What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-02-03 compared with 2022-02-04 · 108 added, 262 removed, 184 unchanged (67% of the section changed)

1 unchanged sentence

The California vehicle emissions program also includes requirements for manufacturers to produce and deliver for sale zero-emission vehicles (“ZEVs”).

The current light-duty vehicle ZEV regulation, which uses a system based on credits that can be banked and carried forward, mandates substantial annual increases in the production and sale of battery-electric, fuel cell, and plug-in hybrid vehicles through the 2025 model year.

At that time, the regulation will require credits equating to 22% of a manufacturer’s California light-duty vehicle sales volume.

California is in the process of adopting new ZEV regulations applicable to model years 2026-2035.

The proposed regulations include substantial annual increases in required sales volumes, significant restrictions on credit usage, and new requirements for EV battery durability.

California has also instituted ZEV regulations aimed at medium- and heavy-duty vehicles, beginning with the 2024 model year.

These medium- and heavy-duty rules, which could entail significant costs and compliance challenges, include complex warranty and recall requirements for some vehicle configurations.

Compliance with ZEV rules depends on market conditions as well as the availability of adequate infrastructure to support vehicle charging.

California’s light-duty vehicle ZEV regulation, which uses a system based on credits that can be banked and carried forward, mandates annual increases in the production and sale of battery-electric, fuel cell, and plug-in hybrid vehicles.

For 2025 model year, this regulation will require approximately 22% of a manufacturer’s California light-duty vehicle sales volume be ZEVs.

In August 2022, California approved a sweeping revision to the ZEV regulation.

Beginning with the 2026 model year, the revised ZEV rule mandates a 35% ZEV sales requirement, rising to 100% by 2035.

The revised regulation also imposes significant restrictions on credit usage, and new requirements for EV battery durability.

California has also instituted ZEV regulations governing medium- and heavy-duty vehicles, beginning with the 2024 model year.

These stringent ZEV requirements covering light-, medium-, and heavy-duty vehicles could entail significant costs and compliance challenges, and include complex warranty and recall requirements.

Compliance with ZEV rules depends on market conditions (including the pace of adoption of EVs), technology readiness, and battery raw material availability as well as the availability of adequate infrastructure to support vehicle charging.

European Requirements.

1 unchanged sentence

regulations, directives, and related legislation limit the amount of regulated pollutants that may be emitted by new motor vehicles and engines sold in the EU and the United Kingdom.

Regulatory stringency has increased significantly since Stage VI emission standards were introduced, with the subsequent implementation of a laboratory test cycle for CO 2 and emissions and the introduction of on-road emission testing using portable emission analyzers (Real Driving Emission or “RDE”).

These on-road emission tests are in addition to the laboratory-based tests.

Regulatory stringency has increased significantly with the application of Stage VI emission standards (first introduced in 2014) and the implementation of a laboratory test cycle for CO 2 and emissions and the introduction of on-road emission testing using portable emission analyzers (Real Driving Emission or “RDE”).

These on-road emission tests are in addition to the laboratory-based tests (first introduced in 2017).

The divergence between the regulatory limit that is tested in laboratory conditions and the allowed values measured in RDE tests will ultimately be reduced to zero as the regulatory demands increase.

In addition, new requirements for tailpipe and non-tailpipe emissions will be included in the upcoming Euro 7 regulation.

In addition, new requirements for tailpipe and non-tailpipe emissions will be included in the upcoming Euro 7 regulation, and the lead-time for engineering and type approval may potentially be too short.

The costs associated with complying with all of these requirements are significant, and following the EU Commission’s indication of its intent to accelerate emissions rules in its road map publication “EU Green Deal” as well as the EU sustainable mobility action plan, these challenges will continue in European markets, including the United Kingdom.

1 unchanged sentence

Moreover, following the U.K.’s withdrawal from the European Union, we may be subject to diverging requirements in our European markets, which could increase vehicle complexity and duties.

There is an increasing trend of city access restrictions for internal combustion engine powered vehicles, particularly in European cities that do not meet air quality limits.

There is an increasing trend of city access restrictions for internal combustion engine powered vehicles.

The access rules being introduced are developed by individual cities based on their specific concerns, resulting in rapid deployment of access rules that differ greatly among cities.

The speed of implementation of access rules may directly influence customer vehicle residual values and choice of next purchase, and there is a risk that these rules may result in the need for customers to retrofit their vehicles with emission after-treatment systems.

The speed of implementation of access rules may directly influence customer vehicle residual values and choice of next purchase.

In an effort to support the Paris Accord, some countries are adopting yearly increases in CO 2 taxes, where such a system is in place, and publishing dates by when internal combustion powered vehicles may no longer be registered, e.g., Norway in 2025 and the United Kingdom and the Netherlands in 2030.

4 unchanged sentences

evaporative and refueling emissions standards, and CARB OBD II requirements, incorporate two levels of stringency for tailpipe emissions.

Under the level one (VI(a)) standard, which is currently in place nationwide in China, the emissions limits are comparable to the EU Stage VI limits, except for CO, which is 30% lower than the EU Stage VI limit.

Under the level one (VI(a)) standard, which is currently in place nationwide in China, the emissions limits are comparable to the EU Stage VI limits, except for carbon monoxide, which is 30% lower than the EU Stage VI limit.

The more stringent level two (VI(b)) standard’s emissions limits are approximately 30-50% lower than the EU Stage VI limits, depending on the pollutant.

While level two (VI(b)) is not slated for nationwide implementation until July 2023, the government has encouraged the more economically developed cities and provinces to pull ahead implementation.

For example, Shanghai, Tianjin, Hebei province, and Guangdong province have all begun implementing level two (VI(b)).

Both China Stage VII light duty vehicle and heavy duty vehicle emission regulations are currently under evaluation, and the Ministry of Ecology and Environment has advised that the Stage VII regulations will have more stringent limits on pollutant emissions and will establish limits for greenhouse gas (primarily CO 2 ) tailpipe emissions.

For example, Beijing, Shanghai, Tianjin, Hebei province, and Guangdong province have all begun implementing level two (VI(b)).

Both China Stage VII light-duty vehicle and heavy duty vehicle emission regulations are currently under pre-study, and the Ministry of Ecology and Environment has advised that the Stage VII regulations will have more stringent limits on pollutant emissions and will establish limits for greenhouse gas (primarily CO 2 ) tailpipe emissions.

In South America, most countries are evolving to implement more stringent requirements accepting Europe and U.S.

regulations, except Brazil, which has a unique local process called PROCONVE based on U.S.

regulations for light-duty vehicles and European regulations for heavy-duty vehicles.

Business (Continued)

Canadian criteria emissions regulations are largely aligned with U.S.

1 unchanged sentence

however, the existing ZEV regulations in Quebec and those published in British Columbia in July 2020 are more stringent than those in place in California.

The federal government has started preliminary consultations on a potential ZEV mandate.

Both British Columbia and Quebec have proposed draft amendments to their regulations to increase requirements starting in 2025 and 2026, respectively.

The federal government has published draft light-duty ZEV sales requirements through an amendment to the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations and has also published its intent to develop ZEV sales requirements for heavy-duty vehicles.

Other provinces have signaled their interest in light-duty ZEV sales regulations but are awaiting the finalization of the federal ZEV regulations.

Elsewhere, there is a mix of regulations and processes based on U.S.

2 unchanged sentences

This could lead to compliance problems, particularly if OBD or in-use surveillance requirements are implemented.

Business (Continued)

Global Developments.

22 unchanged sentences

California continued to assert its authority to regulate vehicle GHGs, challenged in court the federal government’s preemption actions, withdrew from ONP, and planned to return to enforcing its own state-specific GHG standards.

Business (Continued)

The litigation over both standards and preemption, with uncertain outcomes, created difficulty for purposes of Ford’s future product planning.

2 unchanged sentences

Ford finalized its agreement with California in 2020, and other states that adopted the California standards indicated they would respect the agreement.

Business (Continued)

In 2021, EPA again re-evaluated the stringency of fuel economy and GHG standards through the 2026 model year and whether to restore the stringency to the previous ONP levels, or greater.

Final GHG standards applicable to model years 2023-2026 were finalized in December 2021, with increased stringency.

These standards, along with more stringent fuel economy standards for model years 2024-2026 that are expected to be finalized in 2022, could increase costs and complexity for Ford.

The federal government also acted in December 2021 to repeal its rule blocking California’s authority to set and enforce its own vehicle GHG standards, as well as the authority of other states that adopted California’s standards.

EPA is expected to take similar action in early 2022 under the Clean Air Act.

In 2021, EPA again re-evaluated the stringency of light-duty fuel economy and GHG standards through the 2026 model year, and considered whether to restore the stringency to the previous ONP levels, or greater.

EPA finalized this evaluation in December 2021, establishing GHG standards applicable to model years 2023-2026 with stringency that exceeded ONP levels.

In 2022, NHTSA finalized more stringent fuel economy standards for model years 2024-2026, which are substantially aligned with EPA’s GHG standards.

In late 2022, EPA began consideration of sweeping changes to light-duty GHG regulations for model years 2027 and beyond.

These regulations are expected to extend through at least the 2030 model year, and to drive significant ZEV sales mix, along with rapid improvement of ICE vehicle performance, by virtue of greatly increased stringency.

These new rules are expected to impose increased challenges and costs on the development of light-duty vehicles.

If any federal or state agency imposes and enforces fuel economy and GHG standards that are misaligned with market conditions, Ford would likely be forced to take various actions that could have substantial adverse effects on its sales volumes and results of operations.

3 unchanged sentences

Requirements - Heavy-Duty Vehicles.

EPA and NHTSA have jointly promulgated GHG and fuel economy standards for heavy-duty vehicles (generally, vehicles over 8,500 pounds gross vehicle weight rating) through the 2027 model year.

EPA and NHTSA have jointly promulgated GHG and fuel economy standards for heavy-duty vehicles (generally, vehicles over 8,500 pounds gross vehicle weight rating) through the 2027 model year, and EPA is preparing a major update to these standards for the 2027 model year and beyond.

In Ford’s case, the standards primarily affect heavy-duty pickup trucks and vans, plus vocational vehicles such as shuttle buses and delivery trucks.

5 unchanged sentences

For “multi-stage vehicles” (e.g., Ford’s Transit chassis cabs), the base manufacturer (e.g., Ford) is fully responsible for the CO 2 performance of the final up-fitted vehicles.

The initial target levels get significantly more stringent every five years (2025, 2030, 2035), requiring significant investments in propulsion technologies and extensive fleet management forcing low CO 2 emissions.

Delayed launches, supply shortages, or lower demand for low CO 2 emission vehicles, as well as a limited charging infrastructure, can trigger compliance risks.

The initial target levels get significantly more stringent every five years (2025, 2030, and 2035, after which all new vehicles must be zero emission), requiring significant investments in propulsion technologies and extensive fleet management forcing low CO 2 emissions.

The United Kingdom and Switzerland have introduced similar rules, and the United Kingdom is considering adopting ZEV mandates.

The EU Commission is investigating the introduction of Real Driving CO 2 and Life Cycle Assessment elements, and heavy-duty vehicles are addressed in separate regulations with analogous requirements and challenges.

1 unchanged sentence

While the EU Commission targets net climate neutrality by 2050 and a more ambitious 2030 interim target (a 55% instead of 40% CO 2 reduction compared to 1990), several countries, such as Germany, have adopted stricter interim targets and earlier net climate neutrality targets.

Outside of the EU, the United Kingdom and Switzerland have introduced similar rules.

Ford faces the risk of advance premium payment requirements for both passenger cars as well as for light commercial vehicles due to, for example, unexpected market fluctuations and shorter lead times impacting average fleet performance.

Ford also faces the risk of advance premium payments for both passenger cars and light commercial vehicles in all European markets due to, for example, unexpected market fluctuations and shorter lead times impacting average fleet performance.

Business (Continued)

The United Nations developed a technical regulation for passenger car emissions and CO 2 .

5 unchanged sentences

The EU CO 2 requirements are likely to trigger further measures.

Business (Continued)

In addition, delayed vehicle launches and supply shortages, as well as an insufficient charging infrastructure and lower demand for ZEV and low CO 2 emission vehicles as certain electric vehicle incentives are reduced, can trigger compliance risks in all European markets.

Other National Requirements.

3 unchanged sentences

The revised U.S.

EPA standards were automatically adopted in Canada by reference for the 2022-2025 model years;

however, Canada also undertook a mid-term evaluation of the standards for the 2022 model year and beyond, which concluded in 2021 and sought to align with the most stringent standards in the United States (federal or state).

EPA’s final rule goes into effect, Canada will automatically adopt the new standards by reference to the U.S.

Code of Federal Regulations.

However, consultation is now underway for the few standalone elements that are not automatically adopted by reference for the 2023-2025 model years, and these draft amendments are expected in 2022.

EPA standards were automatically adopted in Canada by reference for the 2022-2025 model years, and draft amendments for a few standalone administrative elements not automatically adopted by reference were published in December 2022.

The heavy-duty vehicle and engine GHG emissions regulations for the 2021 model year and beyond were published in May 2018 and are in line with U.S.

requirements, subject to any change in those requirements under the current U.S.

presidential administration.

requirements, subject to any change in those requirements.

China’s Corporate Average Fuel Consumption and New Energy Vehicle (“NEV”) Credit Administrative Rules contain fuel consumption requirements as well as credit mandates for NEV passenger vehicles, i.e., plug-in hybrids, battery electric vehicles, or fuel cell vehicles.

The fuel consumption requirement uses a weight-based approach to establish targets, with year-over-year target reductions.

China set a target of 5.0L/100km for the 2020 passenger vehicle industry fuel consumption fleet average, which lowers to 4.0L/100km by 2025 based on the New European Driving Cycle (“NEDC”) system.

The government is projecting a further fuel consumption reduction in 2030 and is targeting 3.2L/100km.

China set a target of 5.0L/100km for the 2020 passenger vehicle industry fuel consumption fleet average, which lowers to 4.0L/100km by 2025 based on the New European Driving Cycle system.

The government is projecting a further fuel consumption reduction in 2030, and is targeting 3.5L/100km based on the WLTP cycle (“WLTC”) system.

The NEV mandate requires that OEMs generate a specific amount of NEV credits each year, with NEV credits of at least 16%, 18%, 28%, and 38% of the annual ICE passenger vehicle production or import volume required in 2022, 2023, 2024, and 2025, respectively.

12 unchanged sentences

European Requirements.

The EU has established vehicle safety standards and regulations and is likely to adopt additional or more stringent requirements in the future, especially in the areas of access to in-vehicle data and autonomous vehicles.

The European General Safety Regulation (“GSR”) introduced UN-ECE regulations, which will be required for the European Type Approval process.

The GSR includes the mandatory introduction of multiple active and passive safety features, including cybersecurity requirements for new vehicle models in 2022 and for all registrations in 2024.

EU regulators also are focusing on active safety features, such as lane departure warning systems, electronic stability control, and automatic brake assist.

Business (Continued)

The European General Safety Regulation (“GSR”) introduced UN-ECE regulations, which are required for the European Type Approval process.

The GSR includes the mandatory introduction of multiple active and passive safety features, including cybersecurity requirements for new vehicle models from 2022 and for all registrations in 2024.

EU regulators are focusing on active safety features, such as lane departure warning systems, electronic stability control, and automatic brake assist.

Furthermore, mobile network providers in certain EU Member States have begun shutting down their 2G and 3G networks, which form the basis for e-Call system functionality in existing vehicles.

The e-Call systems in existing vehicles may need to be updated as these systems are phased out.

It is also possible that the EU may mandate Member States to maintain these networks to allow for the continued functionality of existing e-Call systems.

Other National Requirements.

2 unchanged sentences

several on-going bilateral negotiations on free trade can potentially contribute to this goal.

Business (Continued)

Safety and recall requirements in Brazil, China, India, and Gulf Cooperation Council (“GCC”) countries may add substantial costs and complexity to our global recall practice.

Safety and recall requirements in Brazil, China, India, South Korea, and Gulf Cooperation Council (“GCC”) countries may add substantial costs and complexity to our global recall practice.

Brazil has set mandatory fleet safety targets and penalties are applied if these levels are not maintained, while a tax reduction may be available for over-performance.

1 unchanged sentence

however, under the Canadian Motor Vehicle Safety Act, the Minister of Transport has broad powers to order manufacturers to submit a notice of defect or non-compliance when the Minister considers it to be in the interest of safety.

In 2021, Canada started preliminary consultations on several new proposed regulations, including an Administrative Monetary Penalties (“AMPs”) Regulation.

Draft language for the AMPs regulation is expected in 2022.

In 2021, Canada started preliminary consultations on several new proposed regulations, including Administrative Monetary Penalties (“AMPs”) and Analysis of Technical Information for Vehicles and Equipment (“ACTIVE”) regulations.

Draft language for the AMPs regulation was published in May 2022 with final regulations expected to be published at the end of 2023.

In China, a new mandatory Event Data Recorder regulation that is more comprehensive than U.S.

requirements has been released, and in China, Malaysia, and South Korea, mandatory e-Call requirements are being drafted.

E-Call is mandatory in the UAE for new vehicles beginning with the 2021 model year, and is expected to become mandatory in a number of other GCC countries within five years.

E-Call is mandatory in the UAE for new vehicles starting with the 2021 model year, and in Saudi Arabia from the 2025 model year.

New Car Assessment Programs.

9 unchanged sentences

People Strategy and Governance

Caring for each other through valuing diversity, embracing inclusion, celebrating success, encouraging new thinking, supporting each other through change, and winning as a team is a key element of our plan to drive long-term business success.

We strive to create an employee experience that enables an inclusive environment of excellence, focus, and collaboration among team members, allowing us to deliver short- and long-term business success.

Ford maintains an Executive People Forum consisting of the CEO and top leadership team that meets monthly with a specific focus on people and organizational topics that will enable and accelerate delivery of the business plan.

Key topic areas include our Enterprise People Strategy, Organization Design & Workforce Planning, Talent Planning & Development, and Leadership Development & Culture.

Key topic areas include Compensation & Retention, Diversity, Equity, and Inclusion (“DEI”), Organization Design, Talent Planning & Development, and Culture.

Our Board of Directors and Board committees provide important oversight on certain human capital matters, including items discussed at the Executive People Forum.

2 unchanged sentences

leadership succession planning;

diversity, equity, and inclusion (“DEI”);

and talent development programs.

The Sustainability, Innovation and Policy Committee is responsible for discussing and advising management on maintaining and improving sustainability strategies, the implementation of which creates value consistent with the long-term preservation and enhancement of shareholder value and social wellbeing, including human rights, working conditions, and responsible sourcing.

The collective recommendations to the Board and its committees are how we proactively manage our human capital and care for our employees in a manner that is consistent with our Ford values.

The collective recommendations to the Board and its committees are how we proactively manage our human capital and create an employee experience that allows employees and our organization to thrive.

Diversity, Equity, and Inclusion

At Ford, we believe that creating a Culture of Belonging for all our employees is both foundational to achieving our Ford+ plan and the right thing to do.

At Ford, we believe that creating a Culture of Inclusion for all our employees is both foundational to achieving our Ford+ plan and the right thing to do.

Ford offers 12 Employee Resource Groups (“ERGs”) that represent various dimensions of our employee population, including racial, ethnic, gender, religious, sexual orientation and gender identity, ability, and generational communities with chapters throughout the world, in addition to Ford Advocacy for Belonging (“FAB”) Councils in every region.

Our ERGs and FAB Councils are instrumental in providing a voice to our globally diverse workforce as well as sharing valuable insights into the development of products, services, and experiences.

In 2020 and 2021, we conducted comprehensive DEI Audits in the United States and seven major markets.

The purpose of the audits, which included qualitative data, quantitative data, and deep ethnography, is to accelerate our efforts to improve the employee experience and cultivate a culture of belonging.

Each of our global Business Units has developed action plans specific to its unique needs and culture.

From an enterprise perspective, we have taken several concrete steps to further these efforts, including embedding DEI into our corporate strategy and governance and establishing objectives for progress for every salaried employee.

This holistic DEI strategy includes a strong focus on racial equity and DEI education.

Our business has developed DEI action plans specific to each region’s unique needs and culture.

From an enterprise perspective, we have taken several concrete steps to further these efforts, including embedding DEI into our corporate strategy and governance, ensuring that revisions to employee expected behaviors enable an inclusive culture, and establishing objectives for progress for every salaried employee.

This holistic DEI strategy includes a strong focus on racial equity, growing representation of diverse talent throughout the pipeline, and DEI education.

Our diversity statistics include the following as of December 31, 2022 (based on self-reporting at the date of hire):

3 unchanged sentences

Talent Attraction, Growth, and Capability Assessment

In an environment where many employees are no longer bound to physical locations, where and how we source our talent is evolving.

From a growth perspective, we are focusing on several key segments vital to our success (e.g., software, electrification, and data science).

Since January 2020, we have added a substantial number of employees to our salaried workforce to support these emerging areas of our business, and have dedicated more resources to recruiting these employees.

The workplace is quickly evolving, and new working practices are constantly developing.

Many employees are no longer bound to physical locations, where and how we source our talent is evolving, and employee expectations have shifted.

From a growth perspective, we are focused on several key areas vital to our success (e.g., software, electrification, and data science).

Ford continues to accelerate its efforts to attract new employees with diverse skill sets and capabilities, and more resources have been dedicated to recruiting these employees, who are critical to supporting our business model.

From a capability perspective, we are leveraging best practices in assessments and talent management to strengthen our current capabilities and future pipeline while reinforcing a culture of belonging, collaboration, empowerment, and innovation.

The performance management process is reviewed regularly to ensure we set clear expectations, measure individual performance, and reward appropriately.

We are also creating targeted learning experiences, democratizing learning and career development opportunities across the organization, and empowering employees to design their own career paths with skill development targeted for the roles of today and the future.

Business (Continued)

Further, we are also creating targeted learning experiences, democratizing learning and career development opportunities across the organization, and empowering employees to design their own career paths with skill development targeted for the roles of today and the future.

Finally, the extent to which our People Leaders are equipped to care for, inspire, and empower our people plays a vital role in our strategy, and we are committed to helping our leaders strengthen these capabilities with dedicated learning paths and non-traditional learning opportunities.

In 2021, we established Leadership+, a new mechanism for developing People Leaders and delivering key messages related to that role, including demonstrating care, fostering psychological safety, instilling a challenger mindset, and leading through the evolution of work.

Through Leadership+, we have activated People Leaders – quickly and at scale – to help deliver Ford+.

Our Leadership+ mechanism for developing People Leaders guides how we think about performance management and how we assess our talent to meet our organizational needs.

Leadership+ will continue to prepare and empower our People Leaders to lead our teams through significant change at our Company and in our industry.

Employee Health and Safety

Nothing is more important than the health, safety, and wellbeing of our people, and we consistently strive to achieve world-class levels of safety through the application of sound policies and best practices.

Nothing is more important than the health, safety, and wellbeing of our employees, and we consistently strive to achieve world-class levels of safety through the application of sound policies and best practices.

We maintain a robust safety culture to reduce workplace injuries, supported by effective communication, reporting, and external benchmarking.

3 unchanged sentences

Any loss of life or serious injury in the workplace is unacceptable and deeply regretted.

Unfortunately, there were three fatal incidents in 2021 in our North American manufacturing facilities.

Unfortunately, there were two fatal incidents in 2022 in our China region.

Another key safety indicator is our global lost-time case rate (“LTCR”), which is defined as the number of cases where one or more working days is lost due to work-related injury/illness per 200,000 hours worked.

Our LTCR increased to 0.35 in 2021 from 0.31 in 2020, primarily due to high variations in production schedules and employee turnover.

We continue to address the complexity of the global COVID-19 pandemic, including how we support and protect our employees, the communities in which we operate, and our Company assets.

The COVID-19 Business Resumption Plan, i.e., “The Return-To-Work Playbook,” continues to guide our efforts to protect our employees as the pandemic continues.

The Return-To-Work Playbook is our corporate guideline and aligns with recommendations from the World Health Organization, the Centers for Disease Control and Prevention, and country and local health departments.

The Playbook’s core objective is to protect our employees and provide a safe work environment.

The main elements of the Playbook include:

• Guidelines and requirements for completion of a daily health check survey

• Guidelines for temperature scanning prior to entering certain facilities

• Guidelines for appropriate use and application of Personal Protective Equipment

• Guidelines and recommendations for social distancing inside and outside of workstations

• Cleaning and disinfecting workstations and common areas

• Guidelines supporting handwashing methods and frequency

• Placement strategy for hand sanitizer stations

We will continue to be vigilant and proactive in our efforts to effectively manage the COVID-19 pandemic.

Business (Continued)

While our global LTCR remains stable overall, there was an increase to 0.39 in 2022 from 0.35 in 2021.

We will continue our efforts to reduce workplace injuries.

Employee Wellbeing Initiatives

3 unchanged sentences

We use data-driven insights gathered through surveys, focus groups, and claims data to understand employee needs and prioritize our wellbeing efforts.

Through our global wellbeing programs, which include enhanced childcare and parental resources, Mental Health First Aid, mindfulness clubs, and World Mental Health Day observances, among other things, we provide employees with experiences, self-guided tools, and access to the professional support and resources they need to achieve their own sense of wellbeing.

We provide global wellbeing programs, such as Employee Assistance Programs and mindfulness sessions, among other things.

In addition, we provide employees with experiences, self-guided tools, and social connection opportunities, as well as access to the professional support and resources they need to achieve their own sense of wellbeing.

We are committed to creating an environment where employees and People Leaders care for each other as we deliver Ford+.

3 unchanged sentences

Our measurement focuses on several areas that are key to our business:

Employee Mental and Emotional Wellbeing, Health & Safety (including our COVID-19 safety protocols), Employee Experience, Culture, DEI, Leadership, and Strategic Alignment.

Our efforts to drive change in these areas are paying off.

For example, we began surveying our employees about their work-life balance at the onset of the COVID-19 pandemic;

in 2021, 87% of the respondents, which were primarily salaried employees, indicated that they have the flexibility to balance the needs of their work and personal lives.

In 2021, employee responses also indicated that 84% of respondents understand corporate strategy and their role in it, and 85% are excited about what Ford can accomplish in the future.

Employee Mental and Emotional Wellbeing, Health & Safety, Employee Experience, Culture, DEI, Leadership, and Strategic Alignment.

Our employee sentiment surveys guide the actions we take to address employee concerns and related risks, and also help us understand whether our efforts to drive change in these areas are effective.

A critical element of our measurement program is ensuring that data ends up in the hands of those who are best positioned to drive meaningful change.

1 unchanged sentence

Our measurement approach is also used to inform our areas of focus as an organization and to evaluate the effectiveness of talent initiatives across the enterprise.

Business (Continued)

Employment Data

The approximate number of individuals employed by us and entities that we consolidated as of December 31 was as follows (in thousands):

2020 (a) 2021

North America 99 98

6 unchanged sentences

Total Company 183 173

(a) Effective with 2021 reporting, certain costs for the benefit of the global enterprise previously reported in Automotive are now reported in Corporate Other, and costs and benefits related to connectivity previously reported in Mobility are now reported in Automotive.

Prior period totals have been updated to be consistent with 2021 reporting.

The reduction in employees in 2021 is primarily a result of our global redesign efforts, primarily in South America and Europe, partially offset by the addition of employees in growth areas, including software and electrification.

Business (Continued)

The reduction in employees in 2022 is primarily a result of certain divestitures in Europe and in our Mobility segment, and the cessation of operations at certain plants in India.

Substantially all of the hourly employees in our Automotive operations are represented by unions and covered by collective bargaining agreements.

14 unchanged sentences

To the extent cases surge in any locations, stringent limitations on daily activities that may have been eased previously could be reinstated in those areas.

Further, if new strains or variants of COVID-19 develop or sufficient amounts of vaccines or treatments are not available, not widely administered for a significant period of time, or otherwise prove ineffective, the impact of COVID-19 on the global economy, and, in turn, our financial condition, liquidity, and results of operations could be material.

The predominant share of Ford Credit’s business consists of financing Ford and Lincoln vehicles, and the duration or resurgence of COVID-19 or similar public health issues may negatively impact the level of originations at Ford Credit.

A future suspension of our manufacturing operations could have a significant adverse effect on our financial condition and results of operations.

Moreover, outbreaks in certain regions continue to cause intermittent disruptions in our supply chain and local manufacturing operations.

For example, in China, outbreaks of COVID-19 have led the government to impose lockdowns and other restrictions, which have adversely affected our and our supply chain’s production operations, our wholesales, and consumer demand for our products.

Further, as new strains or variants of COVID-19 or other viruses, diseases, or public health issues develop or sufficient amounts of vaccines or treatments are not available, not widely administered for a significant period of time, or otherwise prove ineffective, the impact of a widespread public health issue on the global economy, and, in turn, our financial condition, liquidity, and results of operations could be material.

The predominant share of Ford Credit’s business consists of financing Ford and Lincoln vehicles, and the duration or resurgence of public health issues such as COVID-19 may negatively impact the level of originations at Ford Credit.

For example, Ford’s suspension of manufacturing operations, a significant decline in dealer showroom traffic, and/or a reduction of operations at dealers may lead to a significant decline in Ford Credit’s consumer and non-consumer originations.

Moreover, COVID-19 has had a significant negative impact on many businesses and unemployment rates increased from pre-COVID-19 levels.

Economic uncertainty and higher unemployment may result in higher defaults in Ford Credit’s consumer portfolio, and prolonged unemployment may have a negative impact on both new and used vehicle demand.

The global economic slowdown and stay-at-home orders enacted across the United States disrupted auction activity in many locations, which adversely impacted and caused delays in realizing the resale value for off-lease and repossessed vehicles.

Although auction values have increased significantly, future or additional restrictions could have a similar adverse impact on Ford Credit.

For more information about the impact of higher credit losses and lower residual values on Ford Credit’s business, see “ Ford Credit could experience higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles ” below.

As described in more detail below under “ Ford and Ford Credit’s access to debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts could be affected by credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors, ” the volatility created by COVID-19 adversely affected Ford Credit’s access to the debt and securitization markets and its cost of funding, and any volatility in the capital markets as a result of a surge in cases of COVID-19, new outbreaks or variants, or for any other reason could have an adverse impact on Ford Credit’s access to those markets and its cost of funding.

Risk Factors (Continued)

The full impact of COVID-19 on our financial condition and results of operations remains uncertain and will depend on future developments, such as the ultimate duration and scope of the outbreak (including any potential future waves, the emergence or re-emergence of variants and their transmissibility, and the success of vaccination programs and treatments), its impact on our customers, dealers, and suppliers, how quickly normal economic conditions, operations, and the demand for our products can resume, and any permanent behavioral changes that the pandemic may cause.

For example, in the event manufacturing operations are again suspended, fully ramping up our production schedule to prior levels may take longer than the prior resumption and will depend, in part, on whether our suppliers and dealers have resumed normal operations.

Our automotive operations generally do not realize revenue while our manufacturing operations are suspended, but we continue to incur operating and non-operating expenses, resulting in a deterioration of our cash flow.

Moreover, economic uncertainty and higher unemployment arising from widespread public health issues or otherwise may result in higher defaults in Ford Credit’s consumer portfolio, and prolonged unemployment may have a negative impact on both new and used vehicle demand.

As described in more detail below under “ Ford and Ford Credit’s access to debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts could be affected by credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors, ” the volatility created by COVID-19 adversely affected Ford and Ford Credit’s access to the debt and securitization markets and its cost of funding, and any volatility in the capital markets as a result of a public health issue or for any other reason could have an adverse impact on Ford and Ford Credit’s access to those markets and its cost of funding.

The full impact of COVID-19 or any widespread public health issue on our financial condition and results of operations will depend on the duration and scope of an outbreak (including any potential future waves, the emergence or re-emergence of variants and their transmissibility, and the success of vaccination programs and treatments), its impact on our customers, dealers, and suppliers, how quickly normal economic conditions, operations, and the demand for our products can resume, and any permanent behavioral changes that the pandemic may cause.

For example, the duration of a suspension of manufacturing operations and a return to our full production schedule will depend, in part, on not only a sufficient number of employees being able to return to work but also whether our suppliers and dealers have resumed normal operations.

Our Ford Blue, Ford Model e, and Ford Pro operations generally do not realize revenue while our manufacturing operations are suspended, but we continue to incur operating and non-operating expenses, resulting in a deterioration of our cash flow.

Accordingly, any significant future disruption to our production schedule, regionally or globally, whether as a result of our own or a supplier’s suspension of operations, could have a substantial adverse effect on our financial condition, liquidity, and results of operations.

Further, government-sponsored liquidity or stimulus programs in response to COVID-19 may not be available to our customers, suppliers, dealers, or us, and if available, may nevertheless be insufficient to address the impacts of COVID-19.

Moreover, our supply and distribution chains may be disrupted by supplier or dealer bankruptcies or their permanent discontinuation of operations.

The COVID-19 pandemic may also exacerbate other risks disclosed in our 2021 Form 10-K Report, including, but not limited to, our competitiveness, demand or market acceptance for our products and services, and shifting consumer preferences, and our ability to successfully execute our strategy.

Ford is highly dependent on its suppliers to deliver components in accordance with Ford’s production schedule, and a shortage of key components, such as semiconductors, or raw materials can disrupt Ford’s production of vehicles.

Moreover, our supply and distribution chains may be disrupted by supplier or dealer bankruptcies or their permanent discontinuation of operations triggered by a shutdown of operations due to a widespread public health issue or for other reasons.

Risk Factors (Continued)

Public health issues may also exacerbate other risks disclosed in our 2022 Form 10-K Report, including, but not limited to, our competitiveness, demand or market acceptance for our products and services, and shifting consumer preferences, and our ability to successfully execute our strategy.

Ford is highly dependent on its suppliers to deliver components in accordance with Ford’s production schedule and specifications, and a shortage of or inability to acquire key components, such as semiconductors, or raw materials, such as lithium, cobalt, nickel, graphite, and manganese, can disrupt Ford’s production of vehicles.

Our products contain components that we source globally from suppliers who, in turn, source components from their suppliers.

If there is a shortage of a key component in our supply chain, and the component cannot be easily sourced from a different supplier, the shortage may disrupt our production.

If there is a shortage of a key component in our supply chain or a supplier is unable to deliver a component to us in accordance with our specifications, because of a production issue, limited availability of materials, shipping problems, restrictions on transactions with certain countries or companies, or other reason, and the component cannot be easily sourced from a different supplier, or we are unable to obtain a component on a timely basis, the shortage may disrupt our operations or increase our costs of production.

For example, the automotive industry continues to face a significant shortage of semiconductors, which has a complex supply chain with long lead times required to increase production and capacity.

The shortage is due in large part to strong cross-industry demand, which has presented challenges and production disruptions globally, including at our assembly plants.

In addition, Renesas Electronics Corporation, a key supplier of semiconductors for the automotive industry and for us in particular, experienced a significant fire at its Naka Factory in March 2021, and COVID-related work restrictions in Southeast Asia have further impacted semiconductor production.

With up to fifty modules on a vehicle, we and our competitors who need integrated circuits are experiencing various levels of semiconductor impact.

A shortage of key components or raw materials as a result of disruptions in the supply chain, capacity constraints, competition for those items within the automotive industry and other sectors, or otherwise can cause a significant disruption to our production schedule and have a substantial adverse effect on our financial condition or results of operations.

Ford’s long-term competitiveness depends on the successful execution of Ford+.

We previously announced our plan for growth and value creation – Ford+.

Ford+ is focused on delivering distinctive and increasingly electric products plus “Always-On” customer relationships and user experiences.

Our Ford+ plan is designed to leverage our foundational strengths to build new capabilities – enriching customer experiences and deepening loyalty.

As we undertake this transformation of our business, we must integrate our strategic initiatives into a cohesive business model, and balance competing priorities, or we will not be successful.

To facilitate this transformation, we are making substantial investments, recruiting new talent, and optimizing our business model, management system, and organization.

Accordingly, maintaining discipline in our capital allocation continues to be important, as a strong core business and a balance sheet that provides the flexibility to invest in these new growth opportunities is critical to the success of our Ford+ plan.

If we are unable to optimize our capital allocation among vehicles, services, technology, and other calls on capital, or we are otherwise not successful in executing Ford+ (or are delayed for reasons outside of our control), we may not be able to realize the full benefits of our plan, which could have an adverse effect on our financial condition or results of operations.

Furthermore, if we fail to make progress on our plan at the pace that shareholders expect, it may lead to an increase in shareholder activism, which may disrupt the conduct of our business and divert management’s attention and resources.

Risk Factors (Continued)

Ford’s vehicles could be affected by defects that result in delays in new model launches, recall campaigns, or increased warranty costs.

Government safety standards require manufacturers to remedy defects related to vehicle safety through safety recall campaigns, and a manufacturer is obligated to recall vehicles if it determines that the vehicles do not comply with a safety standard.

NHTSA’s enforcement strategy has resulted in significant civil penalties being levied and the use of consent orders requiring direct oversight by NHTSA of certain manufacturers’ safety processes, a trend that could continue.

Should we or government safety regulators determine that a safety or other defect or a noncompliance exists with respect to certain of our vehicles prior to the start of production, the launch of such vehicle could be delayed until such defect is remedied.

The cost of recall and customer satisfaction actions to remedy defects in vehicles that have been sold could be substantial, particularly if the actions relate to global platforms or involve defects that are identified years after production.

For example, NHTSA and the automotive industry are currently engaged in a study of the safety of approximately 56 million Takata desiccated airbag inflators in the United States.

Of these, approximately three and a half million of the inflators are in our vehicles.

Should NHTSA determine that the inflators contain a safety defect, Ford and other manufacturers could potentially face significant incremental recall costs.

Further, to the extent recall and customer satisfaction actions relate to defective components we receive from suppliers, our ability to recover from the suppliers may be limited by the suppliers’ financial condition.

We accrue the estimated cost of both base warranty coverages and field service actions at the time a vehicle is sold, and we reevaluate the adequacy of our accruals on a regular basis.

In addition, from time to time, we issue extended warranties at our expense, the estimated cost of which is accrued at the time of issuance.

For additional information regarding warranty and field service action costs, including our process for establishing our reserves, see “Critical Accounting Estimates” in Item 7 and Note 25 of the Notes to the Financial Statements.

If warranty costs are greater than anticipated as a result of increased vehicle and component complexity, the adoption of new technologies, or otherwise, such costs could have an adverse effect on our financial condition or results of operations.

Furthermore, launch delays, recall actions, and increased warranty costs could adversely affect our reputation or market acceptance of our products as discussed below under “ Ford’s new and existing products, digital and physical services, and mobility services are subject to market acceptance and face significant competition from existing and new entrants in the automotive, mobility, and digital services industries .”

Ford may not realize the anticipated benefits of existing or pending strategic alliances, joint ventures, acquisitions, divestitures, or new business strategies.

We have invested in, formed strategic alliances with, and announced or formed joint ventures with a number of companies, and we may expand those relationships or enter into similar relationships with additional companies.

These initiatives typically involve enormous complexity and may involve a lengthy regulatory approval process.

As a result, we may not be able to complete anticipated transactions, the anticipated benefits of these transactions may not be realized, or the benefits may be delayed.

For example, we may not successfully integrate an alliance or joint venture with our operations, including the implementation of our controls, systems, procedures, and policies, or unforeseen expenses or liabilities may arise that were not discovered during due diligence prior to an investment or entry into a strategic alliance, or a misalignment of interests may develop between us and the other party.

Further, to the extent we share ownership, control, or management with another party in a joint venture, our ability to influence the joint venture may be limited, and we may be unable to prevent misconduct or implement our compliance or internal control systems.

In addition, implementation of a new business strategy may lead to the disruption of our existing business operations, including distracting management from current operations.

Results of operations from new activities may be lower than our existing activities, and, if a strategy is unsuccessful, we may not recoup our investments, which may be significant, in that strategy.

Moreover, we may continue to have financial exposure following a strategic divestiture or cessation of operations in a market, and restructuring actions may subject us to potential claims from employees, suppliers, dealers, or governmental authorities or harm our reputation.

Failure to successfully and timely realize the anticipated benefits of these transactions or strategies could have an adverse effect on our financial condition or results of operations.

Risk Factors (Continued)

Operational systems, security systems, vehicles, and services could be affected by cyber incidents, ransomware attacks, and other disruptions.

We rely on information technology networks and systems, including in-vehicle systems and mobile devices, some of which are managed by suppliers, to process, transmit, and store electronic information that is important to the operation of our business, our vehicles, and the services we offer.

Despite security measures, we are at risk for interruptions, outages, and compromises of:

(i) operational systems (including business, financial, accounting, product development, consumer receivables, data processing, or manufacturing processes);

(ii) facility security systems;

and/or (iii) in-vehicle systems or mobile devices, whether caused by a ransomware or other cyber attack, security breach, or other reasons, e.g., a natural disaster, fire, or overburdened infrastructure system.

Such incidents could materially disrupt operational systems;

result in loss of trade secrets or other proprietary or competitively sensitive information;

compromise the privacy of personal information of consumers, employees, or others;

jeopardize the security of our facilities;

affect the performance of in-vehicle systems or services we offer;

and/or impact the safety of our vehicles.

This risk exposure rises as we continue to develop and produce vehicles with increased connectivity.

Moreover, we, our suppliers, and our dealers have been the target of cyber attacks in the past, and such attacks will continue and evolve in the future, which may cause cyber incidents to be more difficult to detect for periods of time.

Our networks and in-vehicle systems, sharing similar architectures, could also be impacted by, or a data breach may result from, the negligence or misconduct of insiders or third parties who have access to our networks and systems.

We continually employ capabilities, processes, and other security measures designed to reduce and mitigate the risk of cyber attacks;

however, such preventative measures cannot provide absolute security and may not be sufficient in all circumstances or mitigate all potential risks.

Moreover, a cyber incident could harm our reputation, cause customers to lose trust in our security measures, and/or subject us to regulatory actions or litigation, and a cyber incident involving us or one of our suppliers could impact production, our internal operations, or our ability to deliver products and services to our customers.

Ford’s production, as well as Ford’s suppliers’ production, could be disrupted by labor issues, natural or man-made disasters, financial distress, production difficulties, capacity limitations, or other factors.

A work stoppage or other limitation on production could occur at Ford’s or its suppliers’ facilities for any number of reasons, including as a result of labor issues, including disputes under existing collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements, absenteeism, public health issues (e.g., COVID-19), stay-at-home orders, or in response to potential restructuring actions (e.g., plant closures);

as a result of supplier financial distress or other production constraints, such as limited quantities of components, including but not limited to semiconductors, or raw materials, quality issues, capacity limitations, or other difficulties;

as a result of a natural disaster (including climate-related physical risk);

cyber incidents;

or for other reasons.

Many components used in our vehicles are available only from a single or limited number of suppliers and, therefore, cannot be re-sourced quickly or inexpensively to another supplier (due to long lead times, new contractual commitments that may be required by another supplier before ramping up to provide the components or materials, etc.).

Such suppliers also could threaten to disrupt our production as leverage in negotiations.

In addition, when we undertake a model changeover, significant downtime at one or more of our production facilities may be required, and our ability to return to full production may be delayed if we experience production difficulties at one of our facilities or a supplier’s facility.

Moreover, as vehicles, components, and their integration become more complex, we may face an increased risk of a delay in production of new vehicles.

Regardless of the cause, our ability to recoup lost production volume may be limited.

Accordingly, a significant disruption to our production schedule could have a substantial adverse effect on our financial condition or results of operations and may impact our strategy to comply with fuel economy standards as discussed below under “ Ford may need to substantially modify its product plans to comply with safety, emissions, fuel economy, autonomous vehicle, and other regulations.

Ford’s ability to maintain a competitive cost structure could be affected by labor or other constraints.

Substantially all of the hourly employees in our Automotive operations in the United States and Canada are represented by unions and covered by collective bargaining agreements.

These agreements provide guaranteed wage and benefit levels throughout the contract term and some degree of income security, subject to certain conditions.

These agreements may restrict our ability to close plants and divest businesses.

A substantial number of our employees in other regions are represented by unions or government councils, and legislation or custom promoting retention of manufacturing or other employment in the state, country, or region may constrain as a practical matter our ability to sell or close manufacturing or other facilities.

Risk Factors (Continued)

Ford’s ability to attract and retain talented, diverse, and highly skilled employees is critical to its success and competitiveness.

Our success depends on our ability to continue to recruit and retain talented and diverse employees who are highly skilled in engineering, software, technology (including digital capabilities and connectivity), marketing, and finance, among other areas.

Competition for such employees is intense, which has led to an increase in compensation throughout the labor market, and, accordingly, may increase costs for employers.

In addition to compensation considerations, potential employees are increasingly placing a premium on various intangibles, such as working for companies with a clear purpose, flexible work arrangements, and other considerations.

If we are not perceived as an employer of choice, we may be unable to recruit highly skilled employees.

Further, if we lose existing employees with needed skills.

or we are unable to upskill and develop existing employees, particularly with the introduction of new technologies, it could have a substantial adverse effect on our business.

Macroeconomic, Market, and Strategic Risks

Ford’s new and existing products, digital and physical services, and mobility services are subject to market acceptance and face significant competition from existing and new entrants in the automotive, mobility, and digital services industries.

Although we conduct extensive market research before launching new or refreshed vehicles and introducing new services, many factors both within and outside our control affect the success of new or existing products and services in the marketplace, and we may not be able to accurately predict or identify emerging trends or the success of new products or services in the market.

It takes years to design and develop a new vehicle or change an existing vehicle.

Because customers’ preferences may change quickly, our new and existing products may not generate sales in sufficient quantities and at costs low enough to be profitable and recoup investment costs.

Offering vehicles and services that customers want and value can mitigate the risks of increasing price competition and declining demand, but products and services that are perceived to be less desirable (whether in terms of price, quality, styling, safety, overall value, fuel efficiency, or other attributes) can exacerbate these risks.

For example, if we are unable to differentiate our products and services from those of our competitors, develop innovative new products and services, or sufficiently tailor our products and services to customers in other markets, there could be insufficient demand for our products and services, which could have an adverse impact on our financial condition or results of operations.

With increased consumer interconnectedness through the internet, social media, and other media, mere allegations relating to quality, safety, fuel efficiency, corporate social responsibility, or other key attributes can negatively impact our reputation or market acceptance of our products or services, even where such allegations prove to be inaccurate or unfounded.

Further, our ability to successfully grow through capacity expansion and investments in the areas of electrification, connectivity, digital and physical services, and mobility depends on many factors, including advancements in technology, regulatory changes, infrastructure development (e.g., a widespread vehicle charging network), and other factors that are difficult to predict, that may significantly affect the future of electric and autonomous vehicles, digital and physical services, and mobility services.

The automotive, mobility, and digital service businesses are very competitive and are undergoing rapid changes.

Traditional competitors are expanding their offerings, and new types of competitors (particularly in our areas of strength, e.g., pick-up trucks and utilities) that may possess superior technology, may have business models with certain aspects that are more efficient, and are not subject to the same level of fixed costs as us, are entering the market.

This level of competition increases the importance of our ability to anticipate, develop, and deliver products and services that customers desire on a timely basis, in quantities in line with demand, and at costs low enough to be profitable.

We have announced our intent to continue making multi-billion dollar investments in electrification and mobility.

Our plans include offering electrified versions of many of our vehicles, including the F-150 Lightning and E-Transit.

If the market for electrified vehicles does not develop at the rate we expect, even if the regulatory framework encourages a rapid adoption of electrified vehicles, there is a negative perception of our vehicles or about electric vehicles in general, or if consumers prefer our competitors’ vehicles, there could be an adverse impact on our financial condition or results of operations.

Further, as discussed below under “ Ford may need to substantially modify its product plans to comply with safety, emissions, fuel economy, autonomous vehicle, and other regulations, ” lower than planned market acceptance of our vehicles may impact our strategy to comply with fuel economy standards.

Moreover, new offerings, including those related to electric and autonomous vehicles, may present technological challenges that could be costly to implement and overcome and may subject us to customer claims if they do not operate as anticipated.

In addition, since new technologies are subject to market acceptance, a malfunction involving any manufacturer’s autonomous vehicle may negatively impact the perception of autonomous vehicles and erode customer trust.

Risk Factors (Continued)

Ford’s near-term results are dependent on sales of larger, more profitable vehicles, particularly in the United States.

A shift in consumer preferences away from larger, more profitable vehicles with internal combustion engines (including trucks and utilities) to battery electric or other vehicles in our portfolio that may be less profitable could result in an adverse effect on our financial condition or results of operations in the near term.

In the longer term, if demand for battery electric vehicles grows at a rate greater than our ability to increase our production capacity for those vehicles, lower market share and revenue, as well as facility and other asset-related charges (e.g., accelerated depreciation) associated with the production of internal combustion vehicles, may result.

With a global footprint, Ford’s results could be adversely affected by economic, geopolitical, protectionist trade policies, or other events, including tariffs.

With the interconnectedness of the global economy, the challenges of a pandemic, a financial crisis, economic downturn or recession, natural disaster, geopolitical crisis, or other significant event in one area of the world can have an immediate and material adverse impact on markets around the world.

Changes in international trade policy can also have a substantial adverse effect on our financial condition or results of operations.

Steps taken by the U.S.

government to apply or consider applying tariffs on automobiles, parts, and other products and materials have the potential to disrupt existing supply chains, impose additional costs on our business, and may lead to other countries attempting to retaliate by imposing tariffs, which would make our products more expensive for customers in other markets, and, in turn, could make our products less competitive.

China presents unique risks to U.S.

automakers due to the strain in U.S.-China relations and China’s unique regulatory landscape.

We have operations in various markets with volatile economic or political environments.

This may expose us to heightened risks of economic, geopolitical, or other events, including governmental takeover (i.e., nationalization) of our manufacturing facilities or intellectual property, restrictive exchange or import controls, disruption of operations as a result of systemic political or economic instability, outbreak of war or expansion of hostilities, and acts of terrorism, each of which could have a substantial adverse effect on our financial condition or results of operations.

Further, the U.S.

government, other governments, and international organizations could impose additional sanctions that could restrict us from doing business directly or indirectly in or with certain countries or parties, which could include affiliates.

Industry sales volume in any of Ford’s key markets can be volatile and could decline if there is a financial crisis, recession, or significant geopolitical event.

Because we, like other manufacturers, have a high proportion of relatively fixed structural costs, relatively small changes in industry sales volume can have a substantial effect on our cash flow and results of operations.

Industry vehicle sales are affected by overall economic and market conditions and developing trends such as shared vehicle ownership and the transportation as a service model, e.g., ridesharing services.

If industry vehicle sales were to decline to levels significantly below our planning assumption for key markets including the United States, Europe, or China, the decline could have a substantial adverse effect on our financial condition, results of operations, and cash flow.

For a discussion of economic trends, see Item 7.

Ford may face increased price competition or a reduction in demand for its products resulting from industry excess capacity, currency fluctuations, competitive actions, or other factors.

The global automotive industry is intensely competitive, with manufacturing capacity generally far exceeding current demand (the recent capacity constraints being a temporary exception).

Historically, industry overcapacity has resulted in many manufacturers offering marketing incentives on vehicles in an attempt to maintain and grow market share;

these incentives historically have included a combination of subsidized financing or leasing programs, price rebates, and other incentives.

As a result, we are not necessarily able to set our prices to offset higher marketing incentives, commodity or other cost increases, tariffs, or the impact of adverse currency fluctuations, including cost advantages foreign competitors may have because of their weaker home market currencies, which may, in turn, enable those competitors to offer their products at lower prices.

As the automotive industry transitions to battery electric vehicles, excess capacity, particularly for internal combustion engine trucks and utilities, may continue or increase.

This excess capacity may further increase price competition in that segment of the market, which could have a substantial adverse effect on our financial condition or results of operations.

Risk Factors (Continued)

Inflationary pressure and fluctuations in commodity prices, foreign currency exchange rates, interest rates, and market value of Ford or Ford Credit’s investments, including marketable securities, can have a significant effect on results.

We are exposed to inflationary pressure and a variety of market risks, including the effects of changes in commodity prices, foreign currency exchange rates, and interest rates.

We monitor and manage these exposures as an integral part of our overall risk management program, which recognizes the unpredictability of markets and seeks to reduce potentially adverse effects on our business.

Changes in commodity prices (from tariffs, as discussed above under “ With a global footprint, Ford’s results could be adversely affected by economic, geopolitical, protectionist trade policies, or other events, including tariffs ,” or otherwise), currency exchange rates, and interest rates cannot always be predicted, hedged, or offset with price increases to eliminate earnings volatility.

As a result, significant changes in commodity prices, foreign currency exchange rates, or interest rates could have a substantial adverse effect on our financial condition or results of operations.

See Item 7 and Item 7A for additional discussion of currency, commodity price, and interest rate risks.

In addition, our results are impacted by fluctuations in the market value of our investments, including our Rivian marketable securities, with unrealized gains and losses that could be material in any period.

Financial Risks

Ford and Ford Credit’s access to debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts could be affected by credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors.

Ford and Ford Credit’s ability to obtain unsecured funding at a reasonable cost is dependent on their credit ratings or their perceived creditworthiness.

Further, Ford Credit’s ability to obtain securitized funding under its committed asset-backed liquidity programs and certain other asset-backed securitization transactions is subject to having a sufficient amount of assets eligible for these programs, as well as Ford Credit’s ability to obtain appropriate credit ratings and, for certain committed programs, derivatives to manage the interest rate risk.

Over time, and particularly in the event of credit rating downgrades, market volatility, market disruption, or other factors, Ford Credit may reduce the amount of receivables it purchases or originates because of funding constraints.

The discontinuance of LIBOR is one such risk that could cause market volatility or disruption and could adversely affect Ford Credit’s access to the debt, securitization, or derivative markets and increase its cost of funding and hedging.

In addition, Ford Credit may reduce the amount of receivables it purchases or originates if there is a significant decline in the demand for the types of securities it offers or Ford Credit is unable to obtain derivatives to manage the interest rate risk associated with its securitization transactions.

A significant reduction in the amount of receivables Ford Credit purchases or originates would significantly reduce its ongoing results of operations and could adversely affect its ability to support the sale of Ford vehicles.

Ford’s receipt of government incentives could be subject to reduction, termination, or clawback.

We receive economic benefits from national, state, and local governments in various regions of the world in the form of incentives designed to encourage manufacturers to establish, maintain, or increase investment, workforce, or production.

These incentives may take various forms, including grants, loan subsidies, or tax abatements or credits.

The impact of these incentives can be significant in a particular market during a reporting period.

A decrease in, expiration without renewal of, or other cessation or clawback of government incentives for any of our business units, as a result of administrative decision or otherwise, could have a substantial adverse impact on our financial condition or results of operations.

Until 2021, most of our manufacturing facilities in South America were located in Brazil, where the state or federal governments historically offered significant incentives to manufacturers to encourage capital investment, increase manufacturing production, and create jobs.

As a result, the performance of our South American operations had been impacted favorably by government incentives to a substantial extent.

The federal government in Brazil has levied assessments against us concerning the federal incentives we previously received, and the State of São Paulo has challenged the grant to us of tax incentives by the State of Bahia.

See Note 2 of the Notes to the Financial Statements for discussion of our accounting for government incentives, and “Item 3.

Legal Proceedings” for a discussion of tax proceedings in Brazil and the potential requirement for us to post collateral.

The shortage is due in large part to strong cross-industry demand, which has presented challenges and production disruptions globally, including at our assembly plants, and COVID-19-related work restrictions in various parts of the world have further impacted semiconductor production.

Accordingly, we and our competitors who need integrated circuits are experiencing various levels of semiconductor impact.

For the production of our electric vehicles, we are dependent on the supply of batteries and the raw materials (e.g., lithium, cobalt, nickel, graphite, and manganese) used by our suppliers to produce those batteries.

As we increase our production of electric vehicles, we expect our need for such materials to increase significantly.

At the same time, other companies are increasing their production of electric vehicles, which will further increase the demand for such raw materials.

As a result, we may be unable to acquire raw materials needed for electric vehicle production in sufficient amounts that are responsibly sourced or at reasonable prices.

As described below under “ To facilitate access to the raw materials necessary for the production of electric vehicles, Ford has entered into, and expects to continue to enter into, multi-year commitments to raw material suppliers that subject Ford to risks associated with lower future demand for such materials as well as costs that fluctuate and are difficult to accurately forecast ” as well as in the Liquidity and Capital Resources section in Item 7 below, we have entered into, and expect to continue to enter into, offtake agreements and other long-term purchase contracts that obligate us, subject to certain conditions such as quality or minimum output, to purchase a certain percentage or minimum amount of output from certain raw materials suppliers.

In the event the supplier under those agreements or any of our or our suppliers’ raw material supply contracts is unable to deliver sufficient quantities of raw materials needed for our or our suppliers’ production operations, e.g., if a mine does not produce at expected levels, or the raw materials do not otherwise satisfy our requirements, and we or our suppliers are unable to find an alternative resource with sufficient quantities, at reasonable prices, responsibly sourced, and in a timely manner, it could impact our ability to produce electric vehicles.

A shortage of, or our inability to acquire or find adequate suppliers of, key components or raw materials as a result of disruptions in the supply chain, capacity constraints, limited availability, competition for those items within the automotive industry and other sectors, or otherwise can cause a significant disruption to our production schedule and have a substantial adverse effect on our financial condition or results of operations.

To facilitate access to the raw materials necessary for the production of electric vehicles, Ford has entered into, and expects to continue to enter into, multi-year commitments to raw material suppliers that subject Ford to risks associated with lower future demand for such materials as well as costs that fluctuate and are difficult to accurately forecast.

We have announced plans to significantly increase our electric vehicle production volumes;

however, our ability to produce higher volumes of electric vehicles is dependent upon the availability of raw materials necessary for the production of batteries, e.g., lithium, cobalt, nickel, graphite, and manganese, among others.

As described above under “ Ford is highly dependent on its suppliers to deliver components in accordance with Ford’s production schedule and specifications, and a shortage of or inability to acquire key components, such as semiconductors, or raw materials, such as lithium, cobalt, nickel, graphite, and manganese, can disrupt Ford’s production of vehicles ,” to facilitate our access to such raw materials, we have entered into, and expect to continue to enter into, offtake agreements and other long-term purchase contracts.

Such agreements obligate us, subject to certain conditions such as quality or minimum output, to purchase a certain percentage or minimum amount of output from raw material suppliers over an agreed upon period of time pursuant to an agreed upon purchase price mechanism that is typically based upon the market price of the material at the time of delivery.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business