Alexis Beckford

Dora Garcia

Maxine Brandt Elizabeth Bento PRESENTED BY

COMPANY OVERVIEW

• A Global Automotive Industry Leader• Based in Dearborn, Michigan• A manufacturer and distributor of automobiles across six continents• Employs approximately 187,000 persons• Has 62 manufacturing plants worldwide• Manufactures the Ford and Lincoln lines/Also parts and accessories• Incorporated in Delaware in 1919• Provides Financial Services through Ford Motor Credit• Trades under the NYSE under the ticker: F• Most recent stock price: $15.48 as of May 16, 2015• Sales of $6,323,000 worldwide in 2014• Global market share:7.2% in 2014

• Ford Motor Company has been in continuous family control for over 100 years

• In 1908 Ford introduced the first engine with a removable cylinder head, in the Model T

• In 1927, Ford introduced the Model A, the first car with safety glass in the windshield

• Ford launched the first low priced V8 engine powered car in 1932

• Ford owns Brazilian SUV manufacturer, Troller, and Australian performance car manufacturer FPV

• Ford owns a 2.1% stake in Mazda of Japan, an 8% stake in Aston Martin of the United Kingdom, and a 49%

stake in Jiangling of China

• It also has a number of joint-ventures, two in China (Changan Ford Mazda and Ford Lio Ho), one in Thailand

(AutoAlliance Thailand), one in Turkey (Ford Otosan), and one in Russia (Ford Sollers)

COMPANY OVERVIEW (cont’d)

• Ford introduced methods for large-scale manufacturing of cars and large-scale management of an

industrial workforce using elaborately engineered manufacturing sequences typified by moving

assembly lines; by 1914 these methods were known around the world as Fordism

• Ford is the second-largest U.S.-based automaker (preceded by General Motors) and the fifth-

largest in the world

• Ford is the eighth-ranked overall American-based company

• The company went public in 1956 but the Ford family, through special Class B shares, still retain

40 percent voting rights

COMPANY OVERVIEW (cont’d)

COMPANY OFFICERS

BUSINESS SECTORS

NEW INITIATIVES & OPPORTUNITIES

TRENDS & STRATEGIES

• In 2014, Ford Motor Company launched 24 all-new or significantly refreshed products globally, including the all-new F-150, Mustang, Escort, Ka, Transit, and Lincoln MKC. Ford’s momentum will continue in 2015 with 15 new global product launches.

• Ford Motor Company’s strategy is to serve customers in all markets with a full family of best in class vehicles—small, medium and large; cars, utilities and trucks; each delivering the highest quality, fuel efficiency, safety, smart design, and value—and delivering profitable growth for all.

• The Ford Edge was completely redesigned in 2014.• The Edge was designed with 3 rows/seven seats to meet the specific needs of drivers in China.

NEW INITIATIVES & OPPORTUNITIES

Pre-Collision Assist with Pedestrian Detection – uses a camera and radar to help reduce the severity of, or even eliminate, some frontal collisions involving vehicles and pedestrians. The pre-collision assist helps drivers avoid frontal collisions with other vehicles at all speeds, while Pedestrian Detection helps drivers avoid pedestrians at lower speeds.

Active Park Assist – uses ultrasonic sensors and electric power-assisted steering to help drivers parallel park. The sensors measure the gap between two vehicles to determine if there is enough room for the vehicle. After confirming the vehicle can fit, the vehicle automatically steers into the space, while the driver operates the accelerator and brake pedals.

Adaptive Cruise Control / Collision Warning with Brake Support – uses a radar sensor in the front of the vehicle to measure the distance and speed of vehicles ahead. Using this information, the vehicle can automatically slow to keep a consistent following distance set by the driver. The slower speed will be maintained if adaptive cruise control is activated. Collision warning triggers visual and audio alerts if the system detects the following distance is diminishing too quickly and a collision may occur. It also pre-charges the brakes if the driver needs to stop suddenly.

Lane Keeping – uses a camera to help prevent the driver from drifting outside of the intended driving lane. The system automatically detects the left- or right- hand road lane markings. An alert, such as a vibration in the steering wheel, is used to warn the driver. The system can also provide steering torque to help guide the vehicle back into the lane if needed.

Enhanced Active Park Assist – uses ultrasonic sensors to help the driver reverse into a space side-to-side with other cars, and for ease of parking going into and out of parking spaces.

And Ford is researching many automated assist technologies, including Traffic Jam Assist, a further building block toward automated driving in the future.

NEW INITIATIVES & OPPORTUNITIES

RISK FACTORS

• Decline in industry sales volume, particularly in the United States, Europe, or China, due to financial crisis, recession, geopolitical events, or other factors.

• Decline in Ford’s market share or failure to achieve growth. • Lower-than-anticipated market acceptance of Ford’s new or existing products. • Market shift away from sales of larger, more profitable vehicles beyond Ford’s current planning

assumption, particularly in the United States. • An increase in or continued volatility of fuel prices, or reduced availability of fuel. • Continued or increased price competition resulting from industry excess capacity, currency

fluctuations, or other factors. • Fluctuations in foreign currency exchange rates, commodity prices, and interest rates. • Adverse effects resulting from economic, geopolitical, or other events.

RISK FACTORS (cont’d)

• Economic distress of suppliers that may require Ford to provide substantial financial support or take other measures to ensure supplies of components or materials and could increase costs, affect liquidity, or cause production constraints or disruptions.

• Work stoppages at Ford or supplier facilities or other limitations on production (whether as a result of labor disputes, natural or man-made disasters, tight credit markets or other financial distress, production constraints or difficulties, or other factors).

• Single-source supply of components or materials. • Labor or other constraints on Ford’s ability to maintain competitive cost structure. • Substantial pension and postretirement health care and life insurance liabilities impairing liquidity or financial

condition. • Worse-than-assumed economic and demographic experience for postretirement benefit plans (e.g., discount rates

or investment returns).• The discovery of defects in vehicles resulting in delays in new model launches, recall campaigns, or increased

warranty costs. Restriction on use of tax attributes from tax law “ownership change.”

• Increased safety, emissions, fuel economy, or other regulations resulting in higher costs, cash expenditures, and/or sales restrictions.

• Unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, perceived environmental impacts, or otherwise.

• A change in requirements under long-term supply arrangements committing Ford to purchase minimum or fixed quantities of certain parts, or to pay a minimum amount to the seller (“take-or-pay” contracts).

• Adverse effects on results from a decrease in or cessation or clawback of government incentives related to investments.

• Inherent limitations of internal controls impacting financial statements and safeguarding of assets. • Cybersecurity risks to operational systems, security systems, or infrastructure owned by Ford, Ford Credit, or a

third-party vendor or supplier. • Failure of financial institutions to fulfill commitments under committed credit and liquidity facilities.

RISK FACTORS (cont’d)

• Higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles.

• Increased competition from banks, financial institutions, or other third parties seeking to increase their share of financing Ford vehicles.

• New or increased credit, consumer, or data protection or other regulations resulting in higher costs and/or additional financing restrictions.

RISK FACTORS (cont’d)

PRODUCT LIABILITY MATTERS

ASBESTOS MATTERS

ENVIRONMENTAL MATTERS

CLASS ACTIONS

OTHER MATTERS

RISK FACTORS: Legal Proceedings

SWOT ANALYSIS

Use of EstimatesBased on assumptions believed to be reasonable

Restricted CashRecorded in Other Assets section of balance sheet. Cash is restrictedfor legal and regulatory requirements

Net Intangible AssetsRecognize and amortize finite intangibles over their useful livesIndefinite life intangibles are not amortized, but tested for impairment

Long-Lived Assets Impairment

Asset groups are tested for recoverability and impairment as necessary

Sales and Marketing Incentives

Generally recognized in the automotive sector as reductions in

automotive revenues

ACCOUNTING POLICIES

Supplier Price Adjustments

Recognize when a final agreement with supplier is reached

Long-Lived Assets Impairment

Asset groups are tested for recoverability and impairment as necessary

Raw Material Arrangements

These arrangements are negotiated at arms’ length and do not involve

volume guarantees

Government Incentives

Receive in the form of tax rebates or credits, grants, and loans

Recorded when all conditions of agreements are filled

Selected Other Costs

Engineering and R&D are included in Automotive cost of sales

Advertising is included in SG&A expenses

ACCOUNTING POLICIES (cont’d)

ASC 235 - Notes to Financial Statements Management is required to adopt and adhere to the highest quality of

accounting policies possibleManagement must disclose the policies used, and the method of application

ACCOUNTING POLICIES (cont’d)

Venezuelan operations: Change from consolidation method to cost method of accounting• In 2013 the Venezuelan government effected a devaluation of their currency

which caused lack of exchangeability between currencies• This caused a one time $800 million loss in the 4th quarter of 2014

ACCOUNTING CHANGES & ERROR CORRECTIONS ASC 250

Disability accounting policies: switched from an event based model to a service based model

• Change was made because it better aligns the expense with the period the company benefits from the employee’s service and will provide better compatibility

• The change was retroactively applied and had a cumulative effect on total equity of $250 million

ACCOUNTING CHANGES & ERROR CORRECTIONS (cont’d)

Other accounting changes that did not impact the financial statements or disclosures:

Income TaxesPresentation of an unrecognized tax benefit when a net operating loss carryforward, a similar loss, or tax credit carryforward exists

Foreign Currency MattersParent’s accounting for cumulative translation adjustment

LiabilitiesObligations resulting from joint and several liability arrangements

ACCOUNTING CHANGES & ERROR CORRECTIONS (cont’d)

ASC 250 Accounting changes are allowed if:

Management deems it to be preferable to change an existing principle versus

continued use of the one being used

Adoption of a and further information

Correcting an error previously made new accounting principle

Refining a prior estimate as a result of experience in issued financial statements

ACCOUNTING CHANGES & ERROR CORRECTIONS (cont’d)

Sales of vehicles, parts, and accessories – to dealers and distributers• Recorded when all risks and rewards of ownership are transferred to the

Majority when products ship from manufacturer• If there is a right of return, related revenues are reduced by expected

returnsSales to fleet customers• Subject to guaranteed repurchase options• Vehicles accounting for as operating leases with sale proceeds recorded

as deferred revenue• The difference between the proceeds and guaranteed repurchase amount

is recognized in automotive revenues over the term of the leaseAverage leases is 11 months

REVENUE RECOGNITION – AUTOMOTIVE SECTOR

Revenue is generated primarily from interest on finance receivables• Recognized using the interest method

Revenue from rental payments received on operating leases is recognized

on a straight-line basis over the term of the lease

Accrued interest on finance revenue on operating lease is discontinued at the

time the account is determined to be uncollectable

REVENUE RECOGNITION – FINANCE SECTOR

REVENUE RECOGNITION

For the years ended December 31,2014 2013 2012

RevenuesAutomotive $ 135,782 $ 139,369 $ 126,567

Financial Services 8,295 7,548 6,992

Total revenues 144,077 146,917 133,559

ASC 605, Revenue for the sale of a product or provision of services is to be recognized when earned.To be earned, the following must be met:

• There is persuasive evidence that an arrangement exists• Delivery has occurred or services have been rendered• The seller’s price is determinable• Collectability is reasonably assures

REVENUE RECOGNITION

To recognize revenue when there is a right of return:

• The seller’s price is fixed

• The buyer has paid the seller

• The buyer's obligation will not change in the event of product destruction

• The buyer has economic substance apart from the seller

• The seller does not have significant future obligations for the resale

• Future returns can be reasonably estimated

REVENUE RECOGNITION

Receivables are made up of finance receivables and leases

The finance receivables are composed of two segments consumer and non-consumer financing.

The receivables are generally secured by the vehicles, inventory, or other property being financed.

The consumer segment is vehicles financed for the use of businesses and people that use the vehicles for

commercial and personal use

The non-consumer segment is made up of vehicles offered to dealers and parts and accessories. It also

includes financing available for dealers to make improvements to their dealerships facilities and to

purchase dealership real estate as well as for dealerships to use for working capital

RECIEVABLES

ASC 310

Consumer PortfolioReceivables 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.

Consumer

Non-Consumer

Finance receivables 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.

Non-Consumer PortfolioReceivables 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 94% of our dealer financing

• Other financing – primarily related to the sale of parts and accessories to dealers

2014: Finance receivables 3.6 billion

FINANCE RECIEVABLES

Operating leasesNorth America accounted for 99% of Ford Credit’s total operating leases at December 31, 2013Finance Receivables. Finance receivables 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. Ford measures finance receivables at fair value for purposes of disclosure using internal valuation models.

These models project future cash flows of financing contracts based on scheduled contract payments (including principal and interest). The projected cash flows are discounted to present value based on assumptions regarding credit losses, pre-payment speed, and applicable spreads to approximate current rates.

The fair value of collateral for retail receivables is calculated by multiplying the outstanding receivable balances by the average recovery value percentage to determine the fair value adjustment. The fair value of collateral for dealer loans is determined by reviewing various appraisals, which include total adjusted appraised value of land and improvements, alternate use appraised value, broker’s opinion of value, and purchase offers. The fair value adjustment is calculated by comparing the net carrying value of the dealer loan and the estimated fair value of collateral.

RECIEVABLES

Ford generally suspends credit lines and extends no further funding to dealers classified in Group IV. They

regularly review their 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,

they 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 credit quality of dealer

financing receivables is evaluated based on Ford’s internal dealer risk rating analysis. A dealer has the same risk rating for

its entire dealer financing regardless of the type of financing.

RECIEVABLES

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

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

• Ford Credit’s charge-offs were up from its record-low in 2013, primarily reflecting higher severity and lower recoveries in North America, and higher losses in International.

• In purchasing retail finance and operating lease contracts, Ford Credit uses a proprietary scoring system that classifies contracts using several factors, such as credit bureau information, consumer credit risk scores (e.g., FICO score), and contract characteristics. In addition to Ford Credit’s proprietary scoring system, it considers other factors, such as employment history, financial stability, and capacity to pay. Consumer receivables credit quality ratings are as follows:

RECIEVABLES

Pass – current to 60 days past due Special Mention – 61 to 120 days past due and in intensified collection status Substandard – greater than 120 days past due and for which the uncollectible portion

of the receivables has already been charged off, as measured using the fair value of collateral. At December 31, 2013, Ford Credit had between 5% and 6% of the outstanding U.S. retail finance and operating lease contracts in its portfolio as high risk at contract inception.

Residual Risk:

Ford Credit is exposed to residual risk on operating leases and similar balloon payment products where the customer may return the financed vehicle to Ford Credit. Residual risk is the possibility that the amount Ford Credit obtains from returned vehicles will be less than its estimate of the expected residual value for the vehicle.

RECIEVABLES

Credit Loss:

Credit loss measures changes in the provision for credit losses. For analysis purposes, management splits the provision for credit losses primarily into net charge-offs and the change in the allowance for credit losses.

Net charge-off changes are primarily driven by the number of repossessions, severity per repossession, and recoveries. Changes in the allowance for credit losses are primarily driven by changes in historical trends in credit losses and recoveries, changes in the composition and size of Ford Credit’s present portfolio, changes in trends in historical used vehicle values, and changes in economic conditions.

Increased competition from banks, financial institutions, or other third parties seeking to increase their

share of financing Ford vehicles. No single company is a dominant force in the automotive finance

industry. Most of Ford Credit’s bank competitors in the United States use credit aggregation systems that

permit dealers to send, through standardized systems, retail credit applications to multiple finance sources

to evaluate financing options offered by these sources. Also, direct on-line or large dealer group financing

options provide consumers with alternative finance sources and/or increased pricing transparency. All of

these financing alternatives drive greater competition based on financing rates. Competition from such

institutions and alternative finance sources could adversely affect Ford Credit’s profitability and the

volume of its retail business. In addition, Ford Credit may face increased competition on wholesale

financing for Ford dealers.

RECIEVABLES

Trade Receivables, recorded on their consolidated balance sheet in Other

receivables, net, consist primarily of Automotive sector receivables for

vehicles, parts, and accessories. Trade receivables initially are recorded at

the transaction amount. They record an allowance for doubtful accounts

representing their estimate of the probable losses. Each reporting period,

they assess the adequacy of their allowance for doubtful accounts taking

into consideration recoveries received during that period. Additions to the

allowance for doubtful accounts are made by recording charges to bad debt

expense reported in Automotive cost of sales. Receivables are charged to

the allowance for doubtful accounts when an account is deemed to be

uncollectible.

RECIEVABLES

Net Receivables Finance receivables - North America Consumer - Retail financing 44.1Dealer financing (a) 22.5Other 1.0Total finance receivables - North America 67.6Finance receivables - International Consumer - Retail financing 11.8Non-Consumer Dealer financing (a) 9.3 ; Other( 0.3) Total finance receivables - International (b) 21.4Unearned interest supplements (1.8) Allowance for credit losses (0.4) Finance receivables, net 86.9Net investment in operating leases (b) (c) 21.5 Total net receivables $ 108.4

RECIEVABLES

Ford Credit’s receivables, including finance receivables and operating leases, at December 31 were as follows (in billions):

Managed receivables at December 31, 2014 increased from year-end 2013, driven by increases in non-consumer and consumer finance receivables in all operations and increases in leasing in North America

Accounts Receivable is agreements by customers to pay for services received or merchandise obtained. Under rule ASC 310 Receivables a financing receivable arrangement has both of the following characteristic:

RECIEVABLES

A. It represents a contractual right to receive money in either of the following ways:1. On demand2. On fixed or determinable dates

B. It is recognized as an asset in the entity’s statement of financial positionC. Ford follows these rules because they are giving some type of merchandise or service in

return for payment.

Property Plant and Equipment is made up of manufacturing and assembly facilities located in different parts of the country.

The facilities are composed of assembly plants, engine plants, casting plants, metal stamping plants, transmission plants, and other component plants

A good portion of the warehouse and sales office space is leased (they own approximately 51% of the total square footage, and lease the balance). A substantial amount of our warehousing is provided by third-party providers under service contracts.

Almost all of the engineering centers and other research centers are owned by Ford as well as many engineering centers located outside of the United States

PROPERTY, PLANT, & EQUIPMENT

ASC 360

PROPERTY, PLANT, & EQUIPMENT

Ford uses eight regional engineering, research, and development centers, and 62 manufacturing plants as stated below:

Segment Plants North America 30

South America 8

Europe 12

Middle East & Africa 2

Asia Pacific 10

Total 62

Assets are recorded at cost, net of accumulated depreciation and impairments.

New assets are capitalized when they are expected to be used for more than one

year. Routine maintenance and repair costs are expensed when incurred.

Property and equipment are depreciated primarily using the straight-line method

over the estimated useful life of the asset.

PROPERTY, PLANT, & EQUIPMENT

PROPERTY, PLANT, & EQUIPMENT

Property, Plant, and Equipment Cost considerations-initial acquisition:

Determination of costs is critical to proper accounting for property, plant, and equipment. Upon acquisition, the reporting entity should capitalize all the costs necessary to deliver the asset to its intended location and prepare it for its productive use. Ford complies with this because they capitalize all new assets when they will be used for more than a year.

INVENTORY

“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 26% and 20% of total inventories at June 30, 2014 and December 31, 2013, respectively. Cost of other inventories is determined by costing methods that approximate a first-in, firstout (“FIFO”) basis”. (NOTE 9)

Raw materials, work-in-process, and supplies $ 3,822

Finished products 5,022

Total inventories under FIFO 8,844

LIFO adjustment (978)

Total inventories $7,866

ASC 340

INVENTORY

“Ford has entered into a number of long-term supply contracts that require them to purchase a fixed quantity of parts to be used in the production of their vehicles. If their need for any of these parts were to lessen, they could still be required to purchase a specified quantity of the part or pay a minimum amount to the seller pursuant to the take-or-pay contract, which could have a substantial adverse effect on their financial condition or results of operations”.

Raw Materials Ford purchases many raw materials from numerous suppliers around the world for use in production of their

vehicles. These materials include base metals (e.g., steel, iron castings, and aluminum), precious metals (e.g., palladium),

energy (e.g., natural gas), and plastics/resins (e.g., polypropylene). There always are risks and uncertainties with respect to the supply of raw materials, however, which could impact

availability in sufficient quantities to meet their needs.

Ford manages their vehicle production schedule based on a number of factors, including retail

sales (i.e., units sold by our dealerships to their customers at retail) and dealer stock levels (i.e., the

number of units held in inventory by our dealerships for sale to their customers). Historically, they have

experienced some seasonal fluctuation in the business, with production in many markets tending to be

higher in the first half of the year to meet demand in the spring and summer (typically the strongest sales

months of the year).

INVENTORY

All inventories are listed at the lower of cost or market value: “as stated in ASC 340-10-20: market shall not exceed the net realizable value and market shall not be less than net realizable value reduced by an allowance for an approximately normal profit margin”. This rule states that if the replacement cost (market) of the inventory is lower than the inventory cost, the lower figure should be used. Valuation can be determined on an item-by-item or major category basis”. Ford complies with these rules

INVENTORY

ASC 830Fluctuations in foreign currency exchange rates, commodity prices, and interest rates.• Affects both Automotive and Financial Services sectors • Normal practice is to use derivative instruments, when available, to hedge economic exposure with respect to forecasted

revenues and costs, assets, liabilities, and firm commitments denominated in foreign currencies. (ASC 815)

Key Economic Factors and Trends Affecting the Automotive Industry• Currency Exchange Rate Volatility. The U.S. Federal Reserve has ended financial asset purchases, and the resulting shifts in capital flows have

contributed to downward pressure on several emerging market currencies.• The yen and euro have depreciated as a result of policy changes by the Bank of Japan, and European Central Bank. The weak yen, in particular, adds

significant potential downward pressure on vehicle pricing across many markets globally.

FOREIGN CURRENCY MATTERS

PRESENTATION Venezuelan Operations

March 31, 2014 Exchange Rate Effect (Q1)

Automotive Sector $ (310,000,000)

Financial Services $ (6,000,000)

201 3

201 4 The exchange rate used at March 31, 2014 resulted in a re-measurement loss of $316 million in in the

first quarter of 2014

On February 13, 2013, a devaluation of the bolivar resulted in a re-measurement loss of $186 million in Automotive cost of sales in the first quarter of 2013.

FORD MOTOR COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

Cash flows from operating activities of continuing operations 2014 2013 2012Foreign currency adjustments $ 825 $ 228 $ (116)

REMEASUREMENT

Foreign Currency

Re-measurement results and the results of foreign currency hedging activities- reported in Automotive cost of sales, Selling, administrative, and other expenses, and Automotive interest income and other income, net:

Pre-Tax Losses due to re-measurement

2014 2013 2012$ 510 $ 349 $ 426

Changes in carrying values of assets and liabilities due to exchange rate fluctuations are recognized as Foreign Currency Translations (component of Other comprehensive income/(Ioss) and are reclassified upon sale or liquidation to Net income and recognized as part of the gain or loss on the investment.

RECLASSIFICATION OF FOREIGN CURRENCY TRANSLATION

Automotive Sector

Changes in Investments in Affiliates

During the third quarter of 2013, Ford liquidated a foreign subsidiary holding company, Ford LRH. • reclassified a foreign currency translation loss of $103 million related to the investment from:

Accumulated other comprehensive income/(loss) Automotive interest income and other income/(loss), net.

PRESS RELEASE……..FORD MOTOR COMPANY ANNOUNCES AGREEMENT TO SELL JAGUAR LAND ROVER TO TATA MOTORS

Income Effect of Derivative Financial Instruments

The gains/(losses), by hedge designation, recorded in income for the years ended December 31 were as follows (in millions):

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES ASC 815

Foreign currency exchange contracts 2014 2013 2012Automotive Sector 193 (26) (138)

Financial Services Sector 68 21 (70)

Derivative: A security whose price is dependent upon or derived from one or more underlying assets. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes.

The Automotive sector designated certain forward contracts as cash flow hedges of forecasted transactions with exposure to foreign currency exchange and commodity price risks.

Balance Sheet Effect of Derivative Financial Instruments

• Recorded on the balance sheet at fair value• Presented on a gross basis• Includes an adjustment for non-performance risk• Notional amounts are presented on a gross basis.

2014 2013Automotive Sector Notional Fair Value of

AssetsFair Value of

Liabilities Notional Fair Value of Assets

Fair Value of Liabilities

Cash Flow HedgesForeign currency exchange & commodity contracts $ 15,434 $ 359 $ 517 $ 16,238 $ 413 $ 189

Derivatives not designated as hedging instrumentsForeign currency exchange contracts $ 12,198 $ 157 $ 129 $ 11,599 $ 144 $ 210

Financial Services Sector Notional Fair Value of Assets

Fair Value of Liabilities Notional Fair Value

of AssetsFair Value of

Liabilities

Derivatives not designated as hedging instrumentsForeign currency exchange contracts $ 1,527 $ 18 $ 1 $ 2410 $ 1 $ 25

* Notional Amount is a specific unit of measure (e.g., currency units, shares, pounds, etc)

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (cont)

The *notional amount and estimated fair value of our derivative financial instruments at December 31 was as follows(in millions):

ASC 840

OPERATING LEASES RECORDEDInitial sale transaction Other Liabilities & Deferred Revenue

Difference between proceeds and the guaranteed repurchase amountAutomotive Revenues (using Straight line Method)

Initial vehicle cost Net Investment in Operating Leases

Depreciation Automotive Cost of Sales

Proceeds from sale at auction Automotive Revenues

Vehicles are sold to fleet customers, primarily daily rental car companies, and are subject to guaranteed repurchase options.

These vehicles are accounted for as operating leases.

LEASES

NET INVESTMENT IN OPERATING LEASES (ASC 840-20)

The net investment in operating leases at December 31 was as follows (in millions):

NET INVESTMENT 2014 2013Automotive SectorVehicles, net of depreciation $ 1,699 $ 1,384

Financial Services SectorVehicles and other equipment, at cost (a) $ 24,952 $ 21,738Accumulated depreciation (3,396) (3,115)Allowance for credit losses 38 23Total Financial Services sector $ 21,518 $ 18,600

Total Company $ 23,217 $ 19,984

2014 2013 2012Operating lease depreciation expense $ 3,098 $ 2,411 $ 1,795

Benefit plans impose significant liabilities that are not fully funded and will require additional cash contributions

ASC 405 Recall campaigns Warranty costs Product development Restructuring Growth

Pension and postretirement health care and life insurance

STRATEGY Close participation to new participants to limit liability growth

Reducing plan deficits through discretionary cash contributions

Progressively re-balancing assets to more fixed income investments to better match assets to the characteristics of liabilities

Strategic actions such as the voluntary lump sum payout program

Infrastructure Income Taxes Dealer and dealers’ customer allowances and claims Employee benefit plans Accrued interest

LIABILITIES

DEFERRED TAX LIABILITIES

• Leasing transactions• Deferred income• Depreciation and amortization (excluding leasing transactions)• Finance receivables• Other foreign deferred tax liabilities

“The amount of deferred income tax is based on the tax rates expected to be in effect during the periods in which the temporary differences reverse. It is a balance-sheet-oriented approach. It emphasizes the usefulness of financial statements in evaluating financial position and predicting future cash flows.” (investopedia.com)

Asset-liability Method

ASC 405

FAIR VALUE MEASUREMENT

Measured at fair value on a nonrecurring basis

Translated into functional currency Liabilities of foreign subsidiaries are translated from

their respective functional currencies to U.S. dollars using end-of-period exchange rates where they are recognized in Foreign currency translation, a component of Other comprehensive income/(Ioss).

Upon sale or upon complete or substantially complete liquidation of an investment in a foreign subsidiary, the amount of accumulated foreign currency translation related to the entity is reclassified to Net income and recognized as part of the gain or loss on the investment.

LIABILITIES