholesale receivables, which are included in dealer financing, maturities stated above are estimated
based on historical trends, as maturities on outstanding amounts are scheduled upon the sale of the underlying vehicle by
the dealer.
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 $16 million and $21 million at December 31, 2015 and 2016, respectively. The recorded
investment of non-consumer receivables greater than 90 days past due and still accruing interest was $1 million and
de minimis at December 31, 2015 and 2016, respectively.
The aging analysis of our finance receivables balances at December 31 was as follows (in millions):
Consumer
31-60 days past due
61-90 days past due
91-120 days past due
Greater than 120 days past due
Total past due
Current
Consumer finance receivables
Non-Consumer
Total past due
Current
Non-Consumer finance receivables
Total recorded investment
FS-22
2015
2016
$
$
708
108
27
38
881
59,068
59,949
116
30,999
31,115
$
91,064
$
760
114
34
39
947
64,391
65,338
107
31,229
31,336
96,674
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 6. FINANCIAL SERVICES FINANCE RECEIVABLES (Continued)
Credit Quality
Consumer Portfolio. When originating all classes of consumer receivables (i.e., retail and lease products), we use a
proprietary scoring system that measures credit quality using information in the credit application, proposed contract
terms, credit bureau data, and other information we obtain. After a proprietary risk score is generated, we decide whether
to originate a contract using a decision process based on a judgmental evaluation of the applicant, the credit application,
the proposed contract terms, credit bureau information (e.g., FICO score), proprietary risk score, and other information.
Our evaluation emphasizes the applicant’s ability to pay and creditworthiness focusing on payment, affordability, applicant
credit history, and stability as key considerations.
Subsequent to origination, we review the credit quality of retail financing based on customer payment activity. As
each customer develops a payment history, we use an internally-developed behavioral scoring model to assist in
determining the best collection strategies which allows us to focus collection activity on higher-risk accounts. These
models are used to refine our risk-based staffing model to ensure collection resources are aligned with portfolio risk.
Based on data from this scoring model, contracts are categorized by collection risk. Our collection models evaluate
several factors, including origination characteristics, updated credit bureau data, and payment patterns.
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. We extend credit to dealers primarily in the form of lines of credit to purchase new Ford and
Lincoln vehicles as well as used vehicles. Payment is required when the dealer has sold the vehicle. Each non-
consumer lending request is evaluated by taking into consideration the borrower’s financial condition and the underlying
collateral securing the loan. We use a proprietary model to assign each dealer a risk rating. This model uses historical
dealer performance data to identify key factors about a dealer that we consider most significant in predicting a dealer’s
ability to meet its financial obligations. We also consider numerous other financial and qualitative factors of the dealer’s
operations including capitalization and leverage, liquidity and cash flow, profitability, and credit history with ourselves and
other creditors.
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
We generally suspend credit lines and extend no further funding to dealers classified in Group IV.
We regularly review our model to confirm the continued business significance and statistical predictability of the
factors and update the model to incorporate new factors or other information that improves its statistical predictability. In
addition, we regularly audit dealer inventory and dealer sales records to verify that the dealer is in possession of the
financed vehicles and is promptly paying each receivable following the sale of the financed vehicle. The frequency of on-
site vehicle inventory audits depends on factors such as the dealer’s risk rating and our security position. Under our
policies, on-site vehicle inventory audits of low-risk dealers are conducted only as circumstances warrant. Audits of
higher-risk dealers are conducted with increased frequency based on risk ratings and our security position. We perform a
credit review of each dealer at least annually and adjust the dealer’s risk rating, if necessary.
The credit quality of dealer financing receivables is evaluated based on our internal dealer risk rating analysis. A
dealer has the same risk rating for its entire dealer financing regardless of the type of financing.
FS-23
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 6. FINANCIAL SERVICES FINANCE RECEIVABLES (Continued)
The credit quality analysis of our dealer financing receivables at December 31 was as follows (in millions):
Dealer Financing
Group I
Group II
Group III
Group IV
Total recorded investment
2015
2016
$
$
22,146
$
24,315
7,175
1,683
111
5,552
1,376
93
31,115
$
31,336
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 December 31, 2015 and 2016 was $375 million, or
0.6% of consumer receivables, and $367 million, or 0.6% of consumer receivables, respectively. The recorded investment
of non-consumer receivables that were impaired at December 31, 2015 and 2016 was $134 million, or 0.4% of non-
consumer receivables, and $107 million, or 0.3% of the non-consumer receivables, respectively. Impaired finance
receivables are evaluated both collectively and specifically.
The accrual of revenue is discontinued at the time a receivable is determined to be uncollectible. Accounts may be
restored to accrual status only when a customer settles all past-due deficiency balances and future payments are
reasonably assured. For receivables in non-accrual status, subsequent financing revenue is recognized only to the extent
a payment is received. Payments are generally applied first to outstanding interest and then to the unpaid principal
balance.
A restructuring of debt constitutes a TDR if we grant a concession to a debtor for economic or legal reasons related to
the debtor’s financial difficulties that we otherwise would not consider. Consumer and non-consumer receivables that
have a modified interest rate below market rate or that were modified in reorganization proceedings pursuant to the
U.S. Bankruptcy Code, except non-consumer receivables that are current with minimal risk of loss, are considered to be
TDRs. We do not grant concessions on the principal balance of our receivables. If a receivable is modified in a
reorganization proceeding, all payment requirements of the reorganization plan need to be met before remaining balances
are forgiven. Finance receivables involved in TDRs are specifically assessed for impairment.
FS-24
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 7. NET INVESTMENT IN OPERATING LEASES
Net investment in operating leases on our balance sheet consists primarily of lease contracts for vehicles with retail
customers, daily rental companies, government entities, and fleet customers. Assets subject to operating leases are
depreciated using the straight-line method over the term of the lease to reduce the asset to its estimated residual value.
Estimated residual values are based on assumptions for used vehicle prices at lease termination and the number of
vehicles that are expected to be returned.
The net investment in operating leases at December 31 was as follows (in millions):
Automotive Segment
Vehicles, net of depreciation
Financial Services Segment
Vehicles and other equipment, at cost (a)
Accumulated depreciation
Allowance for credit losses
Total Financial Services Segment
Total
2015
2016
$
2,014
$
1,620
29,673
(4,545)
(49)
25,079
$
27,093
$
32,823
(5,550)
(64)
27,209
28,829
__________
(a)
Includes Ford Credit’s operating lease assets of $13.3 billion and $11.8 billion at December 31, 2015 and 2016, respectively, for which the related
cash flows have been used to secure certain lease securitization transactions. Cash flows associated with the net investment in operating leases
are available only for payment of the debt or other obligations issued or arising in the securitization transactions; they are not available to pay other
obligations or the claims of other creditors.
Financial Services Segment
Included in Financial Services interest, operating, and other expense is operating lease depreciation expense (which
includes gains and losses on disposal of assets). Operating lease depreciation expense for the years ended
December 31 was as follows (in millions):
Operating lease depreciation expense
2014
2015
2016
$
3,098
$
3,640
$
4,330
Included in Financial Services revenues are rents on operating leases. The amounts contractually due for minimum
rentals on operating leases at December 31, 2016 were as follows (in millions):
Minimum rentals on operating leases
$
4,349
$
2,750
$
949
$
66
$
5
$
8,119
2017
2018
2019
2020
Thereafter
Total
FS-25
NOTE 8. FINANCIAL SERVICES ALLOWANCE FOR CREDIT LOSSES
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
The allowance for credit losses represents our estimate of the probable credit loss inherent in finance receivables as
of the balance sheet date. The adequacy of the allowance for credit losses is assessed quarterly and the assumptions
and models used in establishing the allowance are evaluated regularly. Because credit losses may vary substantially over
time, estimating credit losses requires a number of assumptions about matters that are uncertain. The majority of credit
losses are attributable to Ford Credit’s consumer receivables portfolio.
Additions to the allowance for credit losses are made by recording charges to Financial Services interest, operating,
and other expenses on the income statement. The uncollectible portion of finance receivables are charged to the
allowance for credit losses at the earlier of when an account is deemed to be uncollectible or when an account
is 120 days delinquent, taking into consideration the financial condition of the customer, borrower, or lessee, the value of
the collateral, recourse to guarantors, and other factors.
In the event we repossess the collateral, the receivable is charged off and we record the collateral at its estimated fair
value less costs to sell and report it in Other assets on the balance sheet. Charge-offs on finance receivables include
uncollected amounts related to principal, interest, late fees, and other allowable charges. Recoveries on finance
receivables previously charged off as uncollectible, are credited to the allowance for credit losses.
Consumer
We estimate the allowance for credit losses on our consumer receivables using a combination of measurement
models and management judgment. The models consider factors such as historical trends in credit losses and recoveries
(including key metrics such as delinquencies, repossessions, and bankruptcies), the composition of the present portfolio
(including vehicle brand, term, risk evaluation, and new/used vehicles), trends in historical used vehicle values, and
economic conditions. Estimates from these models rely on historical information and may not fully reflect losses inherent
in the present portfolio. Therefore, we may adjust the estimate to reflect management judgment regarding observable
changes in recent economic trends and conditions, portfolio composition, and other relevant factors.
We make projections of two key assumptions to assist in estimating the consumer allowance for credit losses:
•
•
Frequency - number of finance receivables contracts that are expected to default over the loss emergence period,
measured as repossessions; and
Loss severity - expected difference between the amount a customer owes when the finance contract is charged
off and the amount received, net of expenses from selling the repossessed vehicle
Collective Allowance for Credit Losses. The collective allowance is evaluated primarily using a collective loss-to-
receivables (“LTR”) model that, based on historical experience, indicates credit losses have been incurred in the portfolio
even though the particular accounts that are uncollectible cannot be specifically identified. The LTR model is based on
the most recent years of history. Each LTR is calculated by dividing credit losses by average finance receivables
excluding unearned interest supplements and allowance for credit losses. An average LTR is calculated for each product
and multiplied by the end-of-period balances for that given product.
FS-26
NOTE 8. FINANCIAL SERVICES ALLOWANCE FOR CREDIT LOSSES (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Our largest markets also use a loss projection model to estimate losses inherent in the portfolio. The loss projection
model applies recent monthly performance metrics, stratified by contract type (retail or lease), contract term
(e.g., 60 month), and risk rating to our active portfolio to estimate the losses that have been incurred.
The loss emergence period (“LEP”) is an assumption within our models and represents the average amount of time
between when a loss event first occurs and when it is charged off. This time period starts when the consumer begins to
experience financial difficulty. It is evidenced, typically through delinquency, before eventually resulting in a charge-off.
The LEP is a multiplier in the calculation of the collective consumer allowance for credit losses.
For accounts greater than 120 days past due, the uncollectible portion is charged off such that the remaining recorded
investment is equal to the estimated fair value of the collateral less costs to sell.
Specific Allowance for Impaired Receivables. Consumer receivables involved in TDRs are specifically assessed for
impairment. A specific allowance is estimated based on the present value of the expected future cash flows of the
receivable discounted at the contract’s original effective interest rate or the fair value of any collateral adjusted for
estimated costs to sell.
After establishing the collective and specific allowance for credit losses, if management believes the allowance does
not reflect all losses inherent in the portfolio due to changes in recent economic trends and conditions, or other relevant
factors, an adjustment is made based on management judgment.
Non-Consumer
We estimate the allowance for credit losses for non-consumer receivables based on historical LTR ratios, expected
future cash flows, and the fair value of collateral.
Collective Allowance for Credit Losses. We estimate an allowance for non-consumer receivables that are not
specifically identified as impaired using a LTR model for each financing product based on historical experience. This LTR
is an average of the most recent historical experience and is calculated consistent with the consumer receivables LTR
approach. All accounts that are specifically identified as impaired are excluded from the calculation of the non-specific or
collective allowance.
Specific Allowance for Impaired Receivables. Dealer financing is evaluated by segmenting individual loans by the risk
characteristics of the loan (such as the amount of the loan, the nature of the collateral, and the financial status of the
debtor). The loans are analyzed to determine whether individual loans are impaired, and a specific allowance is
estimated based on the present value of the expected future cash flows of the receivable discounted at the loan’s original
effective interest rate or the fair value of the collateral adjusted for estimated costs to sell.
After establishing the collective and the specific allowance for credit losses, if management believes the allowance
does not reflect all losses inherent in the portfolio due to changes in recent economic trends and conditions, or other
relevant factors, an adjustment is made based on management judgment.
FS-27
NOTE 8. FINANCIAL SERVICES ALLOWANCE FOR CREDIT LOSSES (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
An analysis of the allowance for credit losses related to finance receivables for the years ended December 31 were as
follows (in millions):
Allowance for credit losses
Beginning balance
Charge-offs
Recoveries
Provision for credit losses
Other (a)
Ending balance (b)
Analysis of ending balance of allowance for credit losses
Collective impairment allowance
Specific impairment allowance
Ending balance (b)
Analysis of ending balance of finance receivables
Collectively evaluated for impairment
Specifically evaluated for impairment
Recorded investment
Ending balance, net of allowance for credit losses
__________
(a) Primarily represents amounts related to translation adjustments.
(b) Total allowance, including reserves for operating leases, was $422 million.
Allowance for credit losses
Beginning balance
Charge-offs
Recoveries
Provision for credit losses
Other (a)
Ending balance (b)
Analysis of ending balance of allowance for credit losses
Collective impairment allowance
Specific impairment allowance
Ending balance (b)
Analysis of ending balance of finance receivables
Collectively evaluated for impairment
Specifically evaluated for impairment
Recorded investment
Ending balance, net of allowance for credit losses
__________
(a) Primarily represents amounts related to translation adjustments.
(b) Total allowance, including reserves for operating leases, was $548 million.
Consumer
2015
Non-Consumer
Total
$
$
$
$
$
$
305
(333)
120
276
(11)
357
338
19
357
$
$
$
16
(3)
6
(2)
(1)
16
12
4
16
321
(336)
126
274
(12)
373
350
23
373
59,574
375
59,949
30,981
134
31,115
90,555
509
91,064
$
59,592
$
31,099
$
90,691
Consumer
Non-Consumer
Total
2016
$
$
$
$
$
$
357
(435)
116
436
(5)
469
450
19
469
$
$
$
16
(8)
6
2
(1)
15
13
2
15
373
(443)
122
438
(6)
484
463
21
484
64,971
367
65,338
31,229
107
31,336
96,200
474
96,674
$
64,869
$
31,321
$
96,190
FS-28
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 9. 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 27% and 30% of total inventories at
December 31, 2015 and 2016, respectively. Cost of other inventories is determined by costing methods that
approximate a first-in, first-out (“FIFO”) basis.
Inventories at December 31 were as follows (in millions):
Raw materials, work-in-process, and supplies
Finished products
Total inventories under FIFO
LIFO adjustment
Total inventories
2015
2016
$
$
4,005
5,254
9,259
(940)
8,319
$
$
3,843
5,943
9,786
(888)
8,898
NOTE 10. EQUITY IN NET ASSETS OF AFFILIATED COMPANIES
We use the equity method of accounting for our investments in entities over which we do not have control, but over
whose operating and financial policies we are able to exercise significant influence.
Our ownership percentages and carrying value of our equity method investments at December 31 were as follows
(in millions, except percentages):
Changan Ford Automobile Corporation, Limited
$
1,307
$
1,315
50.0%
Investment Balance
Ownership
Percentage
2015
2016
2016
636
429
352
182
77
—
66
48
30
15
—
8
9
9
4
5
4
3
4
36
—
623
476
306
194
80
75
68
59
27
20
15
9
9
8
6
5
4
3
2
—
—
32.0
50.0
41.0
50.0
25.0
9.3
50.0
50.0
97.7
30.0
17.2
49.9
20.0
45.0
33.3
33.3
10.0
25.0
50.0
—
49.0
$
3,224
$
3,304
Jiangling Motors Corporation, Limited
AutoAlliance (Thailand) Co., Ltd.
Ford Otomotiv Sanayi Anonim Sirketi
Getrag Ford Transmissions GmbH
Changan Ford Mazda Engine Company, Ltd.
Velodyne LiDAR, Inc.
Forso Nordic AB
FFS Finance South Africa (Pty) Limited
DealerDirect LLC
RouteOne LLC
ZoomCar, Inc.
Automotive Fuel Cell Cooperation Corporation
Thirdware Solutions Limited
Percepta, LLC
CNF-Administradora de Consorcio Nacional Ltda.
U.S. Council for Automotive Research LLC
Chongqing ANTE Trading Co., Ltd.
Blue Diamond Parts, LLC
Crash Avoidance Metrics Partnership LLC
OEConnection LLC (a)
ZF Transmission Tech, LLC
Total
__________
(a) OEConnection LLC became a cost method investment following a partial sale in 2016.
FS-29
NOTE 10. EQUITY IN NET ASSETS OF AFFILIATED COMPANIES (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
We received $1.5 billion, $1.5 billion, and $1.6 billion of dividends from these affiliated companies for the years ended
December 31, 2014, 2015, and 2016, respectively.
A summary of the total financial results, as reported by our equity method investees, in the aggregate at December 31
was as follows (in millions):
Summarized Balance Sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Equity attributable to noncontrolling interests
Summarized Income Statement
Total revenue
Income before income taxes
Net income
2015
2016
$
$
$
$
$
10,400
9,687
20,087
10,863
2,608
13,471
8
$
$
$
$
$
10,368
9,956
20,324
10,690
2,934
13,624
14
For the years ended December 31,
2014
2015
2016
$
40,658
$
35,623
$
3,985
3,510
4,525
3,894
36,992
4,401
3,747
In the ordinary course of business we buy/sell various products and services including vehicles, parts, and
components to/from our equity method investees. In addition, we receive royalty income.
Transactions with equity method investees reported on our consolidated income statement and balance sheet at
December 31 were as follows (in millions):
Income Statement
Sales
Purchases
Royalty income
Balance Sheet
Receivables
Payables
For the years ended December 31,
2014
2015
2016
$
5,208
$
4,426
$
9,430
500
7,780
610
4,367
8,665
649
2015
2016
$
$
870
671
722
603
FS-30
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 11. NET PROPERTY AND LEASE COMMITMENTS
Net Property
Net property is reported at cost, net of accumulated depreciation and impairments. We capitalize new assets when
we expect to use the asset for more than one year. Routine maintenance and repair costs are expensed when incurred.
Property and equipment are depreciated primarily using the straight-line method over the estimated useful life of the
asset. Useful lives range from 3 years to 36 years. The estimated useful lives generally are 14.5 years for machinery and
equipment, 8 years for software, 30 years for land improvements, and 36 years for buildings. Tooling generally is
amortized over the expected life of a product program using a straight-line method.
Net property at December 31 was as follows (in millions):
Land
Buildings and land improvements
Machinery, equipment, and other
Software
Construction in progress
Total land, plant and equipment, and other
Accumulated depreciation
Net land, plant and equipment, and other
Tooling, net of amortization
Total
2015
2016
$
344
$
9,983
33,191
2,598
1,804
47,920
(27,803)
20,117
10,046
$
30,163
$
391
10,308
34,149
2,803
2,170
49,821
(27,804)
22,017
10,055
32,072
Property-related expenses excluding net investment in operating leases for the years ended December 31 were as
follows (in millions):
Depreciation and other amortization
Tooling amortization
Total
Maintenance and rearrangement
Conditional Asset Retirement Obligations
2014
2015
2016
2,127
$
2,049
$
2,160
2,304
4,287
$
4,353
$
2,130
2,563
4,693
1,543
$
1,656
$
1,801
$
$
$
Conditional asset retirement obligations relate to legal obligations associated with the retirement, abandonment, or
disposal of tangible long-lived assets. Estimates of the fair value liabilities for our conditional asset retirement obligations
that are recorded in Other liabilities and deferred revenue in the non-current liabilities section of our consolidated balance
sheet at December 31 were as follows (in millions):
Beginning balance
Liabilities settled
Revisions to estimates
Ending balance
2015
2016
$
$
228
$
(6)
(6)
216
$
216
(2)
(28)
186
FS-31
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 11. NET PROPERTY AND LEASE COMMITMENTS (Continued)
Lease Commitments
We lease land, buildings, and equipment under agreements that expire over various contractual periods. Minimum
non-cancellable operating lease commitments at December 31, 2016 were as follows (in millions):
2017
2018
2019
2020
2021
Thereafter
Total
Operating lease expense for the years ended December 31 was as follows (in millions):
2014
2015
2016
Operating
Lease
Commitments
$
342
275
202
137
88
340
$
1,384
Operating
Lease
Expense
$
524
460
474
NOTE 12. OTHER LIABILITIES AND DEFERRED REVENUE
Other liabilities and deferred revenue at December 31 were as follows (in millions):
2015
2016
Current
Dealer and dealers’ customer allowances and claims
$
8,122
$
Deferred revenue
Employee benefit plans
Accrued interest
OPEB
Pension
Other
Total current other liabilities and deferred revenue
Non-current
Pension
OPEB
Dealer and dealers’ customer allowances and claims
Deferred revenue
Employee benefit plans
Other
$
$
4,675
1,562
840
354
249
3,287
19,089
$
9,542
3,866
1,469
974
349
247
2,869
19,316
9,543
$
10,150
5,347
2,731
3,285
1,041
1,510
5,516
2,564
3,687
1,063
1,415
Total non-current other liabilities and deferred revenue
$
23,457
$
24,395
FS-32
NOTE 13. RETIREMENT BENEFITS
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Defined benefit pension and OPEB plan obligations are remeasured at least annually as of December 31 based on
the present value of projected future benefit payments for all participants for services rendered to date. The measurement
of projected future benefits is dependent on the provisions of each specific plan, demographics of the group covered by
the plan, and other key measurement assumptions. For plans that provide benefits dependent on salary assumptions, we
include a projection of salary growth in our measurements. No assumption is made regarding any potential changes to
benefit provisions beyond those to which we are presently committed (e.g., in existing labor contracts).
Net periodic benefit costs, including service cost, interest cost, and expected return on assets are determined using
assumptions regarding the benefit obligation and the fair value of plan assets (where applicable) as of the beginning of
each year. We have elected to use a fair value of plan assets to calculate the expected return on assets in net periodic
benefit cost. The funded status of the benefit plans, which represents the difference between the benefit obligation and
fair value of plan assets, is calculated on a plan-by-plan basis. The benefit obligation and related funded status are
determined using assumptions as of the end of each year. Actuarial gains and losses resulting from plan remeasurement
are recognized in net periodic benefit cost in the period of the remeasurement. The impact of plan amendments is
recorded in Accumulated other comprehensive income/(loss), and is amortized as a component of net periodic cost
generally over the remaining service period of the active employees. Net periodic benefit costs are recorded in Cost of
sales and Selling, administrative, and other expenses.
Curtailment gains or losses are recorded when an event occurs that significantly reduces the expected years of future
service or eliminates the accrual of defined benefits for the future services of a significant number of employees. We
record a curtailment gain when the employees who are entitled to the benefits terminate their employment; we record a
curtailment loss when it becomes probable a loss will occur. We recognize settlement expense, when applicable, if the
cost of all settlements during the year exceeds the interest component of net periodic cost for the affected plan. Expense
from curtailments and settlements is recorded in Cost of sales and Selling, administrative, and other expenses.
Defined Benefit Pension Plans. We have defined benefit pension plans covering hourly and salaried employees in the
United States, Canada, United Kingdom, Germany and other locations. The largest portion of our worldwide obligation is
associated with our U.S. plans. The vast majority of our worldwide defined benefit plans are closed to new participants.
In general, our defined benefit pension plans are funded (i.e., have restricted assets from which benefits are paid).
Our unfunded defined benefit pension plans are treated on a “pay as you go” basis with benefit payments from general
Company cash. These unfunded plans primarily include certain plans in Germany and the U.S. defined benefit plans for
senior management.
OPEB. We have defined benefit OPEB plans, primarily certain health care and life insurance benefits, covering hourly
and salaried employees in the United States, Canada, and other locations. The largest portion of our worldwide obligation
is associated with our U.S. plans. Our OPEB plans are unfunded and the benefits are paid from general Company cash.
Defined Contribution and Savings Plans. We also have defined contribution and savings plans for hourly and salaried
employees in the United States and other locations. Company contributions to these plans, if any, are made from general
Company cash and are expensed as incurred. The expense for our worldwide defined contribution and savings plans
was $275 million, $291 million, and $340 million for the years ended December 31, 2014, 2015, and 2016,
respectively. This includes the expense for Company-matching contributions to our primary employee savings plan in the
United States of $114 million, $124 million, and $132 million for the years ended December 31, 2014, 2015, and 2016,
respectively.
FS-33
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 13. RETIREMENT BENEFITS (Continued)
Defined Benefit Plans – Expense and Status
The assumptions used to determine benefit obligation and net periodic benefit cost were as follows:
Weighted Average Assumptions at December 31
Discount rate
Average rate of increase in compensation
Weighted Average Assumptions Used to Determine Net
Benefit Cost for the Year Ended December 31
Pension Benefits
U.S. Plans
Non-U.S. Plans
Worldwide OPEB
2015
2016
2015
2016
2015
2016
4.27%
3.80
4.03%
3.50
3.20%
3.40
2.44%
3.38
4.23%
3.81
4.00%
3.51
Discount rate - Service Cost
3.94%
4.60%
3.06%
3.36%
3.93%
4.53%
Effective interest rate on benefit obligation
Expected long-term rate of return on assets
Average rate of increase in compensation
3.94
6.75
3.80
3.46
6.75
3.80
3.06
6.11
3.40
2.72
5.56
3.40
3.93
—
3.76
3.48
—
3.81
The pre-tax net periodic benefit cost for our defined benefit pension and OPEB plans for the years ended
December 31 was as follows (in millions):
Pension Benefits
U.S. Plans
Non-U.S. Plans
Worldwide OPEB
2014
2015
2016
2014
2015
2016
2014
2015
2016
Service cost
Interest cost
$
507
$
586
$
510
$
468
$
1,992
1,817
1,524
1,189
$
532
936
483
782
Expected return on assets
(2,735)
(2,928)
(2,693)
(1,534)
(1,480)
(1,339)
Amortization of prior service costs/(credits)
Net remeasurement (gain)/loss
Separation programs/other
Settlements and curtailments
155
641
19
—
155
1,964
17
—
170
900
12
—
55
2,801
83
13
47
38
(974)
1,876
39
—
81
2
$
54
$
60
$
269
—
(229)
681
—
—
236
—
(204)
(292)
1
—
49
194
—
(142)
220
—
—
Net periodic benefit cost/(income)
$
579
$ 1,611
$
423
$ 3,075
$
(900) $ 1,923
$
775
$
(199) $
321
Beginning in 2016, we changed the method used to estimate the service and interest costs for pension and OPEB
plans that utilize a yield curve approach. We now apply the specific spot rates along the yield curve to the relevant cash
flows instead of using a single effective discount rate. Service and interest costs in 2016 were about $580 million lower
with the new method than they would have been under the prior method. This refinement had no effect on the
measurement of our plan obligations or on full year net periodic benefit cost/(income) as lower service and interest costs
recorded quarterly are offset in net remeasurement (gain)/loss.
FS-34
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 13. RETIREMENT BENEFITS (Continued)
The year-end status of these plans was as follows (in millions):
Change in Benefit Obligation
Benefit obligation at January 1
Service cost
Interest cost
Amendments
Separation programs and other
Curtailments
Settlements
Plan participant contributions
Benefits paid
Foreign exchange translation
Actuarial (gain)/loss
Benefit obligation at December 31
Change in Plan Assets
Fair value of plan assets at January 1
Actual return on plan assets
Company contributions
Plan participant contributions
Benefits paid
Settlements
Foreign exchange translation
Other
Fair value of plan assets at December 31
Funded status at December 31
Amounts Recognized on the Balance Sheet
Prepaid assets
Other liabilities
Total
Amounts Recognized in Accumulated Other
Comprehensive Loss (pre-tax)
Unamortized prior service costs/(credits)
Pension Plans in which Accumulated Benefit
Obligation Exceeds Plan Assets at December 31
Accumulated benefit obligation
Fair value of plan assets
Accumulated Benefit Obligation at December 31
Pension Plans in which Projected Benefit Obligation
Exceeds Plan Assets at December 31
Projected benefit obligation
Fair value of plan assets
Projected Benefit Obligation at December 31
$
$
$
$
$
$
$
$
$
Pension Benefits
U.S. Plans
Non-U.S. Plans
2015
2016
2015
2016
Worldwide OPEB
2016
2015
$
47,103
586
1,817
99
(27)
—
—
26
(2,949)
—
(1,719)
44,936
44,844
(755)
130
26
(2,949)
—
—
(44)
41,252
$
44,936
510
1,524
—
(30)
—
—
27
(2,966)
—
1,745
45,746
$
33,223
532
936
4
40
—
(29)
24
(1,350)
(2,995)
(746)
29,639
29,639
483
782
—
71
2
(131)
22
(1,252)
(2,576)
3,584
30,624
41,252
25,675
25,141
3,538
130
27
(2,966)
—
—
(42)
41,939
1,722
1,345
24
(1,350)
(29)
(2,238)
(8)
25,141
3,041
1,346
22
(1,252)
(131)
(2,612)
(6)
25,549
$
6,375
$
60
236
1
1
—
—
23
(402)
(301)
(292)
5,701
—
—
—
—
—
—
—
—
—
5,701
49
194
14
—
—
—
20
(382)
49
220
5,865
—
—
—
—
—
—
—
—
—
(3,684) $
(3,807) $
(4,498) $
(5,075) $
(5,701) $
(5,865)
— $
— $
1,611
$
1,515
$
— $
(3,684)
(3,684) $
(3,807)
(6,109)
(6,590)
(3,807) $
(4,498) $
(5,075) $
(5,701)
(5,701) $
—
(5,865)
(5,865)
553
$
383
$
278
$
213
$
(475) $
(322)
26,021
$
26,170
$
9,634
$
10,039
22,967
23,204
4,636
4,700
43,698
$
44,513
$
26,835
$
27,166
44,936
$
45,746
$
11,238
$
11,703
41,252
41,939
5,129
5,113
44,936
$
45,746
$
29,639
$
30,624
FS-35
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 13. RETIREMENT BENEFITS (Continued)
Pension Plan Contributions
Our policy for funded pension plans is to contribute annually, at a minimum, amounts required by applicable laws and
regulations. We may make contributions beyond those legally required.
In 2016, we contributed $1.2 billion to our worldwide funded pension plans (most of which were mandatory
contributions) and made about $300 million of benefit payments to participants in unfunded plans. During 2017, we
expect to contribute about $1 billion from cash and cash equivalents to our worldwide funded pension plans (most of
which are mandatory) and to make about $300 million of benefit payments to participants in unfunded plans, for a total of
about $1.3 billion. Based on current assumptions and regulations, we do not expect to have a legal requirement to
contribute to our major U.S. pension plans in 2017.
Expected Future Benefit Payments and Amortization
The expected future benefit payments were as follows (in millions):
2017
2018
2019
2020
2021
2022-2026
Benefit Payments
Pension
U.S. Plans
Non-U.S.
Plans
Worldwide
OPEB
$
3,030
$
1,170
$
3,020
2,980
2,970
2,950
14,750
1,080
1,100
1,120
1,130
5,980
350
350
350
340
340
1,710
The prior service cost/(credit) amounts in Accumulated other comprehensive income/(loss) that are expected to be
recognized as components of net periodic benefit cost/(income) during 2017 are $143 million for U.S. pension plans,
$35 million for non-U.S. pension plans, and $(119) million for Worldwide OPEB plans.
Pension Plan Asset Information
Investment Objective and Strategies. Our investment objectives for the U.S. plans are to minimize the volatility of the
value of our U.S. pension assets relative to U.S. pension obligations and to ensure assets are sufficient to pay plan
benefits. Our U.S. target asset allocations are 80% fixed income and 20% growth assets (primarily alternative
investments which include hedge funds, real estate, and private equity, and public equity). Our largest non-U.S. plans
(United Kingdom and Canada) have similar investment objectives to the U.S. plans and have made progress towards
these objectives.
Investment strategies and policies for the U.S. plans and the largest non-U.S. plans reflect a balance of risk-reducing
and return-seeking considerations. The objective of minimizing the volatility of assets relative to obligations is addressed
primarily through asset-liability matching, asset diversification, and hedging. The fixed income target asset allocation
matches the bond-like and long-dated nature of the pension obligations. Assets are broadly diversified within asset
classes to achieve risk-adjusted returns that in total lower asset volatility relative to the obligations. Strategies to address
the goal of ensuring sufficient assets to pay benefits include target allocations to a broad array of asset classes, and
strategies within asset classes that provide adequate returns, diversification, and liquidity.
Derivatives are permitted for fixed income investment and public equity managers to use as efficient substitutes for
traditional securities and to manage exposure to interest rate and foreign exchange risks. Interest rate and foreign
currency derivative instruments are used for the purpose of hedging changes in the fair value of assets that result from
interest rate changes and currency fluctuations. Interest rate derivatives also are used to adjust portfolio duration.
Derivatives may not be used to leverage or to alter the economic exposure to an asset class outside the scope of the
mandate an investment manager has been given. Alternative investment managers are permitted to employ leverage
(including through the use of derivatives or other tools) that may alter economic exposure.
FS-36
NOTE 13. RETIREMENT BENEFITS (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Alternative investments execute diverse strategies that provide exposure to a broad range of hedge fund strategies,
equity investments in private companies, and investments in private property funds.
Significant Concentrations of Risk. Significant concentrations of risk in our plan assets relate to interest rate, equity,
and operating risk. In order to minimize asset volatility relative to the obligations, the majority of plan assets are allocated
to fixed income investments which are exposed to interest rate risk. Rate increases generally will result in a decline in the
value of fixed income assets, while reducing the present value of the obligations. Conversely, rate decreases generally
will increase the value of fixed income assets, offsetting the related increase in the obligations.
In order to ensure assets are sufficient to pay benefits, a portion of plan assets is allocated to growth assets that are
expected over time to earn higher returns with more volatility than fixed income investments which more closely match
pension obligations. Within equities, risk is mitigated by constructing a portfolio that is broadly diversified by geography,
market capitalization, manager mandate size, investment style, and process. Within alternative investments, risk is
similarly mitigated by constructing a portfolio that is broadly diversified by asset class, investment strategy, manager, style,
and process.
Operating risks include the risks of inadequate diversification and weak controls. To mitigate these risks, investments
are diversified across and within asset classes in support of investment objectives. Policies and practices to address
operating risks include ongoing manager oversight (e.g., style adherence, team strength, firm health, and internal risk
controls), plan and asset class investment guidelines and instructions that are communicated to managers, and periodic
compliance and audit reviews to ensure adherence.
At year-end 2016, Ford securities comprised less than 1% of our plan assets.
Expected Long-Term Rate of Return on Assets. The long-term return assumption at year-end 2016 is 6.75% for the
U.S. plans, 5.75% for the U.K. plans, and 5.50% for the Canadian plans, and averages 5.19% for all non-U.S. plans. A
generally consistent approach is used worldwide to develop this assumption. This approach considers various sources,
primarily inputs from a range of advisors for long-term capital market returns, inflation, bond yields, and other variables,
adjusted for specific aspects of our investment strategy by plan. Historical returns also are considered where appropriate.
The assumption is based on consideration of all inputs, with a focus on long-term trends to avoid short-term market
influences.
Fair Value of Plan Assets. Pension assets are recorded at fair value, and include primarily fixed income and public
equity securities, derivatives, and alternative investments, which include hedge funds, private equity, and real
estate. Fixed income and public equity securities may each be combined into commingled fund investments. Most
commingled funds are valued to reflect the pension fund’s interest in the fund based on the reported year-end net asset
value (“NAV”). Alternative investments are valued based on year-end reported NAV, with adjustments as appropriate for
lagged reporting of up to 6 months.
Fixed Income. Fixed income securities are valued based on quotes received from independent pricing services or
from dealers who make markets in such securities. Pricing services utilize matrix pricing, which considers prepayment
speed assumptions, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity, and type,
as well as dealer-supplied prices, and generally are categorized as Level 2 inputs in the fair value hierarchy. Securities
categorized as Level 3 typically are priced by dealers and pricing services that use proprietary pricing models which
incorporate unobservable inputs. These inputs primarily consist of prepayment curves, discount rates, default
assumptions, recovery rates, yield assumptions, and credit spread assumptions.
Public Equities. Public equity securities are valued based on quoted prices and are primarily exchange-
traded. Securities for which official close or last trade pricing on an active exchange is available are classified as Level 1
in the fair value hierarchy. If closing prices are not available, securities are valued at the last quoted bid price or may be
valued using the last available price and typically are categorized as Level 2. Level 3 securities often are thinly traded or
delisted, with unobservable pricing data.
FS-37
NOTE 13. RETIREMENT BENEFITS (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
Derivatives. Exchange-traded derivatives for which market quotations are readily available are valued at the last
reported sale price or official closing price as reported by an independent pricing service on the primary market or
exchange on which they are traded and are categorized as Level 1. Over-the-counter derivatives typically are valued by
independent pricing services and categorized as Level 2. Level 3 derivatives typically are priced by dealers and pricing
services that use proprietary pricing models which incorporate unobservable inputs, including extrapolated or
assumptions such as volatilities and yield and credit spread assumptions.
Alternative Assets. Hedge funds generally hold liquid and readily-priced securities, such as public equities, exchange-
traded derivatives, and corporate bonds. Private equity and real estate investments are less liquid. External investment
managers typically report valuations reflecting initial cost or updated appraisals, which are adjusted for cash flows, and
realized and unrealized gains/losses. All alternative assets are valued using the NAV provided by the investment sponsor
or third party administrator, as they do not have readily-available market quotations. Valuations may be lagged up to
6 months. The NAV will be adjusted for cash flows (additional investments or contributions, and distributions) through
year-end. We may make further adjustments for any known substantive valuation changes not reflected in the NAV.
The Ford-Werke GmbH (“Ford-Werke”) defined benefit plan is primarily funded through a group insurance contract.
Beginning with year-end 2015, we measure the fair value of the insurance asset by projecting expected future cash flows
from the contract and discounting them to present value based on current market rates including an assessment for
risk of the insurance company. The assumptions used to project expected future cash flows are based
on actuarial estimates and are unobservable; therefore the contract is Level 3.
FS-38
NOTE 13. RETIREMENT BENEFITS (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
The fair value of our defined benefit pension plan assets (including dividends and interest receivables of $363 million
and $94 million for U.S. and non-U.S. plans, respectively) by asset category at December 31 was as follows (in millions):
U.S. Plans
Non-U.S. Plans
Level 1
Level 2
Level 3
Assets
measured
at NAV (a)
Total
Level 1
Level 2
Level 3
Assets
measured
at NAV (a)
Total
2015
Asset Category
Equity
U.S. companies
$
1,935
$
4
$
— $
— $
1,939
$
1,647
$
1
$
— $
86
$
1,734
International
companies
Total equity
Fixed Income
1,082
3,017
U.S. government
5,209
U.S. government-
sponsored enterprises
Non-U.S. government
Corporate bonds (b)
Investment grade
High yield
Other credit
Mortgage/other asset-
backed
Commingled funds
Derivative financial
instruments, net
—
—
—
—
—
—
—
22
10
14
—
3,106
1,588
18,687
1,576
412
1,101
—
(231)
Total fixed income
5,231
26,239
Alternatives
Hedge funds
Private equity
Real estate
Total alternatives
Cash and cash
equivalents (c)
Other (d)
Total assets at fair
value
—
—
—
—
221
—
175
—
20
195
1,103
(1,227)
1
1
—
—
—
—
9
—
12
—
—
21
—
—
—
—
—
—
1,100
3,039
1,290
2,937
5,209
138
7
7
—
—
—
—
—
—
—
174
—
174
2,548
2,745
963
6,256
3,106
1,588
18,687
1,585
412
1,113
174
(209)
31,665
2,723
2,745
983
6,451
292
293
—
10
10,650
2,027
539
65
292
—
(130)
108
—
1
109
556
—
—
—
—
—
—
—
1
—
—
—
—
—
—
139
13,453
—
—
1,324
(1,227)
(1,173)
5,256
1
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
29
115
1,612
3,346
—
—
—
—
—
—
—
379
—
379
138
10
10,650
2,027
539
65
292
379
(129)
13,971
1,762
1,870
633
681
633
682
3,076
3,185
—
—
556
4,083
$
8,469
$ 26,324
$
22
$
6,437
$ 41,252
$
3,076
$ 13,238
$
5,257
$
3,570
$ 25,141
_______
(a) Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair
(b)
value hierarchy.
“Investment grade” bonds are those rated Baa3/BBB- or higher by at least two rating agencies; “High yield” bonds are those rated below investment
grade; “Other credit” refers to non-rated bonds.
(c) Primarily short-term investment funds to provide liquidity to plan investment managers and cash held to pay benefits.
(d) For U.S. plans, primarily cash related to net pending security (purchases)/sales and net pending foreign currency purchases/(sales). For non-
U.S plans, primarily Ford-Werke, plan assets (insurance contract valued at $4.4 billion at year-end 2015) and cash related to net pending security
(purchases)/sales and net pending foreign currency purchases/(sales).
FS-39
NOTE 13. RETIREMENT BENEFITS (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
The fair value of our defined benefit pension plan assets (including dividends and interest receivables of $345 million
and $93 million for U.S. and non-U.S. plans, respectively) by asset category at December 31 was as follows (in millions):
U.S. Plans
Non-U.S.Plans
2016
Level 1
Level 2
Level 3
Assets
measured
at NAV (a)
Total
Level 1
Level 2
Level 3
Assets
measured
at NAV (a)
Total
Asset Category
Equity
U.S. companies
$
2,353
$
6
$
— $
— $
2,359
$
1,614
$
93
$
— $
— $
1,707
International
companies
Total equity
Fixed Income
1,457
3,810
U.S. government
5,157
U.S. government-
sponsored enterprises
Non-U.S. government
Corporate bonds (b)
Investment grade
High yield
Other credit
Mortgage/other asset-
backed
Commingled funds
Derivative financial
instruments, net
—
—
—
—
—
—
—
27
19
25
—
3,030
1,343
8,922
11,512
203
855
—
(213)
Total fixed income
5,184
25,652
Alternatives
Hedge funds
Private equity
Real estate
Total alternatives
Cash and cash
equivalents (c)
Other (d)
Total assets at fair
value
—
—
—
—
218
—
158
—
—
158
1,385
(1,152)
1,484
3,843
1,278
2,892
5,157
433
1
1
—
—
—
—
13
—
—
—
—
13
—
—
—
—
—
—
7
7
—
—
—
—
—
—
—
153
—
153
2,802
2,548
1,135
6,485
3,030
1,343
8,922
11,525
203
855
153
(186)
31,002
2,960
2,548
1,135
6,643
—
—
1,603
(1,152)
360
453
—
57
11,171
1,014
1,338
—
242
379
28
—
—
—
—
—
—
—
5
438
14,229
—
—
—
—
—
—
215
—
(2)
213
97
(572)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,252
—
—
—
—
—
—
—
—
—
—
—
—
1,638
3,345
433
57
11,171
1,014
1,338
—
242
379
33
14,667
1,383
1,598
679
485
679
483
2,547
2,760
—
—
97
4,680
$
9,212
$ 26,068
$
14
$
6,645
$ 41,939
$
3,330
$ 14,420
$
5,252
$
2,547
$ 25,549
_______
(a) Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair
(b)
value hierarchy.
“Investment grade” bonds are those rated Baa3/BBB- or higher by at least two rating agencies; “High yield” bonds are those rated below investment
grade; “Other credit” refers to non-rated bonds.
(c) Primarily short-term investment funds to provide liquidity to plan investment managers and cash held to pay benefits.
(d) For U.S. plans, primarily cash related to net pending security (purchases)/sales and net pending foreign currency purchases/(sales). For non-
U.S plans, primarily Ford-Werke, plan assets (insurance contract valued at $4.5 billion at year-end 2016) and cash related to net pending security
(purchases)/sales and net pending foreign currency purchases/(sales).
FS-40
NOTE 13. RETIREMENT BENEFITS (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
The following table summarizes the changes in Level 3 defined benefit pension plan assets measured at fair value on
a recurring basis for the years ended December 31 (in millions):
2015
Return on plan assets
Attributable
to Assets
Held
at
December 31
Attributable
to
Assets
Sold
Fair
Value
at
January 1
Net
Purchases/
(Settlements)
Transfers
Into/ (Out of)
Level 3
Fair
Value
at
December 31
U.S. Plans
Non-U.S. Plans (a)
$
$
48
4,725
(9) $
531
(4) $
—
(13) $
1
22
5,257
— $
—
2016
Return on plan assets
Attributable
to Assets
Held
at
December 31
Attributable
to
Assets
Sold
Fair
Value
at
January 1
Net
Purchases/
(Settlements)
Transfers
Into/ (Out of)
Level 3
Fair
Value
at
December 31
U.S. Plans
Non-U.S. Plans (a)
_______
(a) Primarily Ford-Werke plan assets (insurance contract valued at $4.4 billion and $4.5 billion at year-end 2015 and 2016, respectively). Return on plan
assets attributable to assets held at December 31, 2015 reflects a change in valuation technique (totaling $725 million) noted in the alternative assets
section of the pension plan asset information.
(13) $
—
— $
—
— $
—
14
5,252
22
5,257
5
(5)
$
$
$
NOTE 14. DEBT AND COMMITMENTS
Our debt consists of short-term and long-term secured and unsecured debt securities, and secured and unsecured
borrowings from banks and other lenders. Debt issuances are placed directly by us or through securities dealers or
underwriters and are held by institutional and retail investors. In addition, Ford Credit sponsors securitization programs
that provide short-term and long-term asset-backed financing through institutional investors in the U.S. and international
capital markets.
Debt is reported on our balance sheet at par value adjusted for unamortized discount or premium, unamortized
issuance costs, and adjustments related to designated fair value hedges (see Note 17). Discounts, premiums, and costs
directly related to the issuance of debt are capitalized and amortized over the life of the debt or to the put date and are
recorded in interest expense using the effective interest method. Gains and losses on the extinguishment of debt are
recorded in Non-Financial Services interest income and other income/(loss), net and Financial Services other income/
(loss), net.
FS-41
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 14. DEBT AND COMMITMENTS (Continued)
The carrying value of Automotive and Financial Services debt at December 31 was as follows (in millions):
Automotive Segment
Debt payable within one year
Short-term
Long-term payable within one year
U.S. Department of Energy (“DOE”) Advanced
Technology Vehicles Manufacturing (“ATVM”)
Incentive Program
Other debt
Unamortized (discount)/premium
Total debt payable within one year
Long-term debt payable after one year
Public unsecured debt securities
DOE ATVM Incentive Program
Other debt
Adjustments
Unamortized (discount)/premium
Unamortized issuance costs
Total long-term debt payable after one year
Total Automotive Segment
Fair value of Automotive Segment debt (c)
Financial Services Segment
Debt payable within one year
Short-term
Long-term payable within one year
Unsecured debt
Asset-backed debt
Adjustments
Unamortized (discount)/premium
Unamortized issuance costs
Fair value adjustments (d)
Total debt payable within one year
Long-term debt payable after one year
Unsecured debt
Asset-backed debt
Adjustments
Interest Rates
Average Contractual
Average Effective (a)
2015
2016
2015
2016
2015
2016
$
818
$
1,324
7.3%
10.3%
7.3%
10.3%
591
370
—
1,779
6,594
3,242
1,696
(412)
(60)
11,060
12,839
14,199
$
$
$
$
591
827
(57)
2,685
9,394
2,651
1,573
(320)
(76)
13,222
15,907
17,433
5.3% (b)
5.5% (b)
6.0% (b)
6.2% (b)
$
12,123
$
15,330
1.6%
2.3%
1.6%
2.3%
10,241
18,855
(5)
(18)
—
41,196
49,193
29,390
12,369
19,286
(2)
(16)
17
46,984
49,912
30,112
(9)
(197)
261
80,079
127,063
128,777
2.3% (b)
2.4% (b)
2.4% (b)
2.5% (b)
Unamortized (discount)/premium
Unamortized issuance costs
Fair value adjustments (d)
Total long-term debt payable after one year
Total Financial Services Segment
Fair value of Financial Services Segment debt (c)
(24)
(198)
458
78,819
120,015
121,170
$
$
$
$
Includes interest on long-term debt payable within one year and after one year.
__________
(a) Average effective rates reflect the average contractual interest rate plus amortization of discounts, premiums, and issuance costs.
(b)
(c) The fair value of debt includes $560 million and $1.1 billion of Automotive short-term debt and $10.3 billion and $14.3 billion of Financial Services
short-term debt at December 31, 2015 and 2016, respectively, carried at cost which approximates fair value. All debt is categorized within Level 2
of the fair value hierarchy.
(d) Adjustments related to designated fair value hedges of unsecured debt.
FS-42
NOTE 14. DEBT AND COMMITMENTS (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
The fair value of debt reflects interest accrued but not yet paid. Interest accrued on Automotive debt was $213 million
and $258 million at December 31, 2015 and 2016, respectively. Interest accrued on Financial Services debt was
$568 million and $676 million at December 31, 2015 and 2016, respectively. Accrued interest is reported in Other
liabilities and deferred revenue in the current liabilities section of our consolidated balance sheet. See Note 2 for fair
value method.
We paid interest of $774 million, $693 million, and $780 million in 2014, 2015, and 2016, respectively, on Automotive
debt. We paid interest of $2.7 billion, $2.4 billion, and $2.6 billion in 2014, 2015, and 2016, respectively, on Financial
Services debt.
Maturities
Debt maturities at December 31, 2016 were as follows (in millions):
2017
2018
2019
2020
2021
Thereafter Adjustments
Total Debt
Maturities
Automotive Segment
Public unsecured debt securities
$
— $
DOE ATVM Incentive Program
Short-term and other debt (a)
591
2,151
361
591
558
$
— $
— $
— $
9,033
$
(211) $
287
260
—
(242)
9,183
3,242
3,482
591
240
831
$
591
362
953
$
591
153
744
2,742
$
1,510
$
$
9,580
$
(453) $
15,907
Total
Financial Services Segment
Unsecured debt
Asset-backed debt
Total
__________
(a) Primarily non-U.S. affiliate debt.
$
$
$
26,636
$
12,374
$
11,135
$
6,972
$
9,305
$
10,126
$
116
$
76,664
20,349
12,129
9,725
4,909
2,299
1,050
(62)
50,399
46,985
$
24,503
$
20,860
$
11,881
$
11,604
$
11,176
$
54
$ 127,063
FS-43
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 14. DEBT AND COMMITMENTS (Continued)
Automotive Segment
Public Unsecured Debt Securities
Our public, unsecured debt securities outstanding at December 31 were as follows (in millions):
Title of Security
6 1/2% Debentures due August 1, 2018
8 7/8% Debentures due January 15, 2022
7 1/8% Debentures due November 15, 2025
7 1/2% Debentures due August 1, 2026
6 5/8% Debentures due February 15, 2028
6 5/8% Debentures due October 1, 2028 (a)
6 3/8% Debentures due February 1, 2029 (a)
7.45% GLOBLS due July 16, 2031 (a)
8.900% Debentures due January 15, 2032
9.95% Debentures due February 15, 2032
7.75% Debentures due June 15, 2043
7.40% Debentures due November 1, 2046
9.980% Debentures due February 15, 2047
7.70% Debentures due May 15, 2097
4.346% Notes due December 8, 2026
5.291% Notes due December 8, 2046
4.75% Notes due January 15, 2043
Total public unsecured debt securities (b)
Aggregate Principal Amount
Outstanding
2015
2016
$
361
86
209
193
104
638
260
1,794
151
4
73
398
181
142
—
—
2,000
6,594
$
361
86
209
193
104
638
260
1,794
151
4
73
398
181
142
1,500
1,300
2,000
9,394
$
$
__________
(a) Listed on the Luxembourg Exchange and on the Singapore Exchange.
(b) Excludes 9.215% Debentures due September 15, 2021 with an outstanding balance at December 31, 2016 of $180 million. The proceeds from
these securities were on-lent by Ford to Ford Holdings to fund Financial Services activity and are reported as Financial Services long-term debt.
DOE ATVM Incentive Program
In September 2009, we entered into a Loan Arrangement and Reimbursement Agreement with the DOE, under which
we borrowed through multiple draws $5.9 billion to finance certain costs for fuel-efficient, advanced-technology vehicles.
At December 31, 2016, an aggregate $3.2 billion was outstanding. 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.
Automotive Credit Facilities
Lenders under our Third Amended and Restated Credit Agreement dated as of April 29, 2016 and as further amended
(the “corporate credit facility”) have commitments to us totaling $13.4 billion, with 75% of the commitments maturing on
April 30, 2021 and 25% of the commitments maturing on April 30, 2019. We have allocated $3 billion of commitments to
Ford Credit on an irrevocable and exclusive basis to support its liquidity. Any borrowings by Ford Credit under the
corporate credit facility would be guaranteed by us.
The corporate credit facility is unsecured and free of material adverse change conditions to borrowing, restrictive
financial covenants (for example, interest or fixed charge coverage ratio, debt-to-equity ratio, and minimum net worth
requirements), and credit rating triggers that could limit our ability to obtain funding. The corporate credit facility contains
a liquidity covenant that requires us to maintain a minimum of $4 billion in aggregate of domestic cash, cash equivalents,
and loaned and marketable securities and/or availability under the corporate credit facility. If our senior, unsecured,
debt does not maintain at least two investment grade ratings from Fitch, Moody’s, and S&P, the guarantees of
certain subsidiaries will be required.
At December 31, 2016, the utilized portion of the corporate credit facility was $35 million, representing amounts
utilized as letters of credit.
FS-44
NOTE 14. DEBT AND COMMITMENTS (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
At December 31, 2016, we had $1.5 billion of local credit facilities available to non-U.S. Automotive affiliates, of which
$967 million had been utilized.
Financial Services Segment
Asset-Backed Debt
At December 31, 2016, the carrying value of our asset-backed debt was $50.4 billion. This secured debt is issued by
Ford Credit and includes asset-backed securities used to fund operations and maintain liquidity. Assets securing the
related debt issued as part of all our securitization transactions are included in our consolidated results and are based
upon the legal transfer of the underlying assets in order to reflect legal ownership and the beneficial ownership of the debt
holder. The third-party investors in the securitization transactions have legal recourse only to the assets securing the debt
and do not have such recourse to us, except for the customary representation and warranty provisions or when we are
counterparty to certain derivative transactions of the special purpose entities (“SPEs”). In addition, the cash flows
generated by the assets are restricted only to pay such liabilities; Ford Credit retains the right to residual cash flows. See
Note 16 for additional information.
Although not contractually required, we regularly support our wholesale securitization programs by repurchasing
receivables of a dealer from a SPE when the dealer’s performance is at risk, which transfers the corresponding risk of loss
from the SPE to us. In order to continue to fund the wholesale receivables, we also may contribute additional cash or
wholesale receivables if the collateral falls below required levels. The balances of cash related to these contributions
were $0 at December 31, 2015 and 2016, and ranged from $0 to $72 million during 2015 and $0 to $12 million during
2016.
SPEs that are exposed to interest rate or currency risk may reduce their risks by entering into derivative transactions.
In certain instances, we have entered into derivative transactions with the counterparty to protect the counterparty from
risks absorbed through derivative transactions with the SPEs. Derivative income/(expense) related to the derivative
transactions that support Ford Credit’s securitization programs were $4 million, $2 million, and $(29) million for the years
ended December 31, 2014, 2015, and 2016, respectively. See Note 17 for additional information regarding the
accounting for derivatives.
Interest expense on securitization debt was $595 million, $630 million, and $773 million in 2014, 2015, and 2016,
respectively.
The assets and liabilities related to our asset-backed debt arrangements included on our financial statements at
December 31 were as follows (in billions):
Assets
Cash and cash equivalents
Finance receivables, net
Net investment in operating leases
Liabilities
Debt (a)
__________
(a) Debt is net of unamortized discount and issuance costs.
Committed Credit Facilities
2015
2016
$
$
4.3
$
53.6
13.3
3.4
58.3
11.8
50.0
$
50.4
At December 31, 2016, Ford Credit’s committed capacity totaled $40.1 billion of which $19.5 billion is available for
use. Ford Credit’s committed capacity is primarily comprised of unsecured credit facilities with financial institutions,
committed asset-backed security lines from bank-sponsored commercial paper conduits and other financial institutions,
and allocated commitments under the corporate credit facility.
FS-45
NOTE 15. REDEEMABLE NONCONTROLLING INTEREST
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
We formed the Ford Sollers joint venture with Sollers OJSC (“Sollers”) in October 2011 to operate in Russia. On
March 31, 2015, we and Sollers agreed to certain changes to the structure of the joint venture and the related
shareholders’ agreement to support the business in the near term and provide a platform for future growth in this
important market. The changes included Ford providing additional funding to the joint venture and gaining a controlling
interest in the joint venture through the acquisition of preferred shares. As a result, effective March 31, 2015, we
consolidated the joint venture for financial reporting purposes.
The value of the redeemable noncontrolling interest, reflecting the redemption features embedded in the 50% equity
interest in the joint venture that is held by Sollers, reported in the mezzanine section of our balance sheet at
December 31, 2015 and 2016 was $94 million and $96 million, respectively.
NOTE 16. VARIABLE INTEREST ENTITIES
A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional
subordinated financial support, or (ii) has equity investors who lack the characteristics of a controlling financial interest.
We consolidate VIEs of which we are the primary beneficiary. We consider ourselves the primary beneficiary of a VIE
when we have both the power to direct the activities that most significantly impact the entity’s economic performance
and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to
the VIE. Assets recognized as a result of consolidating these VIEs do not represent additional assets that could be
used to satisfy claims against our general assets. Liabilities recognized as a result of consolidating these VIEs do not
represent additional claims on our general assets; rather, they represent claims against the specific assets of the
consolidated VIEs.
We have the power to direct the significant activities of an entity when our management has the ability to make key
operating decisions, such as decisions regarding capital or product investment or manufacturing production schedules.
For securitization entities, we have the power to direct significant activities when we have the ability to exercise
discretion in the servicing of financial assets (including general collection activity on current and non-current accounts
and loss mitigation efforts including repossession and sale of collateral), issue additional debt, exercise a unilateral call
option, add assets to revolving structures, or control investment decisions.
VIEs of Which We are Not the Primary Beneficiary
Certain of our joint ventures are VIEs, in which the power to direct economically significant activities is shared with
the joint venture partner. Our investments in these joint ventures are accounted for as equity method investments.
Our maximum exposure to any potential losses associated with these joint ventures is limited to our investment,
including loans, and was $251 million and $262 million at December 31, 2015 and 2016, respectively.
VIEs of Which We are the Primary Beneficiary
Securitization Entities. Through Ford Credit, we securitize, transfer, and service financial assets associated with
consumer finance receivables, operating leases, and wholesale loans. Our securitization transactions typically involve
the legal transfer of financial assets to bankruptcy remote SPEs. We generally retain economic interests in the asset-
backed securitization transactions, which are retained in the form of senior or subordinated interests, cash reserve
accounts, residual interests, and servicing rights. For accounting purposes, we are precluded from recording the
transfers of assets in securitization transactions as sales.
In most cases, the bankruptcy remote SPEs meet the definition of VIEs for which we have determined we have
both the power to direct the activities of the entity that most significantly impact the entity’s performance and the
obligation to absorb losses or the right to receive benefits of the entity that could be significant, and would therefore
also be consolidated. We account for all securitization transactions as if they were secured financing and therefore the
assets, liabilities, and related activity of these transactions are consolidated in our financial results and are included in
amounts presented on the face of our consolidated balance sheet. See Note 14 for additional information on the
accounting for asset-backed debt and the assets securing this debt.
FS-46
NOTE 17. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
In the normal course of business, our operations are exposed to global market risks, including the effect of changes in
foreign currency exchange rates, certain commodity prices, and interest rates. To manage these risks, we enter into
highly effective derivative contracts:
•
•
•
•
Foreign currency exchange contracts, including forwards, that are used to manage foreign exchange exposure;
Commodity contracts, including forwards, that are used to manage commodity price risk;
Interest rate contracts, including swaps, that are used to manage the effects of interest rate fluctuations; and
Cross-currency interest rate swap contracts that are used to manage foreign currency and interest rate exposures
on foreign-denominated debt.
Our derivatives are over-the-counter customized derivative transactions and are not exchange-traded. We review our
hedging program, derivative positions, and overall risk management strategy on a regular basis.
Derivative Financial Instruments and Hedge Accounting. Derivatives are recorded on the balance sheet at fair value
and presented on a gross basis. Derivative assets are reported in Other assets and derivative liabilities are reported in
Payables and Other liabilities and deferred revenue.
We have elected to apply hedge accounting to certain derivatives. Derivatives that are designated in hedging
relationships are evaluated for effectiveness using regression analysis at the time they are designated and throughout the
hedge period. Some derivatives do not qualify for hedge accounting; for others, we elect not to apply hedge accounting.
Cash Flow Hedges. Our Automotive segment has designated certain forward contracts as cash flow hedges of
forecasted transactions with exposure to foreign currency exchange and commodity price risks.
The effective portion of changes in the fair value of cash flow hedges is deferred in Accumulated other comprehensive
income/(loss) and is recognized in Cost of sales when the hedged item affects earnings. The ineffective portion is
reported in Cost of sales in the period of measurement. Our policy is to de-designate foreign currency exchange cash
flow hedges prior to the time forecasted transactions are recognized as assets or liabilities on the balance sheet and
report subsequent changes in fair value through Cost of sales. If it becomes probable that the originally-forecasted
transaction will not occur, the related amount included in Accumulated other comprehensive income/(loss) is reclassified
and recognized in earnings. The majority of our cash flow hedges mature in two years or less.
Fair Value Hedges. Our Financial Services segment uses derivatives to reduce the risk of changes in the fair value of
debt. We have designated certain receive-fixed, pay-float interest rate swaps as fair value hedges of fixed-rate debt. The
risk being hedged is the risk of changes in the fair value of the hedged debt attributable to changes in the benchmark
interest rate. If the hedge relationship is deemed to be highly effective, we record the changes in the fair value of the
hedged debt related to the risk being hedged in Financial Services debt with the offset in Financial Services other income/
(loss), net. The change in fair value of the related derivative (excluding accrued interest) also is recorded in Financial
Services other income/(loss), net. Net interest settlements and accruals on fair value hedges are excluded from the
assessment of hedge effectiveness and are reported in Financial Services interest, operating, and other expenses. The
cash flows associated with fair value hedges are reported in Net cash provided by/(used in) operating activities on our
statement of cash flows.
When a fair value hedge is de-designated, or when the derivative is terminated before maturity, the fair value
adjustment to the hedged debt continues to be reported as part of the carrying value of the debt and is amortized over its
remaining life.
Derivatives Not Designated as Hedging Instruments. Our Automotive segment reports changes in the fair value of
derivatives not designated as hedging instruments through Cost of sales. Cash flows associated with non-designated or
de-designated derivatives are reported in Net cash provided by/(used in) investing activities on our statements of cash
flows.
Our Financial Services segment reports net interest settlements and accruals and changes in the fair value of interest
rate swaps not designated as hedging instruments in Financial Services other income/(loss), net. Foreign currency
revaluation on accrued interest along with gains and losses on foreign exchange contracts and cross currency interest
rate swaps are reported in Financial Services other income/(loss), net. Cash flows associated with non-designated or de-
designated derivatives are reported in Net cash provided by/(used in) investing activities on our statements of cash flows.
FS-47
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 17. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
Normal Purchases and Normal Sales Classification. We have elected to apply the normal purchases and normal
sales classification for physical supply contracts that are entered into for the purpose of procuring commodities to be used
in production over a reasonable period in the normal course of our business.
Income Effect of Derivative Financial Instruments
The gains/(losses), by hedge designation, recorded in income for the years ended December 31 were as follows
(in millions):
Cash flow hedges (a)
Reclassified from AOCI to net income
Fair value hedges
Interest rate contracts
Net interest settlements and accruals excluded from the assessment of hedge
effectiveness
Ineffectiveness (b)
Derivatives not designated as hedging instruments
Foreign currency exchange contracts
Cross-currency interest rate swap contracts
Interest rate contracts
Commodity contracts
Total
2014
2015
2016
$
78
$
(239) $
537
304
20
261
161
(41)
(47)
370
3
425
100
(58)
(64)
367
4
257
398
(9)
7
$
736
$
537
$
1,561
__________
(a) For 2014, 2015, and 2016 a $271 million loss, a $123 million gain, and a $770 million gain, respectively, were recorded in Other comprehensive
income/(loss), net of tax.
(b) For 2014, 2015, and 2016, hedge ineffectiveness reflects the net change in fair value on derivatives of $407 million gain, $72 million gain, and
$120 million loss, respectively, and change in value on hedged debt attributable to the change in benchmark interest rates of $387 million loss,
$69 million loss, and $124 million gain, respectively.
FS-48
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 17. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
Balance Sheet Effect of Derivative Financial Instruments
Derivative assets and liabilities are recorded on the balance sheet at fair value and are presented on a gross basis.
The notional amounts of the derivative instruments do not necessarily represent amounts exchanged by the parties and
are not a direct measure of our financial exposure. We also enter into master agreements with counterparties that may
allow for netting of exposures in the event of default or breach of the counterparty agreement.
The fair value of our derivative instruments and the associated notional amounts, presented gross, at December 31
were as follows (in millions):
2015
2016
Notional
Fair Value of
Assets
Fair Value of
Liabilities
Notional
Fair Value of
Assets
Fair Value of
Liabilities
Derivatives not designated as hedging instruments
Cash flow hedges
Foreign currency exchange and
commodity contracts
Fair value hedges
Interest rate contracts
Foreign currency exchange contracts
Cross-currency interest rate swap
contracts
Interest rate contracts
Commodity contracts
Total derivative financial instruments,
gross (a) (b)
Current portion
Non-current portion
Total derivative financial instruments,
gross
$
12,593
$
522
$
366
$
19,091
$
620
$
28,964
21,108
3,137
62,638
643
670
426
73
159
2
16
242
111
112
26
33,175
17,227
3,201
61,689
531
487
379
242
156
11
$
129,083
$
1,852
$
873
$
134,914
$
1,895
$
$
$
1,209
$
643
1,852
$
692
181
873
$
$
1,108
$
787
1,895
$
257
80
194
8
74
6
619
371
248
619
__________
(a) At December 31, 2015, and 2016, the net obligation to return cash collateral was $0 and $3 million, respectively.
(b) At December 31, 2015, and 2016, the fair value of assets and liabilities available for counterparty netting was $733 million and $554 million,
respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.
FS-49
NOTE 18. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
The changes in the balances for each component of accumulated other comprehensive income/(loss) attributable to
Ford Motor Company for the years ended December 31 were as follows (in millions):
2014
2015
2016
Foreign currency translation
Beginning balance
Gains/(Losses) on foreign currency translation
Less: Tax/(Tax benefit) (a)
Net gains/(losses) on foreign currency translation
(Gains)/Losses reclassified from AOCI to net income (b)
Other comprehensive income/(loss), net of tax
Ending balance
Marketable securities
Beginning balance
Gains/(Losses) on available for sale securities
Less: Tax/(Tax benefit)
Net gains/(losses) on available for sale securities
(Gains)/Losses reclassified from AOCI to net income
Less: Tax/(Tax benefit)
Net (gains)/losses reclassified from AOCI to net income
Other comprehensive income/(loss), net of tax
Ending balance
Derivative instruments
Beginning balance
Gains/(Losses) on derivative instruments
Less: Tax/(Tax benefit)
Net gains/(losses) on derivative instruments
(Gains)/Losses reclassified from AOCI to net income
Less: Tax/(Tax benefit)
Net (gains)/losses reclassified from AOCI to net income (c)
Other comprehensive income/(loss), net of tax
Ending balance
Pension and other postretirement benefits
Beginning balance
Prior service (costs)/credits arising during the period
Less: Tax/(Tax benefit)
Net prior service (costs)/credits arising during the period
Amortization and recognition of prior service costs/(credits) (d)
Less: Tax/(Tax benefit)
Net prior service costs/(credits) reclassified from AOCI to net income
Translation impact on non-U.S. plans
Other comprehensive income/(loss), net of tax
Ending balance
Total AOCI ending balance at December 31
$
$
$
$
$
$
$
$
$
(2,402) $
(206)
(17)
(189)
153
(36)
(2,438) $
— $
—
—
—
—
—
—
—
— $
$
19
(271)
(96)
(175)
(78)
(71)
(7)
(182)
(163) $
(2,641) $
(11)
(2)
(9)
(19)
(7)
(12)
(2)
(23)
(2,664) $
(2,438) $
(969)
177
(1,146)
14
(1,132)
(3,570) $
— $
(10)
(4)
(6)
—
—
—
(6)
(6) $
(163) $
123
50
73
239
85
154
227
64
$
(2,664) $
(104)
(41)
(63)
(2)
6
(8)
(10)
(81)
(2,745) $
(5,265) $
(6,257) $
(3,570)
(494)
537
(1,031)
8
(1,023)
(4,593)
(6)
(13)
(10)
(3)
(1)
4
(5)
(8)
(14)
64
770
144
626
(537)
(130)
(407)
219
283
(2,745)
(16)
(4)
(12)
66
22
44
24
56
(2,689)
(7,013)
__________
(a) We do not recognize deferred taxes for a majority of the foreign currency translation gains and losses because we do not anticipate reversal in the
foreseeable future. However, we have made elections to tax certain non-U.S. operations simultaneously in U.S. tax returns, and have recorded
deferred taxes for temporary differences that will reverse, independent of repatriation plans, on U.S. tax returns. Taxes or tax benefits resulting
from foreign currency translation of the temporary differences are recorded in Other comprehensive income/(loss), net of tax.
(b) Reclassified to Non-Financial Services interest income and other income/(loss), net.
(c) Reclassified to Cost of sales. During the next twelve months we expect to reclassify existing net gains on cash flow hedges of $358 million. See
Note 17 for additional information.
(d) Amortization and recognition of prior service costs/(credits) is included in the computation of net periodic pension cost. See Note 13 for additional
information.
FS-50
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 19. OTHER INCOME/(LOSS)
Non-Financial Services
The amounts included in Non-Financial Services interest income and other income/(loss), net for the years ended
December 31 were as follows (in millions):
Investment-related interest income
Interest income/(expense) on income taxes
Realized and unrealized gains/(losses) on cash equivalents and marketable securities
Gains/(Losses) on changes in investments in affiliates
Gains/(Losses) on extinguishment of debt
Royalty income
Other
Total
Financial Services
2014
2015
2016
193
109
(9)
(798)
(132)
559
154
$
233
$
—
46
42
1
666
200
217
(5)
(9)
139
—
714
300
76
$
1,188
$
1,356
$
$
The amounts included in Financial Services other income/(loss), net for the years ended December 31 were as
follows (in millions):
Investment-related interest income
Interest income/(expense) on income taxes
Insurance premiums earned
Other
Total
2014
2015
2016
51
$
76
$
(13)
125
185
348
$
3
133
160
372
$
74
8
156
200
438
$
$
NOTE 20. SHARE-BASED EMPLOYEE COMPENSATION
We issue to our employees restricted stock units (“RSUs”), which consist of time-based and performance-based
awards. RSUs provide the recipients with the right to shares of Common Stock following a specified performance period
and/or vesting period. Time-based awards generally have a vesting feature whereby one-third of each grant of RSUs
vests after the first anniversary of the grant date, one-third after the second anniversary, and one-third after the third
anniversary. Performance-based RSUs vest at the end of the specified performance period, generally three years,
assuming required metrics are met. Performance-based RSUs have two components: one based on Ford’s internal
financial performance metrics, and the other based on Ford’s total shareholder return relative to total shareholder returns
of an industrial and automotive peer group. We issue new shares of Common Stock upon vesting of RSUs. At the time of
vest, RSU awards are net settled (shares are withheld to cover the employee tax obligation).
The fair value of both the time-based and the portion of the performance-based RSUs pertaining to internal
performance metrics is determined using the closing price of our Common Stock. The fair value of time-based RSUs is
expensed over the shorter of the vesting period, using the graded vesting method, or the time period an employee
becomes eligible to retain the award at retirement. The fair value of performance-based RSUs is expensed when it is
probable and estimable as measured against the performance metrics over the shorter of the performance or required
service periods. Expense is recorded in Selling, administrative, and other expenses.
Share-based compensation awards outstanding at December 31, 2016 consist of awards granted to employees under
two Long-Term Incentive Plans (“LTIP”): the 1998 LTIP and the 2008 LTIP. No further grants may be made under the
1998 LTIP. Under the 2008 LTIP, the number of shares that may be granted in any year is limited to 2% of our issued and
outstanding Common Stock as of December 31 of the prior calendar year. Any unused portion is available for awards in
later years. The limit may be increased up to 3% in any year, with a corresponding reduction in shares available for
grants in future years. At December 31, 2016, the number of unused shares carried forward was 423 million shares.
FS-51
NOTE 20. SHARE-BASED EMPLOYEE COMPENSATION (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
The performance-based RSUs granted in March 2015 and 2016 include a relative Total Shareholder Return (“TSR”)
metric. We estimate the fair value of the TSR component of the performance-based RSUs using a Monte Carlo
simulation. Inputs and assumptions used to calculate the fair value at grant date were as follows:
Fair value per stock award
Grant date stock price
Assumptions:
Ford’s stock price expected volatility (a)
Expected average volatility of peer companies (a)
Risk-free interest rate
Dividend yield
2015
2016
$
$
16.98
16.03
15.56
13.54
23.3%
24.1%
1.09%
3.74%
23.1%
26.4%
0.98%
4.43%
__________
(a) Expected volatility based on three years of daily closing share price changes ending on the grant date.
During 2016, activity for RSUs was as follows (in millions, except for weighted average fair value):
Outstanding, beginning of year
Granted
Vested
Forfeited
Outstanding, end of year
RSUs expected to vest
Shares
Weighted-
Average Fair
Value
$
27.4
17.5
(11.1)
(0.4)
33.4
32.9
15.04
13.54
14.07
14.13
14.49
N/A
The table above also includes shares awarded to non-employee directors. At December 31, 2016, there were
362,271 shares vested, but unissued.
Additional information about RSUs for the years ended December 31 was as follows (in millions, except for weighted
average fair value):
Fair value of vested shares
Weighted average grant fair value (per unit)
Compensation cost (a)
2014
2015
2016
$
102
$
126
$
15.40
95
15.86
125
157
13.54
135
__________
(a) Net of tax benefit of $49 million, $65 million, and $72 million in 2014, 2015, and 2016, respectively.
As of December 31, 2016, there was approximately $90 million in unrecognized compensation cost related to non-
vested RSUs. This expense will be recognized over a weighted average period of 1.8 years.
Stock Options
During 2016, no stock options were issued to our employees. As of December 31, 2016, the last of our outstanding
stock options will expire in July 2024, if not exercised sooner. We measure the fair value of our stock options using the
Black-Scholes option-pricing model and record expense in Selling, administrative, and other expenses.
For the years ended December 31, 2015 and 2016, stock options outstanding were 45.4 million and 35.5 million,
respectively, and stock options exercisable were 39.3 million and 33.4 million, respectively. For the year ended
December 31, 2016, the intrinsic value for vested and unvested stock options was $75 million and $0, respectively. The
average remaining terms for fully vested stock options and unvested stock options were 4.2 years and 7.2 years,
respectively. We received approximately $58 million in proceeds from the exercise of stock options in 2016. An
equivalent of approximately $119 million in new issues was used to settle exercised stock options. Compensation cost for
stock options for the year ended December 31, 2016 was $2.1 million, net of tax benefit of $0.5 million. As of
December 31, 2016, there was approximately $0.4 million in unrecognized compensation cost related to non-vested stock
options.
FS-52
NOTE 21. INCOME TAXES
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
We recognize income tax-related penalties in the Provision for/(Benefit from) income taxes on our consolidated
income statement. We recognize income tax-related interest income and interest expense in Non-Financial Services
interest income and other income/(loss), net and Financial Services other income/(loss), net on our consolidated income
statement.
Valuation of Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary
differences that exist between the financial statement carrying value of assets and liabilities and their respective tax
bases, and operating loss and tax credit carryforwards on a taxing jurisdiction basis. We measure deferred tax assets
and liabilities using enacted tax rates that will apply in the years in which we expect the temporary differences to be
recovered or paid.
Our accounting for deferred tax consequences represents our best estimate of the likely future tax consequences of
events that have been recognized on our financial statements or tax returns and their future probability. In assessing the
need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of
the deferred tax assets. If, based on the weight of available evidence, it is more likely than not that the deferred tax
assets will not be realized, we record a valuation allowance.
FS-53
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 21. INCOME TAXES (Continued)
Components of Income Taxes
Components of income taxes excluding cumulative effects of changes in accounting principles, other comprehensive
income, and equity in net results of affiliated companies accounted for after-tax, for the years ended December 31 were
as follows:
2014
2015
2016
Income before income taxes (in millions)
U.S.
Non-U.S.
Total
Provision for/(Benefit from) income taxes (in millions)
Current
Federal
Non-U.S.
State and local
Total current
Deferred
Federal
Non-U.S.
State and local
Total deferred
Total
Reconciliation of effective tax rate
U.S. statutory rate
Non-U.S. tax rates under U.S. rates
State and local income taxes
General business credits
Dispositions and restructurings
U.S. tax on non-U.S. earnings
Prior year settlements and claims
Tax-exempt income
Enacted change in tax laws
Valuation allowances
Other
Effective rate
3,852
(2,618)
1,234
$
$
5,374
4,878
10,252
$
$
$
(2)
$
389
(22)
365
(735)
160
214
(361)
$
4
$
$
$
$
$
5,266
1,530
6,796
(122)
630
12
520
1,323
121
225
1,669
2,189
75
572
17
664
1,494
472
251
2,217
2,881
35.0%
35.0%
35.0%
(5.2)
8.3
(27.1)
13.0
(23.7)
(9.1)
(24.1)
3.9
32.3
(3.0)
0.3%
(2.7)
1.7
(3.0)
0.4
(3.0)
(0.4)
(2.0)
0.1
3.6
(1.6)
28.1%
(1.0)
2.3
(3.1)
7.4
(5.6)
—
(0.9)
(4.2)
2.7
(0.4)
32.2%
Our 2016 tax provision includes a $300 million benefit for the recognition of deferred taxes resulting from a 2016
change in U.S. tax law related to the taxation of foreign currency gains and losses for our non-U.S. branch operations.
At December 31, 2016, $5.7 billion of non-U.S. earnings are considered indefinitely reinvested in operations outside
the United States, for which deferred taxes have not been provided. Repatriation of these earnings in their entirety would
result in a residual U.S. tax liability of about $300 million. Our measure of the amount of non-U.S. earnings considered
indefinitely reinvested in operations outside of the United States reflects accumulated earnings determined under U.S. tax
law.
FS-54
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 21. INCOME TAXES (Continued)
Components of Deferred Tax Assets and Liabilities
The components of deferred tax assets and liabilities at December 31 were as follows (in millions):
2015
2016
Deferred tax assets
Employee benefit plans
Net operating loss carryforwards
Tax credit carryforwards
Research expenditures
Dealer and dealers’ customer allowances and claims
Other foreign deferred tax assets
All other
Total gross deferred tax assets
Less: valuation allowances
Total net deferred tax assets
Deferred tax liabilities
Leasing transactions
Deferred income
Depreciation and amortization (excluding leasing transactions)
Finance receivables
Other foreign deferred tax liabilities
All other
Total deferred tax liabilities
Net deferred tax assets/(liabilities)
$
6,620
$
2,327
6,456
1,279
2,394
442
2,206
21,724
(1,831)
19,893
3,329
1,215
2,484
688
407
763
8,886
$
11,007
$
6,870
1,764
5,860
1,469
2,500
28
2,289
20,780
(909)
19,871
4,523
807
3,175
593
371
1,388
10,857
9,014
At December 31, 2016, we have a valuation allowance of $909 million primarily related to deferred tax assets in
various non-U.S. operations.
Deferred tax assets for net operating losses and other temporary differences related to certain non-U.S. operations
have not been recorded as a result of elections to tax these operations simultaneously in U.S. tax returns. Reversal of
these elections would result in the recognition of $7.6 billion of deferred tax assets, subject to valuation allowance testing.
During 2016, we extended these elections to a significant portion of our South American operations resulting in a
$1.1 billion reduction in deferred tax assets and related valuation allowances.
Operating loss carryforwards for tax purposes were $5 billion at December 31, 2016, resulting in a deferred tax asset
of $1.8 billion. There is no expiration date for $3.3 billion of these losses. A substantial portion of the remaining losses
will expire beyond 2018. Tax credits available to offset future tax liabilities are $5.9 billion. A substantial portion of these
credits have a remaining carryforward period of five years or more. Tax benefits of operating loss and tax credit
carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results,
the eligible carryforward period, and other circumstances.
FS-55
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 21. INCOME TAXES (Continued)
Other
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31
were as follows (in millions):
Beginning balance
Increase – tax positions in prior periods
Increase – tax positions in current period
Decrease – tax positions in prior periods
Settlements
Lapse of statute of limitations
Foreign currency translation adjustment
Ending balance
2015
2016
$
1,286
$
1,601
330
91
(24)
(65)
(7)
(10)
12
69
(67)
(23)
(3)
(3)
$
1,601
$
1,586
The amount of unrecognized tax benefits that would affect the effective tax rate if recognized were $1.5 billion and
$1.5 billion at December 31, 2015 and 2016, respectively.
Examinations by tax authorities have been completed through 2004 in Germany, 2008 in Canada, 2011 in the United
States, 2013 in China and United Kingdom. Although examinations have been completed in these jurisdictions, limited
transfer pricing disputes exist for years dating back to 1996.
Net interest income on income taxes was $96 million, $3 million, and $3 million for the years ended
December 31, 2014, 2015, and 2016, respectively. These were reported in Non-Financial Services interest income and
other income/(loss), net and Financial Services other income/(loss), net in our consolidated income statement. Net
payables for tax related interest were $93 million and $67 million as of December 31, 2015 and 2016, respectively.
We paid income taxes of $467 million, $585 million, and $740 million in 2014, 2015, and 2016, respectively.
NOTE 22. CAPITAL STOCK AND EARNINGS PER SHARE
All general voting power is vested in the holders of Common Stock and Class B Stock. Holders of our Common Stock
have 60% of the general voting power and holders of our Class B Stock are entitled to such number of votes per share as
will give them the remaining 40%. Shares of Common Stock and Class B Stock share equally in dividends when and as
paid, with stock dividends payable in shares of stock of the class held.
If liquidated, each share of Common Stock is entitled to the first $0.50 available for distribution to holders of Common
Stock and Class B Stock, each share of Class B Stock is entitled to the next $1.00 so available, each share of Common
Stock is entitled to the next $0.50 so available, and each share of Common and Class B Stock is entitled to an equal
amount thereafter.
We present both basic and diluted earnings per share (“EPS”) amounts in our financial reporting. Basic EPS excludes
dilution and is computed by dividing income available to Common and Class B Stock holders by the weighted-average
number of Common and Class B Stock outstanding for the period. Diluted EPS reflects the maximum potential dilution
that could occur from our share-based compensation, including “in-the-money” stock options and unvested RSUs.
Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period.
FS-56
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 22. CAPITAL STOCK AND EARNINGS PER SHARE (Continued)
Earnings Per Share Attributable to Ford Motor Company Common and Class B Stock
Basic and diluted income per share were calculated using the following (in millions):
Basic and Diluted Income Attributable to Ford Motor Company
Basic income
Diluted income (a)
Basic and Diluted Shares
Basic shares (average shares outstanding)
Net dilutive options and warrants
Diluted shares (a)
2014
2015
2016
$
1,231
$
7,373
$
1,231
7,373
3,912
46
3,958
3,969
33
4,002
4,596
4,596
3,973
26
3,999
__________
(a) Not included in the 2014 calculation of diluted earnings per share due to their antidilutive effect are 87 million shares and the related income effect
for the 2016 Convertible Notes. In October 2014, we elected to terminate the conversion rights of holders under the 2016 Convertible Notes in
accordance with their terms effective as of the close of business on November 20, 2014. We no longer have convertible debt outstanding.
NOTE 23. SELECTED QUARTERLY FINANCIAL DATA (unaudited)
Selected financial data by calendar quarter were as follows (in millions, except per share amounts):
2015
2016
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total revenues
Income/(Loss) before income taxes
$ 33,900
1,779
$
37,263
$
38,144
$
40,251
3,286
3,291
1,896
$ 37,718
3,651
$
39,485
$
35,943
$
2,875
1,387
38,654
(1,117)
Amounts Attributable to Ford Motor Company Common and Class B Shareholders
Net income/(loss)
$
1,153
$
2,160
$
2,192
$
1,868
$
2,452
$
1,970
$
957
$
(783)
Common and Class B per share from income from continuing operations
Basic
Diluted
$
$
0.29
0.29
$
0.54
0.54
$
0.55
0.55
$
0.47
0.47
$
0.62
0.61
$
0.50
0.49
$
0.24
0.24
(0.20)
(0.20)
Certain of the quarterly results identified in the table above include material unusual or infrequently occurring items as
follows on a pre-tax basis, except for tax items:
The fourth quarter 2016 results include a pension and OPEB net remeasurement loss of $3 billion.
The fourth quarter 2016 net income includes a tax benefit of $300 million for the recognition of deferred taxes resulting
from a 2016 change in U.S. tax law related to taxation of foreign currency gains and losses for our non-U.S. branch
operations.
The fourth quarter 2015 results include a pension and OPEB net remeasurement loss of $698 million.
The fourth quarter 2015 net income includes a tax benefit of $346 million related to retroactive reinstatement of
U.S. tax legislation in the Protecting Americans from Tax Hikes Act of 2015.
FS-57
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 24. COMMITMENTS AND CONTINGENCIES
Commitments and contingencies primarily consist of guarantees and indemnifications, litigation and claims, and
warranty.
Guarantees and Indemnifications
Guarantees and indemnifications are recorded at fair value at their inception. We regularly review our performance
risk under these arrangements, and in the event it becomes probable we will be required to perform under guarantee or
indemnity, the amount of probable payment is recorded.
We guarantee debt and lease obligations of certain joint ventures, as well as certain financial obligations of outside
third parties, including suppliers, to support our business and economic growth. Expiration dates vary through 2033, and
guarantees will terminate on payment and/or cancellation of the underlying obligation. A payment by us would be
triggered by failure of the joint venture or other third party to fulfill its obligation covered by the guarantee. In some
circumstances, we are entitled to recover from a third party amounts paid by us under the guarantee. However, our ability
to enforce these rights is sometimes stayed until the guaranteed party is paid in full, and may be limited in the event of
insolvency of the third party or other circumstances.
In the ordinary course of business, we execute contracts involving indemnifications standard in the industry and
indemnifications specific to a transaction, such as the sale of a business. These indemnifications might include and are
not limited to claims relating to any of the following: environmental, tax, and shareholder matters; intellectual property
rights; power generation contracts; governmental regulations and employment-related matters; dealer, supplier, and other
commercial contractual relationships; and financial matters, such as securitizations. Performance under these
indemnities generally would be triggered by a breach of terms of the contract or by a third-party claim. While some of
these indemnifications are limited in nature, many of them do not limit potential payment. Therefore, we are unable to
estimate a maximum amount of future payments that could result from claims made under these unlimited indemnities.
The maximum potential payments and the carrying value of recorded liabilities related to guarantees and limited
indemnities at December 31 were as follows (in millions):
Maximum potential payments
Carrying value of recorded liabilities related to guarantees and limited indemnities
Litigation and Claims
2015
2016
$
284
$
23
177
23
Various legal actions, proceedings, and claims (generally, “matters”) are pending or may be instituted or asserted
against us. These include but are not limited to matters arising out of alleged defects in our products; product warranties;
governmental regulations relating to safety, emissions, and fuel economy or other matters; government incentives; tax
matters; alleged illegal acts resulting in fines or penalties; financial services; employment-related matters; dealer, supplier,
and other contractual relationships; intellectual property rights; environmental matters; shareholder or investor matters;
and financial reporting matters. Certain of the pending legal actions are, or purport to be, class actions. Some of the
matters involve or may involve claims for compensatory, punitive, or antitrust or other treble damages in very large
amounts, or demands for field service actions, environmental remediation programs, sanctions, loss of government
incentives, assessments, or other relief, which, if granted, would require very large expenditures.
The extent of our financial exposure to these matters is difficult to estimate. Many matters do not specify a dollar
amount for damages, and many others specify only a jurisdictional minimum. To the extent an amount is asserted, our
historical experience suggests that in most instances the amount asserted is not a reliable indicator of the ultimate
outcome.
We accrue for matters when losses are deemed probable and reasonably estimable. In evaluating matters for accrual
and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar
nature, the specific facts and circumstances asserted, the likelihood that we will prevail, and the severity of any potential
loss. We reevaluate and update our accruals as matters progress over time.
For the majority of matters, which generally arise out of alleged defects in our products, we establish an accrual based
on our extensive historical experience with similar matters. We do not believe there is a reasonably possible outcome
materially in excess of our accrual for these matters.
FS-58
NOTE 24. COMMITMENTS AND CONTINGENCIES (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
For the remaining matters, where our historical experience with similar matters is of more limited value (i.e., “non-
pattern matters”), we evaluate the matters primarily based on the individual facts and circumstances. For non-pattern
matters, we evaluate whether there is a reasonable possibility of a material loss in excess of any accrual that can be
estimated. Our estimate of reasonably possible loss in excess of our accruals for all material matters currently reflects
indirect tax and customs matters, for which we estimate the aggregate risk to be a range of up to about $2.8 billion.
As noted, the litigation process is subject to many uncertainties, and the outcome of individual matters is not
predictable with assurance. Our assessments are based on our knowledge and experience, but the ultimate outcome of
any matter could require payment substantially in excess of the amount that we have accrued and/or disclosed.
Warranty and Field Service Actions
We accrue obligations for warranty costs and field service actions (i.e., safety recalls, emission recalls, and other
product campaigns) at the time of sale using a patterned estimation model that includes historical information regarding
the nature, frequency, and average cost of claims for each vehicle line by model year. Warranty and field service action
obligations are reported in Other liabilities and deferred revenue. We reevaluate the adequacy of our accruals on a
regular basis.
We recognize the benefit from a recovery of the costs associated with our warranty and field service actions when
specifics of the recovery have been agreed with our supplier and the amount of the recovery is virtually certain.
Recoveries are reported in Trade and other receivables and Other assets.
The estimate of our future warranty and field service action costs, net of supplier recoveries, for the years ended
December 31 were as follows (in millions):
Beginning balance
Payments made during the period
Changes in accrual related to warranties issued during the period
Changes in accrual related to pre-existing warranties
Foreign currency translation and other
Ending balance
2015
2016
$
$
4,786
$
(2,849)
2,046
807
(232)
4,558
$
4,558
(3,286)
2,326
1,360
2
4,960
Revisions to our estimated costs are reported as changes in accrual related to pre-existing warranties in the table
above.
FS-59
FORD MOTOR COMPANY AND SUBSIDIARIES
Schedule II — Valuation and Qualifying Accounts
(in millions)
Description
For the Year Ended December 31, 2014
Allowances deducted from assets
Credit losses
Doubtful receivables
Inventories (primarily service part obsolescence)
Deferred tax assets
Total allowances deducted from assets
For the Year Ended December 31, 2015
Allowances deducted from assets
Credit losses
Doubtful receivables
Inventories (primarily service part obsolescence)
Deferred tax assets
Total allowances deducted from assets
For the Year Ended December 31, 2016
Allowances deducted from assets
Credit losses
Doubtful receivables
Inventories (primarily service part obsolescence)
Deferred tax assets
Total allowances deducted from assets
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Deductions
Balance at End
of Period
$
$
$
$
$
$
$
405
120
262
1,633
2,420
$
199
374
(8) (c)
(29) (d)
536
$
$
220 (a)
$
39 (b)
—
—
259
$
$
347
$
294 (a)
$
(7)
(29) (c)
227 (d)
76 (b)
—
—
538
$
370
$
551
24
(33) (c)
209 (d)
$
421 (a)
$
19 (b)
—
1,131 (e)
384
455
254
1,604
2,697
$
$
437
372
225
1,831
2,865
$
384
455
254
1,604
2,697
437
372
225
1,831
2,865
567
377
192
909
751
$
1,571
$
2,045
_________
(a) Finance receivables and lease investments deemed to be uncollectible and other changes, principally amounts related to finance receivables sold
and translation adjustments.
(b) Accounts and notes receivable deemed to be uncollectible as well as translation adjustments.
(c) Net change in inventory allowances, including translation adjustments.
(d)
Includes $(428) million, $(142) million, and $26 million in 2014, 2015, and 2016, respectively, of valuation allowance for deferred tax assets through
Accumulated other comprehensive income/(loss), including translation adjustments and $399 million, $369 million, and $183 million in 2014, 2015,
and 2016, respectively, of valuation allowance for deferred tax assets through the income statement.
(e) During 2016 we elected to tax a significant portion of our South American operations simultaneously in U.S. tax returns resulting in a $1.1 billion
reduction in deferred tax assets and related valuation allowance.
FSS-1
Exhibit 10-G-3
Amendment to Description of Director Compensation as of January 1, 2017
Effective January 1, 2017, the Board of Directors approved an increase in Board annual retainer
compensation to $315,000 from the current $250,000 and approved increases in the Presiding Director
and certain Committee chair fees.
Specifically, the Board of Directors:
•
•
•
•
Increased from $250,000 to $315,000 the annual retainer for Board service, while requiring
$215,000 of the annual retainer to be mandatorily deferred into Restricted Stock Units under the
2014 Stock Plan for Non-Employee Directors. Previously, 60% of the annual retainer was
mandatorily deferred into Restricted Stock Units. Consequently, the entire increase of $65,000 in
annual retainer fees is mandatorily deferred under the 2014 Stock Plan for Non-Employee
Directors.
Increased the Presiding Director fee to $50,000 from $30,000.
Increased the Audit Committee chair fee to $30,000 from $25,000.
Increased the Committee chair fees to $20,000 from $15,000 for the following Committees:
Finance, Nominating and Governance, and Sustainability and Innovation (the Compensation
Committee chair fee remains unchanged at $25,000).
A review of director compensation at companies similarly situated to Ford indicated that Ford was below
the median levels paid to directors. This increase is consistent with Ford’s philosophy of paying its
directors near the top level of leading companies in order to continue to attract quality directors in a
difficult environment.
Survey data also indicated that our fees for the Presiding Director position and the Committee chairs
listed above were below competitive levels. The Board approved the additional compensation for the
Presiding Director and the chairs of each of the Committees, as shown above, to be reasonably
competitive with leading companies.
Annual Incentive Compensation Plan Metrics for 2017
Exhibit 10-O-4
On February 8, 2017, the Compensation Committee of the Board of Directors of the Company approved the specific
performance goals and business criteria to be used for purposes of determining any future cash awards for 2017
participants, including executive officers, under the Company’s shareholder-approved Annual Incentive
Compensation Plan (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2008). The Corporate performance criteria and weightings to be used for 2017 under the plan include
attaining specified levels of:
•
•
•
•
Automotive Segment Revenue (20%)
Automotive Segment Operating Margin (30%)
Ford Credit Pre-tax Profit (10%)
Automotive Operating Cash Flow (20%)
• Quality (20%)
Based on business performance results for 2017 against the targeted levels established for each metric, the
Compensation Committee will determine the percentage of the target award that is earned, which could range
between 0% and 200% depending on actual performance achieved relative to the target levels.
Performance-Based Restricted Stock Unit Award Metrics for 2017
Exhibit 10-O-10
On February 8, 2017, the Compensation Committee of the Board of Directors of the Company approved the specific
performance goals and business criteria to be used for purposes of determining any future performance-based
restricted stock unit final awards for the 2017 performance-period for participants, including executive officers,
under the Company’s shareholder-approved 2008 Long-Term Incentive Plan (filed as Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).
The performance based restricted stock unit grant is a target opportunity; however, participants will have the
opportunity to earn a maximum of up to 200% of the target. The performance based restricted stock unit grant has
a three-year performance period (2017-2019), after which the Compensation Committee will determine the final
award based on corporate performance-to-objectives. The maximum performance level that can be achieved for
any single metric for the 2017 Performance Unit grants is 200%. 75% of the final award will be based on financial
metrics and 25% will be based on relative Total Shareholder Return of Ford’s common stock compared to a peer
group of companies over the three-year performance period. The metrics and weightings are summarized below:
Financial Metrics - 75%
Metrics
Automotive Segment Revenue
Automotive Segment Operating Margin
Ford Credit Pre-tax Profit
Automotive Segment Operating Cash Flow
Weighting
25%
40%
10%
25%
100%
Total Shareholder Return - 25%
Metric
Total Shareholder Return (TSR)
Weighting
100%
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FORD MOTOR COMPANY AND SUBSIDIARIES
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in millions)
Exhibit 12
Earnings
Income before income taxes
Add/(Deduct):
Equity in net income of affiliated companies
Dividends from affiliated companies
Fixed charges excluding capitalized interest
Amortization of capitalized interest
Earnings
Fixed Charges
Interest expense
Interest portion of rental expense (a)
Capitalized interest
Total fixed charges
Ratios
2012
2013
2014
2015
2016
$
2,005
$
14,371
$
1,234
$
10,252
$
6,796
(588)
593
3,998
44
(1,069)
(1,275)
(1,818)
(1,780)
529
3,861
41
1,463
3,671
39
1,485
3,380
38
1,613
3,860
37
6,052
$
17,733
$
5,132
$
13,337
$
10,526
3,828
$
3,689
$
3,496
$
3,227
$
3,702
170
4
172
18
175
21
153
20
158
27
4,002
$
3,879
$
3,692
$
3,400
$
3,887
$
$
$
Ratio of earnings to fixed charges
1.5
4.6
1.4
3.9
2.7
__________
(a) One-third of all rental expense is deemed to be interest.
SUBSIDIARIES OF FORD MOTOR COMPANY AS OF JANUARY 31, 2017*
Organization
Ford Auto Securitization Trust
Ford Component Sales, L.L.C.
Ford Espana S.L.
Ford Italia S.p.A.
Groupe FMC France SAS
FMC Automobiles SAS
Ford European Holdings LLC
Ford Deutschland Holding GmbH
Ford-Werke GmbH
Ford Floorplan Auto Securitization Trust
Ford Global Engineering, Inc.
Ford Global Technologies, LLC
Ford VHC AB
Ford Argentina S.C.A.
Ford Asia Pacific Automotive Holdings Ltd.
Ford Mexico Holdings LLC
Ford Motor Company, S.A. de C.V.
Ford Holdings LLC
Ford Motor Credit Company LLC
CAB East Holdings, LLC
CAB East LLC
CAB West Holdings, LLC
CAB West LLC
Ford Automotive Finance (China) Limited
Ford Credit Auto Receivables Six LLC
Ford Credit Auto Owner Trust 2014-REV1
Ford Credit Auto Owner Trust 2014-REV2
Ford Credit Auto Owner Trust 2015-REV1
Ford Credit Auto Owner Trust 2016-REV1
Ford Credit Auto Owner Trust 2016-REV2
Ford Credit CP Auto Receivables LLC
Ford Credit Floorplan, LLC
Ford Credit Floorplan Master Owner Trust A
Ford Credit International, Inc.
FCIF Holdings LP
Ford Credit International Finance B.V.
Ford Credit Canada Company
Ford CTCD Company
Canadian Road Holdings Company
Canadian Road Leasing Company
FCSH GmbH
FCE Bank plc
Exhibit 21
Jurisdiction
Canada
Delaware, U.S.A.
Spain
Italy
France
France
Delaware, U.S.A.
Germany
Germany
Canada
Delaware, U.S.A.
Delaware, U.S.A.
Sweden
Argentina
Mauritius
Delaware, U.S.A.
Mexico
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
China
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Canada
Netherlands
Canada
Canada
Canada
Canada
Switzerland
England
Organization
Ford India Private Limited
Ford International Capital LLC
Blue Oval Holdings
Ford Motor Company Limited
Ford Retail Group Limited
Global Investments 1 Inc.
Ford VH Limited
Ford Lease Trust
Ford Motor (China) Ltd.
Ford Motor Company of Australia Limited
Ford Motor Company of Canada, Limited
Ford Motor Company of Southern Africa (Pty) Limited
Ford Motor Service Company
Ford Russia Holdings B.V.
Ford Sollers Netherlands B.V.
Ford Sollers Holding, LLC
Ford Trading Company, LLC
Granite Management Corporation
Ford Motor Company Brasil Ltda.
Exhibit 21 (Continued)
Jurisdiction
India
Delaware, U.S.A.
England
England
England
Delaware, U.S.A.
England
Canada
China
Australia
Canada
South Africa
Michigan, U.S.A.
Netherlands
Netherlands
Russia
Delaware, U.S.A.
Delaware, U.S.A.
Brazil
91
131
Other U.S. Subsidiaries
Other Non-U.S. Subsidiaries
* Other subsidiaries are not shown by name in the above list because, considered in the aggregate as a single subsidiary, they
would not constitute a significant subsidiary.
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ford Motor Company Registration Statement Nos. 33-62227, 333-02735, 333-20725, 333-31466, 333-47733,
333-56660, 333-57596, 333-65703, 333-71380, 333-74313, 333-85138, 333-87619, 333-104063, 333-113584,
333-123251, 333-138819, 333-138821, 333-149453, 333-149456, 333-153815, 333-153816, 333-156630,
333-156631, 333-157584, 333-162992, 333-162993, 333-165100, 333-172491, 333-179624, 333-186730,
333-193999, 333-194000, 333-203697, and 333-210978 on Form S-8 and 333-194060 on Form S-3.
We hereby consent to the incorporation by reference in the aforementioned Registration Statements of Ford Motor
Company of our report dated February 9, 2017 relating to the financial statements, financial statement schedule
and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Detroit, Michigan
February 9, 2017
Exhibit 24
Certificate of Secretary
FORD MOTOR COMPANY
The undersigned, Jonathan E. Osgood, Secretary of Ford Motor Company, a Delaware corporation (the
“Company”), DOES HEREBY CERTIFY that the following resolutions were adopted at a meeting of the Board of
Directors of the Company duly called and held on February 8, 2017 and that the same are in full force and effect:
WHEREAS, pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, Mark Fields, President and
Chief Executive Officer of the Company, and Bob Shanks, Executive Vice President and Chief Financial Officer of
the Company, each will execute certifications with respect to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2016 (“Form 10-K Report”), which certifications are to be set forth in the Form 10-K
Report; and
WHEREAS, such certifications are made, in part, on reliance of the assurances given by the Company’s
Disclosure Committee, co-chaired by Bradley M. Gayton, Group Vice President and General Counsel of the
Company, and John T. Lawler, Vice President and Controller of the Company, which committee oversees the
preparation of the Company’s annual and quarterly reports.
NOW, THEREFORE, BE IT:
RESOLVED, That the draft Form 10-K Report presented to this meeting to be filed with the Securities and
Exchange Commission (the “Commission”) under the Securities Exchange Act of 1934, as amended, be and hereby
is in all respects authorized and approved; that the directors and appropriate officers of the Company, and each of
them, be and hereby are authorized to sign and execute in their own behalf, or in the name and on behalf of the
Company, or both, as the case may be, the Form 10-K Report, and any and all amendments thereto, with such
changes therein as such directors or officers may deem necessary, appropriate or desirable, as conclusively
evidenced by their execution thereof; and that the appropriate officers of the Company, and each of them, be and
hereby are authorized to cause the Form 10-K Report and any such amendments, so executed, to be filed with the
Commission.
RESOLVED, That each officer and director who may be required to sign and execute the Form 10-K Report or
any amendment thereto or document in connection therewith (whether in the name and on behalf of the Company,
or as an officer or director of the Company, or otherwise), be and hereby is authorized to execute a power of
attorney appointing B. M. Gayton, J. T. Lawler, J. E. Osgood, and C. M. MacGillivray, and each of them, severally,
his or her true and lawful attorney or attorneys to sign in his or her name, place, and stead in any such capacity the
Form 10-K Report and any and all amendments thereto and documents in connection therewith, and to file the
same with the Commission, each of said attorneys to have power to act with or without the other, and to have full
power and authority to do and perform in the name and on behalf of each of said officers and directors who shall
have executed such power of attorney, every act whatsoever which such attorneys, or any of them, may deem
necessary, appropriate or desirable to be done in connection therewith as fully and to all intents and purposes as
such officers or directors might or could do in person.
WITNESS my hand as of this 9th day of February, 2017.
/s/ Jonathan E. Osgood
Jonathan E. Osgood
Secretary
(SEAL)
POWER OF ATTORNEY WITH RESPECT TO
ANNUAL REPORT OF FORD MOTOR COMPANY ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2016
Exhibit 24 (Continued)
Each of the undersigned, a director or officer of Ford Motor Company (“Ford”), appoints each of B. M. Gayton,
J. T. Lawler, J. E. Osgood, and C. M. MacGillivray, his or her true and lawful attorney and agent to do any and all
acts and things and execute any and all instruments which the attorney and agent may deem necessary or
advisable in order to enable Ford to comply with the Securities Exchange Act of 1934, and any requirements of the
Securities and Exchange Commission, in connection with the filing of Ford’s Annual Report on Form 10-K for the
year ended December 31, 2016 and any and all amendments thereto, as authorized at a meeting of the Board of
Directors of Ford duly called and held on February 8, 2017 including, but not limited to, power and authority to sign
his or her name (whether on behalf of Ford, or as a director or officer of Ford, or by attesting the seal of Ford, or
otherwise) to such instruments and to such Annual Report and any amendments thereto, and to file them with the
Securities and Exchange Commission. Each of the undersigned ratifies and confirms all that any of the attorneys
and agents shall do or cause to be done by virtue hereof. Any one of the attorneys and agents shall have, and may
exercise, all the powers conferred by this instrument. Each of the undersigned has signed his or her name as of the
8th day of February, 2017:
/s/ William Clay Ford, Jr.
(William Clay Ford, Jr.)
/s/ Stephen G. Butler
(Stephen G. Butler)
/s/ Kimberly A. Casiano
(Kimberly A. Casiano)
/s/ Anthony F. Earley, Jr.
(Anthony F. Earley, Jr.)
/s/ Mark Fields
(Mark Fields)
/s/ Edsel B. Ford II
(Edsel B. Ford II)
/s/ James H. Hance, Jr.
(James H. Hance, Jr.)
/s/ William W. Helman IV
(William W. Helman IV)
/s/ Jon M. Huntsman, Jr.
(Jon M. Huntsman, Jr.)
/s/ William E. Kennard
(William E. Kennard)
/s/ John C. Lechleiter
(John C. Lechleiter)
/s/ Ellen R. Marram
(Ellen R. Marram)
/s/ Gerald L. Shaheen
(Gerald L. Shaheen)
/s/ John L. Thornton
(John L. Thornton)
/s/ John S. Weinberg
(John S. Weinberg)
/s/ Bob Shanks
(Bob Shanks)
/s/ John Lawler
(John Lawler)
Exhibit 31.1
I, Mark Fields, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2016 of
Ford Motor Company;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Dated: February 9, 2017
/s/ Mark Fields
Mark Fields
President and Chief Executive Officer
Exhibit 31.2
I, Bob Shanks, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2016 of
Ford Motor Company;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Dated: February 9, 2017
/s/ Bob Shanks
Bob Shanks
Executive Vice President and
Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Mark Fields, President and Chief Executive Officer of Ford Motor Company (the “Company”), hereby certify
pursuant to Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350 of
Chapter 63 of Title 18 of the United States Code that to my knowledge:
1. The Company’s Annual Report on Form 10-K for the period ended December 31, 2016, to which this
statement is furnished as an exhibit (the “Report”), fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in this Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Dated: February 9, 2017
/s/ Mark Fields
Mark Fields
President and Chief Executive Officer
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Bob Shanks, Executive Vice President and Chief Financial Officer of Ford Motor Company (the “Company”),
hereby certify pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended,
and Section 1350 of Chapter 63 of Title 18 of the United States Code that to my knowledge:
1. The Company’s Annual Report on Form 10-K for the period ended December 31, 2016, to which this
statement is furnished as an exhibit (the “Report”), fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in this Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Dated: February 9, 2017
/s/ Bob Shanks
Bob Shanks
Executive Vice President and
Chief Financial Officer
New York Stock Exchange Required Disclosures
On June 3, 2016, Ford’s Chief Executive Officer certified that he was not aware of any violations by the Company
of the New York Stock Exchange Corporate Governance listing standards, other than has been notified to the Exchange
pursuant to Section 303A.12(b), of which there was none.
Stock Performance Graph
The graph below shows over the past five years, the performance of our common stock against the Standard &
Poor’s 500 Stock Index and the Dow Jones Automobiles & Parts Titans 30 Index.
COMPARISON OF CUMULATIVE FIVE-YEAR TOTAL RETURN
2009
Total Return To Shareholders (Includes reinvestment of dividends)
Base Period
Years Ending
Company / Index
2011
2012
2013
2014
2015
2016
Ford Motor Company
S&P 500
Dow Jones Automobiles &
Parts Titans 30
100
100
100
123
116
124
150
154
165
156
175
158
147
177
157
135
198
153
Shareholder information
Corporate Headquarters
Ford Motor Company
One American Road
Dearborn, 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 brokerage
methods of purchasing, holding and selling Ford Common
Stock. You can contact Computershare through the
following methods:
Overnight Mail Delivery
Computershare Investor Services
211 Quality Circle, Suite 210
College Station, TX 77845 United States
Regular Mail Delivery
Computershare Investor Services
P.O. Box 30170
College Station, TX 77842 United States
Telephone: (800) 279-1237 (U.S. and Canada)
(781) 575-2732 (International)
E-mail: fordteam@computershare.com
Website: computershare.com
Stock Exchanges
Ford Common Stock is listed and traded on
the New York Stock Exchange in the United States.
The NYSE trading symbol is:
F Common Stock
Investor Information
Investor information including this report, quarterly
financial results, press releases and various other reports
are available online at shareholder.ford.com.
Alternatively, individual investors may contact us at:
Ford Motor Company
Shareholder Relations
P.O. Box 6248
Dearborn, MI 48126
Telephone: (800) 555-5259 (U.S. and Canada)
(313) 845-8540 (International)
Fax: (313) 845-6073
E-mail: stockinf@ford.com
Security analysts and institutional investors may contact:
Ford Motor Company
Investor Relations
P.O. Box 6248
Dearborn, MI 48126
Equity Investment
Telephone: (313) 845-2868
E-mail: fordir@ford.com
Fixed Income
Telephone: (313) 621-0965
E-mail: fixedinc@ford.com
Annual Meeting
The 2017 Annual Meeting of Shareholders will be held
as a virtual-only meeting on May 11, 2017. A notice of
the meeting and instructions for participation and voting
will be mailed to shareholders in advance.
Company Information
Automotive Brand
Customer Assistance
Automotive Brand
Customer Assistance
800.392.3673
Ford.com
FordOwner.com
800.521.4140
Lincoln.com
LincolnOwner.com
Financial Services
Operations
Customer Assistance
Ford Motor Credit Company
• A leading automotive financial services company founded in 1959
• Provides a wide variety of dealer and customer financing
products and services globally in support of Ford Motor
Company vehicle sales
• As of year-end 2016, Ford Credit was financing about 5,100 Ford
and Lincoln dealers and more than 5 million customer contracts
around the world
800.727.7000
FordCredit.com
888.498.8801
LincolnAFS.com
Customer Services
Operations
Service
A total service experience for Ford and Lincoln owners available
only at Ford and Lincoln stores — designed to deliver customer
satisfaction and loyalty
• Ford and Motorcraft-engineered parts and tools designed
specifically to fit your Ford and Lincoln vehicle
• Factory-trained and certified technicians specifically on Ford
and Lincoln vehicles
• One-stop service for all vehicle maintenance and repair needs
Quick Lane Tire & Auto Center
Ford Motor Company’s all-makes quick maintenance and service
brand successfully occupies a unique niche in the marketplace
by offering customers “fast and dependable auto service.” Fast
comes in the form of all-makes-all-models service capabilities,
no-appointment-necessary, service while you wait, evening and
weekend hours, and competitive prices. Dependable comes in the
form of factory-trained technicians and quality Motorcraft parts
Ford Parts, Motorcraft and Omnicraft
New and remanufactured parts recommended by Ford Motor
Company and available in Ford and Lincoln stores, Ford
authorized distributors and thousands of major retail and
repair locations
Customer Assistance
Locate Ford and Lincoln
Dealer Service at:
FordOwner.com
LincolnOwner.com
Locate Quick Lane Tire & Auto
Center at: Quicklane.com
Order Motorcraft and
Ford Parts at: FordParts.com
Find out more about our
Motorcraft and Omnicraft
brands at: Motorcraft.com and
Omnicraftautoparts.com
Ford and Lincoln Accessories
Wide variety of original and licensed accessories are available,
all designed to personalize Ford and Lincoln vehicles
Original and licensed accessories at:
accessories.ford.com
accessories.lincoln.com
Ford Protect and Lincoln Protect Extended Service Plans
Provides comprehensive vehicle service contracts and
maintenance programs to support dealer and direct mail sales
to Ford, Lincoln and competitive-make owners
Ford Protect and Lincoln Protect
800.521.4144
Fordprotect.com
Lincolnprotect.com
Ford Fleet/Commercial Vehicles
Ford Fleet brings together fleet-specific vehicles, offers and
programs, along with a team of experts.
See more at: fleet.ford.com
Fleet Service Operations
Trusting Ford and Lincoln Parts and Service to maintain fleet
vehicles can enhance performance and reliability, help extend the
life of vehicles and improve resale value.
See more at: fleet.ford.com
About Ford Motor Company
Ford Motor Company is a global automotive and mobility company based in Dearborn, Michigan. With about 201,000 employees and 62 plants
worldwide, the company’s core business includes designing, manufacturing, marketing and servicing a full line of Ford cars, trucks and SUVs, as well as
Lincoln luxury vehicles. To expand its business model, Ford is aggressively pursuing emerging opportunities with investments in electrification, autonomy
and mobility. Ford provides financial services through Ford Motor Credit Company. For more information regarding Ford and its products and services,
please visit corporate.ford.com.
F-SERIES, BEST-SELLING TRUCK IN THE U.S.
40 YEARS IN A ROW
Super Duty 2017 Motor Trend Truck of the Year
ANNOUNCED INTENT
TO BUILD A FULLY
AUTONOMOUS
VEHICLE FOR RIDE
SHARING IN 2021
Launched next-generation
Fusion Hybrid autonomous
development vehicle
ACQUIRED CHARIOT,
A CROWD-SOURCED
SHUTTLE SERVICE
Plans to expand to eight cities
by the end of 2017
RECORD FULL-YEAR
PROFIT IN EUROPE
ON TRACK TO DELIVER 12 NEW PERFORMANCE
VEHICLES BY THE END OF THE DECADE
Ford Motor Company - One American Road - Dearborn, MI 48126
corporate.ford.com
GLOBAL LINCOLN
SALES UP 24%
YEAR-OVER-YEAR
Sales up 10% in U.S. and
nearly triple in China
SOLD A RECORD
1.27 MILLION
VEHICLES IN CHINA
Sales up 14% in 2016
13 NEW ELECTRIFIED
VEHICLES WITHIN
THE NEXT FIVE YEARS
This includes fully electric small
SUV with estimated range of
at least 300 miles
BEST-SELLING BRAND IN THE UNITED STATES
FOR THE SEVENTH STRAIGHT YEAR
Printed in U.S.A. 10% post-consumer waste paper.
Ford encourages you to please recycle this document.