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Quantitative and Qualitative Disclosures About Market Risk Pre-tax cash flow sensitivity as of year-end 2011 and 2010 was as follows (in millions): Pre-Tax Cash Flow Sensitivity (given a one percentage point instantaneous increase in interest rates) Pre-Tax Cash Flow Sensitivity (given a one percentage point instantaneous decrease in interest rates) (a) December 31, 2011 December 31, 2010 $ $ 60 (22) $ $ (60) 22 _____ (a) Pre-tax cash flow sensitivity given a one percentage point decrease in interest rates requires an assumption of negative interest rates in markets where existing interest rates are below one percent. As of December 31, 2011, in the aggregate Ford Credit's assets re-price faster than its debt combined with the derivative instruments hedging the debt. Other things being equal, this means that during a period of rising interest rates, the interest rates earned on Ford Credit's assets will increase more rapidly than the interest paid on Ford Credit's debt, thereby initially increasing Ford Credit's pre-tax cash flow. Correspondingly, during a period of falling interest rates, Ford Credit would expect its pre-tax cash flow to initially decrease. While the sensitivity analysis presented is Ford Credit's best estimate of the impacts of the specified assumed interest rate scenarios, its actual results could differ from those projected. The model Ford Credit uses to conduct this analysis is heavily dependent on assumptions. Embedded in the model are assumptions regarding the reinvestment of maturing asset principal, refinancing of maturing debt, replacement of maturing derivatives, exercise of options embedded in debt and derivatives, and predicted repayment of retail installment sale and lease contracts ahead of contractual maturity. Ford Credit's repayment projections ahead of contractual maturity are based on historical experience. If interest rates or other factors change, Ford Credit's actual prepayment experience could be different than projected. Foreign Currency Risk. Ford Credit's policy is to minimize exposure to changes in currency exchange rates. To meet funding objectives, Ford Credit borrows in a variety of currencies, principally U.S. dollars, Canadian dollars, Euros and Pound Sterling. Ford Credit faces exposure to currency exchange rates if a mismatch exists between the currency of receivables and the currency of the debt funding those receivables. When possible, receivables are funded with debt in the same currency, minimizing exposure to exchange rate movements. When a different currency is used, Ford Credit may use foreign currency swaps and foreign currency forwards to convert substantially all of its foreign currency debt obligations to the local country currency of the receivables: As a result of this policy, Ford Credit believes its market risk exposure relating to changes in currency exchange rates is insignificant. Derivative Fair Values. The net fair value of Ford Credit's derivative financial instruments as of December 31, 2011 was an asset of about $1.1 billion, compared to an asset of $712 million as of December 31, 2010. For additional information regarding our Financial Services sector derivatives, see Note 25 of the Notes to the Financial Statements. 82 Ford Motor Company | 2011 Annual Report
Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Ford Motor Company In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of equity and of cash flows, including pages 84 through 179, present fairly, in all material respects, the financial position of Ford Motor Company and its subsidiaries at December 31, 2011 and December 31, 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting in this Annual Report. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying sector balance sheets and the related sector statements of operations and of cash flows are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. PricewaterhouseCoopers LLP Detroit, Michigan February 21, 2012 Ford Motor Company | 2011 Annual Report 83
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PROFITABLE GROWTH FOR ALL Ford Moto
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1 2 ON THE COVER The all-new Ford F
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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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3 4 Our product strategy remains co
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2 3 UTILITIES The latest One Ford g
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LINCOLN CUTTING-EDGE PRODUCTS, PERS
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1) Ford Focus Electric builds on th
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SMART As technology becomes ever mo
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The key to our projected growth is
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THE POWER OF CHOICE With record sal
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1 “A business that makes nothing
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FINANCIAL CONTENT * 26 Management
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Management’s Discussion and Analy
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Employment Data The approximate num
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GLOBAL OVERVIEW Automotive Brand Cu
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