RETIREMENT BENEFITS

We provide pension benefits and OPEB, such as health care and life insurance, to employees in many of our operations around the world. 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 plans are determined using assumptions regarding the benefit obligation and the market-related value of plan assets 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. We record a curtailment 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.

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 general, our plans are funded, with the main exceptions being certain plans in Germany, and U.S. defined benefit plans for senior management. In such cases, an unfunded liability is recorded.

Employee Retirement and Savings Plans. We, and certain of our subsidiaries, sponsor plans to provide pension benefits for retired employees. We have qualified defined benefit retirement plans in the United States covering hourly and salaried employees. The principal hourly plan covers Ford employees represented by the UAW. The salaried plan covers substantially all other Ford employees in the United States hired on or before December 31, 2003. The hourly plan provides noncontributory benefits related to employee service. The salaried plan provides similar noncontributory benefits and contributory benefits related to pay and service. Other U.S. and non-U.S. subsidiaries have separate plans that generally provide similar types of benefits for their employees.

We established, effective January 1, 2004, a defined contribution plan covering salaried U.S. employees hired on or after that date. Effective October 24, 2011, hourly U.S. employees represented by the UAW hired on or after that date also participate in a defined contribution plan.

On April 27, 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 provides participants with a one-time choice of electing to receive a lump-sum settlement of their remaining pension benefit. Offers to eligible participants began in August 2012 and will continue through 2013. In 2012, as part of this voluntary lump sum program, the Company settled $1.2 billion of its pension obligations for salaried retirees.

The expense for our worldwide defined contribution plans was $167 million, $131 million, and $123 million in 2012, 2011, and 2010, respectively. This includes the expense for company matching contributions to our primary employee savings plan in the United States of $70 million, $54 million, and $52 million in 2012, 2011, and 2010, respectively.

OPEB. We, and certain of our subsidiaries, sponsor plans to provide OPEB for retired employees, primarily certain health care and life insurance benefits. The Ford Salaried Health Care Plan (the "Plan") provides retiree health care benefits for Ford salaried employees in the United States hired before June 1, 2001. U.S. salaried employees hired on or after June 1, 2001 are covered by a separate plan that provides for annual company allocations to employee-specific notional accounts to be used to fund postretirement health care benefits. The Plan also covers Ford hourly non-UAW represented employees in the United States hired before November 19, 2007. U.S. hourly employees hired on or after November 19, 2007 are eligible to participate in a separate health care plan that provides defined contributions made by Ford to individual participant accounts. UAW-represented employees hired before November 19, 2007 are covered by the UAW Retiree Medical Benefits Trust (the "UAW VEBA Trust"), an independent, non-Ford sponsored voluntary employee beneficiary association trust. Company-paid postretirement life insurance benefits also are provided to U.S. salaried employees hired before January 1, 2004 and all U.S. hourly employees.

NOTE 16. RETIREMENT BENEFITS (Continued)

Effective August 1, 2008, the Company-paid retiree basic life insurance benefits were capped at $25,000 for eligible existing and future salaried retirees. Salaried employees hired on or after January 1, 2004 are not eligible for retiree basic life insurance.

Benefit Plans – Expense and Status

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
	2012			2011			2010			2012			2011			2010			2012			2011			2010
Service cost	$	521		$	467		$	376		$	372		$	327		$	314		$	67		$	63		$	54
Interest cost	2,208			2,374			2,530			1,189			1,227			1,249			290			327			338
Expected return on assets	(2,873		)	(3,028		)	(3,172		)	(1,340		)	(1,404		)	(1,337		)	—			—			—
Amortization of
Prior service costs/(credits)	220			343			370			72			72			75			(545		)	(612		)	(617		)
(Gains)/Losses	425			194			20			412			301			218			129			94			92
Separation programs/other	7			1			(2		)	162			170			54			2			10			5
(Gains)/Losses from curtailments and settlements	250			—			—			—			111			—			(11		)	(26		)	(30		)
Net expense/(income)	$	758		$	351		$	122		$	867		$	804		$	573		$	(68	)	$	(144	)	$	(158	)

NOTE 16. RETIREMENT BENEFITS (Continued)

The year-end status of these plans was as follows (dollar amounts in millions):



	Pension Benefits
	U.S. Plans						Non-U.S. Plans						Worldwide OPEB
	2012			2011			2012			2011			2012			2011
Change in Benefit Obligation
Benefit obligation at January 1	$	48,816		$	46,647		$	25,163		$	23,385		$	6,593		$	6,423
Service cost	521			467			372			327			67			63
Interest cost	2,208			2,374			1,189			1,227			290			327
Amendments	(39		)	5			222			38			(156		)	(62		)
Separation programs and other	(40		)	(52		)	202			196			3			10
Curtailments	—			—			—			—			—			(50		)
Settlements	(1,123		)	—			—			(152		)	—			—
Plan participant contributions	27			23			36			46			29			29
Benefits paid	(3,427		)	(3,534		)	(1,420		)	(1,373		)	(454		)	(473		)
Foreign exchange translation	—			—			803			(441		)	47			(62		)
Divestiture	—			—			—			—			—			—
Actuarial (gain)/loss	5,182			2,886			4,135			1,910			391			388
Benefit obligation at December 31	$	52,125		$	48,816		$	30,702		$	25,163		$	6,810		$	6,593
Change in Plan Assets
Fair value of plan assets at January 1	$	39,414		$	39,960		$	19,198		$	18,615		$	—		$	—
Actual return on plan assets	5,455			2,887			1,637			934			—			—
Company contributions	2,134			132			1,629			1,403			—			—
Plan participant contributions	27			23			36			46			—			—
Benefits paid	(3,427		)	(3,534		)	(1,420		)	(1,373		)	—			—
Settlements	(1,123		)	—			—			(152		)	—			—
Foreign exchange translation	—			—			641			(267		)	—			—
Divestiture	—			—			—			—			—			—
Other	(85		)	(54		)	(8		)	(8		)	—			—
Fair value of plan assets at December 31	$	42,395		$	39,414		$	21,713		$	19,198		$	—		$	—

Funded status at December 31	$	(9,730	)	$	(9,402	)	$	(8,989	)	$	(5,965	)	$	(6,810	)	$	(6,593	)

Amounts Recognized on the Balance Sheet
Prepaid assets	$	—		$	—		$	85		$	114		$	—		$	—
Accrued liabilities	(9,730		)	(9,402		)	(9,074		)	(6,079		)	(6,810		)	(6,593		)
Total	$	(9,730	)	$	(9,402	)	$	(8,989	)	$	(5,965	)	$	(6,810	)	$	(6,593	)
Amounts Recognized in Accumulated Other Comprehensive Loss (pre-tax)
Unamortized prior service costs/(credits)	$	938		$	1,197		$	487		$	323		$	(1,263	)	$	(1,648	)
Unamortized net (gains)/losses	11,349			9,394			11,375			7,612			2,594			2,305
Total	$	12,287		$	10,591		$	11,862		$	7,935		$	1,331		$	657
Pension Plans in which Accumulated Benefit Obligation Exceeds Plan Assets at December 31
Accumulated benefit obligation	$	50,821		$	47,555		$	21,653		$	18,138
Fair value of plan assets	42,395			39,414			14,625			13,207

Accumulated Benefit Obligation at December 31	$	50,821		$	47,555		$	28,136		$	23,524

Pension Plans in which Projected Benefit Obligation Exceeds Plan Assets at December 31
Projected benefit obligation	$	52,125		$	48,816		$	29,984		$	24,184
Fair value of plan assets	42,395			39,414			20,910			18,105

Projected Benefit Obligation at December 31	$	52,125		$	48,816		$	30,702		$	25,163

NOTE 16. RETIREMENT BENEFITS (Continued)

As a result of various personnel-reduction programs (discussed in Note 23), we have recognized curtailments in the U.S. and Canadian OPEB plans.

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

In 2012, we changed our accounting policy for recognizing unamortized gains or losses upon the settlement of plan obligations. We now recognize a 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. Prior to 2012, we recognized a proportionate amount of the unamortized gains and losses if the cost of all settlements during the year exceeded both interest and service cost for the affected plan. The Company believes this change in accounting principle is preferable as it results in the earlier recognition of unamortized gains and losses that previously had been deferred and recognized over time.

An incremental settlement loss of $250 million related to the U.S. salaried lump sum program has been recognized during 2012 as a result of this change with a corresponding balance sheet reduction in Accumulated other comprehensive income/(loss). This accounting change does not impact financial results in prior periods.

The financial impact of the curtailments and settlements is reflected in the tables above and the expense is recorded in Automotive cost of sales and Selling, administrative, and other expenses.

The following table summarizes the assumptions used to determine benefit obligation and expense:



	Pension Benefits
	U.S. Plans				Non-U.S. Plans				U.S. OPEB
	2012		2011		2012		2011		2012		2011
Weighted Average Assumptions at 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
Assumptions Used to Determine Net Benefit Cost for the Year Ended December 31
Discount rate	4.64	%	5.24	%	4.84	%	5.31	%	4.60	%	5.20	%
Expected long-term rate of return on assets	7.50		8.00		6.77		7.20		—		—
Average rate of increase in compensation	3.80		3.80		3.39		3.34		3.80		3.80

The amounts in Accumulated other comprehensive income/(loss) that are expected to be recognized as components of net expense/(income) during 2013 are as follows (in millions):



	Pension Benefits
	U.S. Plans		Non-U.S. Plans		Worldwide OPEB			Total
Prior service cost/(credit)	$	174	$	68	$	(286	)	$	(44	)
(Gains)/Losses	778		707		160			1,645

Pension Plan Contributions

In 2012, we contributed $3.4 billion to our worldwide funded pension plans (including $2 billion in discretionary contributions to our U.S. plans) and made $400 million of benefit payments to participants in unfunded plans. During 2013, we expect to contribute about $5 billion from Automotive cash and cash equivalents to our worldwide funded plans (including discretionary contributions of about $3.4 billion largely to our U.S. plans), and to make $400 million of benefit payments to participants in unfunded plans, for a total of about $5.4 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 2013.

NOTE 16. RETIREMENT BENEFITS (Continued)

Estimated Future Benefit Payments

The following table presents estimated future gross benefit payments (in millions):



	Gross Benefit Payments
	Pension
	U.S. Plans		Non-U.S. Plans		Worldwide OPEB
2013	$	5,940	$	1,370	$	440
2014	3,320		1,350		400
2015	3,250		1,380		390
2016	3,200		1,410		390
2017	3,160		1,450		380
2018 - 2022	15,330		7,690		1,890

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 in our Annual Report on Form 10-K for the year ended December 31, 2011, in 2011 we adopted a broad global pension de-risking strategy, including a revised U.S. investment strategy which 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 several 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 target asset allocations similar to the new U.S. target asset allocations over the next several 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.

NOTE 16. RETIREMENT BENEFITS (Continued)

In order to ensure assets are sufficient to pay benefits, a portion of plan assets is allocated to growth assets (equity investments and alternative investments) 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 2012, within the total fair value of our assets in major worldwide plans, we held less than 2% of fixed income investments in the obligations of Greece, Ireland, Italy, Portugal, and Spain. Also at year-end 2012, we held less than 2% in Ford securities.

Expected Long-Term Rate of Return on Assets. The long-term return assumption at year-end 2012 is 7.38% for the U.S. plans, 7.25% for the U.K. plans, and 6.75% for the Canadian plans, and averages 6.74% 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, 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. At December 31, 2011, our actual 10-year annual rate of return on pension plan assets was 8.6% for the U.S. plans, 6.0% for the U.K. plans, and 4.6% 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 - 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.

NOTE 16. RETIREMENT BENEFITS (Continued)

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 in long/short funds, exchange-traded derivatives in macro/commodity trading advisor funds, and corporate bonds in credit relative value funds. 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 - 3 months. For 2012 and 2011, we made adjustments of $33 million, and $(10) million, respectively, to adjust for hedge fund lagged valuations.

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 2012 and 2011, we made adjustments of $56 million and $6 million, respectively, to adjust for private equity lagged valuations. For 2012 and 2011, we made adjustments of $24 million and $13 million, respectively, to adjust for real estate lagged valuations.

The Ford Germany 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 16. 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):



U.S. Plans	December 31, 2012
	Level 1			Level 2			Level 3		Total
Asset Category
Equity
U.S. companies	$	7,544		$	48		$	15	$	7,607
International companies	4,971			133			3		5,107
Derivative financial instruments (a)	—			—			—		—
Total equity	12,515			181			18		12,714
Fixed Income
U.S. government	2,523			—			—		2,523
U.S. government-sponsored enterprises (b)	—			3,236			3		3,239
Non-U.S. government	—			2,884			32		2,916
Corporate bonds (c)
Investment grade	—			10,581			80		10,661
High yield	—			1,386			14		1,400
Other credit	—			28			50		78
Mortgage/other asset-backed	—			1,183			115		1,298
Commingled funds	—			477			—		477
Derivative financial instruments (a)
Interest rate contracts	(31		)	15			—		(16		)
Credit contracts	—			2			—		2
Other contracts	—			(122		)	—		(122		)
Total fixed income	2,492			19,670			294		22,456
Alternatives
Hedge funds (d)	—			—			3,121		3,121
Private equity (e)	—			—			2,412		2,412
Real estate (f)	—			—			457		457
Total alternatives	—			—			5,990		5,990
Cash and cash equivalents (g)	—			1,844			57		1,901
Other (h)	(681		)	15			—		(666		)
Total assets at fair value	$	14,326		$	21,710		$	6,359	$	42,395

_______


(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)	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, 2012: global macro (39%), event-driven (21%), equity long/short (17%), relative value (13%), and multi-strategy (10%).


(e)	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.


(f)	Investment in private property funds broadly classified as core (54%), value-added and opportunistic (46%).


(g)	Primarily short-term investment funds to provide liquidity to plan investment managers and cash held to pay benefits.


(h)	Primarily cash related to net pending security (purchases)/sales and net pending foreign currency purchases/(sales).

NOTE 16. RETIREMENT BENEFITS (Continued)



Non-U.S. Plans	December 31, 2012
	Level 1			Level 2			Level 3			Total
Asset Category
Equity
U.S. companies	$	3,221		$	223		$	—		$	3,444
International companies	3,424			188			1			3,613
Derivative financial instruments (a)	—			—			—			—
Total equity	6,645			411			1			7,057
Fixed Income
U.S. government	99			—			—			99
U.S. government-sponsored enterprises (b)	—			6			—			6
Non-U.S. government	—			5,841			41			5,882
Corporate bonds (c)
Investment grade	—			1,147			22			1,169
High yield	—			268			1			269
Other credit	—			13			6			19
Mortgage/other asset-backed	—			168			28			196
Commingled funds	—			504			—			504
Derivative financial instruments (a)
Interest rate contracts	—			4			(1		)	3
Credit contracts	—			(1		)	—			(1		)
Other contracts	—			—			—			—
Total fixed income	99			7,950			97			8,146
Alternatives
Hedge funds (d)	—			—			1,142			1,142
Private equity (e)	—			—			236			236
Real estate (f)	—			1			329			330
Total alternatives	—			1			1,707			1,708
Cash and cash equivalents (g)	—			867			—			867
Other (h)	(751		)	16			4,670			3,935
Total assets at fair value	$	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)	Funds investing in diversified portfolio of underlying hedge 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)	Investments in private investment funds (funds of funds) pursuing strategies broadly classified as venture capital and buyouts.


(f)	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.


(h)	Primarily Ford-Werke GmbH ("Ford-Werke") plan assets (insurance contract valued at $3,609 million) and cash related to net pending security (purchases)/sales and net pending foreign currency purchases/(sales).

NOTE 16. RETIREMENT BENEFITS (Continued)

The fair value of our pension benefits plan assets (including dividends and interest receivables of $291 million and $78 million for U.S. and non-U.S. plans, respectively) by asset category was as follows (in millions):



U.S. Plans	December 31, 2011
	Level 1			Level 2			Level 3			Total
Asset Category
Equity
U.S. companies	$	7,331		$	44		$	12		$	7,387
International companies	5,565			32			3			5,600
Commingled funds	—			244			3			247
Derivative financial instruments (a)	—			—			—			—
Total equity	12,896			320			18			13,234
Fixed Income
U.S. government	4,084			—			—			4,084
U.S. government-sponsored enterprises (b)	—			4,581			7			4,588
Non-U.S. government	—			1,375			169			1,544
Corporate bonds (c)
Investment grade	—			9,061			33			9,094
High yield	—			1,280			11			1,291
Other credit	—			17			18			35
Mortgage/other asset-backed	—			1,348			54			1,402
Commingled funds	—			258			—			258
Derivative financial instruments (a)
Interest rate contracts	13			28			(3		)	38
Credit contracts	—			(8		)	—			(8		)
Other contracts	—			(265		)	9			(256		)
Total fixed income	4,097			17,675			298			22,070
Alternatives
Hedge funds (d)	—			—			2,968			2,968
Private equity (e)	—			—			2,085			2,085
Real estate (f)	—			—			362			362
Total alternatives	—			—			5,415			5,415
Cash and cash equivalents (g)	—			1,477			1			1,478
Other (h)	(2,798		)	18			(3		)	(2,783		)
Total assets at fair value	$	14,195		$	19,490		$	5,729		$	39,414

_______


(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)	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, 2011: global macro (42%), equity long/short (21%), event-driven (18%), relative value (11%), and multi-strategy (8%).


(e)	Diversified investments in private equity funds with the following strategies: buyout (61%), venture capital (25%), mezzanine/distressed (8%), and other (6%). Allocations are estimated based on latest available data for managers reflecting June 30, 2011 holdings.


(f)	Investment in private property funds broadly classified as core (64%), value-added and opportunistic (36%).


(g)	Primarily short-term investment funds to provide liquidity to plan investment managers and cash held to pay benefits.


(h)	Primarily cash related to net pending trade purchases/sales and net pending foreign exchange purchases/sales.

NOTE 16. RETIREMENT BENEFITS (Continued)



Non-U.S. Plans	December 31, 2011
	Level 1			Level 2			Level 3			Total
Asset Category
Equity
U.S. companies	$	2,596		$	181		$	—		$	2,777
International companies	2,906			154			1			3,061
Derivative financial instruments (a)	—			—			—			—
Total equity	5,502			335			1			5,838
Fixed Income
U.S. government	33			—			—			33
U.S. government-sponsored enterprises (b)	—			16			—			16
Non-U.S. government	2			5,805			122			5,929
Corporate bonds (c)
Investment grade	—			975			11			986
High yield	—			271			—			271
Other credit	—			15			—			15
Mortgage/other asset-backed	—			189			6			195
Commingled funds	—			415			—			415
Derivative financial instruments (a)
Interest rate contracts	—			(15		)	(6		)	(21		)
Credit contracts	—			(1		)	—			(1		)
Other contracts	—			(1		)	—			(1		)
Total fixed income	35			7,669			133			7,837
Alternatives
Hedge funds (d)	—			—			1,053			1,053
Private equity (e)	—			—			123			123
Real estate (f)	—			1			160			161
Total alternatives	—			1			1,336			1,337
Cash and cash equivalents (g)	—			370			—			370
Other (h)	(554		)	12			4,358			3,816
Total assets at fair value	$	4,983		$	8,387		$	5,828		$	19,198

_______


(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)	Funds investing in diversified portfolio of underlying hedge funds (commingled fund of funds). At December 31, 2011, the composition of underlying hedge fund investments (within the U.K. and Canada pension plans) was: event-driven (30%), equity long/short (27%), global macro (14%), multi-strategy (14%), relative value (11%), and cash (4%).


(e)	Investments in private investment funds (funds of funds) pursuing strategies broadly classified as venture capital and buyouts.


(f)	Investment in private property funds broadly classified as core (13%), value-added and opportunistic (87%). Also includes investment in real assets.


(g)	Primarily short-term investment funds to provide liquidity to plan investment managers.


(h)	Primarily Ford-Werke plan assets (insurance contract valued at $3,406 million) and cash related to net pending trade purchases/sales and net pending foreign exchange purchases/sales.

NOTE 16. 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):



U.S. Plans	2012
				Return on plan assets									Transfers
	Fair Value at January 1, 2012			Attributable to Assets Held at December 31, 2012			Attributable to Assets Sold			Net Purchases/ (Settlements)			Into Level 3		Out of Level 3			Fair Value at December 31, 2012
Asset Category
Equity
U.S. companies	$	15		$	—		$	—		$	—		$	—	$	—		$	15
International companies	3			—			3			(3		)	1		(1		)	3
Derivative financial instruments	—			—			—			—			—		—			—
Total equity	18			—			3			(3		)	1		(1		)	18
Fixed Income
U.S. government	—			—			—			—			—		—			—
U.S. government-sponsored enterprises	8			—			—			(5		)	—		—			3
Non-U.S. government	169			2			5			(137		)	5		(12		)	32
Corporate bonds
Investment grade	33			5			(4		)	14			42		(10		)	80
High yield	11			1			1			4			1		(4		)	14
Other credit	17			5			—			28			—		—			50
Mortgage/other asset-backed	54			1			3			43			21		(7		)	115
Derivative financial instruments
Interest rate contracts	(3		)	—			5			(2		)	—		—			—
Credit contracts	—			—			—			—			—		—			—
Other contracts	9			(3		)	(14		)	12			—		(4		)	—
Total fixed income	298			11			(4		)	(43		)	69		(37		)	294
Alternatives
Hedge funds	2,968			189			(6		)	(30		)	—		—			3,121
Private equity	2,085			201			—			126			—		—			2,412
Real estate	362			31			1			63			—		—			457
Total alternatives	5,415			421			(5		)	159			—		—			5,990
Other	(2		)	2			—			67			—		(10		)	57
Total Level 3 fair value	$	5,729		$	434		$	(6	)	$	180		$	70	$	(48	)	$	6,359

NOTE 16. RETIREMENT BENEFITS (Continued)



Non-U.S. Plans	2012
				Return on plan assets								Transfers
	Fair Value at January 1, 2012			Attributable to Assets Held at December 31, 2012		Attributable to Assets Sold			Net Purchases/ (Settlements)			Into Level 3		Out of Level 3			Fair Value at December 31, 2012
Asset Category
Equity
U.S. companies	$	—		$	—	$	—		$	—		$	—	$	—		$	—
International companies	1			—		—			—			—		—			1
Total equity	1			—		—			—			—		—			1
Fixed Income
U.S. government	—			—		—			—			—		—			—
U.S. government-sponsored enterprises	—			—		—			—			—		—			—
Non-U.S. government	122			1		9			(31		)	—		(60		)	41
Corporate bonds
Investment grade	11			1		1			4			5		—			22
High yield	—			—		—			1			—		—			1
Other credit	—			—		—			6			—		—			6
Mortgage/other asset-backed	6			—		—			14			8		—			28
Commingled funds	—			—		—			—			—		—			—
Derivative financial instruments	(6		)	—		(3		)	—			8		—			(1		)
Total fixed income	133			2		7			(6		)	21		(60		)	97
Alternatives
Hedge funds	1,053			79		10			—			—		—			1,142
Private equity	123			14		—			99			—		—			236
Real estate	160			4		(1		)	166			—		—			329
Total alternatives	1,336			97		9			265			—		—			1,707
Other (a)	4,358			312		—			—			—		—			4,670
Total Level 3 fair value	$	5,828		$	411	$	16		$	259		$	21	$	(60	)	$	6,475

_______


(a)	Primarily Ford-Werke plan assets (insurance contract valued at $3,609 million).

NOTE 16. 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, 2011 (in millions):



U.S. Plans	2011
				Return on plan assets									Transfers
	Fair Value at January 1, 2011			Attributable to Assets Held at December 31, 2011			Attributable to Assets Sold			Net Purchases/ (Settlements)			Into Level 3		Out of Level 3			Fair Value at December 31, 2011
Asset Category
Equity
U.S. companies	$	16		$	(1	)	$	—		$	—		$	—	$	—		$	15
International companies	6			—			(1		)	(1		)	—		(1		)	3
Derivative financial instruments	—			—			—			—			—		—			—
Total equity	22			(1		)	(1		)	(1		)	—		(1		)	18
Fixed Income
U.S. government	—			—			—			—			—		—			—
U.S. government-sponsored enterprises	14			—			—			(5		)	—		(1		)	8
Non-U.S. government	280			(2		)	(3		)	(86		)	13		(33		)	169
Corporate bonds
Investment grade	28			4			2			18			3		(22		)	33
High yield	2			(1		)	—			8			3		(1		)	11
Other credit	50			(1		)	—			(32		)	—		—			17
Mortgage/other asset-backed	125			(3		)	1			(38		)	4		(35		)	54
Derivative financial instruments
Interest rate contracts	(2		)	—			(1		)	—			—		—			(3		)
Credit contracts	—			—			—			—			—		—			—
Other contracts	—			25			(8		)	(8		)	—		—			9
Total fixed income	497			22			(9		)	(143		)	23		(92		)	298
Alternatives
Hedge funds	2,854			10			(22		)	126			—		—			2,968
Private equity	1,491			244			—			350			—		—			2,085
Real estate	120			39			—			203			—		—			362
Total alternatives	4,465			293			(22		)	679			—		—			5,415
Other	(3		)	—			—			1			—		—			(2		)
Total Level 3 fair value	$	4,981		$	314		$	(32	)	$	536		$	23	$	(93	)	$	5,729

NOTE 16. RETIREMENT BENEFITS (Continued)



Non-U.S. Plans	2011
			Return on plan assets									Transfers
	Fair Value at January 1, 2011		Attributable to Assets Held at December 31, 2011			Attributable to Assets Sold			Net Purchases/ (Settlements)			Into Level 3		Out of Level 3			Fair Value at December 31, 2011
Asset Category
Equity
U.S. companies	$	—	$	—		$	—		$	—		$	—	$	—		$	—
International companies	10		—			—			(5		)	1		(5		)	1
Commingled funds	—		—			—			—			—		—			—
Total equity	10		—			—			(5		)	1		(5		)	1
Fixed Income
U.S. government	—		—			—			—			—		—			—
U.S. government-sponsored enterprises	—		—			—			—			—		—			—
Non-U.S. government	103		(6		)	1			28			—		(4		)	122
Corporate bonds
Investment grade	15		(1		)	1			(7		)	3		—			11
High yield	20		—			—			(10		)	—		(10		)	—
Other credit	—		—			—			—			—		—			—
Mortgage/other asset-backed	34		—			1			(24		)	1		(6		)	6
Commingled funds	8		—			—			(8		)	—		—			—
Derivative financial instruments	—		—			(2		)	(4		)	—		—			(6		)
Total fixed income	180		(7		)	1			(25		)	4		(20		)	133
Alternatives
Hedge funds	711		(31		)	11			362			—		—			1,053
Private equity	31		(3		)	—			95			—		—			123
Real estate	11		6			—			143			—		—			160
Total alternatives	753		(28		)	11			600			—		—			1,336
Other (a)	4,380		(22		)	—			—			—		—			4,358
Total Level 3 fair value	$	5,323	$	(57	)	$	12		$	570		$	5	$	(25	)	$	5,828

_______


(a)	Primarily Ford-Werke plan assets (insurance contract valued at $3,406 million).