Ford 2014 Annual Report Download - page 25

Item 1A. Risk Factors (Continued)
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Cybersecurity risks to operational systems, security systems, or infrastructure owned by Ford, Ford Credit,
or a third-party vendor or supplier. We are at risk for interruptions, outages, and breaches of: (i) operational
systems (including business, financial, accounting, product development, consumer receivables, data processing, or
manufacturing processes); (ii) facility security systems; and/or (iii) in-vehicle systems or mobile devices. Such cyber
incidents could materially disrupt operational systems; result in loss of trade secrets or other proprietary or
competitively sensitive information; compromise personally identifiable information of customers, employees, or others;
jeopardize the security of our facilities; and/or affect the performance of in-vehicle systems. A cyber incident could be
caused by malicious third parties using sophisticated, targeted methods to circumvent firewalls, encryption, and other
security defenses, including hacking, fraud, trickery, or other forms of deception. The techniques used by third parties
change frequently and may be difficult to detect for long periods of time. A significant cyber incident could harm our
reputation and subject us to regulatory actions or litigation.
Failure of financial institutions to fulfill commitments under committed credit and liquidity facilities. Under
our Second Amended and Restated Credit Agreement dated as of April 30, 2014 and as further amended (the
“revolving credit facility”), we are able to borrow, repay, and then re-borrow up to $12.2 billion. Certain of our
subsidiaries have standby or revolving credit facilities on which they depend for liquidity. If the financial institutions that
provide these or other committed credit facilities were to default on their obligation to fund the commitments, these
facilities would not be available to us, which could substantially adversely affect our liquidity and financial condition.
For discussion of our Credit Agreement, see “Liquidity and Capital Resources” in Item 7 and Note 13 of the Notes to
the Financial Statements.
Inability of Ford Credit to access debt, securitization, or derivative markets around the world at competitive
rates or in sufficient amounts, due to credit rating downgrades, market volatility, market disruption, regulatory
requirements, or other factors. Ford Credit’s ability to obtain unsecured funding at a reasonable cost is dependent
on its credit ratings or its perceived creditworthiness. Ford Credit’s ability to obtain securitized funding under its
committed asset-backed liquidity programs and certain other asset-backed securitization transactions is subject to
having a sufficient amount of assets eligible for these programs, as well as Ford Credit’s ability to obtain appropriate
credit ratings and, for certain committed programs, derivatives to manage the interest rate risk. Over time, and
particularly in the event of any credit rating downgrades, market volatility, market disruption, or other factors, Ford
Credit may reduce the amount of receivables it purchases or originates because of funding constraints. In addition,
Ford Credit may be limited in the amount of receivables it purchases or originates in certain countries or regions if the
local capital markets, particularly in developing countries, do not exist or are not adequately developed. Similarly, Ford
Credit may reduce the amount of receivables it purchases or originates if there is a significant decline in the demand
for the types of securities it offers or Ford Credit is unable to obtain derivatives to manage the interest rate risk
associated with its securitization transactions. A significant reduction in the amount of receivables Ford Credit
purchases or originates would significantly reduce its ongoing profits and could adversely affect its ability to support the
sale of Ford vehicles.
Higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return
volumes for leased vehicles. Credit risk is the possibility of loss from a customer’s or dealer’s failure to make
payments according to contract terms. Credit risk (which is heavily dependent upon economic factors including
unemployment, consumer debt service burden, personal income growth, dealer profitability, and used car prices) has a
significant impact on Ford Credit’s business. The level of credit losses Ford Credit may experience could exceed its
expectations and adversely affect its financial condition and results of operations. In addition, Ford Credit projects
expected residual values (including residual value support payments from Ford) and return volumes for the vehicles it
leases. Actual proceeds realized by Ford Credit upon the sale of returned leased vehicles at lease termination may be
lower than the amount projected, which would reduce the profitability of the lease transaction. Among the factors that
can affect the value of returned lease vehicles are the volume of vehicles returned, economic conditions, and quality or
perceived quality, safety, fuel efficiency, or reliability of the vehicles. Actual return volumes may be higher than
expected and can be influenced by contractual lease-end values relative to auction values, marketing programs for
new vehicles, and general economic conditions. Each of these factors, alone or in combination, has the potential to
adversely affect Ford Credit’s profitability if actual results were to differ significantly from Ford Credit’s projections. See
“Critical Accounting Estimates” in Item 7 for additional discussion.
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