Edgar Filing: FORD MOTOR CO

F 09.30.2011- 10Q

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 September 30, 2011

[ ]	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 October 28, 2011, the registrant had outstanding 3,729,248,130 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit Index begins on p. 89

FORD MOTOR COMPANY

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended September 30, 2011



	Table of Contents	Page
	Part I – Financial Information
Item 1	Financial Statements	1
	Consolidated Statement of Operations	1
	Sector Statement of Operations	2
	Consolidated Balance Sheet	3
	Sector Balance Sheet	4
	Consolidated Statement of Cash Flows	5
	Sector Statement of Cash Flows	6
	Consolidated Statement of Comprehensive Income	7
	Notes to the Financial Statements	8
	Report of Independent Registered Public Accounting Firm	58
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	59
	Results of Operations	59
	Automotive Sector	60
	Financial Services Sector	68
	Liquidity and Capital Resources	72
	Outlook	79
	Critical Accounting Estimates	83
	Accounting Standards Issued But Not Yet Adopted	85
	Other Financial Information	85
Item 3	Quantitative and Qualitative Disclosures About Market Risk	85
	Automotive Sector	85
	Financial Services Sector	85
Item 4	Controls and Procedures	86

	Part II – Other Information
Item 1	Legal Proceedings	86
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 5	Other Information	87
Item 6	Exhibits	88
	Signature	88
	Exhibit Index	89

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

For the Periods Ended September 30, 2011 and 2010

(in millions, except per share amounts)



	Third Quarter					First Nine Months
	2011		2010			2011			2010
	(unaudited)
Revenues
Automotive	$	31,043	$	27,592		$	95,557		$	89,050
Financial Services	2,004		2,301			6,131			7,476
Total revenues	33,047		29,893			101,688			96,526

Costs and expenses
Automotive cost of sales	27,617		24,233			83,646			77,200
Selling, administrative and other expenses	2,861		2,654			8,502			8,880
Interest expense	1,096		1,469			3,397			4,806
Financial Services provision for credit and insurance losses	5		(36		)	(28		)	(208		)
Total costs and expenses	31,579		28,320			95,517			90,678

Automotive interest income and other non-operating income/(expense), net (Note 12)	98		88			337			336
Financial Services other income/(loss), net (Note 12)	176		108			314			301
Equity in net income/(loss) of affiliated companies	104		118			406			384
Income/(Loss) before income taxes	1,846		1,887			7,228			6,869
Provision for/(Benefit from) income taxes	194		199			620			500
Income/(Loss) from continuing operations	1,652		1,688			6,608			6,369
Income/(Loss) from discontinued operations	—		—			—			—
Net income/(loss)	1,652		1,688			6,608			6,369
Less: Income/(Loss) attributable to noncontrolling interests	3		1			10			(2		)
Net income/(loss) attributable to Ford Motor Company	$	1,649	$	1,687		$	6,598		$	6,371

NET INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
Income/(Loss) from continuing operations	$	1,649	$	1,687		$	6,598		$	6,371
Income/(Loss) from discontinued operations	—		—			—			—
Net income/(loss) attributable to Ford Motor Company	$	1,649	$	1,687		$	6,598		$	6,371

AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 15)
Basic income/(loss)
Income/(Loss) from continuing operations	$	0.43	$	0.49		$	1.74		$	1.87
Income/(Loss) from discontinued operations	—		—			—			—
Net income/(loss)	$	0.43	$	0.49		$	1.74		$	1.87
Diluted income/(loss)
Income/(Loss) from continuing operations	$	0.41	$	0.43		$	1.62		$	1.61
Income/(Loss) from discontinued operations	—		—			—			—
Net income/(loss)	$	0.41	$	0.43		$	1.62		$	1.61

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

SECTOR STATEMENT OF OPERATIONS

For the Periods Ended September 30, 2011 and 2010

(in millions, except per share amounts)



	Third Quarter					First Nine Months
	2011		2010			2011			2010
	(unaudited)
AUTOMOTIVE
Revenues	$	31,043	$	27,592		$	95,557		$	89,050
Costs and expenses
Cost of sales	27,617		24,233			83,646			77,200
Selling, administrative and other expenses	2,202		2,025			6,690			6,669
Total costs and expenses	29,819		26,258			90,336			83,869
Operating income/(loss)	1,224		1,334			5,221			5,181

Interest expense	181		415			634			1,475

Interest income and other non-operating income/(expense), net (Note 12)	98		88			337			336
Equity in net income/(loss) of affiliated companies	100		119			391			376
Income/(Loss) before income taxes — Automotive	1,241		1,126			5,315			4,418

FINANCIAL SERVICES
Revenues	2,004		2,301			6,131			7,476
Costs and expenses
Interest expense	915		1,054			2,763			3,331
Depreciation	481		426			1,289			1,580
Operating and other expenses	178		203			523			631
Provision for credit and insurance losses	5		(36		)	(28		)	(208		)
Total costs and expenses	1,579		1,647			4,547			5,334

Other income/(loss), net (Note 12)	176		108			314			301
Equity in net income/(loss) of affiliated companies	4		(1		)	15			8
Income/(Loss) before income taxes — Financial Services	605		761			1,913			2,451

TOTAL COMPANY
Income/(Loss) before income taxes	1,846		1,887			7,228			6,869
Provision for/(Benefit from) income taxes	194		199			620			500
Income/(Loss) from continuing operations	1,652		1,688			6,608			6,369
Income/(Loss) from discontinued operations	—		—			—			—
Net income/(loss)	1,652		1,688			6,608			6,369
Less: Income/(Loss) attributable to noncontrolling interests	3		1			10			(2		)
Net income/(loss) attributable to Ford Motor Company	$	1,649	$	1,687		$	6,598		$	6,371

NET INCOME/(LOSS) ATTRIBUTABLE TO FORD MOTOR COMPANY
Income/(Loss) from continuing operations	$	1,649	$	1,687		$	6,598		$	6,371
Income/(Loss) from discontinued operations	—		—			—			—
Net income/(loss) attributable to Ford Motor Company	$	1,649	$	1,687		$	6,598		$	6,371

AMOUNTS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 15)
Basic income/(loss)
Income/(Loss) from continuing operations	$	0.43	$	0.49		$	1.74		$	1.87
Income/(Loss) from discontinued operations	—		—			—			—
Net income/(loss)	$	0.43	$	0.49		$	1.74		$	1.87
Diluted income/(loss)
Income/(Loss) from continuing operations	$	0.41	$	0.43		$	1.62		$	1.61
Income/(Loss) from discontinued operations	—		—			—			—
Net income/(loss)	$	0.41	$	0.43		$	1.62		$	1.61

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)



	September 30, 2011			December 31, 2010
	(unaudited)
ASSETS
Cash and cash equivalents	$	16,460		$	14,805
Marketable securities	16,732			20,765
Finance receivables, net (Note 5)	67,789			70,070
Other receivables, net	9,036			8,381
Net investment in operating leases	12,326			11,675
Inventories (Note 7)	7,212			5,917
Equity in net assets of affiliated companies	2,608			2,569
Net property	22,304			23,179
Deferred income taxes	1,694			2,003
Net intangible assets (Note 9)	100			102
Assets of held-for-sale operations (Note 14)	502			—
Other assets	5,977			5,221
Total assets	$	162,740		$	164,687

LIABILITIES
Payables	$	18,924		$	16,362
Accrued liabilities and deferred revenue	41,441			43,844
Debt (Note 11)	95,131			103,988
Deferred income taxes	1,109			1,135
Liabilities of held-for-sale operations (Note 14)	109			—
Total liabilities	156,714			165,329

EQUITY
Capital stock
Common Stock, par value $.01 per share (3,745 million shares issued)	37			37
Class B Stock, par value $.01 per share (71 million shares issued)	1			1
Capital in excess of par value of stock	20,819			20,803
Accumulated other comprehensive income/(loss)	(14,269		)	(14,313		)
Treasury stock	(166		)	(163		)
Retained earnings/(Accumulated deficit)	(440		)	(7,038		)
Total equity/(deficit) attributable to Ford Motor Company (Note 19)	5,982			(673		)
Equity/(Deficit) attributable to noncontrolling interests (Note 19)	44			31
Total equity/(deficit) (Note 19)	6,026			(642		)
Total liabilities and equity	$	162,740		$	164,687

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 8 for additional information on our VIEs.



ASSETS
Cash and cash equivalents	$	3,434	$	4,062
Finance receivables, net	48,738		50,473
Other receivables, net	—		13
Net investment in operating leases	4,712		6,121
Inventories	—		19
Net property	—		31
Other assets	169		28
LIABILITIES
Payables	—		16
Accrued liabilities and deferred revenue	94		222
Debt	38,979		40,247

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

SECTOR BALANCE SHEET

(in millions)



	September 30, 2011			December 31, 2010
ASSETS	(unaudited)
Automotive
Cash and cash equivalents	$	8,089		$	6,301
Marketable securities	12,687			14,207
Total cash and marketable securities	20,776			20,508
Receivables, less allowances of $126 and $228	4,039			3,992
Inventories (Note 7)	7,212			5,917
Deferred income taxes	103			359
Net investment in operating leases	1,533			1,282
Other current assets	934			610
Current receivable from Financial Services	1,639			1,700
Total current assets	36,236			34,368
Equity in net assets of affiliated companies	2,465			2,441
Net property	22,165			23,027
Deferred income taxes	2,502			2,468
Net intangible assets (Note 9)	100			102
Assets of held-for-sale operations (Note 14)	502			—
Non-current receivable from Financial Services	368			181
Other assets	2,476			2,019
Total Automotive assets	66,814			64,606
Financial Services
Cash and cash equivalents	8,371			8,504
Marketable securities	4,246			6,759
Finance receivables, net (Note 5)	71,760			73,265
Net investment in operating leases	10,793			10,393
Equity in net assets of affiliated companies	143			128
Other assets	3,899			4,221
Total Financial Services assets	99,212			103,270
Intersector elimination	(2,209		)	(2,083		)
Total assets	$	163,817		$	165,793
LIABILITIES
Automotive
Trade payables	$	15,603		$	13,466
Other payables	2,144			1,544
Accrued liabilities and deferred revenue	15,369			17,065
Deferred income taxes	350			392
Debt payable within one year (Note 11)	916			2,049
Total current liabilities	34,382			34,516
Long-term debt (Note 11)	11,738			17,028
Other liabilities	22,508			23,016
Deferred income taxes	248			344
Liabilities of held-for-sale operations (Note 14)	109			—
Total Automotive liabilities	68,985			74,904
Financial Services
Payables	1,177			1,352
Debt (Note 11)	82,678			85,112
Deferred income taxes	1,588			1,505
Other liabilities and deferred income	3,565			3,764
Payable to Automotive	2,007			1,881
Total Financial Services liabilities	91,015			93,614
Intersector elimination	(2,209		)	(2,083		)
Total liabilities	157,791			166,435
EQUITY
Capital stock (Note 15)
Common Stock, par value $.01 per share (3,745 million shares issued)	37			37
Class B Stock, par value $.01 per share (71 million shares issued)	1			1
Capital in excess of par value of stock	20,819			20,803
Accumulated other comprehensive income/(loss)	(14,269		)	(14,313		)
Treasury stock	(166		)	(163		)
Retained earnings/(Accumulated deficit)	(440		)	(7,038		)
Total equity/(deficit) attributable to Ford Motor Company (Note 19)	5,982			(673		)
Equity/(Deficit) attributable to noncontrolling interests (Note 19)	44			31
Total equity/(deficit) (Note 19)	6,026			(642		)
Total liabilities and equity	$	163,817		$	165,793

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Periods Ended September 30, 2011 and 2010

(in millions)



	First Nine Months
	2011			2010
	(unaudited)
Cash flows from operating activities of continuing operations
Net cash (used in)/provided by operating activities	$	10,019		$	10,238

Cash flows from investing activities of continuing operations
Capital expenditures	(3,135		)	(2,946		)
Acquisitions of retail and other finance receivables and operating leases	(26,150		)	(21,594		)
Collections of retail and other finance receivables and operating leases	25,626			29,075
Purchases of securities	(58,365		)	(79,096		)
Sales and maturities of securities	62,440			74,627
Proceeds from sale of business	150			1,318
Settlements of derivatives	50			(234		)
Elimination of cash balances upon disposition of discontinued/held-for-sale operations	—			(456		)
Other	375			(74		)
Net cash (used in)/provided by investing activities	991			620

Cash flows from financing activities of continuing operations
Sales of Common Stock	—			1,230
Changes in short-term debt	1,552			(908		)
Proceeds from issuance of other debt	25,070			25,804
Principal payments on other debt	(35,915		)	(39,701		)
Other	79			5
Net cash (used in)/provided by financing activities	(9,214		)	(13,570		)

Effect of exchange rate changes on cash	(72		)	(190		)

Net increase/(decrease) in cash and cash equivalents	$	1,724		$	(2,902	)

Cash and cash equivalents at January 1	$	14,805		$	20,894
Cash and cash equivalents of held-for-sale operations at January 1	—			—
Net increase/(decrease) in cash and cash equivalents	1,724			(2,902		)
Less: Cash and cash equivalents of held-for-sale operations at September 30	69			—
Cash and cash equivalents at September 30	$	16,460		$	17,992

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONDENSED SECTOR STATEMENT OF CASH FLOWS

For the Periods Ended September 30, 2011 and 2010

(in millions)



	First Nine Months 2011						First Nine Months 2010
	Automotive			Financial Services			Automotive			Financial Services
	(unaudited)
Cash flows from operating activities of continuing operations
Net cash (used in)/provided by operating activities	$	6,783		$	3,194		$	4,625		$	3,500

Cash flows from investing activities of continuing operations
Capital expenditures	(3,121		)	(14		)	(2,932		)	(14		)
Acquisitions of retail and other finance receivables and operating leases	—			(26,082		)	—			(21,496		)
Collections of retail and other finance receivables and operating leases	—			25,626			—			29,075
Net (acquisitions)/collections of wholesale receivables	—			(26		)	—			715
Purchases of securities	(36,261		)	(22,104		)	(41,262		)	(38,026		)
Sales and maturities of securities	37,830			24,610			41,830			33,415
Settlements of derivatives	140			(90		)	(277		)	43
Proceeds from sale of business	135			15			1,318			—
Investing activity (to)/from Financial Services	2,589			—			1,374			—
Elimination of cash balances upon disposition of discontinued/held-for-sale operations	—			—			(456		)	—
Other	196			179			(126		)	52
Net cash (used in)/provided by investing activities	1,508			2,114			(531		)	3,764

Cash flows from financing activities of continuing operations
Sales of Common Stock	—			—			1,230			—
Changes in short-term debt	(325		)	1,877			117			(1,025		)
Proceeds from issuance of other debt	1,963			23,107			2,104			23,700
Principal payments on other debt	(7,982		)	(27,933		)	(8,481		)	(30,346		)
Financing activity to/(from) Automotive	—			(2,589		)	—			(1,374		)
Other	68			11			170			(165		)
Net cash (used in)/provided by financing activities	(6,276		)	(5,527		)	(4,860		)	(9,210		)

Effect of exchange rate changes on cash	(158		)	86			44			(234		)

Net increase/(decrease) in cash and cash equivalents	$	1,857		$	(133	)	$	(722	)	$	(2,180	)

Cash and cash equivalents at January 1	$	6,301		$	8,504		$	9,762		$	11,132
Cash and cash equivalents of held-for-sale operations at January 1	—			—			—			—
Net increase/(decrease) in cash and cash equivalents	1,857			(133		)	(722		)	(2,180		)
Less: Cash and cash equivalents of held-for-sale operations at September 30	69			—			—			—
Cash and cash equivalents at September 30	$	8,089		$	8,371		$	9,040		$	8,952

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Periods Ended September 30, 2011 and 2010

(in millions)



	Third Quarter						First Nine Months
	2011			2010			2011			2010
	(unaudited)
Net income/(loss)	$	1,652		$	1,688		$	6,608		$	6,369
Other comprehensive income/(loss), net of tax:
Foreign currency translation	(1,317		)	(460		)	(481		)	(2,189		)
Net gain/(loss) on derivative instruments	43			65			177			36
Employee benefit-related	241			62			346			409
Net holding gain/(loss)	—			—			—			(2		)
Total other comprehensive income/(loss), net of tax	(1,033		)	(333		)	42			(1,746		)
Comprehensive income/(loss)	619			1,355			6,650			4,623
Less: Comprehensive income/(loss) attributable to noncontrolling interests (Note 19)	3			—			8			(3		)
Comprehensive income/(loss) attributable to Ford Motor Company	$	616		$	1,355		$	6,642		$	4,626

The accompanying notes are part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents



Footnote		Page
Note 1	Presentation	9
Note 2	Accounting Standards Issued But Not Yet Adopted	12
Note 3	Fair Value Measurements	12
Note 4	Restricted Cash	21
Note 5	Finance Receivables	21
Note 6	Allowance for Credit Losses	27
Note 7	Inventories	30
Note 8	Variable Interest Entities	30
Note 9	Net Intangible Assets	34
Note 10	Retirement Benefits	35
Note 11	Debt and Commitments	36
Note 12	Other Income/(Loss)	43
Note 13	Income Taxes	43
Note 14	Held-for-Sale Operations, Dispositions and Acquisitions	44
Note 15	Amounts Per Share Attributable to Ford Motor Company Common and Class B Stock	45
Note 16	Derivative Financial Instruments and Hedging Activities	46
Note 17	Segment Information	52
Note 18	Commitments and Contingencies	54
Note 19	Equity/(Deficit) Attributable to Ford Motor Company and Noncontrolling Interests	56

Item 1. Financial Statements (Continued)

NOTE 1. PRESENTATION

Our financial statements are presented in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. We show certain of our financial statements on both a consolidated and a sector basis for our Automotive and Financial Services sectors. Intercompany items and transactions have been eliminated in both the consolidated and sector balance sheets. Where the presentation of these intercompany eliminations or consolidated adjustments differs between the consolidated and sector financial statements, reconciliations of certain line items are explained below in this Note and in Notes 5 and 11.

In the opinion of management, these unaudited financial statements reflect a fair statement of the results of operations and financial condition of Ford Motor Company, its consolidated subsidiaries, and consolidated VIEs of which we are the primary beneficiary for the periods and at the dates presented. The 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, 2010 ("2010 Form 10-K Report"). For purposes of this report, "Ford," the "Company," "we," "our," "us" or similar references mean Ford Motor Company, our consolidated subsidiaries, and our consolidated VIEs of which we are the primary beneficiary, unless the context requires otherwise.

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

UAW Subsequent Event

On October 26, 2011, we signed a new national labor agreement with the UAW covering approximately 41,000 employees in the United States ("Agreement"). Among other things, the Agreement sets wages and benefits for the covered employees for a four-year period expiring in September 2015.

The Agreement provides for a ratification bonus of $6,000 to most of the covered employees. These bonuses will be paid, and the full amount of the expense recorded, in the fourth quarter of 2011.

Covered employees also will receive four annual operational performance bonuses of up to $250 per year beginning in December 2011, and four annual inflation protection lump sum payments in the amount of $1,500 per year beginning in June 2012. The first operational performance bonus in the amount of $250 will be paid and expensed in the fourth quarter of 2011. The subsequent operational performance bonuses will be expensed over the twelve-month period leading up to each payment date. The first inflation protection lump sum payment will be expensed over the eight-month period leading up to the June 2012 payment date; each subsequent lump sum payment will be expensed over the twelve-month period leading up to the respective June payment date.

The Agreement also modifies the method for calculating payment to covered employees under our profit sharing plan. Planned profit sharing payments are accrued throughout the year in which the payment is earned. Each quarter, we evaluate and adjust as necessary the year-to-date accrual to ensure that it is consistent with our expected full-year profit and current profit sharing plan in place at the end of the quarter. We generally make any payment under the profit sharing plan in the first quarter subsequent to the year in which it is earned. This year, we intend to make a partial payment in the fourth quarter of 2011, based on first half 2011 Ford North America profits, with the remainder of the 2011 profit sharing payment to be made in the first quarter of 2012.

We also agreed to offer lump sum payments to eligible employees who elect to separate or retire, and we will expense the cost of each separation payment in the quarter in which the offer is accepted.

Adoption of New Accounting Standards

Troubled Debt Restructurings. On July 1, 2011 we adopted the new accounting standard related to a creditor's determination of whether a restructuring is a troubled debt restructuring ("TDR"). The new standard provides additional guidance as to whether a restructuring meets the criteria to be considered a TDR. Refer to Notes 5 and 6 for further information regarding TDRs.

Business Combinations. On January 1, 2011 we adopted the new accounting standard on business combinations. The new standard requires public entities that present comparative financial statements to disclose the revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the prior annual reporting period. The new accounting standard did not have an impact on our financial statement disclosures.

Item 1. Financial Statements (Continued)

NOTE 1. PRESENTATION (Continued)

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 the totals for the sector and consolidated balance sheets is as follows (in millions):



	September 30, 2011			December 31, 2010
Sector balance sheet presentation of deferred income tax assets:
Automotive sector current deferred income tax assets	$	103		$	359
Automotive sector non-current deferred income tax assets	2,502			2,468
Financial Services sector deferred income tax assets *	166			282
Total	2,771			3,109
Reclassification for netting of deferred income taxes	(1,077		)	(1,106		)
Consolidated balance sheet presentation of deferred income tax assets	$	1,694		$	2,003

Sector balance sheet presentation of deferred income tax liabilities:
Automotive sector current deferred income tax liabilities	$	350		$	392
Automotive sector non-current deferred income tax liabilities	248			344
Financial Services sector deferred income tax liabilities	1,588			1,505
Total	2,186			2,241
Reclassification for netting of deferred income taxes	(1,077		)	(1,106		)
Consolidated balance sheet presentation of deferred income tax liabilities	$	1,109		$	1,135

__________


*	Financial Services deferred income tax assets are included in Financial Services other assets on our sector balance sheet.

Item 1. Financial Statements (Continued)

NOTE 1. PRESENTATION (Continued)

Sector to Consolidated Cash Flow. We present certain cash flows from wholesale receivables, finance receivables and the Automotive acquisition of Financial Services debt differently on our sector and consolidated statements of cash flows. The reconciliation between totals for the sector and consolidated cash flows is as follows (in millions):



	First Nine Months
	2011			2010
Automotive cash flows from operating activities of continuing operations	$	6,783		$	4,625
Financial Services cash flows from operating activities of continuing operations	3,194			3,500
Total sector cash flows from operating activities of continuing operations	9,977			8,125
Reclassifications from investing to operating cash flows:
Wholesale receivables (a)	(26		)	715
Finance receivables (b)	68			98
Reclassifications from operating to financing cash flows:
Payments on notes to the Voluntary Employee Benefit Association ("VEBA") trust ("UAW VEBA Trust") (c)	—			1,300
Consolidated cash flows from operating activities of continuing operations	$	10,019		$	10,238

Automotive cash flows from investing activities of continuing operations	$	1,508		$	(531	)
Financial Services cash flows from investing activities of continuing operations	2,114			3,764
Total sector cash flows from investing activities of continuing operations	3,622			3,233
Reclassifications from investing to operating cash flows:
Wholesale receivables (a)	26			(715		)
Finance receivables (b)	(68		)	(98		)
Reclassifications from investing to financing cash flows:
Automotive sector acquisition of Financial Services sector debt (d)	—			(426		)
Elimination of investing activity to/(from) Financial Services in consolidation	(2,589		)	(1,374		)
Consolidated cash flows from investing activities of continuing operations	$	991		$	620

Automotive cash flows from financing activities of continuing operations	$	(6,276	)	$	(4,860	)
Financial Services cash flows from financing activities of continuing operations	(5,527		)	(9,210		)
Total sector cash flows from financing activities of continuing operations	(11,803		)	(14,070		)
Reclassifications from investing to financing cash flows:
Automotive sector acquisition of Financial Services sector debt (d)	—			426
Reclassifications from operating to financing cash flows:
Payments on notes to the UAW VEBA Trust (c)	—			(1,300		)
Elimination of investing activity to/(from) Financial Services in consolidation	2,589			1,374
Consolidated cash flows from financing activities of continuing operations	$	(9,214	)	$	(13,570	)

__________

(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 "Notes Due to UAW VEBA Trust" in Note 11 for discussion of these transactions. Cash outflows related to this transaction are reported as financing activities on the consolidated statement of cash flows and operating activities on the sector statement of cash flows.


(d)	See "Automotive Acquisition of Financial Services Debt" in Note 11 for discussion of these transactions. 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.

Venezuelan Operations

At September 30, 2011 and December 31, 2010, we had $201 million and $41 million, respectively, in net monetary assets (primarily cash and receivables partially offset by payables and accrued liabilities) denominated in Venezuelan bolivars. These net monetary assets included $265 million and $132 million in cash and cash equivalents at September 30, 2011 and December 31, 2010, respectively. As a result of regulation of foreign currency exchange in Venezuela, the official exchange rate of 4.3 bolivars to the U.S. dollar is used to re-measure the assets and liabilities of our Venezuelan operations for GAAP financial statement presentation. The Venezuelan government also controls securities transactions in the parallel exchange market. Our ability to obtain funds in the parallel exchange market has been limited. For any U.S. dollars that we obtain at a rate less favorable than the official rate, we realize a loss for the difference in the exchange rates. Continuing restrictions on the foreign currency exchange market could affect our Venezuelan operations' ability to pay U.S.-dollar denominated obligations as well as our ability to benefit from those operations.

Item 1. Financial Statements (Continued)

NOTE 2. ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

Intangibles - Goodwill and Other. In September 2011, the Financial Accounting Standards Board ("FASB") issued a new standard that provides the option to evaluate prescribed qualitative factors to determine whether a calculated goodwill impairment test is necessary. The standard is effective for us as of January 1, 2012. We do not expect this standard to have a material impact on our financial condition, results of operations, or financial statement disclosures.

Comprehensive Income - Presentation. In June 2011, the FASB issued a new standard that modifies the options for presentation of other comprehensive income. The new standard will require us to present comprehensive income either on a single continuous statement or two separate but consecutive statements. The standard is effective for us as of January 1, 2012. We do not expect this standard to have a material impact on our financial condition or results of operations.

Fair Value Measurement. In May 2011, the FASB issued a new standard that provides a consistent definition of fair value measurement and closely aligns disclosure requirements between GAAP and International Financial Reporting Standards. The new standard will require us to report the level in the fair value hierarchy of assets and liabilities not measured at fair value in the balance sheet but for which the fair value is disclosed, and to expand existing disclosures. The standard is effective for us as of January 1, 2012. We do not expect this standard to have a material impact on our financial condition or results of operations.

Transfers and Servicing - Repurchase Agreements. In April 2011, the FASB issued a new standard for agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The standard is effective for us as of January 1, 2012. We do not expect this standard to have a material impact on our financial condition, results of operations, or financial statement disclosures.

Financial Services - Insurance. In October 2010, the FASB issued a new standard addressing the deferral of acquisition costs within the insurance industry. The new standard modifies which types of costs can be capitalized in the acquisition and renewal of insurance contracts. The standard is effective for us as of January 1, 2012. We do not expect this standard to have a material impact on our financial condition, results of operations, or financial statement disclosures.

NOTE 3. FAIR VALUE MEASUREMENTS

Cash equivalents, marketable securities, and derivative financial instruments are presented on our financial statements at fair value. The fair value of finance receivables and debt, together with the related carrying value, is disclosed in Notes 5 and 11, respectively. Certain other assets and liabilities are measured at fair value on a nonrecurring basis and vary based on specific circumstances such as impairments.

Fair Value Measurements

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 include data not observable in the market and reflect management judgment about the assumptions market participants would use in pricing the asset or liability.

The use of observable and unobservable inputs and their significance in measuring fair value are reflected in our hierarchy assessment.

Item 1. Financial Statements (Continued)

NOTE 3. FAIR VALUE MEASUREMENTS (Continued)

Valuation Methodologies

Cash and Cash Equivalents. Included in Cash and cash equivalents are highly liquid investments that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of changes in value due to interest rate, market 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 90 days 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. These include $1.8 billion of demand deposits with financial institutions which were classified as Marketable securities prior to 2011, and this amount is reported in Sales and maturities of securities in the 2011 consolidated statement of cash flows. Time deposits, certificates of deposit, and money market accounts that meet the above criteria are classified as Cash and cash equivalents, reported at par value, and excluded from the tables below.

Marketable Securities. Investments in securities with a maturity date greater than 90 days at the date of purchase and other securities for which there is a more than insignificant risk of changes in value because of interest rate, market price, or penalty on withdrawal are classified as Marketable securities. For marketable 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 are 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 the master netting agreements and 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 are not available and we develop assumptions or use models (e.g., Black Scholes) 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 reset based on actual payments on the securitized contracts. We use management judgment to estimate timing and amount of the swap cash flows based on historical pre-payment speeds.

Ford Credit has two asset-backed debt transactions with derivative features related to Ford Upgrade Exchange Linked ("FUEL") notes. These features include a mandatory exchange to Ford Credit unsecured notes when Ford Credit's senior unsecured debt receives two investment grade credit ratings among Fitch, Moody's and S&P and a make-whole provision. We estimated the fair value of these features by comparing the market value of the FUEL notes to the value of a hypothetical debt instrument without these features.

Finance Receivables. We generally 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 based on scheduled contract payments (including principal and interest). 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 the discount rate. Our assumptions regarding pre-payment 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 or current market rates 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 projected payments for specific assets securing the underlying debt considering historical prepayment speeds.

Item 1. Financial Statements (Continued)

NOTE 3. 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):



	September 30, 2011
	Level 1		Level 2		Level 3		Total
Automotive Sector
Assets
Cash equivalents – financial instruments (a)
U.S. government	$	—	$	—	$	—	$	—
U.S. government-sponsored enterprises	—		394		—		394
Government – non-U.S.	—		131		—		131
Foreign government agencies (b)	—		990		—		990
Corporate debt	—		—		—		—
Total cash equivalents – financial instruments	—		1,515		—		1,515
Marketable securities (c)
U.S. government	1,240		—		—		1,240
U.S. government-sponsored enterprises	—		5,211		—		5,211
Foreign government agencies (b)	—		3,837		—		3,837
Corporate debt	—		1,097		—		1,097
Mortgage-backed and other asset-backed	—		46		1		47
Equity	146		—		—		146
Government – non-U.S.	—		881		—		881
Other liquid investments (d)	—		27		—		27
Total marketable securities	1,386		11,099		1		12,486
Derivative financial instruments
Foreign exchange contracts	—		401		1		402
Commodity contracts	—		—		—		—
Other – warrants	—		—		3		3
Total derivative financial instruments (e)	—		401		4		405
Total assets at fair value	$	1,386	$	13,015	$	5	$	14,406
Liabilities
Derivative financial instruments
Foreign exchange contracts	$	—	$	196	$	5	$	201
Commodity contracts	—		276		76		352
Total derivative financial instruments (e)	—		472		81		553
Total liabilities at fair value	$	—	$	472	$	81	$	553

__________


(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 totaling $5.1 billion as of September 30, 2011 for the Automotive sector. In addition to these cash equivalents, our Automotive sector also had cash on hand totaling $1.5 billion as of September 30, 2011.


(b)	Includes notes issued by foreign government agencies that include implicit and explicit guarantees, as well as notes issued by supranational institutions.


(c)	Excludes an investment in Ford Credit debt securities held by the Automotive sector with a carrying value of $201 million and an estimated fair value of $200 million as of September 30, 2011; see Note 11 for additional detail.


(d)	"Other liquid investments" in this table includes certificates of deposit and time deposits.


(e)	See Note 16 for additional information regarding derivative financial instruments.

Item 1. Financial Statements (Continued)

NOTE 3. FAIR VALUE MEASUREMENTS (Continued)



	September 30, 2011
	Level 1		Level 2		Level 3		Total
Financial Services Sector
Assets
Cash equivalents – financial instruments (a)
U.S. government	$	5	$	—	$	—	$	5
U.S. government-sponsored enterprises	—		190		—		190
Government – non-U.S.	—		386		—		386
Foreign government agencies (b)	—		701		—		701
Corporate debt	—		1		—		1
Mortgage-backed and other asset-backed	—		—		—		—
Total cash equivalents – financial instruments	5		1,278		—		1,283
Marketable securities
U.S. government	905		—		—		905
U.S. government-sponsored enterprises	—		1,039		—		1,039
Foreign government agencies (b)	—		778		—		778
Corporate debt	—		1,198		—		1,198
Mortgage-backed and other asset-backed	—		152		—		152
Government – non-U.S.	—		157		—		157
Other liquid investments (c)	—		17		—		17
Total marketable securities	905		3,341		—		4,246
Derivative financial instruments
Interest rate contracts	—		905		550		1,455
Foreign exchange contracts	—		125		—		125
Cross currency interest rate swap contracts	—		—		8		8
Other (d)	—		—		158		158
Total derivative financial instruments (e)	—		1,030		716		1,746
Total assets at fair value	$	910	$	5,649	$	716	$	7,275
Liabilities
Derivative financial instruments
Interest rate contracts	$	—	$	85	$	168	$	253
Foreign exchange contracts	—		47		—		47
Cross-currency interest rate swap contracts	—		—		7		7
Total derivative financial instruments (e)	—		132		175		307
Total liabilities at fair value	$	—	$	132	$	175	$	307

__________

(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 September 30, 2011 for the Financial Services sector. In addition to these cash equivalents, our Financial Services sector also had cash on hand totaling $2.5 billion as of September 30, 2011.


(b)	Includes notes issued by foreign government agencies that include implicit and explicit guarantees, as well as notes issues by supranational institutions.


(c)	"Other liquid investments" in this table includes certificates of deposit and time deposits.


(d)	"Other" in this table represents derivative features included in the FUEL notes.


(e)	See Note 16 for additional information regarding derivative financial instruments.

Item 1. Financial Statements (Continued)

NOTE 3. FAIR VALUE MEASUREMENTS (Continued)



	December 31, 2010
	Level 1		Level 2		Level 3		Total
Automotive Sector
Assets
Cash equivalents – financial instruments (a)
U.S. government	$	—	$	—	$	—	$	—
U.S. government-sponsored enterprises	—		224		—		224
Government – non-U.S.	—		133		—		133
Foreign government agencies (b)	—		1,619		—		1,619
Corporate debt	—		199		—		199
Total cash equivalents – financial instruments	—		2,175		—		2,175
Marketable securities (c)
U.S. government	2,718		—		—		2,718
U.S. government-sponsored enterprises	—		4,809		—		4,809
Foreign government agencies (b)	—		3,215		1		3,216
Corporate debt	—		517		—		517
Mortgage-backed and other asset-backed	—		20		—		20
Equity	203		—		—		203
Government – non-U.S.	—		818		1		819
Other liquid investments (d)	—		1,704		—		1,704
Total marketable securities	2,921		11,083		2		14,006
Derivative financial instruments
Foreign exchange contracts	—		58		—		58
Commodity contracts	—		36		33		69
Other – warrants	—		—		5		5
Total derivative financial instruments (e)	—		94		38		132
Total assets at fair value	$	2,921	$	13,352	$	40	$	16,313
Liabilities
Derivative financial instruments
Foreign exchange contracts	$	—	$	93	$	—	$	93
Commodity contracts	—		6		—		6
Total derivative financial instruments (e)	—		99		—		99
Total liabilities at fair value	$	—	$	99	$	—	$	99

__________


(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 totaling $2.2 billion as of December 31, 2010 for the Automotive sector. In addition to these cash equivalents, our Automotive sector also had cash on hand totaling $1.9 billion as of December 31, 2010.


(b)	Includes notes issued by foreign government agencies that include implicit and explicit guarantees, as well as notes issued by supranational institutions.


(c)	Excludes an investment in Ford Credit debt securities held by the Automotive sector with a carrying value of $201 million and an estimated fair value of $203 million as of December 31, 2010; see Note 11 for additional detail.


(d)	"Other liquid investments" in this table includes certificates of deposit and time deposits.


(e)	See Note 16 for additional information regarding derivative financial instruments.

Item 1. Financial Statements (Continued)

NOTE 3. FAIR VALUE MEASUREMENTS (Continued)

December 31, 2010

Level 1

Level 2

Level 3

Total

Financial Services Sector