Ford 2014 Annual Report Download - page 169

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 22. CHANGES IN INVESTMENTS IN AFFILIATES AND ASSETS HELD FOR SALE (Continued)
Automotive Sector
Changes in Investments in Affiliates
Ford Sollers. We formed the Ford Sollers joint venture in October 2011. Upon contribution of our then wholly-owned
operations in Russia to the joint venture in exchange for cash and notes receivable in the amount of $307 million and a
50% equity interest in the new joint venture, we deconsolidated the related assets and liabilities, recorded an equity
method investment in Ford Sollers at its fair value of $364 million, and recognized a pre-tax gain of $401 million. The fair
value was calculated using a discounted cash flow analysis with assumptions of relevant factors at that time.
During the second quarter of 2014, we recorded a $329 million pre-tax impairment for our Ford Sollers joint venture as
a result of factors in the Russian market including a weaker ruble, lower industry volume, and industry segmentation
changes that negatively impacted the sales of Focus. These factors reduced our expected cash flows for Ford Sollers in
the near-term, thereby reducing the investment’s fair value. The non-cash charge was reported in Equity in net income of
affiliated companies.
We measured the fair value of our equity in net assets of Ford Sollers using a discounted cash flow analysis. We
used cash flows that reflect Ford Sollers present plan, aligned with assumptions a market participant would have made.
We assumed a discount rate of 15% based on the appropriate weighted average cost of capital, adjusted for perceived
business risks related to regulatory concerns, political tensions, foreign exchange volatility, and risk associated with the
Russian automotive industry.
JMC. During the fourth quarter of 2013, we completed the acquisition of an additional 2% stake in JMC, a publicly-
traded company in China that assembles Ford and non-Ford vehicles for distribution in China and other export markets.
As a result, we recorded a $48 million increase in Equity in net assets of affiliated companies.
Ford LRH. During the third quarter of 2013, we completed the liquidation of a foreign subsidiary holding company,
Ford LRH, and, as a result, reclassified a foreign currency translation loss of $103 million related to the investment from
Accumulated other comprehensive income/(loss) to Automotive interest income and other income/(loss), net.
Changan Ford Mazda Automobile Corporation, Ltd (“CFMA”). Our Chinese joint venture, CFMA, whose members
included Chongqing Changan Automobile Co., Ltd. (“Changan”) (50% partner), Mazda (15% partner), and
Ford (35% partner), produced and distributed in China a variety of Ford passenger car models, as well as Mazda and
Volvo models. On November 30, 2012, CFMA transferred its Nanjing operations to Changan Mazda Automobile Ltd.
(“CMA”), and CFMA was renamed CAF. Immediately after the split, Ford and Mazda fully exchanged their respective
interest in the two joint ventures. As a result, Ford now owns a 50% interest in CAF and Mazda owns a 50% interest in
CMA; Changan remains a 50% partner in each joint venture. CMA continued to assemble vehicles for CAF as a contract
manufacturer until 2014.
Upon the exchange, we de-recognized the historical carrying value of our equity investment in CMA of $115 million,
increased our equity investment in CAF by the fair value of the interest received of $740 million, and recognized a fourth
quarter 2012 pre-tax gain of $625 million in Automotive interest income and other income/(expense), net.
Financial Services Sector
Assets Held for Sale
Other Financial Services. During April and August 2013, we executed agreements to sell certain V retail
financing receivables in tranches to a third-party financing company. We received cash proceeds of $495 million and
recognized pre-tax gains of $6 million for receivables sold in 2013. The pre-tax gains are reported in Financial Services
other income(loss), net. All servicing obligations were transferred to the third party upon sale of the receivables. As a
consequence of the sale of receivables, we also recognized other expenses of $56 million. As of December 31, 2014,
there were no remaining Volvo-related retail financing receivables.
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