10-Q 1 f0331201510-q.htm 10-Q F 03.31.2015 10-Q


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)
 
R
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
For the quarterly period ended March 31, 2015
 
 
 
or
 
 
o
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
For the transition period from  __________ to __________
 
 
 
Commission file number 1-3950
 
Ford Motor Company
(Exact name of Registrant as specified in its charter)

Delaware
38-0549190
(State of incorporation)
(I.R.S. Employer Identification No.)
 
 
One American Road, Dearborn, Michigan
48126
(Address of principal executive offices)
(Zip Code)
313-322-3000
(Registrant’s telephone number, including area code)


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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No  R
 
As of April 21, 2015, Ford had outstanding 3,904,504,162 shares of Common Stock and 70,852,076 shares of Class B Stock.  
  


Exhibit Index begins on page


 




 


FORD MOTOR COMPANY
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended March 31, 2015
 
Table of Contents
 
Page
 
Part I - Financial Information
 
 
Item 1
Financial Statements
 
 
Consolidated Income Statement
 
 
Consolidated Statement of Comprehensive Income
 
 
Sector Income Statement
 
 
Consolidated Balance Sheet
 
 
Sector Balance Sheet
 
 
Condensed Consolidated Statement of Cash Flows
 
 
Condensed Sector Statement of Cash Flows
 
 
Consolidated Statement of Equity
 
 
Notes to the Financial Statements
 
 
Report of Independent Registered Public Accounting Firm
 
Item 2
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
Results of Operations
 
 
Automotive Sector
 
 
Financial Services Sector
 
 
Liquidity and Capital Resources
 
 
Production Volumes
 
 
Outlook
 
 
Accounting Standards Issued But Not Yet Adopted
 
 
Other Financial Information
 
Item 3
Quantitative and Qualitative Disclosures About Market Risk
 
 
Automotive Sector
 
 
Financial Services Sector
 
Item 4
Controls and Procedures
 
 
 
 
 
 
Part II - Other Information
 
 
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
 
Item 6
Exhibits
 
 
Signature
 
 
Exhibit Index
 

i


PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(in millions, except per share amounts)
 
For the periods ended March 31,
 
2015
 
2014
 
First Quarter
 
(unaudited)
Revenues
 
 
 
Automotive
$
31,800

 
$
33,876

Financial Services
2,100

 
2,000

Total revenues
33,900

 
35,876

 
 
 
 
Costs and expenses
 

 
 

Automotive cost of sales
28,702

 
31,021

Selling, administrative, and other expenses
3,609

 
3,372

Financial Services interest expense
647

 
678

Financial Services provision for credit and insurance losses
73

 
39

Total costs and expenses
33,031

 
35,110

 
 
 
 
Automotive interest expense
165

 
208

 
 
 
 
Automotive interest income and other income/(loss), net (Note 14)
190

 
214

Financial Services other income/(loss), net (Note 14)
74

 
68

Equity in net income of affiliated companies
437

 
419

Income before income taxes
1,405

 
1,259

Provision for/(Benefit from) income taxes (Note 16)
480

 
270

Net income
925

 
989

Less: Income/(Loss) attributable to noncontrolling interests
1

 

Net income attributable to Ford Motor Company
$
924

 
$
989

 
 
 
 
EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 18)
Basic income
$
0.23

 
$
0.25

Diluted income
0.23

 
0.24

 
 
 
 
Cash dividends declared
0.15

 
0.125



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
 
For the periods ended March 31,
 
2015
 
2014
 
First Quarter
 
(unaudited)
Net income
$
925

 
$
989

Other comprehensive income/(loss), net of tax (Note 13)
 
 
 
Foreign currency translation
(636
)
 
(235
)
Derivative instruments
(90
)
 
92

Pension and other postretirement benefits
352

 
183

Total other comprehensive income/(loss), net of tax
(374
)
 
40

Comprehensive income
551

 
1,029

Less: Comprehensive income/(loss) attributable to noncontrolling interests
1

 

Comprehensive income attributable to Ford Motor Company
$
550

 
$
1,029


The accompanying notes are part of the financial statements.

1

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
SECTOR INCOME STATEMENT
(in millions)
 
For the periods ended March 31,
 
2015
 
2014
 
First Quarter
 
(unaudited)
AUTOMOTIVE
 
 
 
Revenues
$
31,800

 
$
33,876

Costs and expenses
 
 
 
Cost of sales
28,702

 
31,021

Selling, administrative, and other expenses
2,616

 
2,476

Total costs and expenses
31,318

 
33,497

 
 
 
 
Interest expense
165

 
208

 
 
 
 
Interest income and other income/(loss), net (Note 14)
190

 
214

Equity in net income of affiliated companies
429

 
412

Income before income taxes — Automotive
936

 
797

 
 
 
 
FINANCIAL SERVICES
 

 
 

Revenues
2,100

 
2,000

Costs and expenses
 
 
 
Interest expense
647

 
678

Depreciation on vehicles subject to operating leases
816

 
706

Operating and other expenses
177

 
190

Provision for credit and insurance losses
73

 
39

Total costs and expenses
1,713

 
1,613

 
 
 
 
Other income/(loss), net (Note 14)
74

 
68

Equity in net income of affiliated companies
8

 
7

Income before income taxes — Financial Services
469

 
462

 
 
 
 
TOTAL COMPANY
 
 
 
Income before income taxes
1,405

 
1,259

Provision for/(Benefit from) income taxes (Note 16)
480

 
270

Net income
925

 
989

Less: Income/(Loss) attributable to noncontrolling interests
1

 

Net income attributable to Ford Motor Company
$
924

 
$
989


The accompanying notes are part of the financial statements.

2

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
 
March 31,
2015
 
December 31,
2014
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
12,368

 
$
10,757

Marketable securities
20,732

 
20,393

Finance receivables, net (Note 4)
79,167

 
81,111

Other receivables, net
13,005

 
11,708

Net investment in operating leases
23,914

 
23,217

Inventories (Note 6)
9,519

 
7,866

Equity in net assets of affiliated companies
3,628

 
3,357

Net property
29,612

 
30,126

Deferred income taxes
12,939

 
13,639

Other assets
7,490

 
6,353

Total assets
$
212,374

 
$
208,527

 
 
 
 
LIABILITIES
 

 
 

Payables
$
22,366

 
$
20,035

Other liabilities and deferred revenue (Note 7)
41,644

 
43,577

Debt (Note 9)
122,776

 
119,171

Deferred income taxes
525

 
570

Total liabilities
187,311

 
183,353

 
 
 
 
Redeemable noncontrolling interest (Note 10)
89

 
342

 
 
 
 
EQUITY
 

 
 

Capital stock (Note 18)
 

 
 

Common Stock, par value $.01 per share (3,958 million shares issued of 6 billion authorized)
40

 
39

Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized)
1

 
1

Capital in excess of par value of stock
21,273

 
21,089

Retained earnings
24,887

 
24,556

Accumulated other comprehensive income/(loss) (Note 13)
(20,406
)
 
(20,032
)
Treasury stock
(848
)
 
(848
)
Total equity attributable to Ford Motor Company
24,947

 
24,805

Equity attributable to noncontrolling interests
27

 
27

Total equity
24,974

 
24,832

Total liabilities and equity
$
212,374

 
$
208,527

 
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 11 for additional information on our VIEs.
 
March 31,
2015
 
December 31,
2014
 
(unaudited)
ASSETS
 
 
 
Cash and cash equivalents
$
2,332

 
$
2,094

Finance receivables, net
40,964

 
39,522

Net investment in operating leases
10,115

 
9,631

Other assets
68

 
27

LIABILITIES
 
 
 
Other liabilities and deferred revenue
$
38

 
$
22

Debt
39,409

 
37,156


The accompanying notes are part of the financial statements.

3

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
SECTOR BALANCE SHEET (in millions) 
 
March 31,
2015
 
December 31,
2014
ASSETS
(unaudited)
Automotive
 
 
 
Cash and cash equivalents
$
5,074

 
$
4,567

Marketable securities
14,468

 
17,135

Total cash and marketable securities
19,542

 
21,702

Receivables, less allowances of $388 and $455
5,649

 
5,789

Inventories (Note 6)
9,519

 
7,866

Deferred income taxes
2,167

 
2,039

Net investment in operating leases
1,930

 
1,699

Other current assets
1,925

 
1,347

Total current assets
40,732

 
40,442

Equity in net assets of affiliated companies
3,490

 
3,216

Net property
29,493

 
29,795

Deferred income taxes
12,845

 
13,331

Other assets
3,204

 
2,798

Non-current receivable from Financial Services
214

 
497

Total Automotive assets
89,978

 
90,079

Financial Services
 

 
 

Cash and cash equivalents
7,294

 
6,190

Marketable securities
6,264

 
3,258

Finance receivables, net (Note 4)
85,699

 
86,141

Net investment in operating leases
21,984

 
21,518

Equity in net assets of affiliated companies
138

 
141

Other assets
3,474

 
3,613

Receivable from Automotive
329

 
527

Total Financial Services assets
125,182

 
121,388

Intersector elimination
(543
)
 
(1,024
)
Total assets
$
214,617

 
$
210,443

LIABILITIES
 

 
 

Automotive
 

 
 

Payables
$
21,161

 
$
18,876

Other liabilities and deferred revenue (Note 7)
16,745

 
17,934

Deferred income taxes
285

 
270

Debt payable within one year (Note 9)
1,986

 
2,501

Current payable to Financial Services
329

 
527

Total current liabilities
40,506

 
40,108

Long-term debt (Note 9)
11,411

 
11,323

Other liabilities and deferred revenue (Note 7)
23,071

 
23,793

Deferred income taxes
298

 
367

Total Automotive liabilities
75,286

 
75,591

Financial Services
 

 
 

Payables
1,205

 
1,159

Debt (Note 9)
109,379

 
105,347

Deferred income taxes
2,185

 
1,849

Other liabilities and deferred income (Note 7)
1,828

 
1,850

Payable to Automotive
214

 
497

Total Financial Services liabilities
114,811

 
110,702

Intersector elimination
(543
)
 
(1,024
)
Total liabilities
189,554

 
185,269

 
 
 
 
Redeemable noncontrolling interest (Note 10)
89

 
342

 
 
 
 
EQUITY
 

 
 

Capital stock (Note 18)
 

 
 

Common Stock, par value $.01 per share (3,958 million shares issued of 6 billion authorized)
40

 
39

Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized)
1

 
1

Capital in excess of par value of stock
21,273

 
21,089

Retained earnings
24,887

 
24,556

Accumulated other comprehensive income/(loss) (Note 13)
(20,406
)
 
(20,032
)
Treasury stock
(848
)
 
(848
)
Total equity attributable to Ford Motor Company
24,947

 
24,805

Equity attributable to noncontrolling interests
27

 
27

Total equity
24,974

 
24,832

Total liabilities and equity
$
214,617

 
$
210,443

The accompanying notes are part of the financial statements.

4

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
 
For the periods ended March 31,
 
2015
 
2014
 
First Quarter
 
(unaudited)
Cash flows from operating activities
 
 
 
Net cash provided by/(used in) operating activities
$
2,413

 
$
2,220

 
 
 
 
Cash flows from investing activities
 
 
 
Capital spending
(1,800
)
 
(1,516
)
Acquisitions of finance receivables and operating leases
(12,257
)
 
(11,646
)
Collections of finance receivables and operating leases
9,251

 
8,983

Purchases of marketable securities
(11,711
)
 
(15,291
)
Sales and maturities of marketable securities
11,327

 
13,780

Settlements of derivatives
113

 
(72
)
Other
117

 
100

Net cash provided by/(used in) investing activities
(4,960
)
 
(5,662
)
 
 
 
 
Cash flows from financing activities
 

 
 

Cash dividends
(593
)
 
(493
)
Net changes in short-term debt
488

 
(1,023
)
Proceeds from issuance of other debt
13,624

 
11,773

Principal payments on other debt
(8,686
)
 
(8,287
)
Other
(249
)
 
18

Net cash provided by/(used in) financing activities
4,584

 
1,988

 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(426
)
 
(31
)
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
1,611

 
$
(1,485
)
 
 
 
 
Cash and cash equivalents at January 1
$
10,757

 
$
14,468

Net increase/(decrease) in cash and cash equivalents
1,611

 
(1,485
)
Cash and cash equivalents at March 31
$
12,368

 
$
12,983


The accompanying notes are part of the financial statements.

5

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONDENSED SECTOR STATEMENT OF CASH FLOWS
(in millions)
 
For the periods ended March 31,
 
2015
 
2014
 
First Quarter
 
Automotive
 
Financial Services
 
Automotive
 
Financial Services
 
(unaudited)
Cash flows from operating activities
 
 
 
 
 
 
 
Net cash provided by/(used in) operating activities (a)
$
1,006

 
$
1,724

 
$
2,026

 
$
1,698

 
 
 
 
 
 
 
 
Cash flows from investing activities
 
 
 
 
 
 
 
Capital spending
(1,786
)
 
(14
)
 
(1,506
)
 
(10
)
Acquisitions of finance receivables and operating leases (excluding wholesale and other)

 
(12,257
)
 

 
(11,646
)
Collections of finance receivables and operating leases (excluding wholesale and other)

 
9,251

 

 
8,983

Net change in wholesale and other receivables (b)

 
(973
)
 

 
(2,142
)
Purchases of marketable securities
(7,161
)
 
(4,550
)
 
(10,969
)
 
(4,322
)
Sales and maturities of marketable securities
9,785

 
1,542

 
10,341

 
3,439

Settlements of derivatives
70

 
43

 
47

 
(119
)
Other
44

 
73

 
36

 
64

Investing activity (to)/from Financial Services (c)
39

 

 
11

 

Interest supplements and residual value support from Automotive (a)

 
656

 

 
638

Net cash provided by/(used in) investing activities
991


(6,229
)

(2,040
)

(5,115
)
 
 
 
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
 
 
 
Cash dividends
(593
)
 

 
(493
)
 

Net changes in short-term debt
49

 
439

 
140

 
(1,163
)
Proceeds from issuance of other debt
172

 
13,452

 
75

 
11,698

Principal payments on other debt
(778
)
 
(7,908
)
 
(190
)
 
(8,097
)
Other
(213
)
 
(36
)
 
53

 
(35
)
Financing activity to/(from) Automotive (c)

 
(39
)
 

 
(11
)
Net cash provided by/(used in) financing activities
(1,363
)
 
5,908

 
(415
)
 
2,392

 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(127
)
 
(299
)
 
3

 
(34
)
 
 
 
 
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
$
507


$
1,104


$
(426
)

$
(1,059
)
 
 
 
 
 
 
 
 
Cash and cash equivalents at January 1
$
4,567

 
$
6,190

 
$
4,959

 
$
9,509

Net increase/(decrease) in cash and cash equivalents
507

 
1,104

 
(426
)
 
(1,059
)
Cash and cash equivalents at March 31
$
5,074


$
7,294


$
4,533


$
8,450

_________
(a)
Operating activities include outflows of $656 million and $638 million for the periods ended March 31, 2015 and 2014, respectively, of interest supplements and residual value support to Financial Services. Interest supplements and residual value support from Automotive to Financial Services are eliminated in the condensed consolidated statement of cash flows.
(b)
Reclassified to operating activities in the condensed consolidated statement of cash flows.
(c)
Eliminated in the condensed consolidated statement of cash flows.


The accompanying notes are part of the financial statements.

6

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
(in millions, unaudited)
 
Equity Attributable to Ford Motor Company
 
 
 
 
 
Capital Stock
 
Cap. in
Excess of
Par Value 
of Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Income/(Loss) (Note 13)
 
Treasury Stock
 
Total
 
Equity
Attributable
to Non-controlling Interests
 
Total
Equity
Balance at December 31, 2014
$
40

 
$
21,089

 
$
24,556

 
$
(20,032
)
 
$
(848
)
 
$
24,805

 
$
27

 
$
24,832

Net income

 

 
924

 

 

 
924

 
1

 
925

Other comprehensive income/(loss), net of tax

 

 

 
(374
)
 

 
(374
)
 

 
(374
)
Common stock issued (including share-based compensation impacts)
1

 
184

 

 

 

 
185

 

 
185

Treasury stock/other 

 

 

 

 

 

 
(1
)
 
(1
)
Cash dividends declared

 

 
(593
)
 

 

 
(593
)
 

 
(593
)
Balance at March 31, 2015
$
41

 
$
21,273

 
$
24,887

 
$
(20,406
)
 
$
(848
)
 
$
24,947

 
$
27

 
$
24,974

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
$
40

 
$
21,422

 
$
23,386

 
$
(18,230
)
 
$
(506
)
 
$
26,112

 
$
33

 
$
26,145

Net income

 

 
989

 

 

 
989

 

 
989

Other comprehensive income/(loss), net of tax

 

 

 
40

 

 
40

 

 
40

Common stock issued (including share-based compensation impacts)

 
143

 

 

 

 
143

 

 
143

Treasury stock/other 

 
(18
)
 

 

 

 
(18
)
 
1

 
(17
)
Cash dividends declared

 

 
(493
)
 

 

 
(493
)
 

 
(493
)
Balance at March 31, 2014
$
40

 
$
21,547

 
$
23,882

 
$
(18,190
)
 
$
(506
)
 
$
26,773

 
$
34

 
$
26,807


The accompanying notes are part of the financial statements.

7

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

Table of Contents
Footnote
 
Page
Note 1
Presentation
Note 2
Accounting Standards Issued But Not Yet Adopted
Note 3
Fair Value Measurements
Note 4
Financial Services Sector Finance Receivables
Note 5
Financial Services Sector Allowance for Credit Losses
Note 6
Inventories
Note 7
Other Liabilities and Deferred Revenue
Note 8
Retirement Benefits
Note 9
Debt
Note 10
Redeemable Noncontrolling Interest
Note 11
Variable Interest Entities
Note 12
Derivative Financial Instruments and Hedging Activities
Note 13
Accumulated Other Comprehensive Income/(Loss)
Note 14
Other Income/(Loss)
Note 15
Employee Separation Actions and Exit and Disposal Activities
Note 16
Income Taxes
Note 17
Changes in Investments in Affiliates
Note 18
Capital Stock and Earnings Per Share
Note 19
Segment Information
Note 20
Commitments and Contingencies



8

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION

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

In the opinion of management, these unaudited financial statements reflect a fair statement of the results of operations and financial condition of Ford Motor Company, its consolidated subsidiaries, and consolidated VIEs of which we are the primary beneficiary for the periods and at the dates presented.  The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.  Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2014 (“2014 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.

Adoption of New Accounting Standards

Transfers and Servicing - Repurchase-to-Maturity Transactions, Repurchase Financings and Disclosures. On January 1, 2015, we adopted the new accounting standard that changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements. The new standard also requires additional disclosures for certain transfers of financial assets with agreements that both entitle and obligate the transferor to repurchase the transferred assets from the transferee. The adoption of this accounting standard did not impact our financial statements or financial statement disclosures.

Reconciliations between Consolidated and Sector Financial Statements

Sector to Consolidated Deferred Tax Assets and Liabilities. The difference between the total assets and total liabilities as presented on our sector balance sheet and consolidated balance sheet is the result of netting deferred income tax assets and liabilities. The reconciliation between the totals for the sector and consolidated balance sheets was as follows (in millions):
 
March 31,
2015
 
December 31,
2014
Sector balance sheet presentation of deferred income tax assets
 
 
 
Automotive sector current deferred income tax assets
$
2,167

 
$
2,039

Automotive sector non-current deferred income tax assets
12,845

 
13,331

Financial Services sector deferred income tax assets (a)
170

 
185

Total
15,182

 
15,555

Reclassification for netting of deferred income taxes
(2,243
)
 
(1,916
)
Consolidated balance sheet presentation of deferred income tax assets
$
12,939

 
$
13,639

 
 
 
 
Sector balance sheet presentation of deferred income tax liabilities
 

 
 

Automotive sector current deferred income tax liabilities
$
285

 
$
270

Automotive sector non-current deferred income tax liabilities
298

 
367

Financial Services sector deferred income tax liabilities
2,185

 
1,849

Total
2,768

 
2,486

Reclassification for netting of deferred income taxes
(2,243
)
 
(1,916
)
Consolidated balance sheet presentation of deferred income tax liabilities
$
525

 
$
570

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

9

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

Internal-Use Software - Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. In April 2015, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard that provides guidance regarding whether a cloud computing arrangement includes a software license, which would impact the accounting for such an arrangement. The new accounting standard is effective as of January 1, 2016 and we are assessing the potential impact to our financial statements and financial statement disclosures.

Imputation of Interest - Simplifying the Presentation of Debt Issuance Costs. In April 2015, the FASB issued a new accounting standard that requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts or premiums. The new accounting standard is effective as of January 1, 2016, and early adoption is permitted. We are currently assessing the potential impact to our financial statements and financial statement disclosures.

Consolidation - Amendments to the Consolidation Analysis. In February 2015, the FASB issued a new accounting standard that makes targeted amendments to the present guidance. One of the amendments in the new standard affects the consolidation analysis performed by reporting entities that are involved with VIEs, particularly those that have decision maker or service provider fee arrangements and related-party relationships. The new accounting standard is effective as of January 1, 2016 and we are assessing the potential impact to our financial statements and financial statement disclosures.

Extraordinary and Unusual Items - Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. In January 2015, the FASB issued a new accounting standard that eliminates the concept of extraordinary items and their segregation from the results of ordinary operations and expands presentation and disclosure guidance to include items that are both unusual in nature and occur infrequently. The new accounting standard is effective as of January 1, 2016 and we are assessing the potential impact to our financial statements and financial statement disclosures.

Derivatives and Hedging - Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. In November 2014, the FASB issued a new accounting standard that requires an entity to determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument issued in the form of a share, including any embedded derivative features being evaluated for bifurcation. The new accounting standard is effective as of January 1, 2016 and we are assessing the potential impact to our financial statements and financial statement disclosures.

Going Concern - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. In August 2014, the FASB issued a new accounting standard that requires management to assess if there is substantial doubt about an entity’s ability to continue as a going concern for each annual and interim period. If conditions or events give rise to substantial doubt, disclosures are required. The new accounting standard is effective as of December 31, 2016 and we do not expect it to have an impact on our financial statement disclosures.

Consolidation - Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity. In August 2014, the FASB issued a new accounting standard that provides an entity the option to elect to measure the financial assets and financial liabilities of a consolidated collateralized financing entity (“CFE”) at a value that is reflective of its economic interest in the CFE. The new accounting standard is effective as of January 1, 2016 and we do not expect it to have an impact on our financial statements or financial statement disclosures.

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

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


10

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. FAIR VALUE MEASUREMENTS

Cash equivalents, marketable securities, and derivative financial instruments are remeasured and presented on our financial statements on a recurring basis at fair value, while other assets and liabilities are measured at fair value on a nonrecurring basis. At March 31, 2015, we consolidated the assets and liabilities of our Ford Sollers Netherlands B.V. (“Ford Sollers”) joint venture (see Note 17 for additional information).

There have been no changes to the types of inputs used or the valuation techniques since year end.

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

The following table categorizes the fair values of items measured at fair value on a recurring basis on our balance sheet (in millions):
 
March 31, 2015
 
December 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Automotive Sector
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents – financial instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$

 
$
11

 
$

 
$
11

 
$

 
$
64

 
$

 
$
64

Non-U.S. government and agencies

 
220

 

 
220

 

 
122

 

 
122

Corporate debt

 
10

 

 
10

 

 
20

 

 
20

Total cash equivalents (a)

 
241

 

 
241

 

 
206

 

 
206

Marketable securities
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
753

 
3,290

 

 
4,043

 
969

 
5,789

 

 
6,758

Non-U.S. government and agencies

 
6,911

 

 
6,911

 

 
7,004

 

 
7,004

Corporate debt

 
2,922

 

 
2,922

 

 
2,738

 

 
2,738

Equities
270

 

 

 
270

 
322

 

 

 
322

Other marketable securities

 
322

 

 
322

 

 
313

 

 
313

Total marketable securities
1,023

 
13,445

 

 
14,468

 
1,291

 
15,844

 

 
17,135

Derivative financial instruments (b)

 
1,102

 

 
1,102

 

 
517

 

 
517

Total assets at fair value
$
1,023

 
$
14,788

 
$

 
$
15,811

 
$
1,291

 
$
16,567

 
$

 
$
17,858

Liabilities
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
Derivative financial instruments (b)
$

 
$
1,260

 
$
6

 
$
1,266

 
$

 
$
710

 
$
3

 
$
713

Total liabilities at fair value
$

 
$
1,260

 
$
6

 
$
1,266

 
$

 
$
710

 
$
3

 
$
713

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Services Sector
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents – financial instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-U.S. government and agencies

 
320

 

 
320

 

 
341

 

 
341

Corporate debt

 
80

 

 
80

 

 
10

 

 
10

Total cash equivalents (a)

 
400

 

 
400

 

 
351

 

 
351

Marketable securities
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
U.S. government and agencies
1,151

 
2,855

 

 
4,006

 
17

 
1,251

 

 
1,268

Non-U.S. government and agencies

 
521

 

 
521

 

 
405

 

 
405

Corporate debt

 
1,706

 

 
1,706

 

 
1,555

 

 
1,555

Other marketable securities

 
31

 

 
31

 

 
30

 

 
30

Total marketable securities
1,151

 
5,113

 

 
6,264

 
17

 
3,241

 

 
3,258

Derivative financial instruments (b)

 
1,204

 

 
1,204

 

 
859

 

 
859

Total assets at fair value
$
1,151

 
$
6,717

 
$

 
$
7,868

 
$
17

 
$
4,451

 
$

 
$
4,468

Liabilities
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
Derivative financial instruments (b)
$

 
$
297

 
$

 
$
297

 
$

 
$
167

 
$

 
$
167

Total liabilities at fair value
$

 
$
297

 
$

 
$
297

 
$

 
$
167

 
$

 
$
167

  __________
(a)
Excludes time deposits, certificates of deposit, money market accounts, and other cash equivalents reported at par value on our balance sheet totaling $3.5 billion and $3.3 billion for Automotive sector and $5.1 billion and $3.8 billion for Financial Services sector at March 31, 2015 and December 31, 2014, respectively. In addition to these cash equivalents, we also had cash on hand totaling $1.4 billion and $1.1 billion for Automotive sector and $1.8 billion and $2 billion for Financial Services sector at March 31, 2015 and December 31, 2014, respectively.
(b)
See Note 12 for additional information regarding derivative financial instruments.

11

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCIAL SERVICES SECTOR FINANCE RECEIVABLES

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

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

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

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

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

Finance receivables, net were as follows (in millions):
 
March 31,
2015
 
December 31,
2014
Consumer
 
 
 
Retail financing, gross
$
55,227

 
$
55,856

Less: Unearned interest supplements
(1,696
)
 
(1,760
)
Consumer finance receivables
53,531

 
54,096

Non-Consumer
 

 
 

Dealer financing
31,421

 
31,340

Other financing
1,061

 
1,026

Non-Consumer finance receivables
32,482

 
32,366

Total recorded investment
$
86,013

 
$
86,462

 
 
 
 
Recorded investment in finance receivables
$
86,013

 
$
86,462

Less:  Allowance for credit losses
(314
)
 
(321
)
Finance receivables, net (a)
$
85,699

 
$
86,141

 
 
 
 
Net finance receivables subject to fair value (b)
$
84,023

 
$
84,468

Fair value
85,458

 
85,941

__________
(a)
At March 31, 2015 and December 31, 2014, Finance receivables, net on the consolidated balance sheet were $79.2 billion and $81.1 billion, respectively. The balance is comprised of Financial Services sector finance receivables of $85.7 billion and $86.1 billion, respectively, net of $6.5 billion and $5 billion, respectively, of receivables purchased by Financial Services sector from Automotive sector, which are reclassified to Other receivables, net.
(b)
At March 31, 2015 and December 31, 2014, excludes $1.7 billion and $1.7 billion, respectively, of certain receivables (primarily direct financing leases) that are not subject to fair value disclosure requirements.

Excluded from finance receivables at March 31, 2015 and December 31, 2014, was $179 million and $191 million, respectively, of accrued uncollected interest, which we report in Other assets on the balance sheet.


12

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCIAL SERVICES SECTOR FINANCE RECEIVABLES (Continued)
Included in the recorded investment in finance receivables at March 31, 2015 and December 31, 2014 were consumer receivables of $25.9 billion and $24.4 billion and non-consumer receivables of $21.3 billion and $21.8 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. The receivables are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations or the claims of Ford Credit’s other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions (see Note 11).

Aging

For all finance receivables, we define “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date. The recorded investment of consumer receivables greater than 90 days past due and still accruing interest was $11 million and $17 million at March 31, 2015 and December 31, 2014, respectively. The recorded investment of non-consumer receivables greater than 90 days past due and still accruing interest was de minimis and $3 million at March 31, 2015 and December 31, 2014, respectively.

The aging analysis of our finance receivables balances were as follows (in millions):
 
March 31,
2015
 
December 31,
2014
Consumer
 
 
 
31-60 days past due
$
552

 
$
718

61-90 days past due
64

 
97

91-120 days past due
21

 
29

Greater than 120 days past due
49

 
52

Total past due
686

 
896

Current
52,845

 
53,200

Consumer finance receivables
53,531

 
54,096

 
 
 
 
Non-Consumer
 
 
 
Total past due
112

 
117

Current
32,370

 
32,249

Non-Consumer finance receivables
32,482

 
32,366

Total recorded investment
$
86,013

 
$
86,462


Credit Quality

Consumer Portfolio. When originating all classes of consumer receivables, we use a proprietary scoring system that measures the credit quality of the receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g., FICO score), and contract characteristics. In addition to our proprietary scoring system, we consider other individual consumer factors, such as employment history, financial stability, and capacity to pay.

Subsequent to origination, we review the credit quality of retail financing based on customer payment activity. As each customer develops a payment history, we use an internally-developed behavioral scoring model to assist in determining the best collection strategies which allows us to focus collection activity on higher-risk accounts. These models are used to refine our risk-based staffing model to ensure collection resources are aligned with portfolio risk. Based on data from this scoring model, contracts are categorized by collection risk. Our collection models evaluate several factors, including origination characteristics, updated credit bureau data, and payment patterns.


13

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCIAL SERVICES SECTOR FINANCE RECEIVABLES (Continued)
Credit quality ratings for consumer receivables are based on aging. Refer to the aging table above.

Consumer receivables credit quality ratings are as follows:

Passcurrent to 60 days past due
Special Mention61 to 120 days past due and in intensified collection status
Substandardgreater than 120 days past due and for which the uncollectible portion of the receivables has already been charged off, as measured using the fair value of collateral

Non-Consumer Portfolio. We extend credit to dealers primarily in the form of lines of credit to purchase new Ford and Lincoln vehicles as well as used vehicles. Payment is required when the dealer has sold the vehicle. Each non‑consumer lending request is evaluated by taking into consideration the borrower’s financial condition and the underlying collateral securing the loan. We use a proprietary model to assign each dealer a risk rating. This model uses historical dealer performance data to identify key factors about a dealer that we consider most significant in predicting a dealer’s ability to meet its financial obligations. We also consider numerous other financial and qualitative factors of the dealer’s operations including capitalization and leverage, liquidity and cash flow, profitability, and credit history with ourselves and other creditors.

Dealers are assigned to one of four groups according to risk ratings as follows:

Group I – strong to superior financial metrics
Group II – fair to favorable financial metrics
Group III – marginal to weak financial metrics
Group IV – poor financial metrics, including dealers classified as uncollectible

We generally suspend credit lines and extend no further funding to dealers classified in Group IV.

We regularly review our model to confirm the continued business significance and statistical predictability of the factors and update the model to incorporate new factors or other information that improves its statistical predictability. In addition, we regularly audit dealer inventory and dealer sales records to verify that the dealer is in possession of the financed vehicles and is promptly paying each receivable following the sale of the financed vehicle. The frequency of on‑site vehicle inventory audits depends on factors such as the dealer’s risk rating and our security position. Under our policies, on-site vehicle inventory audits of low-risk dealers are conducted only as circumstances warrant. Audits of higher-risk dealers are conducted with increased frequency based on risk ratings and our security position. We perform a credit review of each dealer at least annually and adjust the dealer’s risk rating, if necessary.

The credit quality of dealer financing receivables is evaluated based on our internal dealer risk rating analysis. A dealer has the same risk rating for its entire dealer financing regardless of the type of financing.

The credit quality analysis of our dealer financing receivables was as follows (in millions):
 
March 31,
2015
 
December 31,
2014
Dealer Financing
 
 
 
Group I
$
23,906

 
$
23,125

Group II
6,065

 
6,350

Group III
1,351

 
1,783

Group IV
99

 
82

Total recorded investment
$
31,421

 
$
31,340



14

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCIAL SERVICES SECTOR FINANCE RECEIVABLES (Continued)

Impaired Receivables. Impaired consumer receivables include accounts that have been rewritten or modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code that are considered to be troubled debt restructurings (“TDRs”), as well as all accounts greater than 120 days past due. Impaired non-consumer receivables represent accounts with dealers that have weak or poor financial metrics or dealer financing that has been modified in TDRs. The recorded investment of consumer receivables that were impaired at March 31, 2015 and December 31, 2014 was $396 million, or 0.7% of consumer receivables, and $415 million, or 0.8% of consumer receivables, respectively. The recorded investment of non-consumer receivables that were impaired at March 31, 2015 and December 31, 2014 was $126 million, or 0.4% of non-consumer receivables, and $105 million, or 0.3% of non-consumer receivables, respectively. Impaired finance receivables are evaluated both collectively and specifically. See Note 5 for additional information related to the development of our allowance for credit losses.

The accrual of revenue is discontinued at the time a receivable is determined to be uncollectible. Accounts may be restored to accrual status only when a customer settles all past-due deficiency balances and future payments are reasonably assured. For receivables in non-accrual status, subsequent financing revenue is recognized only to the extent a payment is received. Payments are generally applied first to outstanding interest and then to the unpaid principal balance.

A restructuring of debt constitutes a TDR if we grant a concession to a debtor for economic or legal reasons related to the debtor’s financial difficulties that we otherwise would not consider. Consumer and non-consumer receivables that have a modified interest rate below market rate or that were modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code, except non-consumer receivables that are current with minimal risk of loss, are considered to be TDRs. We do not grant concessions on the principal balance of our receivables. If a receivable is modified in a reorganization proceeding, all payment requirements of the reorganization plan need to be met before remaining balances are forgiven. Finance receivables involved in TDRs are specifically assessed for impairment.


15

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 5. FINANCIAL SERVICES SECTOR ALLOWANCE FOR CREDIT LOSSES

An analysis of the allowance for credit losses related to finance receivables for the periods ended March 31 was as follows (in millions):
 
First Quarter 2015
 
Consumer
 
Non-Consumer
 
Total
Allowance for credit losses
 
 
 
 
 
Beginning balance
$
305

 
$
16

 
$
321

Charge-offs
(80
)
 
1

 
(79
)
Recoveries
30

 
2

 
32

Provision for credit losses
53

 
(4
)
 
49

Other (a)
(7
)
 
(2
)
 
(9
)
Ending balance (b)
$
301

 
$
13

 
$
314

 
 
 
 
 
 
Analysis of ending balance of allowance for credit losses

 
 
 
 
Collective impairment allowance
$
280

 
$
12

 
$
292

Specific impairment allowance
21

 
1

 
22

Ending balance (b)
301

 
13

 
314

 
 
 
 
 
 
Analysis of ending balance of finance receivables
 
 
 
 
 
Collectively evaluated for impairment
53,135

 
32,356

 
85,491

Specifically evaluated for impairment
396

 
126

 
522

Recorded investment
53,531

 
32,482

 
86,013

 
 
 
 
 
 
Ending balance, net of allowance for credit losses
$
53,230

 
$
32,469

 
$
85,699

__________
(a)
Primarily represents amounts related to translation adjustments.
(b)
Total allowance, including reserves for operating leases, was $355 million.
 
First Quarter 2014
 
Consumer
 
Non-Consumer
 
Total
Allowance for credit losses
 
 
 
 
 
Beginning balance
$
327

 
$
30

 
$
357

Charge-offs
(75
)
 
(2
)
 
(77
)
Recoveries
34

 
5

 
39

Provision for credit losses
23

 
(7
)
 
16

Other (a)
(2
)
 
1

 
(1
)
Ending balance (b)
$
307

 
$
27

 
$
334

 
 
 
 
 
 
Analysis of ending balance of allowance for credit losses

 
 
 
 
Collective impairment allowance
$
284

 
$
24

 
$
308

Specific impairment allowance
23

 
3

 
26

Ending balance (b)
307

 
27

 
334

 
 
 
 
 
 
Analysis of ending balance of finance receivables
 
 
 
 
 
Collectively evaluated for impairment
50,116

 
33,012

 
83,128

Specifically evaluated for impairment
424

 
92

 
516

Recorded investment
50,540

 
33,104

 
83,644

 
 
 
 
 
 
Ending balance, net of allowance for credit losses
$
50,233

 
$
33,077

 
$
83,310

__________
(a)
Primarily represents amounts related to translation adjustments.
(b)
Total allowance, including reserves for operating leases, was $358 million.


16

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. INVENTORIES

All inventories are stated at the lower of cost or market. Cost for a substantial portion of U.S. inventories is determined on a last-in, first-out (“LIFO”) basis. LIFO was used for 34% and 28% of total inventories at March 31, 2015 and December 31, 2014, respectively. Cost of other inventories is determined by costing methods that approximate a first-in, first-out (“FIFO”) basis.

Inventories were as follows (in millions):
 
March 31,
2015
 
December 31,
2014
Raw materials, work-in-process, and supplies
$
4,178

 
$
3,822

Finished products
6,331

 
5,022

Total inventories under FIFO
10,509

 
8,844

LIFO adjustment
(990
)
 
(978
)
   Total inventories
$
9,519

 
$
7,866


NOTE 7. OTHER LIABILITIES AND DEFERRED REVENUE

Other liabilities and deferred revenue were as follows (in millions):
 
March 31,
2015
 
December 31,
2014
Automotive Sector
 
 
 
Current
 
 
 
Dealer and dealers’ customer allowances and claims
$
7,388

 
$
7,846

Deferred revenue
4,301

 
3,923

Employee benefit plans
1,328

 
1,994

Accrued interest
159

 
222

Other postretirement employee benefits (“OPEB”)
379

 
397

Pension (a)
345

 
374

Other
2,845

 
3,178

Total Automotive other liabilities and deferred revenue
16,745

 
17,934

Non-current
 

 
 

Pension (a)
9,049

 
9,721

OPEB
5,810

 
5,991

Dealer and dealers’ customer allowances and claims
2,793

 
2,852

Deferred revenue
2,747

 
2,686

Employee benefit plans
1,142

 
1,149

Other
1,530

 
1,394

Total Automotive other liabilities and deferred revenue
23,071

 
23,793

Total Automotive sector
39,816

 
41,727

Financial Services Sector
1,828

 
1,850

Total Company
$
41,644

 
$
43,577

__________
(a)
Balances at March 31, 2015 reflect net pension liabilities at December 31, 2014, updated for service and interest cost, expected return on assets, separation expense, actual benefit payments, cash contributions, and an adjustment recorded in the first quarter of 2015 (see Note 8 for additional information). The discount rate and rate of expected return assumptions are unchanged from year-end 2014.


17

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. RETIREMENT BENEFITS

In the first quarter of 2015, we recorded a $782 million adjustment to correct for an understatement in the year-end 2014 valuation of our U.S. pension benefit obligation. The adjustment reduced Other assets by $301 million and increased Other liabilities and deferred revenue by $481 million. The resulting after-tax adjustment to Other comprehensive income was a loss of $508 million. The adjustments were not material to current or prior period financial statements.
Defined Benefit Plans - Expense

The pre-tax expense for our defined benefit pension and OPEB plans for the periods ended March 31 was as follows (in millions):
 
First Quarter
 
Pension Benefits
 
 
 
 
 
U.S. Plans
 
Non-U.S. Plans
 
Worldwide OPEB
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Service cost
$
147

 
$
127

 
$
135

 
$
118

 
$
15

 
$
13

Interest cost
454

 
498

 
239

 
300

 
60

 
67

Expected return on assets
(689
)
 
(678
)
 
(349
)
 
(379
)
 

 

Amortization of: