UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 11-K

 

FORD MOTOR COMPANY SAVINGS AND STOCK

INVESTMENT PLAN FOR SALARIED EMPLOYEES

(Full title of the plan)

FORD MOTOR COMPANY

One American Road

Dearborn, Michigan 48126

(Name of the issuer of the securities held

pursuant to the plan and the address of

its principal executive office)

Financial Report

 

December 31, 2012

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Report of Independent Registered Public Accounting Firm

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Statement of Net Assets Available for Benefits

 

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Statement of Changes in Net Assets Available for Benefits

Year Ended December 31, 2012

 

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Notes to Financial Statements

December 31, 2012 and 2011

 

Note 1 - Description of the Plan

 

The following description of the Ford Motor Company Savings and Stock Investment Plan for Salaried Employees (the “Plan”) provides only general information.  Participants should refer to the provisions of the Plan, which are governed in all respects by the detailed terms and conditions contained in the Plan document.  The Plan was established effective February 1, 1956.

 

Type and Purpose of the Plan - The Plan is a defined contribution plan established to encourage and facilitate systematic savings and investment by eligible salaried employees of Ford Motor Company (the “Company”) and to provide them with an opportunity to become stockholders of the Company.  The Plan includes provisions for voting shares of Company stock.  It is subject to certain provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA), applicable to defined contribution pension plans.

 

Eligibility - With certain exceptions, regular full-time salaried employees are eligible to participate in the Plan immediately following their date of hire or rehire, and are immediately eligible for any applicable company matching contributions. Certain other part-time and temporary employees also may be eligible to participate in the Plan.  Participation in the Plan is voluntary.

 

Contributions and Vesting - Participants can contribute to the Plan on both a pre-tax and after-tax basis, subject to federal tax law and plan limits.  Participants may also elect to contribute all, or a portion, of their distributions under the Company’s Annual Incentive Compensation Plan and the Ford Motor Credit Company Variable Incentive Plan. A contribution in an amount corresponding to each election is made by the Company to the Plan on the participant’s behalf.  Subject to limits under the Internal Revenue Code of 1986, as amended (the "Code"), pre-tax contributions are excluded from the participant’s federal and most state and local taxable income.  The Company makes matching contributions at a rate of $0.60 for each dollar contributed up to 5 percent of participants' base salary deferred. Effective July 1,2012 the matching contribution rate increased to $0.80 for each dollar contributed up to 5 percent of participants’ base salary deferred.

 

Subject to provisions of the Plan, participants may elect to roll over amounts from other eligible retirement plans or arrangements in accordance with the Code.  For the year ended December 31, 2012, transfers from other eligible retirement plans or arrangements totaled $5,281,453, which are included in employee contributions in the statement of changes in net assets available for benefits.

 

 

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Notes to Financial Statements

December 31, 2012 and 2011

Note 1 - Description of the Plan (Continued)

 

After-tax assets can be withdrawn at any time without restriction.

 

Distribution options include lump-sum, partial or installment payments.  Eligible rollover distributions can be rolled over to an IRA or another employer's eligible retirement plan.

 

Activity for participants in the Ford Stock Fund who have elected to receive dividends paid in the form of cash instead of purchasing additional shares is reported in the statement of changes in net assets available for benefits.

 

Participant Accounts - A participant’s account balance is comprised of employee contributions, Company matching contributions, if any, and investment income earned from the individual investment options selected by the participant.  In the absence of participant investment directions, contributions are invested in a target date retirement fund, a qualified default investment alternative (QDIA) prescribed by final regulations issued by the Department of Labor.  Certain investment options will charge a fee on short-term transfers, which is paid from the participant’s account.  The benefit to which a participant is entitled is determined from the participant’s vested account balance.

 

Master Trust Investment Options and Participation - Participant contributions and Company matching contributions are invested in accordance with the participant’s election in one or more investments, which are held in the Ford Defined Contribution Plans Master Trust (the “Master Trust”) (see Note 3).

 

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Notes to Financial Statements

December 31, 2012 and 2011

Note 2 - Summary of Significant Accounting Policies

 

Investments - The investments in the Ford Stock Fund, mutual funds, and money market funds are valued on the basis of quoted year-end market prices. The common and commingled institutional pool investments are valued at the net asset value per share of the individual collective pools included in each respective fund, which are based on the fair value of the underlying net assets. The Interest Income Fund, which invests in fully-benefit responsive synthetic investment contracts, is stated at contract value.  Contract value represents investments at cost, plus accrued interest income, less amounts withdrawn to pay benefits.  The fair value of the Interest Income Fund is based on the fair value of the underlying net assets, which are security-backed contracts (also known as synthetic guaranteed investment contracts), a money market fund and wrapper contracts. The securities underlying the security-backed contracts include government securities, corporate bonds, asset-backed securities, and mortgage-backed securities and are valued using quoted market prices and/or other market data for the same or comparable instruments and transactions in establishing the prices, discounted cash flow models, and other pricing models.  These models are primarily industry-standard models that consider various assumptions, including time value and yield curve as well as other relevant economic measures.  The money market fund is valued at the net asset value per share, which is based on the fair value of the underlying net assets.  The fair value of wrapper contracts provided by a security-backed contract issuer is the present value of the difference between the current wrapper fee and the contracted wrapper fee.  See Note 4 for additional information.

 

The fair value of the Plan's interest in the Master Trust is based on the beginning of the year value of the Plan's interest in the trust, plus actual contributions and allocated investment income, less actual distributions and allocated administrative expense (see Note 3).

 

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

 

Purchases and sales of investments by the Master Trust are reflected on a trade-date basis.  Dividend income is recorded on the ex-dividend date.  Income from other investments of the Master Trust is recorded as earned on an accrual basis.

 

Participant Notes Receivable - Participant notes receivable are recorded at their unpaid principal balances plus any accrued interest. Participant notes receivable are written off when deemed uncollectible.

 

Investment Contracts - The Master Trust, through its investment in the Interest Income Fund, invests in synthetic investment contracts (synthetic GICs).  A synthetic GIC is a wrap contract paired with an underlying investment or investments, usually a portfolio of high-quality, short to intermediate-term fixed-income securities and money market accounts.  The Master Trust purchases a wrap contract from insurance companies and financial services institutions.

 

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Notes to Financial Statements

December 31, 2012 and 2011

 

Note 2 - Summary of Significant Accounting Policies (Continued)

 

A synthetic GIC contract credits a stated interest rate for a specified period of time.  Investment gains and losses are amortized over the expected duration through the calculation of the interest rate applicable to the Master Trust on a prospective basis.  Synthetic GICs provide for a variable crediting rate, which resets on some periodic basis.  The crediting rate set by the wrap contracts resets quarterly. The quarterly crediting rate set by the wrap contracts does not include the short-term investments (e.g. money market account) used for benefit-responsive events. While the issuer of the wrap contract provides assurance that future adjustments to the crediting rate cannot result in a crediting rate less than zero, the actual quarterly interest rate credited to the Master Trust is impacted by the current yield of the short-term investments used for benefit-responsive events.  The crediting rate is primarily based on the current yield-to-maturity of the covered investments, plus or minus amortization of the difference between the market value and contract value of the covered investments over the duration of the covered investments at the time of computation.

 

The crediting rate is most impacted by the change in the annual effective yield to maturity of the underlying securities, but is also affected by the differential between the contract value and the market value of the covered investments.  This difference is amortized over the duration of the covered investments.  Depending on the change in duration from reset period to reset period, the magnitude of the impact to the crediting rate of the contract to market difference is heightened or lessened.  The crediting rate can be adjusted periodically, but in no event is the crediting rate less than zero percent.

 

Certain events limit the ability of the Master Trust to transact at contract value with the insurance company and the financial institution issuer.  Such events include the following: (i) material amendments to the plan documents (including complete or partial plan termination or merger with another plan); (ii) changes to the Plan’s prohibition on competing investment options or deletion of equity wash provisions; (iii) bankruptcy of the plan sponsor or other plan sponsor events (e.g. divestitures or spin-offs of a subsidiary) which cause a significant withdrawal from the Plan; (iv) the failure of the trust to qualify for exemption from federal income taxes or any required prohibited transaction exemption under ERISA; (v) any change in law, regulation, ruling, administrative or judicial position, or accounting requirement, applicable to the Interest Income Fund or the Plan; or (vi) the delivery of any communication to plan participants designed to influence a participant not to invest in the Interest Income Fund.  The plan administrator does not believe that the occurrence of any such event, which would limit the Master Trust’s ability to transact at contract value, is probable.

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Note 2 - Summary of Significant Accounting Policies (Continued)

 

The synthetic investment contracts generally impose conditions on both the Master Trust and the issuer.  If an event of default occurs and is not cured, the non-defaulting party may terminate the contract.  The following may cause the Master Trust to be in default: a breach of material obligation under the contract; a material misrepresentation; or a material amendment to the plan agreement.  The issuer may be in default if it breaches a material obligation under the investment contract; makes a material misrepresentation; has a decline in its long-term credit rating below a threshold set forth in the contract; is acquired or reorganized and the successor issuer does not satisfy the investment or credit guidelines applicable to issuers.  If, in the event of default of an issuer, the Master Trust were unable to obtain a replacement investment contract, withdrawing plans may experience losses if the value of the Master Trust’s assets no longer covered by the contract is below contract value.  The Master Trust may seek to add additional issuers over time to diversify the Master Trust’s exposure to such risk, but there is no assurance the Master Trust may be able to do so.  The combination of the default of an issuer and an inability to obtain a replacement agreement could render the Master Trust unable to achieve its objective of maintaining a stable contract value.  The terms of an investment contract generally provide for settlement of payments only upon termination of the contract or total liquidation of the covered investments.  Generally, payments will be made prorata, based on the percentage of investments covered by each issuer.  Contract termination occurs whenever the contract value or market value of the covered investments reaches zero or upon certain events of default.

 

If the contract terminates due to issuer default (other than a default occurring because of a decline in its rating), the issuer will generally be required to pay to the Master Trust the excess, if any, of contract value over market value on the date of termination.  If a synthetic GIC terminates due to a decline in the ratings of the issuer, the issuer may be required to pay to the Master Trust the cost of  acquiring a replacement contract (i.e. replacement cost) within the meaning of the contract.  If the contract terminates when the market value equals zero, the issuer will pay the excess of contract value over market value to the Master Trust to the extent necessary for the Master Trust to satisfy outstanding contract value withdrawal requests.  Contract termination also may occur by either party upon election and notice.

 

Since synthetic GICs are fully benefit-responsive, contract value is the relevant measurement attribute for that portion of the net assets available for benefits attributable to the synthetic GICs.  Contract value represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses.  Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.

 

		2012				2011
Average yield for synthetic GICs:
Based on actual earnings			0.99	%			1.55	%
Based on interest rate credited to participants			2.50	%			3.09	%

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires plan management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions and deductions during the reporting period.  Actual results could differ from those estimates.

 

Risks and Uncertainties - The Master Trust’s invested assets consist of company stock, equity and fixed-income mutual funds, equity and fixed-income commingled institutional pools, and synthetic GIC investments.  Investment securities are exposed to various risks, such as interest rate, market, and credit.

 

Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect participants’ account balances and the amounts reported in the financial statements.

 

 

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Note 3 - The Master Trust (Continued)

 

A summary of the net assets of the Master Trust as of December 31, 2012 and 2011 is as follows:

 

 

During the year ended December 31, 2012, the Master Trust investment gain was comprised of the following:

 

 

The Ford Stock Fund is a unitized account that is comprised primarily of Ford Motor Company common stock, except a small portion of the fund is invested in cash or a cash equivalent or other short term investments to provide liquidity for daily activity. Transactions within this fund are considered related party transactions to the Plan.

 

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Note 4 - Fair Value Disclosures

 

Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value.  The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value.

 

In determining fair value, various valuation techniques are utilized and observable inputs are prioritized. The availability of observable inputs varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively traded, and other characteristics particular to the transaction. For many financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant management discretion. For other financial instruments, pricing inputs are less observable in the marketplace and may require management judgment.

 

The inputs used to measure fair value are assessed using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market. Level 1 inputs include quoted prices in active markets for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and inputs such as interest rates and yield curves that are observable at commonly quoted intervals.  Level 3 inputs are not observable in the market and include management's judgments about the assumptions market participants would use in pricing the asset.  In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Plan’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset.

 

Disclosures concerning assets measured at fair value on a recurring basis are as follows:

 

		Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Assets - Master Trust investments:
Mutual funds:
Equity investments		$	1,991,817,488			$	-			$	-			$	1,991,817,488
Fixed-income investments			322,934,713				-				-				322,934,713
Total mutual funds			2,314,752,201				-				-				2,314,752,201
Interest Income Fund			-				2,403,951,718				-				2,403,951,718
Common and commingled institutional pools:
Equity investments (1)			-				2,213,539,553				-				2,213,539,553
Fixed-income investments (2)			-				633,513,865				-				633,513,865
Retirement year-based investments (3)			-				670,032,728				-				670,032,728
Short-term investments (4)			-				10,871,057				-				10,871,057
Total common and commingled institutional pools			-				3,527,957,203				-				3,527,957,203
Employer securities - Ford common stock			3,184,618,234				-				-				3,184,618,234
Total master trust investments		$	5,499,370,435			$	5,931,908,921			$	-			$	11,431,279,356

 

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Assets Measured at Fair Value at December 31, 2011

 

(1)	This class invests primarily in common and commingled institutional pools that invest primarily in equity securities which may include common stocks, options, and futures.
(2)	This class invests primarily in common and commingled institutional pools that invest in a variety of fixed-income investments  which may include corporate bonds, both U.S. and non-U.S. municipal securities, interest rate swaps, options, and futures.
(3)	This class invests primarily in common and commingled institutional pools with investments in both equity and debt securities. The investments may include common stock, corporate bonds, U.S. and non-U.S. municipal securities, interest rate swaps, options, and futures.
(4)	This class invests primarily in fixed-income securities, including but not limited to, bonds, notes or other investments such as government securities, commercial paper, certificates of deposit, master notes or variable amount notes, with the objective of providing current income consistent with  the preservation of capital and the maintenance of liquidity.  Short-term investments are valued at $1.00/unit, which approximates fair value.

 

There were no unfunded commitments or redemption restrictions on the investments described above.

 

The Plan and Master Trust also hold other assets and liabilities not measured at fair value on a recurring basis including contributions receivable and net receivables and unsettled trades.  The fair value of these assets and liabilities is equal to the carrying amounts in the accompanying financial statements due to the short maturity of such instruments. Under the fair value hierarchy, these financial instruments are valued primarily using level 2 inputs.

 

The Plan’s policy to recognize transfers between levels of the fair value hierarchy is as of the actual date of the event of change in circumstances that caused the transfer. There were no significant transfers between levels of the fair value hierarchy during 2012.

 

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Note 5 - Tax Status

 

The Internal Revenue Service (IRS) has determined and informed the Company by letter dated July 8, 2003, that the Plan is designed in accordance with applicable sections of the Code.  The Plan has since been amended and restated through December 31, 2012.  The Company believes that the Plan is currently designed and being operated in compliance with the Code. Therefore, no provision for income taxes has been included in the Plan’s financial statements.

 

In accordance with guidance on accounting for uncertainty in income taxes, management evaluated the Plan's tax position and does not believe the Plan has any uncertain tax positions that require disclosure or adjustment to the financial statements.  The plan administrator believes it is no longer subject to tax examinations for years prior to 2009.

 

Note 6 - Administration of Plan Assets

 

The Master Trust assets are held by the trustee of the Plan, State Street Bank and Trust Company.  The assets of the Interest Income Fund (the “Fund”) are held by the Fund’s custodian, The Northern Trust Company.

 

Certain administrative functions are performed by officers or employees of the Company or its subsidiaries.  No such officer or employee receives compensation from the Plan, nor does the Company allocate any costs to the Plan.

 

Note 7 - Plan Termination

 

The Company, by action of the board of directors, may terminate the Plan at any time.  Termination of the Plan would not affect the rights of a participant as to the continuance of investment, distribution or withdrawal of their account balance.  Upon termination of the Plan, participants would become fully vested.  In the event of termination, all loans would become due immediately upon such termination. There are currently no plans to terminate the Plan.

 

Note 8 - Reconciliation to Form 5500

 

The net assets on the financial statements differ from the net assets on Form 5500 due to the synthetic GICs held in the Master Trust being recorded at contract value on the financial statements and at fair value on Form 5500.  The net assets on the financial statements were lower than those on Form 5500 at December 31, 2012 and 2011 by $51,801,128 and $49,142,787, respectively.  Additionally, the increase in net assets on Form 5500 for the year ended December 31, 2012 is higher than the financial statements by $2,658,341.

 

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Ford Motor Company Savings and Stock Investment Plan for Salaried Employees

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Schedule of Assets Held at End of Year

Form 5500, Schedule H, Item 4i

EIN 38-0549190, Plan 010

December 31, 2012

 

 

 

Schedule 1

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