a6257555.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
   
 
For the quarterly period ended March 31, 2010
   
[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
   
 
For the transition period from                                                     to  _____________________                                
   
 
Commission File Number: 1-3950


FORD MOTOR COMPANY
(Exact name of registrant as specified in its charter)

Delaware
38-0549190
(State of Incorporation)
(IRS Employer Identification No.)
   
One American Road, Dearborn, Michigan
48126
(Address of principal executive offices)
(Zip Code)

(313) 322-3000
(Registrant's telephone number, including area code)

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

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

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

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

As of April 29, 2010, the registrant had outstanding 3,335,728,639 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit index located on page number 73.
 
 
 
 

PART I. FINANCIAL INFORMATION
ITEM 1.  Financial Statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
For the Periods Ended March 31, 2010 and 2009
(in millions, except per share amounts)

   
First Quarter
  
   
2010
    
2009
  
   
(unaudited)
  
Sales and revenues
            
Automotive sales
   $ 28,894     $ 20,980  
Financial Services revenues
     2,672       3,410  
Total sales and revenues
     31,566       24,390  
                 
Costs and expenses
                
Automotive cost of sales
     25,139       21,413  
Selling, administrative and other expenses
     3,089       3,692  
Interest expense
     1,701       1,921  
Financial Services provision for credit and insurance losses
     (41 )     402  
Total costs and expenses
     29,888       27,428  
                 
Automotive interest income and other non-operating income/(expense), net (Note 10)
     189       1,352  
Financial Services other income/(loss), net (Note 10)
     126       113  
Equity in net income/(loss) of affiliated companies
     142       (89 )
Income/(Loss) before income taxes
     2,135       (1,662 )
Provision for/(Benefit from) income taxes
     50       (227 )
Income/(Loss) from continuing operations
     2,085       (1,435 )
Income/(Loss) from discontinued operations
     —       —  
Net income/(loss)
     2,085       (1,435 )
Less: Income/(Loss) attributable to noncontrolling interests
     —       (8 )
Net income/(loss) attributable to Ford Motor Company
   $ 2,085     $ (1,427 )
                 
NET INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
          
Income/(Loss) from continuing operations
   $ 2,085     $ (1,427 )
Income/(Loss) from discontinued operations
     —       —  
Net income/(loss)
   $ 2,085     $ (1,427 )
                 
AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 13)
                
Basic income/(loss)
                
Income/(Loss) from continuing operations
   $ 0.62     $ (0.60 )
Income/(Loss) from discontinued operations
     —       —  
Net income/(loss)
   $ 0.62     $ (0.60 )
Diluted income/(loss)
                
Income/(Loss) from continuing operations
   $ 0.50     $ (0.60 )
Income/(Loss) from discontinued operations
     —       —  
Net income/(loss)
   $ 0.50     $ (0.60 )

The accompanying notes are part of the financial statements.
 
 
 
2
 
 
Item 1. Financial Statements (Continued)
 
FORD MOTOR COMPANY AND SUBSIDIARIES

SECTOR STATEMENT OF OPERATIONS
For the Periods Ended March 31, 2010 and 2009
(in millions, except per share amounts)

   
First Quarter
  
   
2010
    
2009
  
   
(unaudited)
  
AUTOMOTIVE
            
Sales
   $ 28,894     $ 20,980  
Costs and expenses
                
Cost of sales
     25,139       21,413  
Selling, administrative and other expenses
     2,220       2,009  
Total costs and expenses
     27,359       23,422  
Operating income/(loss)
     1,535       (2,442 )
                 
Interest expense
     542       469  
                 
Interest income and other non-operating income/(expense), net (Note 10)
     189       1,352  
Equity in net income/(loss) of affiliated companies
     138       49  
Income/(Loss) before income taxes — Automotive
     1,320       (1,510 )
                 
FINANCIAL SERVICES
                
Revenues
     2,672       3,410  
Costs and expenses
                
Interest expense
     1,159       1,452  
Depreciation
     660       1,435  
Operating and other expenses
     209       248  
Provision for credit and insurance losses
     (41 )     402  
Total costs and expenses
     1,987       3,537  
                 
Other income/(loss), net (Note 10)
     126       113  
Equity in net income/(loss) of affiliated companies
     4       (138 )
                 
Income/(Loss) before income taxes — Financial Services
     815       (152 )
                 
TOTAL COMPANY
                
Income/(Loss) before income taxes
     2,135       (1,662 )
Provision for/(Benefit from) income taxes
     50       (227 )
Income/(Loss) from continuing operations
     2,085       (1,435 )
Income/(Loss) from discontinued operations
     —       —  
Net income/(loss)
     2,085       (1,435 )
Less: Income/(Loss) attributable to noncontrolling interests
     —       (8 )
Net income/(loss) attributable to Ford Motor Company
   $ 2,085     $ (1,427 )
                 
NET INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
          
Income/(Loss) from continuing operations
   $ 2,085     $ (1,427 )
Income/(Loss) from discontinued operations
     —       —  
Net income/(loss)
   $ 2,085     $ (1,427 )
                 
AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 13)
                
Basic income/(loss)
                
Income/(Loss) from continuing operations
   $ 0.62     $ (0.60 )
Income/(Loss) from discontinued operations
     —       —  
Net income/(loss)
   $ 0.62     $ (0.60 )
Diluted income/(loss)
                
Income/(Loss) from continuing operations
   $ 0.50     $ (0.60 )
Income/(Loss) from discontinued operations
     —       —  
Net income/(loss)
   $ 0.50     $ (0.60 )
 
The accompanying notes are part of the financial statements.
 
 
3
 
 
Item 1. Financial Statements (Continued)
 
FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(in millions)

   
March 31,
2010
    
December 31,
2009
  
    (unaudited)    
 
  
ASSETS
            
Cash and cash equivalents
   $ 24,356     $ 20,894  
Marketable securities
     21,883       21,387  
Finance receivables, net (Note 4)
     73,837       76,996  
Other receivables, net
     6,925       7,257  
Net investment in operating leases
     15,818       17,270  
Inventories (Note 5)
     6,292       5,041  
Equity in net assets of affiliated companies
     2,544       2,428  
Net property
     22,826       22,637  
Deferred income taxes
     2,861       3,479  
Goodwill and other net intangible assets (Note 7)
     192       208  
Assets of held-for-sale operations (Note 12)
     8,076       7,618  
Other assets
     6,358       6,825  
Total assets
   $ 191,968     $ 192,040  
                 
LIABILITIES
                
Payables
   $ 15,611     $ 14,301  
Accrued liabilities and deferred revenue
     44,445       46,144  
Debt (Note 9)
     130,105       131,635  
Deferred income taxes
     1,600       2,421  
Liabilities of held-for-sale operations (Note 12)
     5,644       5,321  
Total liabilities
     197,405       199,822  
                 
EQUITY
                
Capital stock
                
Common Stock, par value $0.01 per share (3,345 million shares issued)
     33       33  
Class B Stock, par value $0.01 per share (71 million shares issued)
     1       1  
Capital in excess of par value of stock
     17,382       16,786  
Accumulated other comprehensive income/(loss)
     (11,199 )     (10,864 )
Treasury stock
     (178 )     (177 )
Retained earnings/(Accumulated deficit)
     (11,514 )     (13,599 )
Total equity/(deficit) attributable to Ford Motor Company (Note 17)
     (5,475 )     (7,820 )
Equity/(Deficit) attributable to noncontrolling interests (Note 17)
     38       38  
Total equity/(deficit) (Note 17)
     (5,437 )     (7,782 )
Total liabilities and equity
   $ 191,968     $ 192,040  
 
 
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 6 for additional information on our VIEs.

ASSETS
            
Cash and cash equivalents
   $ 5,117     $ 4,922  
Finance receivables, net
     54,471       57,353  
Other receivables, net
     25       34  
Net investment in operating leases
     10,765       10,246  
Inventories
     22       106  
Net property
     31       154  
Other assets
     39       56  
LIABILITIES
                
Payables
     22       23  
Accrued liabilities and deferred revenue
     504       560  
Debt
     47,929       46,167  

 
The accompanying notes are part of the financial statements.
 
 
4
 
 
Item 1. Financial Statements (Continued)
 
FORD MOTOR COMPANY AND SUBSIDIARIES

SECTOR BALANCE SHEET
(in millions)
 
   
March 31,
2010
    
December 31,
2009
  
   
(unaudited)
        
ASSETS
            
Automotive
            
Cash and cash equivalents
   $ 12,801     $ 9,762  
Marketable securities
     12,491       15,169  
Total cash and marketable securities
     25,292       24,931  
Receivables, net
     3,332       3,378  
Inventories (Note 5)
     6,292       5,041  
Deferred income taxes
     493       479  
Other current assets
     2,797       2,832  
Current receivable from Financial Services
     2,834       2,568  
Total current assets
     41,040       39,229  
Equity in net assets of affiliated companies
     2,420       2,307  
Net property
     22,655       22,455  
Deferred income taxes
     5,600       5,660  
Goodwill and other net intangible assets (Note 7)
     183       199  
Assets of held-for-sale operations (Note 12)
     8,076       7,618  
Other assets
     1,726       1,650  
Non-current receivable from Financial Services
     256       —  
Total Automotive assets
     81,956       79,118  
Financial Services
                
Cash and cash equivalents
     11,555       11,132  
Marketable securities
     9,824       6,864  
Finance receivables, net (Note 4)
     77,439       80,885  
Net investment in operating leases
     13,780       15,062  
Equity in net assets of affiliated companies
     124       121  
Goodwill and other net intangible assets (Note 7)
     9       9  
Other assets
     4,330       5,039  
Total Financial Services assets
     117,061       119,112  
Intersector elimination
     (3,532 )     (3,224 )
Total assets
   $ 195,485     $ 195,006  
LIABILITIES
                
Automotive
                
Trade payables
   $ 11,898     $ 10,599  
Other payables
     2,480       2,466  
Accrued liabilities and deferred revenue
     17,642       18,138  
Deferred income taxes
     2,949       3,091  
Debt payable within one year (Note 9)
     5,009       1,638  
Total current liabilities
     39,978       35,932  
Long-term debt (Note 9)
     29,242       31,972  
Other liabilities
     22,337       23,132  
Deferred income taxes
     524       561  
Liabilities of held-for-sale operations (Note 12)
     5,644       5,321  
Total Automotive liabilities
     97,725       96,918  
Financial Services
                
Payables
     1,233       1,236  
Debt (Note 9)
     96,286       98,671  
Deferred income taxes
     1,644       1,735  
Other liabilities and deferred income
     4,476       4,884  
Payable to Automotive
     3,090       2,568  
Total Financial Services liabilities
     106,729       109,094  
Intersector elimination
     (3,532 )     (3,224 )
Total liabilities
     200,922       202,788  
EQUITY
                
Capital stock
                
Common Stock, par value $0.01 per share (3,345 million shares issued)
     33       33  
Class B Stock, par value $0.01 per share (71 million shares issued)
     1       1  
Capital in excess of par value of stock
     17,382       16,786  
Accumulated other comprehensive income/(loss)
     (11,199 )     (10,864 )
Treasury stock
     (178 )     (177 )
Retained earnings/(Accumulated deficit)
     (11,514 )     (13,599 )
Total equity/(deficit) attributable to Ford Motor Company (Note 17)
     (5,475 )     (7,820 )
Equity/(Deficit) attributable to noncontrolling interests (Note 17)
     38       38  
Total equity/(deficit) (Note 17)
     (5,437 )     (7,782 )
Total liabilities and equity
   $ 195,485     $ 195,006  
 
The accompanying notes are part of the financial statements.
 
 
 
5
 
 
Item 1. Financial Statements (Continued)
 
FORD MOTOR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Periods Ended March 31, 2010 and 2009
(in millions)

   
First Quarter
  
   
2010
    
2009
  
   
(unaudited)
  
Cash flows from operating activities of continuing operations
            
Net cash (used in)/provided by operating activities
   $ 2,683     $ 4,016  
                 
Cash flows from investing activities of continuing operations
                
Capital expenditures
     (1,068 )     (1,069 )
Acquisitions of retail and other finance receivables and operating leases
     (6,979 )     (6,032 )
Collections of retail and other finance receivables and operating leases
     9,602       10,047  
Purchases of securities
     (18,341 )     (22,002 )
Sales and maturities of securities
     17,987       19,071  
Settlements of derivatives
     46       1,163  
Proceeds from sale of businesses
     —       166  
Cash change due to deconsolidation of joint ventures
     —       (343 )
Other
     (80 )     (336 )
Net cash (used in)/provided by investing activities
     1,167       665  
                 
Cash flows from financing activities of continuing operations
                
Sales of Common Stock
     530       —  
Changes in short-term debt
     (1,042 )     (3,869 )
Proceeds from issuance of other debt
     8,827       15,410  
Principal payments on other debt
     (8,506 )     (16,355 )
Other
     79       (87 )
Net cash (used in)/provided by financing activities
     (112 )     (4,901 )
                 
Effect of exchange rate changes on cash
     (276 )     (310 )
Cumulative correction of Financial Services prior period error
     —       (630 )
                 
Net increase/(decrease) in cash and cash equivalents from continuing operations
     3,462       (1,160 )
                 
Cash flows from discontinued operations
                
Cash flows from operating activities of discontinued operations
     —       —  
Cash flows from investing activities of discontinued operations
     —       —  
Cash flows from financing activities of discontinued operations
     —       —  
                 
Net increase/(decrease) in cash and cash equivalents
   $ 3,462     $ (1,160 )
                 
Cash and cash equivalents at January 1
   $ 20,894     $ 21,804  
Cash and cash equivalents of discontinued/held-for-sale operations at January 1
     —       —  
Net increase/(decrease) in cash and cash equivalents
     3,462       (1,160 )
Less: cash and cash equivalents of discontinued/held-for-sale operations at March 31
     —       —  
Cash and cash equivalents at March 31
   $ 24,356     $ 20,644  

The accompanying notes are part of the financial statements.
 
 
 
6
 
 
Item 1. Financial Statements (Continued)
 
FORD MOTOR COMPANY AND SUBSIDIARIES

CONDENSED SECTOR STATEMENT OF CASH FLOWS
For the Periods Ended March 31, 2010 and 2009
(in millions)

   
First Quarter 2010
    
First Quarter 2009
  
   
Automotive
    
Financial
Services
    
Automotive
    
Financial
Services
  
   
(unaudited)
    
(unaudited)
  
Cash flows from operating activities of continuing operations
                        
Net cash (used in)/provided by operating activities
   $ 603     $ 1,488     $ (2,410 )   $ 1,911  
                                 
Cash flows from investing activities of continuing operations
                                
Capital expenditures
     (1,064 )     (4 )     (1,064 )     (5 )
Acquisitions of retail and other finance receivables and operating leases
     —       (6,979 )     —       (6,032 )
Collections of retail and other finance receivables and operating leases
     —       9,673       —       10,124  
Net (acquisitions)/collections of wholesale receivables
     —       521       —       4,438  
Purchases of securities
     (9,102 )     (9,239 )     (17,513 )     (5,544 )
Sales and maturities of securities
     11,917       6,284       13,352       5,854  
Settlements of derivatives
     (128 )     174       242       921  
Proceeds from sale of businesses
     —       —       1       165  
Cash change due to deconsolidation of joint ventures
     —       —       (343 )     —  
Other
     (7 )     (73 )     (327 )     (9 )
Net cash (used in)/provided by investing activities
     1,616       357       (5,652 )     9,912  
                                 
Cash flows from financing activities of continuing operations
                                
Sales of Common Stock
     530       —       —       —  
Changes in short-term debt
     269       (1,311 )     359       (4,228 )
Proceeds from issuance of other debt
     310       8,517       10,138       5,272  
Principal payments on other debt
     (117 )     (8,603 )     (150 )     (15,285 )
Other
     116       (37 )     (72 )     (15 )
Net cash (used in)/provided by financing activities
     1,108       (1,434 )     10,275       (14,256 )
                                 
Effect of exchange rate changes on cash
     (80 )     (196 )     (102 )     (208 )
Net change in intersector receivables/payables and other liabilities
     (208 )     208       (590 )     590  
Cumulative correction of prior period error
     —       —       —       (630 )
Net increase/(decrease) in cash and cash equivalents from continuing operations
     3,039       423       1,521       (2,681 )
                                 
Cash flows from discontinued operations
                                
Cash flows from operating activities of discontinued operations
     —       —       —       —  
Cash flows from investing activities of discontinued operations
     —       —       —       —  
Cash flows from financing activities of discontinued operations
     —       —       —       —  
                                 
Net increase/(decrease) in cash and cash equivalents
   $ 3,039     $ 423     $ 1,521     $ (2,681 )
                                 
Cash and cash equivalents at January 1
   $ 9,762     $ 11,132     $ 6,132     $ 15,672  
Cash and cash equivalents of discontinued/held-for-sale operations at January 1
     —       —       —       —  
Net increase/(decrease) in cash and cash equivalents
     3,039       423       1,521       (2,681 )
Less: cash and cash equivalents of discontinued/held-for-sale operations at March 31
     —       —       —       —  
Cash and cash equivalents at March 31
   $ 12,801     $ 11,555     $ 7,653     $ 12,991  

The accompanying notes are part of the financial statements.
 
 
 
7
 
 
Item 1. Financial Statements (Continued)
 
FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the Periods Ended March 31, 2010 and 2009
(in millions)

   
First Quarter
  
   
2010
    
2009
  
   
(unaudited)
  
Net income/(loss)
   $ 2,085     $ (1,435 )
Other comprehensive income/(loss), net of tax:
                
Foreign currency translation
     (489 )     (447 )
Net gain/(loss) on derivative instruments
     (1 )     (87 )
Employee benefit-related
     157       (5 )
Net holding gain/(loss)
     (2 )     (1 )
Total other comprehensive income/(loss), net of tax
     (335 )     (540 )
Comprehensive income/(loss)
     1,750       (1,975 )
Less: Comprehensive income/(loss) attributable to noncontrolling interests (Note 17)
     —       (8 )
Comprehensive income/(loss) attributable to Ford Motor Company
   $ 1,750     $ (1,967 )

The accompanying notes are part of the financial statements.
 
 
 
8
 
 
Item 1. Financial Statements (Continued)
 
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS


Footnote
  
Page
Note 1
Principles of Presentation and Consolidation
10
Note 2
Fair Value Measurements
13
Note 3
Cash and Restricted Cash
21
Note 4
Finance Receivables – Financial Services Sector
22
Note 5
Inventories
22
Note 6
Variable Interest Entities
22
Note 7
Goodwill and Other Net Intangible Assets
26
Note 8
Retirement Benefits
27
Note 9
Debt and Commitments
28
Note 10
Other Income/(Loss)
36
Note 11
Income Taxes
36
Note 12
Held-For-Sale Operations, Discontinued Operations, Other Dispositions, and Acquisitions
36
Note 13
Amounts Per Share Attributable to Ford Motor Company Common and Class B Stock
38
Note 14
Derivative Financial Instruments and Hedging Activities
39
Note 15
Segment Information
44
Note 16
Commitments
44
Note 17
Equity/(Deficit) Attributable to Ford Motor Company and Noncontrolling Interests
46
 
 
9
 
 
NOTE 1.  PRINCIPLES OF PRESENTATION AND CONSOLIDATION

Our financial statements are presented in accordance with generally accepted accounting principles ("GAAP") in the United States for interim financial information, and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X.  We show certain of our financial statements on both a consolidated and a sector basis for our Automotive and Financial Services sectors.  All intercompany items and transactions have been eliminated in both the consolidated and sector basis financial statements.  Reconciliations of certain line items are explained below in this Note, where the presentation of these intercompany eliminations or consolidated adjustments differs between the consolidated and sector financial statements.

In the opinion of management, these unaudited financial statements reflect a fair statement of the results of operations and financial condition of Ford Motor Company and its consolidated subsidiaries and consolidated VIEs of which we are the primary beneficiary for the periods and at the dates presented.  The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.  Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2009, updated by the revised disclosures in Exhibit 99 to our Current Report on Form 8-K dated May 7, 2010 showing retrospective application of the new accounting standard on VIE consolidation effective January 1, 2010 ("2009 Form 10-K Report").  For purposes of this report, "Ford," the "Company," "we," "our," "us" or similar references mean Ford Motor Company and our consolidated subsidiaries and our consolidated VIEs of which we are the primary beneficiary, unless the context requires otherwise.  All held-for-sale assets and liabilities are excluded from the footnotes unless otherwise noted.  See Note 12 for details of held-for-sale operations.

In the first quarter of 2009, our wholly-owned subsidiary Ford Motor Credit Company LLC ("Ford Credit") recorded a $630 million cumulative adjustment to correct for the overstatement of Financial Services sector cash and cash equivalents and certain accounts payable that originated in prior periods.  The impact on previously-issued annual and interim financial statements was not material.

Adoption of New Accounting Standards

Fair Value Measurements.  We adopted the new accounting standard on fair value measurements on January 1, 2010 which both requires new disclosures and clarifies existing disclosure requirements.  The standard requires a greater level of disaggregated information in the fair value hierarchy and expands disclosures about valuation techniques and inputs to measure fair value.  Refer to Note 2 for further information regarding our fair value measurements.

Transfers of Financial Assets.  On January 1, 2010, we adopted the new accounting standard related to transfers of financial assets.  The standard provides greater transparency about transfers of financial assets and a company's continuing involvement in the transferred financial assets.  The standard also removes the concept of a qualifying special-purpose entity from U.S. GAAP and changes the requirements for derecognizing financial assets. The new accounting standard did not have a material impact on our financial condition, results of operations, or financial disclosures.

Variable Interest Entities.  On January 1, 2010, we adopted the new accounting standard on VIEs.  The standard requires ongoing assessments of whether an entity is the primary beneficiary of a VIE, and enhances the disclosures about an entity's involvement with a VIE.  This standard requires the consolidation of a VIE if an entity has both (i) the power to direct the activities of the VIE, and (ii) the obligation to absorb losses or the right to receive residual returns that could potentially be significant to the VIE.

In applying this new standard, we deconsolidated certain entities.  These entities were primarily Automotive joint ventures previously consolidated due to contractual agreements that resulted in a disproportionate relationship between our voting interest in these entities and our exposure to the economic risks and potential rewards of the entities.  We held a majority of the variable interests in the VIEs, and therefore, were deemed to be the primary beneficiary.  We did not, however, possess the power to direct the activities of the VIEs that most significantly impacted the VIEs' economic performance.  Due to the absence of this power, adoption of the new standard resulted in the deconsolidation of the majority of these Automotive joint ventures.  The most significant Automotive joint ventures deconsolidated were Ford Otomotiv Sanayi Anonim Sirketi ("Ford Otosan") and AutoAlliance, Inc. ("AAI").  Ford Otosan is a joint venture between Ford (41% partner), Koc Group of Turkey (41% partner), and public investors (18%).  AAI is a joint venture between Ford (50% partner) and Mazda Motor Corporation ("Mazda") (50%) in North America.  We concluded in each case that the power to direct the activities that most significantly impact the entity's economic performance were shared equally among unrelated parties.  As a result, we account for the ownership in each of these joint ventures as equity method investments.

The new accounting standard did not result in any deconsolidation or consolidation of new entities within our Financial Services sector.
 
10
 
NOTE 1.  PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)

Refer to Note 6 for further information regarding our VIEs.  We have retrospectively applied this new accounting standard and revised our prior year financial statements herein accordingly.

The following table sets forth selected financial data as the data would have appeared had we applied the new consolidation standard for the first quarter of 2009, compared to the originally reported amount in our Quarterly Report on Form 10-Q for the period ended March 31, 2009 (dollar amounts in millions, except for per share amounts).  As noted, 2009 data herein have been adjusted to reflect the new accounting standard on VIE consolidation.

   
First Quarter 2009
  
   
Revised
    
As Originally Reported
    
Effect of Change
  
SUMMARY OF OPERATIONS
                  
Total Company
                  
Sales and revenues
   $ 24,390     $ 24,778     $ (388 )
                         
Income/(Loss) before income taxes
   $ (1,662 )   $ (1,620 )   $ (42 )
Provision for/(Benefit from) income taxes
     (227 )     (204 )     (23 )
Income/(Loss) from continuing operations
     (1,435 )     (1,416 )     (19 )
Income/(Loss) from discontinued operations
     —       —       —  
Net income/(loss)
     (1,435 )     (1,416 )     (19 )
Less: Income/(Loss) attributable to noncontrolling interests
     (8 )     11       (19 )
Net income/(loss) attributable to Ford Motor Company
   $ (1,427 )   $ (1,427 )   $ —  
                         
Automotive Sector
                        
Sales
   $ 20,980     $ 21,368     $ (388 )
Operating income/(loss)
     (2,442 )     (2,338 )     (104 )
Income/(Loss) before income taxes
     (1,510 )     (1,468 )     (42 )
                         
Amounts Per Share Attributable to Ford Motor Company Common and Class B Stock
                  
Basic:
                        
Income/(Loss) from continuing operations
   $ (0.60 )   $ (0.60 )   $ —  
Income/(Loss) from discontinued operations
     —       —       —  
Net income/(loss)
   $ (0.60 )   $ (0.60 )   $ —  
Diluted:
                        
Income/(Loss) from continuing operations
   $ (0.60 )   $ (0.60 )   $ —  
Income/(Loss) from discontinued operations
     —       —       —  
Net income/(loss)
   $ (0.60 )   $ (0.60 )   $ —  

Reconciliations between Consolidated and Sector Financial Statements

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

   
March 31,
 2010
    
December 31,
2009
  
Sector balance sheet presentation of deferred income tax assets:
            
Automotive sector current deferred income tax assets
   $ 493     $ 479  
Automotive sector non-current deferred income tax assets
     5,600       5,660  
Financial Services sector deferred income tax assets*
     285       306  
Total
     6,378       6,445  
Reclassification for netting of deferred income taxes
     (3,517 )     (2,966 )
Consolidated balance sheet presentation of deferred income tax assets
   $ 2,861     $ 3,479  
                 
Sector balance sheet presentation of deferred income tax liabilities:
                
Automotive sector current deferred income tax liabilities
   $ 2,949     $ 3,091  
Automotive sector non-current deferred income tax liabilities
     524       561  
Financial Services sector deferred income tax liabilities
     1,644       1,735  
Total
     5,117       5,387  
Reclassification for netting of deferred income taxes
     (3,517 )     (2,966 )
Consolidated balance sheet presentation of deferred income tax liabilities
   $ 1,600     $ 2,421  
__________
*      Financial Services deferred income tax assets are included in Financial Services other assets on our sector balance sheet.
 
11
 
NOTE 1.  PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)

Debt Reduction Actions

Automotive Acquisition of Financial Services Debt.  During 2008 and 2009, we issued 159,913,115 shares of Ford Common Stock through an equity distribution agreement and used the proceeds of $1 billion to purchase Ford Credit debt and related interest of $20 million.  We recognized a gain on extinguishment of debt of $68 million on the transactions, recorded in Automotive interest income and other non-operating income/(expense), net.  As of March 31, 2010, approximately $349 million of the debt purchased has matured ($214 million and $135 million matured in the first quarter of 2010 and 2009, respectively), and $267 million was repurchased (during the third quarter of 2009) from us by Ford Credit.

On our consolidated balance sheet, we net the remaining debt purchased by us with the outstanding debt of Ford Credit, reducing our consolidated marketable securities and debt balances by $432 million and $646 million at March 31, 2010 and December 31, 2009, respectively.  On our sector balance sheet, the acquisition is reported separately as Automotive marketable securities and Financial Services debt as it has not been retired or cancelled by Ford Credit.

Financial Services Acquisition of Automotive Debt.  During the first quarter of 2009, the Financial Services sector acquired $2.2 billion principal amount of Automotive secured term loan for an aggregate cost of $1.1 billion (including transaction costs).  This transaction settled on March 27, 2009, following which Ford Credit distributed the secured term loan to its immediate parent, Ford Holdings LLC ("Ford Holdings"), whereupon the debt was forgiven.  As a result, we recorded a gain on extinguishment of debt in the amount of $1.1 billion, net of transaction costs, in Automotive interest income and other non-operating income/(expense), net.  At March 31, 2010, the debt acquired is no longer outstanding.

See the table below for the reconciliation between total sector and consolidated cash flows.
 
12
 
NOTE 1.  PRINCIPLES OF PRESENTATION AND CONSOLIDATION (Continued)

Sector to Consolidated Cash Flow Reconciliation.  We present certain cash flows from the wholesale receivables, finance receivables and the debt reduction actions differently on our sector and consolidated statements of cash flows.  The reconciliation between total sector and consolidated cash flows is as follows (in millions):

   
First Quarter
  
   
2010
    
2009
  
Automotive cash flows from operating activities of continuing operations
   $ 603     $ (2,410 )
Financial Services cash flows from operating activities of continuing operations
     1,488       1,911  
Total sector cash flows from operating activities of continuing operations
     2,091       (499 )
Reclassifications from investing to operating cash flows:
                
Wholesale receivables (a)
     521       4,438  
Finance receivables (b)
     71       77  
Consolidated cash flows from operating activities of continuing operations
   $ 2,683     $ 4,016  
                 
Automotive cash flows from investing activities of continuing operations
   $ 1,616     $ (5,652 )
Financial Services cash flows from investing activities of continuing operations
     357       9,912  
Total sector cash flows from investing activities of continuing operations
     1,973       4,260  
Reclassifications from investing to operating cash flows:
                
Wholesale receivables (a)
     (521 )     (4,438 )
Finance receivables (b)
     (71 )     (77 )
Reclassifications from investing to financing cash flows:
                
Automotive sector acquisition of Financial Services sector debt (c)
     (214 )     (134 )
Financial Services sector acquisition of Automotive sector debt (d)
     —       1,054  
Consolidated cash flows from investing activities of continuing operations
   $ 1,167     $ 665  
                 
Automotive cash flows from financing activities of continuing operations
   $ 1,108     $ 10,275  
Financial Services cash flows from financing activities of continuing operations
     (1,434 )     (14,256 )
Total sector cash flows from financing activities of continuing operations
     (326 )     (3,981 )
Reclassifications from investing to financing cash flows:
                
Automotive sector acquisition of Financial Services sector debt (c)
     214       134  
Financial Services sector acquisition of Automotive sector debt (d)
     —       (1,054 )
Consolidated cash flows from financing activities of continuing operations
   $ (112 )   $ (4,901 )
(a)
In addition to the cash flow from vehicles sold by us, the cash flow from wholesale finance receivables (being reclassified from investing to operating) includes financing by Ford Credit of used and non-Ford vehicles.  100% of cash flows from wholesale finance receivables have been reclassified for consolidated presentation as the portion of these cash flows from used and non-Ford vehicles is impracticable to separate.
(b)
Includes cash flows of finance receivables purchased/collected from certain divisions and subsidiaries of the Automotive sector.
(c)
See "Debt Reduction Actions" above for further discussion.  Cash inflows related to these transactions are reported as financing activities on the consolidated statement of cash flows and investing activities on the sector statement of cash flows.  For first quarter 2009, this includes $135 million related to the maturity of Ford Credit debt previously acquired by our Automotive sector.
(d)
See "2009 Secured Term Loan Actions" within the Automotive section of Note 9 for further discussion of these transactions.  Cash outflows related to these transactions are reported as financing activities on the consolidated statement of cash flows and investing or operating activities on the sector statement of cash flows.

NOTE 2.  FAIR VALUE MEASUREMENTS

Certain assets and liabilities are presented on our financial statements at fair value.  Assets and liabilities measured at fair value on a recurring basis on our balance sheet include cash equivalents, marketable securities, derivative financial instruments and retained interest in securitized assets.  Assets and liabilities measured at fair value on a recurring basis for disclosure only include finance receivables and debt.  Fair value of these items are presented together with the related carrying value in Notes 4 and 9, respectively.  Assets and liabilities measured at fair value on a recurring basis vary based on specific circumstances such as impairments.

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The fair value should be based on assumptions that market participants would use, including a consideration of non-performance risk.  In determining fair value, we use various valuation methodologies and prioritize the use of observable inputs.  We assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market:

 
·
Level 1 – inputs include quoted prices for identical instruments and are the most observable.
 
·
Level 2 – inputs include quoted prices for similar assets and observable inputs such as interest rates, currency exchange rates and yield curves.
 
·
Level 3 – inputs are not observable in the market and include management's judgments about the assumptions market participants would use in pricing the asset or liability.
 
13
 
NOTE 2.  FAIR VALUE MEASUREMENTS (Continued)

For instruments measured using Level 3 inputs, a reconciliation of the beginning and ending balances is disclosed.

Valuation Methodologies

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

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

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

Retained Interests in Securitized Assets.  We estimate the fair value of retained interests based on income approach using internal valuation models. These models project future cash flows of the monthly collections on the sold finance receivables in excess of amounts needed for payment of the debt and other obligations issued or arising in the securitization transactions. The projected cash flows are discounted to a present value based on market inputs and our own assumptions regarding credit losses, prepayment speed, and discount rate.  Our assumptions regarding prepayment speed and credit losses are based on historical performance.

Finance Receivables.  We estimate the fair value of finance receivables based on an income approach using internal valuation models. These models project future cash flows of financing contracts incorporating appropriate funding pricing and enhancement requirements.  The projected cash flows are discounted to a present value based on market inputs and our own assumptions regarding credit losses, pre-payment speed, and discount rate.  Our assumptions regarding prepayment speed and credit losses are based on historical performance.

Debt.  We estimate the fair value of debt based on a market approach using quoted market prices or current market rates for similar debt with approximately the same remaining maturities, where possible.  Where market prices are not available, we estimate fair value based on an income approach using discounted cash flow models. These models project future cash flows and discount the future amounts to a present value using market-based expectations for interest rates, our own credit risk and the contractual terms of the debt instruments.  For asset-backed debt issued in securitization transactions, the principal payments are based on the actual payments on the securitized contracts.  We use management judgment to estimate the timing and amount of the debt cash flows based on historical pre-payment speeds.
 
14
 
NOTE 2.  FAIR VALUE MEASUREMENTS (Continued)

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

The following tables summarize the fair values by input hierarchy of items measured at fair value on a recurring basis on our balance sheet (in millions):

   
March 31, 2010
  
   
Level 1
    
Level 2
    
Level 3
    
Total
  
Automotive Sector
                        
Assets
                        
Cash equivalents – financial instruments (a)
                        
U.S. government
   $ 1,085     $ —     $ —     $ 1,085  
Government-sponsored enterprises
     —       2,399       —       2,399  
Government – non-U.S.
     —       99       —       99  
Corporate debt
     —       2,353       —       2,353  
Total cash equivalents – financial instruments
     1,085       4,851       —       5,936  
Marketable securities (b)
                                
U.S. government
     5,706       —       —       5,706  
Government-sponsored enterprises
     —       3,782       —       3,782  
Corporate debt
     —       99       —       99  
Mortgage-backed and other asset-backed
     —       114       2       116  
Equity
     583       —       —       583  
Government – non-U.S.
     —       750       —       750  
Other liquid investments (c)
     —       1,023       —       1,023  
Total marketable securities
     6,289       5,768       2       12,059  
Derivative financial instruments
                                
Foreign exchange contracts
     —       59       —       59  
Commodity contracts
     —       4       8       12  
Other – warrants
     —       —       3       3  
Total derivative financial instruments (d)
     —       63       11       74  
Total assets at fair value
   $ 7,374     $ 10,682     $ 13     $ 18,069  
Liabilities
                                
Derivative financial instruments
                                
Foreign exchange contracts
   $ —     $ 128     $ —     $ 128  
Commodity contracts
     —       29       —       29  
Total derivative financial instruments (d)
     —       157       —       157  
Total liabilities at fair value
   $ —     $ 157     $ —     $ 157  
(a)
"Cash equivalents – financial instruments" in this table excludes time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value on our balance sheet totaling $4.6 billion as of March 31, 2010 for the Automotive sector, which approximates fair value.  In addition to these cash equivalents, we also had cash on hand totaling $2.3 billion as of March 31, 2010.
(b)
Excludes an investment in Ford Credit debt securities held by the Automotive sector with a carrying value of $432 million and an estimated fair value of $439 million as of March 31, 2010; see Note 1 for additional detail.
(c)
Includes certificates of deposit and time deposits with a maturity of more than 90 days at date of purchase.
(d)
See Note 14 for additional information regarding derivative financial instruments.
 
 
15
 
NOTE 2.  FAIR VALUE MEASUREMENTS (Continued)

   
March 31, 2010
  
   
Level 1
    
Level 2
    
Level 3
    
Total
  
Financial Services Sector
                        
Assets
                        
Cash equivalents – financial instruments (a)
                        
U.S. government
   $ 1,179     $ —     $ —     $ 1,179  
Government-sponsored enterprises
     —       850       —       850  
Government – non-U.S.
     —       427       —       427  
Corporate debt
     —       300       —       300  
Total cash equivalents – financial instruments
     1,179       1,577       —       2,756  
Marketable securities
                                
U.S. government
     6,860       —       —       6,860  
Government-sponsored enterprises
     —       1,996       —       1,996  
Corporate debt
     —       165       —       165  
Mortgage-backed
     —       244       —       244  
Government – non-U.S.
     —       323       —       323  
Other liquid investments (b)
     —       236       —       236  
Total marketable securities
     6,860       2,964       —       9,824  
Derivative financial instruments (c)
                                
Interest rate contracts
     —       1,124       350       1,474  
Foreign exchange contracts
     —       6       —       6  
Cross currency interest rate swap contracts
     —       72       —       72  
Total derivative financial instruments
     —       1,202       350       1,552  
Retained interest in securitized assets (d)
     —       —       13       13  
Total assets at fair value
   $ 8,039     $ 5,743     $ 363     $ 14,145  
Liabilities
                                
Derivative financial instruments (c)
                                
Interest rate contracts
   $ —     $ 312     $ 365     $ 677  
Foreign exchange contracts
     —       85       —       85  
Cross-currency interest rate swap contracts 
     —       134       168       302  
Total derivative financial instruments
     —       531       533       1,064  
Total liabilities at fair value
   $ —     $ 531     $ 533     $ 1,064  
(a)
"Cash equivalents – financial instruments" in this table excludes time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value on our balance sheet totaling $6.7 billion as of March 31, 2010 for the Financial Services sector, which approximates fair value.  In addition to these cash equivalents, we also had cash on hand totaling $2.1 billion as of March 31, 2010 for the Financial Services sector.
(b)
Includes certificates of deposit and time deposits with a maturity of more than 90 days at date of purchase.
(c)
See Note 14 for additional information regarding derivative financial instruments.
(d)
Retained interest in securitized assets is reported in Other assets on our consolidated balance sheet.
 
 
16
 
NOTE 2.  FAIR VALUE MEASUREMENTS (Continued)

   
December 31, 2009
  
   
Level 1
    
Level 2
    
Level 3
    
Total
  
Automotive Sector
                        
Assets
                        
Cash equivalents – financial instruments (a)
                        
U.S. government
   $ 30     $ —     $ —     $ 30  
Government-sponsored enterprises
     —       949       —       949  
Government – non-U.S.
     —       238       —       238  
Corporate debt
     —       2,557       —       2,557  
Total cash equivalents – financial instruments
     30       3,744       —       3,774  
Marketable securities(b)
                                
U.S. government
     9,130       —       —       9,130  
Government-sponsored enterprises
     —       2,408       —       2,408  
Corporate debt
     —       108       8       116  
Mortgage-backed and other asset-backed
     —       191       17       208  
Equity
     477       —       —       477  
Government – non-U.S.
     —       1,283       —       1,283  
Other liquid investments (c)
     —       901       —       901  
Total marketable securities
     9,607       4,891       25       14,523  
Derivative financial instruments
                                
Foreign exchange contracts
     —       59       —       59  
Commodity contracts
     —       8       7       15  
Other - warrants