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Notes to the Financial Statements<br />
NOTE 23. HELD-<strong>FOR</strong>-SALE OPERATIONS, DISPOSITIONS, AND ACQUISITIONS (Continued)<br />
On October 1, 2011, we contributed our wholly-owned operations in Russia, consisting primarily of a manufacturing<br />
plant near St. Petersburg and access to our Russian dealership network to the joint venture. Additionally, we entered into<br />
an agreement with FordSollers for the granting of an exclusive right to manufacture, assemble, and distribute certain<br />
Ford-brand vehicles in Russia through the licensing of certain trademarks and intellectual property rights. Sollers<br />
contributed two production facilities. The joint venture will be engaged in the manufacturing and distribution of a range of<br />
Ford passenger cars and light commercial vehicles in Russia. As part of our ongoing relationship with FordSollers, we will<br />
supply parts and other vehicle components to the joint venture and receive a royalty of five percent of the joint venture's<br />
net sales revenue.<br />
The assets and liabilities of Ford Russia that were classified as held for sale were as follows (in millions):<br />
Assets<br />
Cash and cash equivalents<br />
Receivables<br />
Inventories<br />
Net property<br />
Other assets<br />
Total assets of held-for-sale operations<br />
Liabilities<br />
Trade payables<br />
Other payables<br />
Accrued liabilities<br />
Total liabilities of held-for-sale operations<br />
October 1,<br />
2011<br />
$ 69<br />
54<br />
145<br />
221<br />
13<br />
$ 502<br />
$ 222<br />
5<br />
89<br />
$ 316<br />
Upon contribution of our wholly-owned operations in Russia to the joint venture in exchange for a 50% equity interest,<br />
we deconsolidated the assets and liabilities shown above, recorded an equity method investment in FordSollers at its fair<br />
value of $364 million, and recognized a pre-tax gain of $178 million attributable to the remeasurement of the retained<br />
investment to its fair value. In addition, we received cash proceeds of $174 million, recorded a note receivable in the<br />
amount of $133 million, recorded a payable of $27 million, and recognized loss in accumulated foreign currency<br />
adjustment of $57 million. The total pre-tax gain of $401 million is reported in Automotive interest income and other nonoperating<br />
income/(expense), net.<br />
We measured the fair value of our equity interest using the income approach. We used cash flows that were<br />
developed jointly by Ford and Sollers. The significant assumptions used in this approach included:<br />
• Projected growth in the Russian automobile market;<br />
• Reduced import duties on certain auto parts; and<br />
• A discount rate of 16% based on an appropriate weighted average cost of capital, adjusted for perceived business<br />
risks related to regulatory concerns, foreign exchange volatility, execution risk, and risk associated with the<br />
Russian automotive industry.<br />
We, along with Sollers, pledged 100% of the shares in the joint venture to the State Corporation Bank for Development<br />
and Foreign Economic Operations - Vnesheconombank ("VEB") as collateral securing the joint venture's debt.<br />
Dispositions<br />
Automotive Components Holdings, LLC ("ACH"). On June 1, 2011, ACH completed the legal sale of its blow-molded<br />
fuel tank business located at its Milan plant to Inergy Automotive Systems. As a result of the terms of the arrangement,<br />
the value of the property remains on our balance sheet and is being amortized over the term of the new supply agreement<br />
with Inergy Automotive.<br />
Volvo. On August 2, 2010, we completed the sale of Volvo and related assets to Zhejiang Geely Holding Group<br />
Company Limited ("Geely"). As agreed, Volvo retained or acquired certain assets used by Volvo, consisting principally of<br />
licenses to use certain intellectual property. During the first quarter of 2011, the final true-up of the purchase price was<br />
adjusted upward by $9 million, lowering our pre-tax loss on the sale to $14 million reported in Automotive interest income<br />
and other non-operating income/(expense), net.<br />
As part of the agreement between Ford and Geely, we continue to supply Volvo with various vehicle components. Due<br />
to our continued involvement with Volvo after separation, we did not classify Volvo as a discontinued operation.<br />
Ford Motor Company | 2011 Annual Report 161