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90 Ford Motor Company | 2013 Annual Report
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 6. FINANCIAL SERVICES SECTOR FINANCE RECEIVABLES (Continued)
Dealers are assigned to one of four groups according to risk ratings as follows:
• Group I – strong to superior financial metrics
• Group II – fair to favorable financial metrics
• Group III – marginal to weak financial metrics
• Group IV – poor financial metrics, including dealers classified as uncollectible
We suspend credit lines and extend no further funding to dealers classified in Group IV.
We regularly review our model to confirm the continued business significance and statistical predictability of the
factors and update the model to incorporate new factors or other information that improves its statistical predictability. In
addition, we regularly audit dealer inventory and dealer sales records to verify that the dealer is in possession of the
financed vehicles and is promptly paying each receivable following the sale of the financed vehicle. The frequency of on-
site vehicle inventory audits depends on the dealer’s risk rating. Under our policies, on-site vehicle inventory audits of
low-risk dealers are conducted only as circumstances warrant in North America and at least annually internationally, and
audits of higher-risk dealers are conducted with increased frequency based on risk ratings worldwide. We perform a
credit review of each dealer at least annually and adjust the dealer’s risk rating, if necessary.
The credit quality of non-consumer receivables is evaluated based on our internal dealer risk rating analysis. A dealer
has the same risk rating for its entire dealer financing regardless of the type of financing.
The credit quality analysis of our dealer financing receivables at December 31 was as follows (in millions):
2013 2012
North America International Total North America International Total
Dealer Financing
Group I $ 18,357 $ 5,051 $23,408 $16,526 $4,551 $ 21,077
Group II 3,289 2,092 5,381 2,608 1,405 4,013
Group III 424 649 1,073 277 1,279 1,556
Group IV 2 41 43 18 725
Total recorded investment $ 22,072 $ 7,833 $29,905 $19,429 $7,242 $ 26,671
Impaired Receivables. Impaired consumer receivables include accounts that have been rewritten or modified in
reorganization proceedings pursuant to the U.S. Bankruptcy Code that are considered to be troubled debt restructurings
(“TDRs”), as well as all accounts greater than 120 days past due. Impaired non-consumer receivables represent
accounts with dealers that have weak or poor financial metrics or dealer financing that has been modified in TDRs. The
recorded investment of consumer receivables that were impaired at December 31, 2013 and 2012 was $435 million, or
0.9% of consumer receivables, and $422 million, or 0.9% of consumer receivables, respectively. The recorded investment
of non-consumer receivables that were impaired at December 31, 2013 and 2012 was $71 million, or 0.2% of non-
consumer receivables, and $47 million, or 0.2% of the non-consumer receivables, respectively. Impaired finance
receivables are evaluated both collectively and specifically. See Note 8 for additional information related to the
development of our allowance for credit losses.
Non-Accrual Receivables. The accrual of revenue is discontinued at the earlier of the time a receivable is determined
to be uncollectible, at bankruptcy status notification, or greater than 120 days past due. Accounts may be restored to
accrual status only when a customer settles all past-due deficiency balances and future payments are reasonably
assured. For receivables in non-accrual status, subsequent financing revenue is recognized only to the extent a payment
is received. Payments are generally applied first to outstanding interest and then to the unpaid principal balance.
The recorded investment of consumer receivables in non-accrual status was $238 million, or 0.5% of our consumer
receivables at December 31, 2013, and $304 million, or 0.6% of consumer receivables at December 31, 2012. The
recorded investment of non-consumer receivables in non-accrual status was $41 million, or 0.1% of our non-consumer
receivables at December 31, 2013, and $29 million, or 0.1% of non-consumer receivables at December 31, 2012.