pension and opeb update · 1/7/2016 · and opeb update january 7, 2016. slide 2 pension...
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PENSION AND OPEB UPDATE
JANUARY 7, 2016
SLIDE 2
PENSION DE-RISKING PROGRESS
� Limited the growth in pension obligations
– Closed plans to new entrants, e.g., U.S. plans closed since 2011
– Settled $4.2 billion of U.S. obligation in 2012 and 2013 through lump sum program
� Contributed $11 billion since 2012 to global funded plans; expect these plans to be fully funded in aggregate in 2016
� Progressively rebalanced asset mix to higher fixed income to reduce funded status volatility
� Substantially reduced underfunded status, with further improvement expected at year-end 2015
� Adopted immediate recognition for pension and OPEB expense, also referred to as mark-to-market, at year-end 2015
Significant Progress Achieved In Funding And De-Risking Our Pension Plans
SLIDE 3
MARK-TO-MARKET ADOPTION AND REPORTING EFFECTS
� Provides greater transparency of our operating performance and segment results – eliminates costs associated with prior periods
� Improves alignment of operating results with cash flows; reflects current performance of our pension and OPEB plans in net income
� Enhances comparability with key automotive competitors
� Has no impact on cash, funding requirements, or employees’ pension and OPEB benefits
� Expected to improve 2015 Company pre-tax profit by about $1.5 billion; full year profit guidance, excluding special items, revised from $8.5 billion - $9.5 billion to $10.0 billion - $11.0 billion
Mark-To-Market Provides Greater Transparency To Operating Results
SLIDE 4
PENSION AND OPEB EXPENSE
Estimated Impact to 2015 Pre-Tax Operating Results (Bils.)
Prior New
Pension / OPEB
Service cost (1.2)$ (1.2)$ -$
Interest Cost (3.0) (3.0) -
Amortization - Prior Period Gains / (Losses) (1.4) - 1.4
Amortization - Prior Service Cost - - -
Expected Return on Assets 4.1 4.4 0.3
Total Pension & OPEB (Expense) / Income (1.5)$ 0.2$ 1.7$
Non-Pension / OPEB
Inventory Impact/ Other (0.2)
Total Estimated FY Impact - Excluding Special Items 1.5$
Methods
New
Method
B / (W)
Than Prior
Amortization of gains/losses eliminated
Expected returns on assets calculated based on fair value
Includes impact of capitalization of fringe costs on inventory
A
B
C
A
B
C
SLIDE 5
GREATER TRANSPARENCY OF OPERATING RESULTS
Historical Results Revised; First Nine Months 2015 Pre-Tax Results Increased By $1.2 Billion
$9,334
Automotive Operating Margin*Company Pre-tax Results *(Mils)
2012 2013 20142011First Nine Months
2015
$7,293
$10,095
$8,865$8,190
2012 2013 20142011First Nine Months
2015
5.9% 6.0%6.5%
4.6%
7.1%
* Excludes Special Items; see Appendix for reconciliation to GAAP
B / (W) Than ReportedMils: $606 $981 $1,487 $1,011 $1,224 Pts: 0.5 0.7 1.1 0.7 1.2
SLIDE 6
IMPROVED COMPARABILITY
Elimination Of Ford’s Amortization Expense Improves Comparability To Competitors
2010 2011 2012 2013 2014
Amortization Expense 2010 - 2014 (Mils)*
* Gain / (Loss) Amortization from Annual Form 10-K reports
$330
$589
$966
$1,499
$891
$21 $13$127 $101
$318
$6 $6$95 $71
$305
Ford (Prior Method)
GM (Post Bankruptcy)
Chrysler / FCA U.S. LLC (Post Bankruptcy)
SLIDE 7
2015 PLANNING ASSUMPTIONS AND KEY METRICS
2015 Full Year Guidance Updated To $10.0 Billion - $11.0 Billion
* After revision; see Appendix A and B** Compared with 2014
*** Excludes special items
2014 FYResults* Prior Updated
Planning Assumptions (Mils)
Industry Volume
- U.S. 16.8 About 17.7
- Europe 20 14.6 About 16.0
- China 24.0 About 24.0
Key Metrics
Automotive:
- Revenue (Bils) 135.8$ Higher**
- Operating Margin 4.6 Higher**
- Operating-Related Cash Flow (Bils)*** 3.6$ Higher**
Ford Credit (Compared with 2014):
- Pre-Tax Profit (Bils) 1.9$ Equal To Or Higher**
Total Company:
- Pre-Tax Profit (Bils)*** 7.3$ $8.5 - $9.5 $10.0 - $11.0
2015 FY Outlook
%
Q&A
SLIDE 9
Statements included or incorporated by reference herein may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on
expectations, forecasts, and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:
• Decline in industry sales volume, particularly in the United States, Europe, or China due to financial crisis, recession, geopolitical events, or other factors;
• Decline in Ford's market share or failure to achieve growth;
• Lower-than-anticipated market acceptance of Ford's new or existing products;
• Market shift away from sales of larger, more profitable vehicles beyond Ford's current planning assumption, particularly in the United States;
• An increase in or continued volatility of fuel prices, or reduced availability of fuel;
• Continued or increased price competition resulting from industry excess capacity, currency fluctuations, or other factors;
• Fluctuations in foreign currency exchange rates, commodity prices, and interest rates;
• Adverse effects resulting from economic, geopolitical, or other events;
• Economic distress of suppliers that may require Ford to provide substantial financial support or take other measures to ensure supplies of components or materials and could increase costs, affect liquidity, or cause production
constraints or disruptions;
• Work stoppages at Ford or supplier facilities or other limitations on production (whether as a result of labor disputes, natural or man-made disasters, tight credit markets or other financial distress, production constraints or
difficulties, or other factors);
• Single-source supply of components or materials;
• Labor or other constraints on Ford's ability to maintain competitive cost structure;
• Substantial pension and postretirement health care and life insurance liabilities impairing our liquidity or financial condition;
• Worse-than-assumed economic and demographic experience for postretirement benefit plans (e.g., discount rates or investment returns);
• Restriction on use of tax attributes from tax law "ownership change”;
• The discovery of defects in vehicles resulting in delays in new model launches, recall campaigns, or increased warranty costs;
• Increased safety, emissions, fuel economy, or other regulations resulting in higher costs, cash expenditures, and / or sales restrictions;
• Unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, perceived environmental impacts, or otherwise;
• A change in requirements under long-term supply arrangements committing Ford to purchase minimum or fixed quantities of certain parts, or to pay a minimum amount to the seller ("take-or-pay" contracts);
• Adverse effects on results from a decrease in or cessation or clawback of government incentives related to investments;
• Inherent limitations of internal controls impacting financial statements and safeguarding of assets;
• Cybersecurity risks to operational systems, security systems, or infrastructure owned by Ford, Ford Credit, or a third-party vendor or supplier;
• Failure of financial institutions to fulfill commitments under committed credit and liquidity facilities;
• 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;
• Higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles;
• Increased competition from banks, financial institutions, or other third parties seeking to increase their share of financing Ford vehicles; and
• New or increased credit, consumer, or data protection or other regulations resulting in higher costs and / or additional financing restrictions.
We cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences
between projected and actual results. Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statement, whether as
a result of new information, future events, or otherwise. For additional discussion, see "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2014, as updated by subsequent Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K.
RISK FACTORS
APPENDIX
Item Appendix
2011 - 2015 Revised Results A
2014 - 2015 Revised Results By Quarter B
2011 - 2015 Pre-Tax Special Items C
PENSION AND OPEB UPDATE
APPENDIX INDEX
TOTAL COMPANY
2011 – 2015 REVISED RESULTS (MILS)
APPENDIX A
Pre-Tax Results Revised
B/(W)
Than
Reported Revised
B/(W)
Than
Reported Revised
B/(W)
Than
Reported Revised
B/(W)
Than
Reported Revised
B/(W)
Than
Reported
North America 6,665$ 509$ 8,925$ 800$ 9,877$ 1,068$ 7,443$ 545$ 7,316$ 709$
Europe 84 111 (1,525) 195 (1,025) 417 (598) 464 128 509
Rest of World* 755 (14) 225 (14) 227 2 (591) 2 (198) 6
Other Automotive (601) - (470) - (656) - (755) - (542) -
Total Automotive 6,903$ 606$ 7,155$ 981$ 8,423$ 1,487$ 5,499$ 1,011$ 6,704$ 1,224$
Financial Services 2,431 - 1,710 - 1,672 - 1,794 - 1,486 -
Pre-Tax Results (Excl. Special Items) 9,334$ 606$ 8,865$ 981$ 10,095$ 1,487$ 7,293$ 1,011$ 8,190$ 1,224$
Special Items (5,647) (5,565) (6,860) (6,614) 4,276 5,844 (6,059) (4,119) 166 -
Total Company 3,687$ (4,959)$ 2,005$ (5,633)$ 14,371$ 7,331$ 1,234$ (3,108)$ 8,356$ 1,224$
Operating Margin
North America 8.9% 0.6 Pts. 11.2% 0.8 Pts. 11.4% 1.2 Pts. 9.0% 0.6 Pts. 10.9% 1.0 Pts.
Total Automotive 5.9% 0.5 Pts. 6.0% 0.7 Pts. 6.5% 1.1 Pts. 4.6% 0.7 Pts. 7.1% 1.2 Pts.
Year End First Nine Months
2011 2012 2013 2014 2015
* Includes South America, Middle East & Africa, and Asia Pacific Automotive segments
TOTAL COMPANY
2014 – 2015 REVISED RESULTS BY QUARTER (MILS)
APPENDIX B
* Includes South America, Middle East & Africa, and Asia Pacific Automotive segments
B/(W) B/(W) B/(W) B/(W) B/(W) B/(W) B/(W)
Than Than Than Than Than Than Than
Pre-Tax Results Revised Reported Revised Reported Revised Reported Revised Reported Revised Reported Revised Reported Revised Reported
North America 1,725$ 225$ 2,567$ 127$ 1,537$ 127$ 1,614$ 66$ 1,569$ 229$ 2,838$ 241$ 2,909$ 239$
Europe (95) 99 124 110 (330) 109 (297) 146 (42) 143 161 175 9 191
Rest of World* (164) 1 (112) 1 (141) - (174) - (5) 2 (37) 2 (156) 2
Other Automotive (222) - (171) - (144) - (218) - (212) - (167) - (163) -
Total Automotive 1,244$ 325$ 2,408$ 238$ 922$ 236$ 925$ 212$ 1,310$ 374$ 2,795$ 418$ 2,599$ 432$
Financial Services 462 - 429 - 495 - 408 - 469 - 491 526 -
Pre-Tax Results (Excl. Special Items) 1,706$ 325$ 2,837$ 238$ 1,417$ 236$ 1,333$ 212$ 1,779$ 374$ 3,286$ 418$ 3,125$ 432$
Special Items (122) - (481) - (160) - (5,296) (4,119) - - - - 166 -
Total Company 1,584$ 325$ 2,356$ 238$ 1,257$ 236$ (3,963)$ (3,907)$ 1,779$ 374$ 3,286$ 418$ 3,291$ 432$
Operating Margin
North America 8.4% 1.1 Pts. 12.2% 0.6 Pts. 7.7% 0.6 Pts. 7.7% 0.3 Pts. 7.8% 1.1 Pts. 12.2% 1.1 Pts. 12.3% 1.0 Pts.
Total Automotive 4.3% 0.9 Pts. 7.3% 0.7 Pts. 3.3% 0.8 Pts. 3.4% 0.6 Pts. 4.8% 1.2 Pts. 8.4% 1.2 Pts. 7.7% 1.2 Pts.
20152014
Q1 Q2 Q3Q1 Q2 Q3 Q4
TOTAL COMPANY
2011 – 2015 PRE-TAX SPECIAL ITEMS (MILS)
APPENDIX C
Revised
B/(W)
Than
Reported Revised
B/(W)
Than
Reported Revised
B/(W)
Than
Reported Revised
B/(W)
Than
Reported Revised
B/(W)
Than
Reported
Pension and OPEB Remeasurements (5,674)$ (5,674)$ (6,864)$ (6,864)$ 5,250$ 5,250$ (4,119)$ (4,119)$ -$ -$
Personnel and Dealer-Related Items
Separation-related actions (269)$ -$ (498)$ -$ (856)$ -$ (685)$ -$ -$ -$
Job Security Benefits / Other (58) - (54) - - - - - - -
Total Personnel and Dealer-Related Items (327)$ -$ (552)$ -$ (856)$ -$ (685)$ -$ -$ -$
Other Items
Venezuela accounting change -$ -$ -$ -$ -$ -$ (800)$ -$ -$ -$
U.S. pension lump sum program - - - 250 - 594 - - - -
Ford Sollers equity impairment - - - - - - (329) - - -
Belgium pension settlement - 109 - - - - - - - -
CFMA restructuring - - 625 - - - - - - -
Ford Sollers Gain 401 - - - - - - - - -
Other (47) - (69) - (118) - (126) - 166 -
Total Other Items 354$ 109$ 556$ 250$ (118)$ 594$ (1,255)$ -$ 166$ -$
Total Special Items (5,647)$ (5,565)$ (6,860)$ (6,614)$ 4,276$ 5,844$ (6,059)$ (4,119)$ 166$ -$
Full Year First Nine Months
2011 2012 2013 2014 2015