Ford 2010 Annual Report Download - page 176

Notes to the Financial Statements
174 Ford Motor Company | 2010 Annual Report
NOTE 30. SELECTED QUARTERLY FINANCIAL DATA (unaudited) (Continued)
The pre-tax loss of $1.7 billion in the first quarter of 2009 includes a $1.1 billion gain (net of transaction costs) related
to Ford Credit's acquisition of $2.2 billion principal amount of our secured term loan for $1.1 billion of cash, a $292 million
reduction of expense related to a change in benefits and our ability to redeploy employees, and a $650 million impairment
charge related to our total investment in Volvo.
The pre-tax income of $2.2 billion in the second quarter of 2009 includes a $2.2 billion gain (net of transaction costs,
unamortized discounts, premiums and fees) related to Ford Credit's acquisition of $3.4 billion principal amount of our
public unsecured debt securities for $1.1 billion, a $1.2 billion gain related to a conversion offer on our 2036 Convertible
Notes, and a $281 million foreign exchange translation loss related to the liquidation of Progress Ford Sales Limited.
The pre-tax income of $908 million in the fourth quarter of 2009 includes a $310 million charge related to the
announced closure of our St. Thomas Assembly Plant in Canada, and a $264 million charge related to the settlement of
the UAW retiree health care obligation.
NOTE 31. COMMITMENTS AND CONTINGENCIES
Guarantees are recorded at fair value at the inception of the guarantee. Litigation and claims are accrued when losses
are deemed probable and reasonably estimable.
Estimated warranty costs and additional service actions are accrued for at the time the vehicle is sold to a dealer,
including costs for basic warranty coverage on vehicles sold, product recalls, and other customer service actions. Fees or
premiums for the issuance of extended service plans are recognized in income over the contract period in proportion to
the costs expected to be incurred in performing services under the contract.
Guarantees
At December 31, 2010 and 2009, the following guarantees and indemnifications were issued and outstanding:
Guarantees related to affiliates and third parties. We guarantee debt and lease obligations of certain joint ventures, as
well as certain financial obligations of outside third parties including suppliers to support our business and economic
growth. Expiration dates vary through 2017, and guarantees will terminate on payment and/or cancellation of the
obligation. A payment by us would be triggered by failure of the joint venture or other third party to fulfill its obligation
covered by the guarantee. In some circumstances, we are entitled to recover from the third party amounts paid by us
under the guarantee. However, our ability to enforce these rights is sometimes stayed until the guaranteed party is paid in
full, and may be limited in the event of insolvency of the third party or other circumstances. The maximum potential
payments under guarantees and the carrying value of recorded liabilities related to guarantees at December 31 were as
follows (in millions):
2010
20102010
2010
2009
20092009
2009
Maximum potential payments ................................................................................................
................................
$ 500 $ 219
Carrying value of recorded liabilities related to guarantees ................................................................
.........................
43 30
Our performance risk under these guarantees is reviewed regularly, and has resulted in no changes to our initial
valuations.
Indemnifications. In the ordinary course of business, we execute contracts involving indemnifications standard in the
industry and indemnifications specific to a transaction, such as the sale of a business. These indemnifications might
include claims relating to any of the following: environmental, tax, and shareholder matters; intellectual property rights;
power generation contracts; governmental regulations and employment-related matters; dealers, supplier, and other
commercial contractual relationships; and financial matters, such as securitizations. Performance under these
indemnities generally would be triggered by a breach of terms of the contract or by a third-party claim. We also are party
to numerous indemnifications which do not limit potential payment; therefore, we are unable to estimate a maximum
amount of potential future payments that could result from claims made under these indemnities.