FORD MOTOR CO | 2013 | FY | 3


RETIREMENT BENEFITS

We, and certain of our subsidiaries, provide retirement benefits including the following:

Defined Benefit Pension Plans.   We have defined benefit pension plans in the United States, Canada, United Kingdom, Germany and other locations covering hourly and salaried employees. The largest portion of our worldwide obligation is associated with our U.S. plans. The vast majority of our worldwide defined benefit plans are closed to new participants. 

In general, our defined benefit pension plans are funded (i.e., have restricted assets from which benefits are paid). Our unfunded defined benefit pension plans are treated on a “pay as you go” basis with benefit payments from general Company cash. These unfunded plans primarily include certain plans in Germany and U.S. defined benefit plans for senior management.
 
OPEB.  We have defined benefit OPEB plans, primarily certain health care and life insurance benefits, in the United States, Canada, and other locations covering hourly and salaried employees. The largest portion of our worldwide obligation is associated with our U.S. plans. Our OPEB plans are unfunded and the benefits are paid from general Company cash.

Defined Contribution and Savings Plans. We have also established defined contribution and savings plans in the United States and other locations for hourly and salaried employees. Contributions to these plans, if any, are made from general Company cash and are expensed as incurred. The expense for our worldwide defined contribution and savings plans was $238 million, $181 million, and $135 million for the years ended December 31, 2013, 2012, and 2011, respectively.  This includes the expense for Company-matching contributions to our primary employee savings plan in the United States of $99 million, $70 million, and $54 million for the years ended December 31, 2013, 2012, and 2011, respectively.

Defined benefit pension and OPEB plan obligations are measured based on the present value of projected future benefit payments for all participants for services rendered to date. The measurement of projected future benefits is dependent on the provisions of each specific plan, demographics of the group covered by the plan, and other key measurement assumptions. For plans that provide benefits dependent on salary assumptions, we include a projection of salary growth in our measurements. No assumption is made regarding any potential changes to benefit provisions beyond those to which we are presently committed (e.g., in existing labor contracts).

The net periodic benefit costs associated with the Company's defined benefit pension and OPEB plans are determined using assumptions regarding the benefit obligation and the market-related value of plan assets (where applicable) as of the beginning of each year. We have elected to use a market-related value of plan assets to calculate the expected return on assets in net periodic benefit costs. The market-related value recognizes changes in the fair value of plan assets in a systematic manner over five years. Net periodic benefit costs are recorded in Automotive cost of sales and Selling, administrative, and other expenses. The funded status of the benefit plans, which represents the difference between the benefit obligation and fair value of plan assets, is calculated on a plan-by-plan basis. The benefit obligation and related funded status are determined using assumptions as of the end of each year. The impact of plan amendments and actuarial gains and losses are recorded in Accumulated other comprehensive income/(loss), and generally are amortized as a component of net periodic cost over the remaining service period of our active employees. Unamortized gains and losses are amortized only to the extent they exceed 10% of the higher of the market-related value of assets or the benefit obligation of the respective plan (i.e., outside of corridor).

Curtailment gains or losses are recorded when an event occurs that significantly reduces the expected years of future service or eliminates the accrual of defined benefits for the future services of a significant number of employees. We record a curtailment gain when the employees who are entitled to the benefits terminate their employment; we record a curtailment loss when it becomes probable a loss will occur. Upon a settlement, we recognize the proportionate amount of the unamortized gains and losses if the cost of all settlements during the year exceeds the interest component of net periodic cost for the affected plan. Expense from curtailments and settlements is recorded in Automotive cost of sales and Selling, administrative, and other expenses.





NOTE 14.  RETIREMENT BENEFITS (Continued)

Defined Benefit Plans – Expense and Status

The following table summarizes the assumptions used to determine expense and benefit obligation:
 
Pension Benefits
 
 
 
 
 
U.S. Plans
 
Non-U.S. Plans
 
U.S. OPEB
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Weighted Average Assumptions at December 31
 
 
 
 
 
 
 
 
 
 
 
Discount rate
4.74
%
 
3.84
%
 
4.07
%
 
3.92
%
 
4.65
%
 
3.80
%
Expected long-term rate of return on assets
6.89

 
7.38

 
6.63

 
6.74

 

 

Average rate of increase in compensation
3.80

 
3.80

 
3.41

 
3.41

 
3.80

 
3.80

Assumptions Used to Determine Net Benefit Cost for the Year Ended December 31
 
 
 
 
 

 
 

 
 

 
 

Discount rate
3.84
%
 
4.64
%
 
3.92
%
 
4.84
%
 
3.80
%
 
4.60
%
Expected long-term rate of return on assets
7.38

 
7.50

 
6.74

 
6.77

 

 

Average rate of increase in compensation
3.80

 
3.80

 
3.41

 
3.39

 
3.80

 
3.80



The measurement date for all of our worldwide postretirement benefit plans is December 31. The pre-tax expense for our defined benefit pension and OPEB plans for the years ended December 31 was as follows (in millions):
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
 
 
 
 
 
 
 
U.S. Plans
 
Non-U.S. Plans
 
Worldwide OPEB
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
Service cost
$
581

 
$
521

 
$
467

 
$
484

 
$
372

 
$
327

 
$
64

 
$
67

 
$
63

Interest cost
1,914

 
2,208

 
2,374

 
1,137

 
1,189

 
1,227

 
256

 
290

 
327

Expected return on assets
(2,816
)
 
(2,873
)
 
(3,028
)
 
(1,382
)
 
(1,340
)
 
(1,404
)
 

 

 

Amortization of:
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 

 
 
Prior service costs/(credits)
174

 
220

 
343

 
66

 
72

 
72

 
(283
)
 
(545
)
 
(612
)
(Gains)/Losses
655

 
425

 
194

 
686

 
412

 
301

 
158

 
129

 
94

Separation programs/other
10

 
7

 
1

 
242

 
162

 
170

 

 
2

 
10

(Gains)/Losses from curtailments and settlements
594

 
250

 

 
5

 

 
111

 
(2
)
 
(11
)
 
(26
)
Net expense/(income)
$
1,112

 
$
758

 
$
351

 
$
1,238

 
$
867

 
$
804

 
$
193

 
$
(68
)
 
$
(144
)


NOTE 14.  RETIREMENT BENEFITS (Continued)

The year-end status of these plans was as follows (in millions):
 
 
Pension Benefits
 
 
 
 
 
 
U.S. Plans
 
Non-U.S. Plans
 
Worldwide OPEB
 
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Change in Benefit Obligation
 
 
 
 
 
 
 
 
 
 
 
 
Benefit obligation at January 1
 
$
52,125

 
$
48,816

 
$
30,702

 
$
25,163

 
$
6,810

 
$
6,593

Service cost
 
581

 
521

 
484

 
372

 
64

 
67

Interest cost
 
1,914

 
2,208

 
1,137

 
1,189

 
256

 
290

Amendments
 

 
(39
)
 
(1
)
 
222

 

 
(156
)
Separation programs and other
 
(75
)
 
(40
)
 
141

 
202

 
(11
)
 
3

Curtailments
 

 

 

 

 

 

Settlements
 
(3,089
)
 
(1,123
)
 
(51
)
 

 

 

Plan participant contributions
 
26

 
27

 
25

 
36

 
27

 
29

Benefits paid
 
(3,120
)
 
(3,427
)
 
(1,416
)
 
(1,420
)
 
(421
)
 
(454
)
Foreign exchange translation
 

 

 
229

 
803

 
(131
)
 
47

Divestiture
 

 

 

 

 

 

Actuarial (gain)/loss
 
(5,180
)
 
5,182

 
(399
)
 
4,135

 
(705
)
 
391

Benefit obligation at December 31
 
43,182

 
52,125

 
30,851

 
30,702

 
5,889

 
6,810

Change in Plan Assets
 
 

 
 

 
 

 
 

 
 

 
 

Fair value of plan assets at January 1
 
42,395

 
39,414

 
21,713

 
19,198

 

 

Actual return on plan assets
 
1,539

 
5,455

 
1,689

 
1,637

 

 

Company contributions
 
3,535

 
2,134

 
1,852

 
1,629

 

 

Plan participant contributions
 
26

 
27

 
25

 
36

 

 

Benefits paid
 
(3,120
)
 
(3,427
)
 
(1,416
)
 
(1,420
)
 

 

Settlements
 
(3,089
)
 
(1,123
)
 
(51
)
 

 

 

Foreign exchange translation
 

 

 
49

 
641

 

 

Divestiture
 

 

 

 

 

 

Other
 
(69
)
 
(85
)
 
(18
)
 
(8
)
 

 

Fair value of plan assets at December 31
 
41,217

 
42,395

 
23,843

 
21,713

 

 

Funded status at December 31
 
$
(1,965
)
 
$
(9,730
)
 
$
(7,008
)
 
$
(8,989
)
 
$
(5,889
)
 
$
(6,810
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts Recognized on the Balance Sheet
 
 

 
 

 
 

 
 

 
 

 
 

Prepaid assets
 
$
443

 
$

 
$
219

 
$
85

 
$

 
$

Other liabilities
 
(2,408
)
 
(9,730
)
 
(7,227
)
 
(9,074
)
 
(5,889
)
 
(6,810
)
Total
 
$
(1,965
)
 
$
(9,730
)
 
$
(7,008
)
 
$
(8,989
)
 
$
(5,889
)
 
$
(6,810
)
Amounts Recognized in Accumulated Other Comprehensive Loss (pre-tax)
 
 

 
 

 
 

 
 

 
 

 
 

Unamortized prior service costs/(credits)
 
$
764

 
$
938

 
$
417

 
$
487

 
$
(959
)
 
$
(1,263
)
Unamortized net (gains)/losses
 
6,179

 
11,349

 
9,902

 
11,375

 
1,701

 
2,594

Total
 
$
6,943

 
$
12,287

 
$
10,319

 
$
11,862

 
$
742

 
$
1,331

 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Plans in which Accumulated Benefit Obligation Exceeds Plan Assets at December 31
 
 

 
 

 
 

 
 

 
 

 
 

Accumulated benefit obligation
 
$
25,828

 
$
50,821

 
$
15,393

 
$
21,653

 
 

 
 

Fair value of plan assets
 
23,498

 
42,395

 
9,518

 
14,625

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Benefit Obligation at December 31
 
$
42,078

 
$
50,821

 
$
28,312

 
$
28,136

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Plans in which Projected Benefit Obligation Exceeds Plan Assets at December 31
 
 
 
 
 
 
 
 
 
 
 
 
Projected benefit obligation
 
$
25,906

 
$
52,125

 
$
23,653

 
$
29,984

 
 
 
 
Fair value of plan assets
 
23,498

 
42,395

 
16,426

 
20,910

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Projected Benefit Obligation at December 31
 
$
43,182

 
$
52,125

 
$
30,851

 
$
30,702

 
 
 
 



NOTE 14.  RETIREMENT BENEFITS (Continued)

Pension Plan Contributions

Our policy for funded pension plans is to contribute annually, at a minimum, amounts required by applicable laws and regulations. We may make contributions beyond those legally required.

In 2013, we contributed $5 billion to our worldwide funded pension plans (including $3.4 billion in discretionary contributions to our U.S. plans) and made $400 million of benefit payments to participants in unfunded plans.  During 2014, we expect to contribute about $1.5 billion from Automotive cash and cash equivalents to our worldwide funded plans (most of which are mandatory contributions) and to make $400 million of benefit payments to participants in unfunded plans, for a total of about $1.9 billion. Based on current assumptions and regulations, we do not expect to have a legal requirement to fund our major U.S. pension plans in 2014.

Curtailments and Settlements

In April 2012, we announced a program to offer voluntary lump-sum pension payout options to eligible salaried U.S. retirees and former salaried employees that, if accepted, would settle our obligation to them. The program provided participants with a one-time choice of electing to receive a lump-sum settlement of their remaining pension benefit. As part of this voluntary lump-sum program, the Company settled $4.2 billion of its pension obligations for U.S. salaried retirees ($1.2 billion in 2012 and $3 billion in 2013) with an equal amount paid from plan assets. As a result, we recorded settlement losses of $844 million ($250 million in 2012 and $594 million in 2013) reflecting the accelerated recognition of unamortized losses in the salaried plan proportionate to the obligation that was settled. These settlement charges were recorded in Automotive cost of sales and Selling, administrative, and other expenses with a corresponding balance sheet reduction in Accumulated other comprehensive income/(loss).

In 2011, we recognized a settlement loss of $109 million associated with the partial settlement of a Belgium pension plan.

Business Restructurings

In October 2012, we announced a plan to restructure our European manufacturing operations as discussed in Note 21. In 2013, we recognized pension-related employee separation costs of $180 million which are recorded in Automotive cost of sales and Selling, administrative, and other expenses.

Estimated Future Benefit Payments and Amortization

The following table presents estimated future gross benefit payments (in millions):
 
 
Gross Benefit Payments
 
 
Pension
 
 
 
 
U.S. Plans
 
Non-U.S.
Plans
 
Worldwide
OPEB
2014
 
$
3,190

 
$
1,380

 
$
420

2015
 
3,150

 
1,380

 
380

2016
 
3,110

 
1,390

 
380

2017
 
3,060

 
1,430

 
370

2018
 
3,030

 
1,450

 
370

2019 - 2023
 
14,810

 
7,820

 
1,850



The amounts in Accumulated other comprehensive income/(loss) that are expected to be recognized as components of net expense/(income) during 2014 are as follows (in millions):
 
 
Pension Benefits
 
 
 
 
 
 
U.S. Plans
 
Non-U.S.
Plans
 
Worldwide
OPEB
 
Total
Prior service cost/(credit)
 
$
155

 
$
56

 
$
(231
)
 
$
(20
)
(Gains)/Losses
 
207

 
598

 
98

 
903



NOTE 14.  RETIREMENT BENEFITS (Continued)

Pension Plan Asset Information

Investment Objective and Strategies. Our investment objectives for the U.S. plans are to minimize the volatility of the value of our U.S. pension assets relative to U.S. pension liabilities and to ensure assets are sufficient to pay plan benefits. As disclosed previously, in 2012 we adopted a broad global pension de-risking strategy, including a U.S. investment strategy that increases the matching characteristics of our assets relative to our liabilities. Our U.S. target asset allocations, which we expect to reach over the next few years as the plans achieve full funding, are 80% fixed income and 20% growth assets (primarily alternative investments, which include hedge funds, real estate, private equity, and public equity). Our largest non-U.S. plans (Ford U.K. and Ford Canada) have similar investment objectives to the U.S. plans. We expect to reach similar target asset allocations for these plans as they achieve full funding over the next few years, subject to legal requirements in each country.

Investment strategies and policies for the U.S. plans and the largest non-U.S. plans reflect a balance of risk-reducing and return-seeking considerations.  The objective of minimizing the volatility of assets relative to liabilities is addressed primarily through asset - liability matching, asset diversification, and hedging.  The fixed income target asset allocation matches the bond-like and long-dated nature of the pension liabilities. Assets are broadly diversified within asset classes to achieve risk-adjusted returns that in total lower asset volatility relative to the liabilities.  Our rebalancing policies ensure actual allocations are in line with target allocations as appropriate.  Strategies to address the goal of ensuring sufficient assets to pay benefits include target allocations to a broad array of asset classes, and strategies within asset classes that provide adequate returns, diversification, and liquidity.

All assets are externally managed and most assets are actively managed.  Managers are not permitted to invest outside of the asset class (e.g., fixed income, public equity, alternatives) or strategy for which they have been appointed. We use investment guidelines and recurring audits as tools to ensure investment managers invest solely within the investment strategy they have been provided.

Derivatives are permitted for fixed income investment and public equity managers to use as efficient substitutes for traditional securities and to manage exposure to interest rate and foreign exchange risks.  Interest rate and foreign currency derivative instruments are used for the purpose of hedging changes in the fair value of assets that result from interest rate changes and currency fluctuations.  Interest rate derivatives also are used to adjust portfolio duration. Derivatives may not be used to leverage or to alter the economic exposure to an asset class outside the scope of the mandate an investment manager has been given.  Alternative investment managers are permitted to employ leverage (including through the use of derivatives or other tools) that may alter economic exposure.

Significant Concentrations of Risk.  Significant concentrations of risk in our plan assets relate to interest rate, equity, and operating risk.  In order to minimize asset volatility relative to the liabilities, a portion of plan assets is allocated to fixed income investments that are exposed to interest rate risk.  Rate increases generally will result in a decline in fixed income assets while reducing the present value of the liabilities. Conversely, rate decreases will increase fixed income assets, partially offsetting the related increase in the liabilities.
 
In order to ensure assets are sufficient to pay benefits, a portion of plan assets is allocated to growth assets that are expected over time to earn higher returns with more volatility than fixed income investments which more closely match pension liabilities.  Within equities, risk is mitigated by constructing a portfolio that is broadly diversified by geography, market capitalization, manager mandate size, investment style, and process.  Within alternative investments, risk is similarly mitigated by constructing a portfolio that is broadly diversified by asset class, investment strategy, manager, style, and process.

Operating risks include the risks of inadequate diversification and weak controls.  To mitigate these risks, investments are diversified across and within asset classes in support of investment objectives.  Policies and practices to address operating risks include ongoing manager oversight (e.g., style adherence, team strength, firm health, and internal risk controls), plan and asset class investment guidelines and instructions that are communicated to managers, and periodic compliance and audit reviews to ensure adherence.

At year-end 2013, Ford securities comprised less than 1% of our plan assets.

NOTE 14.  RETIREMENT BENEFITS (Continued)

Expected Long-Term Rate of Return on Assets.  The long-term return assumption at year-end 2013 is 6.89% for the U.S. plans, 7.25% for the U.K. plans, and 6.31% for the Canadian plans, and averages 6.63% for all non-U.S. plans. A generally consistent approach is used worldwide to develop this assumption. This approach considers various sources, primarily inputs from a range of advisors for long-term capital market returns, inflation, bond yields, and other variables, adjusted for specific aspects of our investment strategy by plan.  Historical returns also are considered where appropriate.

At December 31, 2013, our actual 10-year annual rate of return on pension plan assets was 9% for the U.S. plans, 7.7% for the U.K. plans, and 5.8% for the Canadian plans.  At December 31, 2012, our actual 10-year annual rate of return on pension plan assets was 11.1% for the U.S. plans, 8.7% for the U.K. plans, and 6.4% for the Canadian plans.

Fair Value of Plan Assets.  Pension assets are recorded at fair value, and include primarily fixed income and equity securities, derivatives, and alternative investments, which include hedge funds, private equity, and real estate.  Fixed income and equity securities may each be combined into commingled fund investments.  Commingled funds are valued to reflect the pension fund’s interest in the fund based on the reported year-end net asset value (“NAV”).  Alternative investments are valued based on year-end reported NAV, with adjustments as appropriate for lagged reporting of 1 month to 6 months.

Fixed Income - Government and Agency Debt Securities and Corporate Debt Securities.  U.S. government and government agency obligations, non-U.S. government and government agency obligations, municipal securities, supranational obligations, corporate bonds, bank notes, floating rate notes, and preferred securities are valued based on quotes received from independent pricing services or from dealers who make markets in such securities.  Pricing services utilize matrix pricing, which considers readily available inputs such as the yield or price of bonds of comparable quality, coupon, maturity, and type, as well as dealer-supplied prices, and generally are categorized as Level 2 inputs in the fair value hierarchy.  Securities categorized as Level 3 typically are priced by dealers and pricing services that use proprietary pricing models which incorporate unobservable inputs.  These inputs primarily consist of yield and credit spread assumptions.
 
Fixed Income - Agency and Non-Agency Mortgage and Other Asset-Backed Securities.  U.S. and non-U.S. government agency mortgage and asset-backed securities, non-agency collateralized mortgage obligations, commercial mortgage securities, residential mortgage securities, and other asset-backed securities are valued based on quotes received from independent pricing services or from dealers who make markets in such securities. Pricing services utilize matrix pricing, which considers prepayment speed assumptions, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity and type, as well as dealer-supplied prices, and generally are categorized as Level 2 inputs in the fair value hierarchy.  Securities categorized as Level 3 typically are priced by dealers and pricing services that use proprietary pricing models which incorporate unobservable inputs.  These inputs primarily consist of prepayment curves, discount rates, default assumptions, and recovery rates.

Equities.  Equity securities are valued based on quoted prices and are primarily exchange-traded.  Securities for which official close or last trade pricing on an active exchange is available are classified as Level 1 in the fair value hierarchy.  If closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and typically are categorized as Level 2.  Level 3 securities often are thinly traded or delisted, with unobservable pricing data.

Derivatives.  Exchange-traded derivatives for which market quotations are readily available are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded and are categorized as Level 1. Over-the-counter derivatives typically are valued by independent pricing services and categorized as Level 2.  Level 3 derivatives typically are priced by dealers and pricing services that use proprietary pricing models which incorporate unobservable inputs, including extrapolated or model-derived assumptions such as volatilities and yield and credit spread assumptions.
 
Alternative Assets.  Hedge funds generally hold liquid and readily-priced securities, such as public equities, exchange-traded derivatives, and corporate bonds.  Since hedge funds do not have readily-available market quotations, they are valued using the NAV provided by the investment sponsor or third party administrator.  Hedge fund assets typically are categorized as Level 3 in the fair value hierarchy due to the inherent restrictions on redemptions that may affect our ability to sell the investment at its NAV in the near term. Valuations may be lagged 1 month to 3 months.  For 2013 and 2012, we made adjustments of $(10) million and $33 million, respectively, to adjust for hedge fund-lagged valuations.

NOTE 14.  RETIREMENT BENEFITS (Continued)

Private equity and real estate investments are less liquid.  External investment managers typically report valuations reflecting initial cost or updated appraisals, which are adjusted for cash flows, and realized and unrealized gains/losses. Private equity and real estate funds do not have readily available market quotations, and therefore are valued using the NAV provided by the investment sponsor or third party administrator.  These assets typically are categorized as Level 3 in the fair value hierarchy, due to the inherent restrictions on redemptions that may affect our ability to sell the investment at its NAV in the near term.  Valuations may be lagged 1 month - 6 months.  The NAV will be adjusted for cash flows (additional investments or contributions, and distributions) through year-end. We may make further adjustments for any known substantive valuation changes not reflected in the NAV.  For 2013 and 2012, we made adjustments of $123 million and $56 million, respectively, to adjust for private equity-lagged valuations. For 2013 and 2012, we made adjustments of $0 and $24 million, respectively, to adjust for real estate-lagged valuations.

The Ford-Werke GmbH (“Ford-Werke”) funded defined benefit plan is funded through a group insurance contract and exists in a pooled structure with other policy holders.  The contract value represents the value of the underlying assets held by the insurance company (primarily bonds) at the guaranteed rate of return.  The adjustment to fair value to recognize contractual returns is a significant unobservable input; therefore the contract is Level 3.

NOTE 14.  RETIREMENT BENEFITS (Continued)

The fair value of our pension benefits plan assets (including dividends and interest receivables of $349 million and $99 million for U.S. and non-U.S. plans, respectively) by asset category was as follows (in millions):
 
December 31, 2013
 
U.S. Plans
 
Non-U.S. Plans
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Asset Category
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. companies
$
3,724

 
$
22

 
$
3

 
$
3,749

 
$
2,711

 
$
229

 
$

 
$
2,940

International companies
2,288

 
76

 
1

 
2,365

 
2,983

 
214

 
2

 
3,199

Derivative financial instruments (a)

 

 

 

 

 

 

 

Total equity
6,012

 
98

 
4

 
6,114

 
5,694

 
443

 
2

 
6,139

Fixed Income
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
U.S. government
3,610

 

 

 
3,610

 
30

 

 

 
30

U.S. government-sponsored enterprises (b)

 
4,127

 

 
4,127

 

 
11

 

 
11

Non-U.S. government

 
2,115

 

 
2,115

 

 
6,880

 
67

 
6,947

Corporate bonds (c)
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Investment grade

 
15,058

 

 
15,058

 

 
1,229

 
55

 
1,284

High yield

 
1,254

 

 
1,254

 

 
337

 
21

 
358

Other credit

 
48

 

 
48

 

 
37

 
13

 
50

Mortgage/other asset-backed

 
1,287

 
33

 
1,320

 

 
238

 
14

 
252

Commingled funds

 
304

 

 
304

 

 
471

 

 
471

Derivative financial instruments (a)
(23
)
 
41

 

 
18

 

 
(5
)
 

 
(5
)
Total fixed income
3,587

 
24,234

 
33

 
27,854

 
30

 
9,198

 
170

 
9,398

Alternatives
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Hedge funds (d)

 

 
2,778

 
2,778

 

 

 
1,657

 
1,657

Private equity (e)

 

 
2,626

 
2,626

 

 

 
352

 
352

Real estate (f)

 

 
610

 
610

 

 

 
601

 
601

Total alternatives

 

 
6,014

 
6,014

 

 

 
2,610

 
2,610

Cash and cash equivalents (g)

 
1,477

 

 
1,477

 

 
950

 

 
950

Other (h)
(273
)
 
30

 
1

 
(242
)
 
(465
)
 
13

 
5,198

 
4,746

Total assets at fair value
$
9,326

 
$
25,839

 
$
6,052

 
$
41,217

 
$
5,259

 
$
10,604

 
$
7,980

 
$
23,843

_______
(a)
Net derivative position.  
(b)
Debt securities primarily issued by U.S. government-sponsored enterprises (“GSEs”).
(c)
“Investment grade” bonds are those rated Baa3/BBB- or higher by at least two rating agencies; “High yield” bonds are those rated below investment grade; “Other credit” refers to non-rated bonds.
(d)
For U.S. Plans, funds investing in diverse hedge fund strategies with the following composition of underlying hedge fund investments within the U.S. pension plans at December 31, 2013:  global macro (32%), event-driven (26%), equity long/short (22%), multi-strategy (11%) and relative value (9%). For non-U.S. Plans, funds investing in diversified portfolio of underlying hedge funds.  At December 31, 2013, the composition of underlying hedge fund investments (within the U.K. and Canada pension plans) was:  event-driven (35%), equity long/short (35%), multi-strategy (12%), global macro (12%) and relative value (6%).
(e)
For U.S. Plans, diversified investments in private equity funds with the following strategies:  buyout (61%), venture capital (26%), mezzanine/distressed (7%), and other (6%).  Allocations are estimated based on latest available data for managers reflecting June 30, 2013 holdings. For non-U.S. Plans, investments in private investment funds (funds of funds) pursuing strategies broadly classified as venture capital and buyouts.
(f)
For investment in private property funds broadly classified as core (49%), value-added and opportunistic (51%). For non-U.S. Plans, investment in private property funds broadly classified as core (40%), value-added and opportunistic (60%).  Also includes investment in real assets.
(g)
Primarily short-term investment funds to provide liquidity to plan investment managers and cash held to pay benefits.
(h)
For U.S. Plans, primarily cash related to net pending security (purchases)/sales and net pending foreign currency purchases/(sales). For non-U.S. Plans, primarily Ford-Werke, plan assets (insurance contract valued at $4,077 million) and cash related to net pending security (purchases)/sales and net pending foreign currency purchases/(sales).



NOTE 14.  RETIREMENT BENEFITS (Continued)

The fair value of our pension benefits plan assets (including dividends and interest receivables of $274 million and $84 million for U.S. and non-U.S. plans, respectively) by asset category was as follows (in millions):
 
December 31, 2012
 
U.S. Plans
 
Non-U.S.Plans
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Asset Category
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. companies
$
7,544

 
$
48

 
$
15

 
$
7,607

 
$
3,221

 
$
223

 
$

 
$
3,444

International companies
4,971

 
133

 
3

 
5,107

 
3,424

 
188

 
1

 
3,613

Derivative financial instruments (a)

 

 

 

 

 

 

 

Total equity
12,515

 
181

 
18

 
12,714

 
6,645

 
411

 
1

 
7,057

Fixed Income
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 

U.S. government
2,523

 

 

 
2,523

 
99

 

 

 
99

U.S. government-sponsored enterprises (b)

 
3,236

 
3

 
3,239

 

 
6

 

 
6

Non-U.S. government

 
2,884

 
32

 
2,916

 

 
5,841

 
41

 
5,882

Corporate bonds (c)
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Investment grade

 
10,581

 
80

 
10,661

 

 
1,147

 
22

 
1,169

High yield

 
1,386

 
14

 
1,400

 

 
268

 
1

 
269

Other credit

 
28

 
50

 
78

 

 
13

 
6

 
19

Mortgage/other asset-backed

 
1,183

 
115

 
1,298

 

 
168

 
28

 
196

Commingled funds

 
477

 

 
477

 

 
504

 

 
504

Derivative financial instruments (a)
(31
)
 
(105
)
 

 
(136
)
 

 
3

 
(1
)
 
2

Total fixed income
2,492

 
19,670

 
294

 
22,456

 
99

 
7,950

 
97

 
8,146

Alternatives
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 

Hedge funds (d)

 

 
3,121

 
3,121

 

 

 
1,142

 
1,142

Private equity (e)

 

 
2,412

 
2,412

 

 

 
236

 
236

Real estate (f)

 

 
457

 
457

 

 
1

 
329

 
330

Total alternatives

 

 
5,990

 
5,990

 

 
1

 
1,707

 
1,708

Cash and cash equivalents (g)

 
1,844

 
57

 
1,901

 

 
867

 

 
867

Other (h)
(681
)
 
15

 

 
(666
)
 
(751
)
 
16

 
4,670

 
3,935

Total assets at fair value
$
14,326

 
$
21,710

 
$
6,359

 
$
42,395

 
$
5,993

 
$
9,245

 
$
6,475

 
$
21,713

_______
(a)
Net derivative position.  
(b)
Debt securities primarily issued by GSEs.
(c)
“Investment grade” bonds are those rated Baa3/BBB- or higher by at least two rating agencies; “High yield” bonds are those rated below investment grade; “Other credit” refers to non-rated bonds.
(d)
For U.S. Plans, funds investing in diverse hedge fund strategies (primarily commingled fund of funds) with the following composition of underlying hedge fund investments within the U.S. pension plans at December 31, 2012:  global macro (39%), event-driven (21%), equity long/short (17%), relative value (13%), and multi-strategy (10%). For non-U.S. Plans, funds investing in diversified portfolio of underlying hedge funds (commingled fund of funds).  At December 31, 2012, the composition of underlying hedge fund investments (within the U.K. and Canada pension plans) was:  event-driven (36%), equity long/short (26%), multi-strategy (14%), global macro (13%) and relative value (11%).
(e)
For U.S. Plans, diversified investments in private equity funds with the following strategies:  buyout (60%), venture capital (25%), mezzanine/distressed (8%), and other (7%).  Allocations are estimated based on latest available data for managers reflecting June 30, 2012 holdings. For non-U.S. Plans, investments in private investment funds (funds of funds) pursuing strategies broadly classified as venture capital and buyouts.
(f)
For U.S. Plans, Investment in private property funds broadly classified as core (54%), value-added and opportunistic (46%). For non-U.S. Plans, investment in private property funds broadly classified as core (31%), value-added and opportunistic (69%).  Also includes investment in real assets.
(g)
Primarily short-term investment funds to provide liquidity to plan investment managers and cash held to pay benefits.
(h)
For U.S. Plans, primarily cash related to net pending trade purchases/sales and net pending foreign exchange purchases/sales. For non-U.S. Plans, primarily Ford-Werke, plan assets (insurance contract valued at $3,609 million) and cash related to net pending trade purchases/sales and net pending foreign exchange purchases/sales.







NOTE 14.  RETIREMENT BENEFITS (Continued)

The following table summarizes the changes in Level 3 pension benefits plan assets measured at fair value on a recurring basis for the year ended December 31, 2013 (in millions):
 
2013
 
 
Return on plan assets
 
 
 
 
 
 
U.S. Plans:
Fair
Value
at
January 1, 2013
 
Attributable
to Assets
Held
at
December 31,
2013
 
Attributable
to
Assets
Sold
 
Net Purchases/
(Settlements)
 
Transfers Into/ (Out of) Level 3
 
Fair
Value
at
December 31,
2013
Asset Category
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
U.S. companies
$
15

 
$

 
$

 
$

 
$
(12
)
 
$
3

International companies
3

 

 

 
(2
)
 

 
1

Total equity
18

 

 

 
(2
)
 
(12
)
 
4

Fixed Income
 

 
 

 
 

 
 

 
 

 
 

U.S. government

 

 

 

 

 

U.S. government-sponsored enterprises
3

 

 

 

 
(3
)
 

Non-U.S. government
32

 

 
(1
)
 
(28
)
 
(3
)
 

Corporate bonds
 

 
 

 
 

 
 

 
 

 
 

Investment grade
80

 

 
(4
)
 
(33
)
 
(43
)
 

High yield
14

 

 
(1
)
 
(12
)
 
(1
)
 

Other credit
50

 

 
(7
)
 
(26
)
 
(17
)
 

Mortgage/other asset-backed
115

 

 
7

 
7

 
(96
)
 
33

Derivative financial instruments

 

 

 

 

 

Total fixed income
294

 

 
(6
)
 
(92
)
 
(163
)
 
33

Alternatives
 

 
 

 
 

 
 

 
 

 
 

Hedge funds
3,121

 
295

 
(40
)
 
(598
)
 

 
2,778

Private equity
2,412

 
345

 

 
(131
)
 

 
2,626

Real estate
457

 
45

 

 
108

 

 
610

Total alternatives
5,990

 
685

 
(40
)
 
(621
)
 

 
6,014

Other
57

 
1

 
2

 
(55
)
 
(4
)
 
1

Total Level 3 fair value
$
6,359

 
$
686

 
$
(44
)
 
$
(770
)
 
$
(179
)
 
$
6,052

 
 
 
 
 
 
 
 
 
 
 
 
Non-U.S. Plans:
 
 
 
 
 
 
 
 
 
 
 
Asset Category
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
U.S. companies
$

 
$

 
$

 
$

 
$

 
$

International companies
1

 

 

 

 
1

 
2

Total equity
1








1


2

Fixed Income
 

 
 

 
 

 
 

 
 

 


U.S. government

 

 

 

 

 

U.S. government-sponsored enterprises

 

 

 

 

 

Non-U.S. government
41

 
(7
)
 

 
33

 

 
67

Corporate bonds
 

 
 

 
 

 
 

 
 
 


Investment grade
22

 
(1
)
 
(1
)
 
32

 
3

 
55

High yield
1

 

 

 
19

 
1

 
21

Other credit
6

 

 

 
7

 

 
13

Mortgage/other asset-backed
28

 

 
2

 
1

 
(17
)
 
14

Derivative financial instruments
(1
)
 

 

 
1

 

 

Total fixed income
97


(8
)

1


93


(13
)

170

Alternatives
 

 
 

 
 

 
 

 
 

 


Hedge funds
1,142

 
114

 
10

 
391

 

 
1,657

Private equity
236

 
34

 

 
82

 

 
352

Real estate
329

 
42

 

 
230

 

 
601

Total alternatives
1,707


190


10


703




2,610

Other (a)
4,670

 
528

 

 

 

 
5,198

Total Level 3 fair value
$
6,475

 
$
710


$
11


$
796


$
(12
)

$
7,980

_______
(a)
Primarily Ford-Werke plan assets (insurance contract valued at $4,077 million).
NOTE 14.  RETIREMENT BENEFITS (Continued)

The following table summarizes the changes in Level 3 pension benefits plan assets measured at fair value on a recurring basis for the year ended December 31, 2012 (in millions):
 
2012
 
 
Return on plan assets
 
 
 
 
 
 
U.S. Plans
Fair
Value
at
January 1, 2012
 
Attributable
to Assets
Held
at
December 31,
2012
 
Attributable
to
Assets
Sold
 
Net Purchases/
(Settlements)
 
Transfers Into/ (Out of) Level 3
 
Fair
Value
at
December 31,
2012
Asset Category
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
U.S. companies
$
15

 
$

 
$

 
$

 
$

 
$
15

International companies
3

 

 
3

 
(3
)
 

 
3

Total equity
18

 

 
3

 
(3
)
 

 
18

Fixed Income
 

 
 

 
 

 
 

 


 
 

U.S. government

 

 

 

 

 

U.S. government-sponsored enterprises
8

 

 

 
(5
)
 

 
3

Non-U.S. government
169

 
2

 
5

 
(137
)
 
(7
)
 
32

Corporate bonds
 

 
 

 
 

 
 

 


 
 

Investment grade
33

 
5

 
(4
)
 
14

 
32

 
80

High yield
11

 
1

 
1

 
4

 
(3
)
 
14