FORD MOTOR CO 10-Q

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk. Automotive Segment Foreign Currency Risk. The net fair value of foreign exchange forward contracts (including adjustments for credit risk) as of June 30, 2022, was a liability of $45 million, compared with a liability of $253 million as of December 31, 2021. The potential change in the fair value from a 10% change in the underlying exchange rates, in U.S. dollar terms, would have been $2.1 billion at June 30, 2022, compared with $2.2 billion at December 31, 2021. Commodity Price Risk. The net fair value of commodity forward contracts (including adjustments for credit risk) as of June 30, 2022, was a liability of $97 million, compared with an asset of $220 million at December 31, 2021. The potential change in the fair value from a 10% change in the underlying commodity prices would have been $180 million at June 30, 2022, compared with $215 million at December 31, 2021. Ford Credit Segment Interest Rate Risk . To provide a quantitative measure of the sensitivity of its pre-tax cash flow to changes in interest rates, Ford Credit uses interest rate scenarios that assume a hypothetical, instantaneous increase or decrease of one percentage point in all interest rates across all maturities (a “parallel shift”), as well as a base case that assumes that all interest rates remain constant at existing levels. The differences in pre-tax cash flow between these scenarios and the base case over a 12-month period represent an estimate of the sensitivity of Ford Credit’s pre-tax cash flow . Under this model, Ford Credit estimates that at June 30, 2022, all else constant, such an increase in interest rates would decrease its pre-tax cash flow by $27 million over the next 12 months, compared with a decrease of $76 million at December 31, 2021 . In reality, interest rate changes are rarely instantaneous or parallel and rates could move more or less than the one percentage point assumed in Ford Credit’s analysis. As a result, the actual impact to pre-tax cash flow could be higher or lower than the results detailed above.