Annual Report 2011 - Ford Motor Company

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Notes to the Financial Statements NOTE 10. 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 approximately 32% of total inventories at December 31, 2011 and 2010. Cost of other inventories is determined by costing methods that approximate a first-in, first-out ("FIFO") basis. Inventories at December 31 were as follows (in millions): Raw materials, work-in-process and supplies Finished products Total inventories under FIFO Less: LIFO adjustment Total inventories NOTE 11. EQUITY IN NET ASSETS OF AFFILIATED COMPANIES 120 Ford Motor Company | 2011 Annual Report 2011 $ 2,847 3,982 6,829 (928) $ 5,901 2010 $ 2,812 3,970 6,782 (865) $ 5,917 We use the equity method of accounting for our investments in entities over which we do not have control, but over whose operating and financial policies we are able to exercise significant influence. Ownership Percentages and Investment Balances The following table reflects our ownership percentages at December 31, 2011, and carrying value of equity method investments at December 31, 2011 and 2010 (in millions, except percentages): Automotive Sector Changan Ford Mazda Automobile Corporation, Ltd Jiangling Motors Corporation, Ltd AutoAlliance International, Inc Ford Otomotiv Sanayi Anonim Sirketi ("Ford Otosan") AutoAlliance (Thailand) Co., Ltd. FordSollers Netherlands B.V. ("FordSollers") (a) Getrag Ford Transmissions GmbH ("GFT") S.C. Automobile Craiova S.A. ("ACSA") (a) Tenedora Nemak, S.A. de C.V. Changan Ford Mazda Engine Company, Ltd. DealerDirect LLC OEConnection LLC Percepta, LLC Blue Diamond Truck, S. de R.L. de C.V. Ford Performance Vehicles Pty Ltd. Blue Diamond Parts, LLC Automotive Fuel Cell Cooperation Corporation Ford Motor Company Capital Trust II ("Trust II") (b) Other Total Automotive sector Financial Services Sector Forso Nordic AB FFS Finance South Africa (Pty) Limited RouteOne LLC CNF-Administradora de Consorcio National Ltda. Total Financial Services sector Total Company __________ (a) See Note 23 for further discussion. (b) See Note 18 for further discussion. Ownership Percentage 35.0% 30.0 50.0 41.0 50.0 50.0 50.0 100.0 6.8 25.0 97.7 33.3 45.0 25.0 49.0 25.0 30.0 — Various 50.0 50.0 30.0 33.3 Investment Balance 2011 $ 468 373 372 369 367 361 229 92 68 33 18 13 7 7 6 4 4 — 6 2,797 71 43 15 10 139 $ 2,936 2010 $ 313 307 293 414 338 — 227 223 67 32 20 13 6 6 9 6 4 157 6 2,441 71 39 14 4 128 $ 2,569 We received $316 million, $337 million, and $299 million of dividends from these affiliated companies for the years ended December 31, 2011, 2010, and 2009, respectively.
Notes to the Financial Statements NOTE 12. SIGNIFICANT UNCONSOLIDATED AFFILIATES We are required to measure the impact of all unconsolidated majority-owned subsidiaries and equity-method investments to determine their significance to our financial statements. If the affiliates meet the defined thresholds of significance, certain financial disclosure data is required. For 2011, none of the affiliates met the defined thresholds of significance. NOTE 13. VARIABLE INTEREST ENTITIES A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary. The primary beneficiary has both the power to direct the activities that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. We have the power to direct the activities of an entity when our management has the ability to make key operating decisions, such as decisions regarding capital or product investment or manufacturing production schedules. We have the power to direct the activities of our special purpose entities when we have the ability to exercise discretion in the servicing of financial assets, issue additional debt, exercise a unilateral call option, add assets to revolving structures, or control investment decisions. Assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against our general assets. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on our general assets; rather, they represent claims against the specific assets of the consolidated VIEs. Automotive Sector VIEs of which we are the primary beneficiary: At December 31, 2010, we had one VIE of which we were the primary beneficiary - Cologne Precision Forge GmbH ("CPF"), formerly Tekfor Cologne GmbH. CPF was a 50/50 joint venture with Neumayer Tekfor GmbH ("Neumayer") to which Ford transferred the operations of its Cologne forge plant in 2003. CPF produces forged components, primarily for transmissions and chassis, for use in Ford vehicles and for sale to third parties. On December 21, 2010, Ford and Neumayer signed an agreement pursuant to which Neumayer would withdraw from the joint venture and sell its shares in the joint venture to Ford. The agreement became effective in March 2011 and CPF is now a wholly-owned subsidiary of Ford. At December 31, 2009, in addition to CPF, we also held interests in certain dealerships in North America as a part of our Dealer Development program. Throughout 2009, we sold our ownership interest and liquidated most of these dealerships. As at December 31, 2010, we consolidated the remaining dealerships under the voting interest model. The total consolidated VIE assets and liabilities reflected on our December 31 balance sheet were as follows (in millions): Assets Cash and cash equivalents Other receivables, net Inventories Net property Other assets Total assets Liabilities Payables Total liabilities 2010 $ 9 13 19 31 2 $ 74 $ 16 $ 16 The financial performance of the VIEs reflected on our statement of operations at December 31, 2011, 2010, and 2009 includes consolidated sales of $10 million, $58 million, and $1,907 million, respectively, and consolidated cost of sales, selling, administrative, and interest expense of $9 million, $66 million, and $2,071 million, respectively. Ford Motor Company | 2011 Annual Report 121
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PROFITABLE GROWTH FOR ALL Ford Moto
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ON THE COVER The all-new Ford Fusio
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A MESSAGE FROM THE PRESIDENT AND CE
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Environmental and social goals are
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1 1) Joe Hinrichs, Group Vice Presi
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To meet regional needs in Asia Paci
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UTILITIES The latest One Ford globa
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LINCOLN CUTTING-EDGE PRODUCTS, PERS
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GREEN 2 Ford continues to work to f
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SMART As technology becomes ever mo
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1) Ford team at the ringing of the
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THE POWER OF CHOICE With record sal
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PEOPLE HELPING PEOPLE Ford voluntee
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FINANCIAL CONTENT * 26 Management
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GLOBAL OVERVIEW Automotive Brand Cu
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Annual Report 2011 - Ford Motor Company

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