Ford Motor Company

Tax-Efficient Savings Plan for Hourly Employees

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Tax-Efficient Savings Plan for Hourly Employees

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Report of Independent Registered Public Accounting Firm

To the Participants and Administrator

Ford Motor Company Tax-Efficient Savings

      Plan for Hourly Employees

We have audited the accompanying statement of net assets available for benefits of the Ford Motor Company Tax-Efficient Savings Plan for Hourly Employees (the Plan) as of December 31, 2012 and 2011 and the related statement of changes in net assets available for benefits for the year ended December 31, 2012.  These financial statements are the responsibility of the Plan’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets of the Plan as of December 31, 2012 and 2011 and the changes in net assets for the year ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

 

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole.  The supplemental schedule of assets held at end of year as of December 31, 2012 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.  This supplemental schedule is the responsibility of the Plan's management.  This supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ Plante & Moran, PLLC

Southfield, Michigan

June 25, 2013

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Ford Motor Company

Tax-Efficient Savings Plan for Hourly Employees

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See Notes to Financial Statements.

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Tax-Efficient Savings Plan for Hourly Employees

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Eligible employees hired between November 19, 2007 and October 23, 2011 are immediately eligible to receive 6.4 percent of eligible wages as a Retirement Contribution.  Eligible employees hired after October 24, 2011 are immediately eligible to receive 4 percent of eligible wages as a Retirement Contribution.   Eligible wages are limited to 40 hours per week for the Retirement Contributions.

Employees become 100 percent vested in their Company Contributions three years from their original hire date.

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Note 1 - Description of the Plan (Continued)

Master Trust Investment Options and Participation - Participant contributions and Company 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).

Transfers of Assets - The Plan permits the transfer of assets among investment options held by the Master Trust, subject to certain trading restrictions imposed on some of the investment options.

Participant Notes Receivable - The Plan permits participants to borrow from both their pre-tax, after-tax, and rollover accounts.  Monthly notes receivable interest rates related to these borrowings are based on the prime rate published in The Wall Street Journal on the last business day of the prior month.  Participant notes receivable are collateralized by the participant’s account balance.

A participant is eligible to take out one note receivable per calendar year, and to have only four notes receivable outstanding at any one time.  General notes receivable may be for a minimum of one year, but not exceeding five years.  Notes receivable related to the purchase of a primary residence may be for a maximum of ten years.

Forfeitures - The plan permits the Company to use Company contribution assets forfeited by participants to reduce the Company's future contributions to the Plan.

Related Party Transactions - Certain Master Trust investment options are investment products managed by State Street Global Advisors (SSgA), which is the investment management division of State Street Bank and Trust Company, a wholly owned subsidiary of State Street Corporation.  State Street Bank and Trust Company is the trustee, as defined by the plan, and disbursement agent.  Additionally, BlackRock Institutional Trust Company, N.A., Evercore Trust Company, N.A., and SSgA are paid investment management fees by the Company on behalf of the Plan.

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Note 2 - Summary of Significant Accounting Policies

 

 

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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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 pro-rata, 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.

 

		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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All transfers to, withdrawals from, or other transactions regarding the Master Trust shall be conducted in such a way that the proportionate interest in the Master Trust of each plan and the fair market value of that interest may be determined at any time.

 

The interest of each such plan shall be debited or credited (as the case may be) (i) for the entire amount of every contribution received on behalf of such plan (including participant contributions), every distribution, or other expense attributable solely to such plan, and every other transaction relating only to such plan; and (ii) for its proportionate share of every item of collected or accrued income, gain or loss, and general expense, and of any other transactions attributable to the Master Trust or that investment option as a whole.

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

 

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Notes to Financial Statements

December 31, 2012 and 2011

 

 

 

 

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Notes to Financial Statements

December 31, 2012 and 2011

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Schedule of Assets Held at End of Year

Form 5500, Schedule H, Item 4i

EIN 38-0549190, Plan 025

December 31, 2012