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 also have 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 $276 million, $238 million, and $181 million for the years ended December 31, 2014, 2013, and 2012, respectively. This includes the expense for Company-matching contributions to our primary employee savings plan in the United States of $114 million, $99 million, and $70 million for the years ended December 31, 2014, 2013, and 2012, 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 12. RETIREMENT BENEFITS (Continued)

Defined Benefit Plans – Expense and Status

The assumptions used to determine expense and benefit obligation were as follows:



	Pension Benefits
	U.S. Plans				Non-U.S. Plans				U.S. OPEB
	2014		2013		2014		2013		2014		2013
Weighted Average Assumptions at December 31
Discount rate	3.94	%	4.74	%	3.06	%	4.07	%	3.86	%	4.65	%
Expected long-term rate of return on assets	6.75		6.89		6.11		6.63		—		—
Average rate of increase in compensation	3.80		3.80		3.40		3.41		3.80		3.80
Assumptions Used to Determine Net Benefit Cost for the Year Ended 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

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
	2014			2013			2012			2014			2013			2012			2014			2013			2012
Service cost	$	507		$	581		$	521		$	468		$	484		$	372		$	54		$	64		$	67
Interest cost	1,992			1,914			2,208			1,189			1,137			1,189			269			256			290
Expected return on assets	(2,713		)	(2,816		)	(2,873		)	(1,508		)	(1,382		)	(1,340		)	—			—			—
Amortization of:
Prior service costs/(credits)	155			174			220			55			66			72			(229		)	(283		)	(545		)
(Gains)/Losses	207			655			425			586			686			412			98			158			129
Separation programs/other	19			10			7			81			242			162			—			—			2
Recognition of (gains)/losses due to:
Curtailments	—			—			—			—			—			—			—			(2		)	(11		)
Settlements	—			594			250			19			5			—			—			—			—
Total expense/(income)	$	167		$	1,112		$	758		$	890		$	1,238		$	867		$	192		$	193		$	(68	)

NOTE 12. 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
	2014			2013			2014			2013			2014			2013
Change in Benefit Obligation
Benefit obligation at January 1	$	43,182		$	52,125		$	30,851		$	30,702		$	5,889		$	6,810
Service cost	507			581			468			484			54			64
Interest cost	1,992			1,914			1,189			1,137			269			256
Amendments	—			—			11			(1		)	—			—
Separation programs and other	(50		)	(75		)	139			141			—			(11		)
Curtailments	—			—			—			—			—			—
Settlements	—			(3,089		)	(116		)	(51		)	—			—
Plan participant contributions	26			26			25			25			23			27
Benefits paid	(3,028		)	(3,120		)	(1,423		)	(1,416		)	(406		)	(421		)
Foreign exchange translation	—			—			(2,997		)	229			(138		)	(131		)
Actuarial (gain)/loss	3,692			(5,180		)	5,076			(399		)	697			(705		)
Benefit obligation at December 31	46,321			43,182			33,223			30,851			6,388			5,889
Change in Plan Assets
Fair value of plan assets at January 1	41,217			42,395			23,843			21,713			—			—
Actual return on plan assets	6,542			1,539			3,656			1,689			—			—
Company contributions	130			3,535			1,715			1,852			—			—
Plan participant contributions	26			26			25			25			—			—
Benefits paid	(3,028		)	(3,120		)	(1,423		)	(1,416		)	—			—
Settlements	—			(3,089		)	(116		)	(51		)	—			—
Foreign exchange translation	—			—			(2,019		)	49			—			—
Other	(43		)	(69		)	(6		)	(18		)	—			—
Fair value of plan assets at December 31	44,844			41,217			25,675			23,843			—			—
Funded status at December 31	$	(1,477	)	$	(1,965	)	$	(7,548	)	$	(7,008	)	$	(6,388	)	$	(5,889	)

Amounts Recognized on the Balance Sheet
Prepaid assets	$	377		$	443		$	696		$	219		$	—		$	—
Other liabilities	(1,854		)	(2,408		)	(8,244		)	(7,227		)	(6,388		)	(5,889		)
Total	$	(1,477	)	$	(1,965	)	$	(7,548	)	$	(7,008	)	$	(6,388	)	$	(5,889	)
Amounts Recognized in Accumulated Other Comprehensive Loss (pre-tax)
Unamortized prior service costs/(credits)	$	609		$	764		$	347		$	417		$	(710	)	$	(959	)
Unamortized net (gains)/losses	5,810			6,179			11,254			9,902			2,278			1,701
Total	$	6,419		$	6,943		$	11,601		$	10,319		$	1,568		$	742

Pension Plans in which Accumulated Benefit Obligation Exceeds Plan Assets at December 31
Accumulated benefit obligation	$	1,906		$	25,828		$	11,018		$	15,393
Fair value of plan assets	150			23,498			4,109			9,518

Accumulated Benefit Obligation at December 31	$	44,919		$	42,078		$	30,098		$	28,312

Pension Plans in which Projected Benefit Obligation Exceeds Plan Assets at December 31
Projected benefit obligation	$	2,004		$	25,906		$	12,874		$	23,653
Fair value of plan assets	150			23,498			4,630			16,426

Projected Benefit Obligation at December 31	$	46,321		$	43,182		$	33,223		$	30,851

NOTE 12. 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 2014, we contributed $1.5 billion to our worldwide funded pension plans (most of which were mandatory contributions) and made about $400 million of benefit payments to participants in unfunded plans. During 2015, we expect to contribute about $1.1 billion from Automotive cash and cash equivalents to our worldwide funded pension plans (most of which are mandatory contributions) and to make about $400 million of benefit payments to participants in unfunded plans, for a total of about $1.5 billion. Based on current assumptions and regulations, we do not expect to have a legal requirement to contribute to our major U.S. pension plans in 2015.

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).

Separation Programs

As a result of various employee separation programs, primarily in Europe, we have recognized pension-related expense in the periods presented. See Note 20 for additional information.

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
2015	$	3,070	$	1,340	$	390
2016	3,030		1,290		390
2017	2,990		1,310		380
2018	2,960		1,330		380
2019	2,940		1,360		380
2020 - 2024	14,440		7,220		1,830

The amounts in Accumulated other comprehensive income/(loss) that are expected to be recognized as components of net expense/(income) during 2015 are as follows (in millions):



	Pension Benefits
	U.S. Plans		Non-U.S. Plans		Worldwide OPEB			Total
Prior service cost/(credit)	$	155	$	49	$	(209	)	$	(5	)
(Gains)/Losses	397		835		145			1,377

NOTE 12. 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 obligations and to ensure assets are sufficient to pay plan benefits. 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 obligations. 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, and private equity, and public equity). Our largest non-U.S. plans (United Kingdom and 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 obligations 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 obligations. Assets are broadly diversified within asset classes to achieve risk-adjusted returns that in total lower asset volatility relative to the obligations. 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 obligations, the majority of plan assets are allocated to fixed income investments which are exposed to interest rate risk. Rate increases generally will result in a decline in the value of fixed income assets, while reducing the present value of the obligations. Conversely, rate decreases generally will increase the value of fixed income assets, offsetting the related increase in the obligations.

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 obligations. 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 2014, Ford securities comprised less than 1% of our plan assets.

NOTE 12. RETIREMENT BENEFITS (Continued)

Expected Long-Term Rate of Return on Assets. The long-term return assumption at year-end 2014 is 6.75% for the U.S. plans, 6.5% for the U.K. plans, and 5.94% for the Canadian plans, and averages 6.11% 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, 2014, our actual 10-year annual rate of return on pension plan assets was 9.3% for the U.S. plans, 8.3% for the U.K. plans, and 6.2% for the Canadian plans. 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.

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 2014 and 2013, we made adjustments of $14 million and $(10) million, respectively, to adjust for hedge fund-lagged valuations.

NOTE 12. 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 to 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 2014 and 2013, we made adjustments of $88 million and $123 million, respectively, to adjust for private equity-lagged valuations. For 2014 and 2013, we made adjustments of $33 million and $0, 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 12. RETIREMENT BENEFITS (Continued)

The fair value of our defined benefit pension plan assets (including dividends and interest receivables of $360 million and $112 million for U.S. and non-U.S. plans, respectively) by asset category at December 31 was as follows (in millions):



	2014
	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	$	2,678		$	2		$	—	$	2,680		$	2,119		$	149		$	—	$	2,268
International companies	1,510			28			—		1,538			1,910			196			—		2,106
Total equity	4,188			30			—		4,218			4,029			345			—		4,374
Fixed Income
U.S. government	4,506			—			—		4,506			92			—			—		92
U.S. government-sponsored enterprises (b)	—			4,047			—		4,047			—			24			—		24
Non-U.S. government	—			1,842			—		1,842			—			10,727			—		10,727
Corporate bonds (c)
Investment grade	—			18,052			—		18,052			—			1,741			—		1,741
High yield	—			3,258			—		3,258			—			472			—		472
Other credit	—			181			14		195			—			81			—		81
Mortgage/other asset-backed	—			1,290			34		1,324			—			230			—		230
Commingled funds	—			200			—		200			—			616			—		616
Derivative financial instruments (a)	13			(206		)	—		(193		)	1			(5		)	—		(4		)
Total fixed income	4,519			28,664			48		33,231			93			13,886			—		13,979
Alternatives
Hedge funds (d)	36			48			2,475		2,559			40			48			1,749		1,837
Private equity (e)	4			(2		)	2,782		2,784			—			—			538		538
Real estate (f)	—			2			821		823			—			1			678		679
Total alternatives	40			48			6,078		6,166			40			49			2,965		3,054
Cash and cash equivalents (g)	—			1,374			—		1,374			—			656			—		656
Other (h)	(167		)	22			—		(145		)	(1,121		)	8			4,725		3,612
Total assets at fair value	$	8,580		$	30,138		$	6,126	$	44,844		$	3,041		$	14,944		$	7,690	$	25,675

_______


(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 at December 31, 2014: global macro (28%), event-driven (26%), equity long/short (26%), multi-strategy (14%), and relative value (7%). For non‑U.S. Plans, funds investing in diversified portfolio of underlying hedge funds. At December 31, 2014, the composition of underlying hedge fund investments (within the United Kingdom and Canada pension plans) was: equity long/short (39%), event-driven (33%), global macro (13%), multi‑strategy (10%), and relative value (5%).

(e)

For U.S. Plans, diversified investments in private equity funds with the following strategies: buyout (62%), venture capital (27%), mezzanine/distressed (6%), and other (5%). Allocations are estimated based on latest available data for managers reflecting June 30, 2014 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 (42%), value-added and opportunistic (58%). For non-U.S. Plans, investment in private property funds broadly classified as core (39%), value-added and opportunistic (61%). 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 $3.8 billion) and cash related to net pending security (purchases)/sales and net pending foreign currency purchases/(sales).

NOTE 12. RETIREMENT BENEFITS (Continued)

The fair value of our defined benefit pension 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 at December 31 was as follows (in millions):



	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
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 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 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 United Kingdom 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 U.S. Plans, 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 trade purchases/sales and net pending foreign exchange purchases/sales. For non‑U.S Plans, primarily Ford-Werke, plan assets (insurance contract valued at $4.1 billion) and cash related to net pending trade purchases/sales and net pending foreign exchange purchases/sales.

NOTE 12. RETIREMENT BENEFITS (Continued)

The following table summarizes the changes in Level 3 defined benefit pension plan assets measured at fair value on a recurring basis for the year ended December 31 (in millions):



	2014
			Return on plan assets
U.S. Plans:	Fair Value at January 1, 2014		Attributable to Assets Held at December 31, 2014		Attributable to Assets Sold			Net Purchases/ (Settlements)			Transfers Into/ (Out of) Level 3			Fair Value at December 31, 2014
Asset Category
Equity
U.S. companies	$	3	$	—	$	(3	)	$	—		$	—		$	—
International companies	1		—		(1		)	—			—			—
Total equity	4		—		(4		)	—			—			—
Fixed Income
Other credit	—		—		—			—			14			14
Mortgage/other asset-backed	33		—		—			34			(33		)	34
Total fixed income	33		—		—			34			(19		)	48
Alternatives
Hedge funds	2,778		205		(4		)	(504		)	—			2,475
Private equity	2,626		403		—			(247		)	—			2,782
Real estate	610		85		—			126			—			821
Total alternatives	6,014		693		(4		)	(625		)	—			6,078
Other	1		—		—			(1		)	—			—
Total Level 3 fair value	$	6,052	$	693	$	(8	)	$	(592	)	$	(19	)	$	6,126

Non-U.S. Plans:
Asset Category
Equity
International companies	$	2	$	—	$	(1	)	$	(1	)	$	—		$	—
Total equity	2		—		(1		)	(1		)	—			—
Fixed Income
Non-U.S. government	67		—		(2		)	(12		)	(53		)	—
Corporate bonds
Investment grade	55		—		3			(17		)	(41		)	—
High yield	21		—		—			(15		)	(6		)	—
Other credit	13		—		—			(7		)	(6		)	—
Mortgage/other asset-backed	14		—		—			(4		)	(10		)	—
Total fixed income	170		—		1			(55		)	(116		)	—
Alternatives
Hedge funds	1,657		169		5			(82		)	—			1,749
Private equity	352		63		—			123			—			538
Real estate	601		52		(14		)	39			—			678
Total alternatives	2,610		284		(9		)	80			—			2,965
Other (a)	5,198		—		(282		)	(191		)	—			4,725
Total Level 3 fair value	$	7,980	$	284	$	(291	)	$	(167	)	$	(116	)	$	7,690

_______


(a)	Primarily Ford-Werke plan assets (insurance contract valued at $3.8 billion).

NOTE 12. RETIREMENT BENEFITS (Continued)

The following table summarizes the changes in Level 3 defined benefit pension plan assets measured at fair value on a recurring basis for the year ended December 31 (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-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
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
International companies	$	1		$	—		$	—		$	—		$	1		$	2
Total equity	1			—			—			—			1			2
Fixed Income
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 $4.1 billion)