Ford 2013 Annual Report Download - page 44

42 Ford Motor Company | 2013 Annual Report
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
We have now completed our U.S. salaried voluntary lump-sum program, under which eligible retirees and former
salaried employees were offered a lump-sum settlement for their remaining pension benefit. For the program in total, we
made payments to approximately 35,000 people, about 37% of those offered. We settled $4.2 billion in obligations
($1.2 billion in 2012 and $3 billion in 2013) with an equal amount paid from plan assets, representing about 25% of the
related plan liability.
Based on present planning assumptions for long-term asset returns, a normalization of discount rates, and planned
cash contributions, we expect our global funded pension obligations to be fully funded by mid-decade, with variability on a
plan-by-plan basis
For a detailed discussion of our pension plans, see Note 14 of the Notes to the Financial Statements.
Liquidity Sufficiency. One of the four key priorities of our One Ford plan is to finance our plan and improve our
balance sheet, while at the same time having resources available to grow our business. The actions described above are
consistent with this priority. Based on our planning assumptions, we believe that we have sufficient liquidity and capital
resources to continue to invest in new products that customers want and value, transform and grow our business, pay our
debts and obligations as and when they come due, pay a sustainable dividend, and provide protection within an uncertain
global economic environment.
Based on improved near-term cash flows and the identification of additional opportunities for profitable growth, we
plan to increase the ongoing amount of capital spending to support product development, growth, restructuring, and
infrastructure to about $7.5 billion annually with variation by year. This compares to our 2013 capital spending of
$6.6 billion.
We will continue to work to strengthen further our balance sheet and improve our investment grade ratings; the
amount of incremental capital required to do this will diminish over time as we achieve our target debt levels and fully fund
and de-risk our global funded pension plans.
Financial Services Sector
Ford Credit
Funding Strategy. Ford Credit’s funding strategy remains focused on diversification and it plans to continue accessing
a variety of markets, channels, and investors. Ford Credit completed its full-year 2013 funding plan, issuing $25 billion of
public term funding. Ford Credit’s public unsecured issuance was about $11 billion, including over $640 million issued
under the Ford Credit U.S. Retail Notes program.
Ford Credit’s liquidity remains strong and it ended the year with $21.4 billion of available liquidity and $34.5 billion of
committed capacity, compared with about $19.7 billion and $31.5 billion, respectively, at December 31, 2012.
Ford Credit’s funding plan is subject to risks and uncertainties, many of which are beyond its control, including
disruption in the capital markets that could impact both unsecured debt and asset-backed securities issuance, and the
effects of regulatory reform efforts on the financial markets. Potential impacts of industry events and regulation on Ford
Credit’s ability to access debt and derivatives markets, or renew its committed liquidity programs in sufficient amounts and
at competitive rates, represents another risk to its funding plan. As a result of such events or regulation, Ford Credit may
need to reduce new originations of receivables, thereby reducing its ongoing profits and adversely affecting its ability to
support the sale of Ford vehicles. Ford Credit is focused on maintaining liquidity levels that meet its business and funding
requirements through economic cycles.
Funding Sources. Ford Credit’s funding sources include primarily securitization transactions (including other structured
financings) and unsecured debt. Ford Credit issues both short- and long-term debt that is held by both institutional and
retail investors, with long-term debt having an original maturity of more than 12 months. Ford Credit sponsors a number
of securitization programs that can be structured to provide both short- and long-term funding through institutional
investors in the United States and international capital markets.