What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-07-28 compared with 2023-05-03 · 89 added, 68 removed, 458 unchanged (26% of the section changed)

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The net impact of this typically results in cash outflows from changes in our working capital balances during these shutdown periods.

Our finished product inventory at March 31, 2023 was higher than at December 31, 2022, reflecting higher in-transit and in-plant inventory.

Our finished product inventory at June 30, 2023 was higher than at December 31, 2022, reflecting higher in-transit inventory, primarily related to capacity constraints in transportation infrastructure, and in-plant inventory.

In response to, or in anticipation of, supplier disruptions, we may stockpile certain components or raw materials to help prevent disruption in our production of vehicles.

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Subject to satisfaction of those conditions, we will be obligated to purchase the materials at the cost determined by the purchase price mechanism.

As of March 31, 2023, our forecasted expenditures for the maximum quantity that we are committed to purchase under these offtake agreements, subject to certain conditions, total about $4.3 billion through 2030 based on our present pricing forecast;

however, our forecasted prices could fluctuate significantly from period to period, which would result in volatility in the estimate of our overall obligation.

In addition, we plan to continue to enter into offtake agreements with raw material suppliers, the costs under which we expect to be significant.

As of June 30, 2023, our estimated expenditures for the maximum quantity that we are committed to purchase under these offtake agreements, subject to certain conditions, total about $12 billion through 2035 based on our present pricing forecast;

however, our pricing forecast could fluctuate significantly from period to period, which could result in significant increases or decreases in the estimate of our overall purchase commitment.

The actual price paid for these materials will be recorded on our balance sheet at the time of purchase.

In addition, we may enter into additional offtake agreements with raw material suppliers, the costs under which could be significant.

Based on the offtake agreements we have entered into thus far, the earliest date by which we could be obligated to purchase any output, subject to satisfaction of the applicable conditions, will be in 2024.

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We have no economic interest in a supplier’s decision to participate in the SCF program, and we do not provide any guarantees in connection with it.

As of March 31, 2023, the outstanding amount of Ford receivables that suppliers elected to sell to the SCF financial institutions was $265 million.

The amount settled through the SCF program during the first quarter of 2023 was $452 million.

As of June 30, 2023, the outstanding amount of Ford receivables that suppliers elected to sell to the SCF financial institutions was $269 million.

The amount settled through the SCF program during the first half of 2023 was $937 million.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Changes in Company cash excluding Ford Credit are summarized below (in billions):

First Quarter

Second Quarter First Half

2022 2023 2022 2023

Company Excluding Ford Credit

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(a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.

(b) 2022 includes a $5.4B mark-to-market loss on our Rivian investment.

(b) Includes a $2.4 billion loss and a $7.9 billion loss on our Rivian investment in the second quarter and first half of 2022, respectively.

Numbers may not sum due to rounding.

Our first quarter 2023 Net cash provided by/(used in) operating activities was positive $2.8 billion, an increase of $3.9 billion from a year ago (see page 58 for additional information), driven primarily by higher net income.

Company adjusted free cash flow was $0.7 billion, $1.3 billion higher than a year ago, driven by higher adjusted EBIT excluding Ford Credit and favorable timing differences, offset partially by lower Ford Credit distributions and higher capital spending.

Capital spending was $1.8 billion in the first quarter of 2023, an increase of $0.4 billion from a year ago.

Our second quarter 2023 Net cash provided by/(used in) operating activities was positive $5.0 billion, an increase of $2.1 billion from a year ago (see page 59 for additional information), driven primarily by higher net income and higher Ford Credit operating cash flow, offset partially by an increase in inventory.

Company adjusted free cash flow was $2.9 billion, $0.7 billion lower than a year ago, driven by higher capital spending and an increase in working capital, offset partially by higher adjusted EBIT excluding Ford Credit and favorable timing differences.

Capital spending was $1.9 billion in the second quarter of 2023, an increase of $0.4 billion from a year ago.

We continue to expect full year 2023 capital spending to be in the range of $8 billion to $9 billion.

First quarter 2023 working capital impact was $1.2 billion negative, driven by higher inventory, offset partially by higher trade payables and lower receivables, each compared to December 31, 2022.

All other and timing differences were negative $0.1 billion.

Second quarter 2023 working capital impact was $0.7 billion negative, driven by higher inventory and higher receivables, offset partially by higher trade payables, each compared to March 31, 2023.

All other and timing differences were positive $1.6 billion.

Timing differences include differences between accrual-based EBIT and the associated cash flows (e.g., pension and OPEB income or expense;

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marketing incentive and warranty payments to dealers).

In the first quarter of 2023, we contributed $125 million to our global funded pension plans.

In the second quarter of 2023, we contributed $109 million to our global funded pension plans.

We continue to expect to contribute between $500 million and $600 million to our global funded pension plans in 2023.

Shareholder distributions were $3.2 billion in the first quarter of 2023, all of which was attributable to our regular and supplemental dividend.

Shareholder distributions were $0.6 billion in the second quarter of 2023, all of which was attributable to our regular dividend.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Available Credit Lines .

Total Company committed credit lines, excluding Ford Credit, at March 31, 2023 were $19.3 billion, consisting of $13.5 billion of our corporate credit facility, $2.0 billion of our supplemental revolving credit facility, $1.75 billion of our 364-day revolving credit facility, and $2.1 billion of local credit facilities.

At March 31, 2023, the utilized portion of the corporate credit facility was $17 million, representing amounts utilized for letters of credit.

In addition, $1.7 billion of committed Company credit lines, excluding Ford Credit, was utilized under local credit facilities for our affiliates as of March 31, 2023.

Our corporate, supplemental, and 364-day revolving credit facilities were amended as of April 26, 2023 to extend the maturity dates of the commitments under each facility.

Following the corporate credit facility amendment, $3.4 billion of commitments mature on April 26, 2026 and $10.1 billion of commitments mature on April 26, 2028.

Following the supplemental revolving credit facility amendment, $0.1 billion of commitments mature on September 29, 2024 and $1.9 billion of commitments mature on April 26, 2026.

Following the 364-day revolving credit facility amendment, $1.8 billion of commitments mature on April 24, 2024.

Total Company committed credit lines, excluding Ford Credit, at June 30, 2023 were $19.3 billion, consisting of $13.5 billion of our corporate credit facility, $2.0 billion of our supplemental revolving credit facility, $1.8 billion of our 364-day revolving credit facility, and $2.1 billion of local credit facilities.

At June 30, 2023, the utilized portion of the corporate credit facility was $18 million, representing amounts utilized for letters of credit.

In addition, $1.7 billion of committed Company credit lines, excluding Ford Credit, was utilized under local credit facilities for our affiliates as of June 30, 2023.

Lenders under our corporate credit facility have $3.4 billion of commitments maturing on April 26, 2026 and $10.1 billion of commitments maturing on April 26, 2028.

Lenders under our supplemental revolving credit facility have $0.1 billion of commitments maturing on September 29, 2024 and $1.9 billion of commitments maturing on April 26, 2026.

Lenders under our 364-day revolving credit facility have $1.8 billion of commitments maturing on April 24, 2024.

The corporate, supplemental, and 364-day credit agreements include certain sustainability-linked targets, pursuant to which the applicable margin and facility fees may be adjusted if Ford achieves, or fails to achieve, the specified targets related to global manufacturing facility greenhouse gas emissions, renewable electricity consumption, and Ford Europe CO 2 tailpipe emissions.

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and Ford Van Dyke Investment Fund, Inc.

As shown in Note 14 of the Notes to the Financial Statements, at March 31, 2023, Company debt excluding Ford Credit was $19.7 billion.

As shown in Note 14 of the Notes to the Financial Statements, at June 30, 2023, Company debt excluding Ford Credit was $19.6 billion.

This balance is $0.4 billion lower than at December 31, 2022.

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Ford Credit remains well capitalized with a strong balance sheet and funding diversified across platforms and markets.

Ford Credit saw sequential improvement in liquidity, securitized funding mix, and financial statement leverage during the quarter and ended the first quarter of 2023 with $26 billion of liquidity, up $5 billion from year-end.

Ford Credit continues to have robust access to the capital markets, completing $12 billion of public term issuances through May 1, 2023.

Ford Credit saw sequential improvement in liquidity and securitized funding mix during the quarter and ended the second quarter of 2023 with $28.8 billion of liquidity, up $7.8 billion from year-end.

Ford Credit continues to have robust access to the capital markets, completing $18 billion of public term issuances through July 26, 2023.

Key elements of Ford Credit’s funding strategy include:

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2022 December 31,

2022 March 31,

2022 June 30,

Funding Structure

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Securitized Funding as Percent of Total Debt 43.0 % 47.4 % 45.0 %

Net receivables were $123.8 billion at March 31, 2023 and were funded primarily with term unsecured debt and term asset-backed securities.

Securitized funding as a percent of total debt was 46.0% at the end of the first quarter of 2023.

Net receivables were $126.1 billion at June 30, 2023 and were funded primarily with term unsecured debt and term asset-backed securities.

Securitized funding as a percent of total debt was 45.0% as of June 30, 2023.

Public Term Funding Plan.

The following table shows Ford Credit’s issuances for full year 2021 and 2022, planned issuances for full year 2023, and its global public term funding issuances through May 1, 2023, excluding short-term funding programs (in billions):

The following table shows Ford Credit’s issuances for full year 2021 and 2022, planned issuances for full year 2023, and its global public term funding issuances through July 26, 2023, excluding short-term funding programs (in billions):

Forecast Through

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2022 December 31,

2022 March 31,

2022 June 30,

Liquidity Sources (a)

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Ford Credit’s net liquidity available for use will fluctuate quarterly based on factors including near-term debt maturities, receivable growth and decline, and timing of funding transactions.

At March 31, 2023, Ford Credit’s net liquidity available for use was $26 billion, $5 billion higher than year-end 2022, reflecting strong access to public funding markets and the addition of $3.1 billion in committed asset-backed capacity.

At March 31, 2023, Ford Credit’s liquidity sources, including cash, committed asset-backed facilities, and unsecured credit facilities, totaled $53.2 billion, up $2.3 billion from year-end 2022.

At June 30, 2023, Ford Credit’s net liquidity available for use was $28.8 billion, $7.8 billion higher than year-end 2022, reflecting strong access to public funding markets and the addition of $4.9 billion in committed asset-backed capacity.

At June 30, 2023, Ford Credit’s liquidity sources, including cash, committed asset-backed facilities, and unsecured credit facilities, totaled $57.3 billion, up $6.4 billion from year-end 2022.

Material Cash Requirements.

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2022 December 31,

2022 March 31,

2022 June 30,

Leverage Calculation

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Ford Credit plans its leverage by considering market conditions and the risk characteristics of its business.

At March 31, 2023, Ford Credit’s financial statement leverage was 9.8:1.

At June 30, 2023, Ford Credit’s financial statement leverage was 9.9:1.

Ford Credit targets financial statement leverage in the range of 9:1 to 10:1.

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Pension Plans - Funded Balances.

As of March 31, 2023, our total Company pension underfunded status reported on our consolidated balance sheets was $0.2 billion and reflects the net funded status at December 31, 2022, updated for:

As of June 30, 2023, our total Company pension underfunded status reported on our consolidated balance sheets was $0.2 billion and reflects the net funded status at December 31, 2022, updated for:

service and interest cost;

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Four Quarters Ending

2022 March 31,

2022 June 30,

Adjusted Net Operating Profit/(Loss) After Cash Tax

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Each rating agency may have different criteria for evaluating company risk and, therefore, ratings should be evaluated independently for each rating agency.

There have been no rating actions taken by these NRSROs since the filing of our 2022 Form 10-K Report.

The following rating actions were taken by these NRSROs since the filing of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023:

• On June 14, 2023, DBRS upgraded the credit ratings for Ford and Ford Credit to BBB (low) from BB (high) and revised the outlook to stable from positive.

• On July 13, 2023, Moody’s upgraded the credit ratings for Ford and Ford Credit to Ba1 from Ba2 with a stable outlook.

The following table summarizes certain of the credit ratings and outlook presently assigned by these four NRSROs:

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Unsecured Outlook / Trend Minimum Long-Term Investment Grade Rating

DBRS BB (high) BB (high) Positive BB (high) R-4 Positive BBB (low)

DBRS BBB (low) BBB (low) Stable BBB (low) R-2 (low) Stable BBB (low)

Fitch BB+ BB+ Positive BB+ B Positive BBB-

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Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

We provided 2023 Company guidance in our earnings release furnished on Form 8-K dated May 2, 2023.

We provided 2023 Company guidance in our earnings release furnished on Form 8-K dated July 27, 2023.

The guidance is based on our expectations as of July 27, 2023, and assumes no material change to our current assumptions for inflation, logistics issues, production, or macroeconomic conditions.

Our actual results could differ materially from our guidance due to risks, uncertainties, and other factors, including those set forth in “Risk Factors” in Item 1A of our 2022 Form 10-K Report and as updated by our subsequent filings with the SEC.

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Adjusted EBIT (a) $11 - $12 billion

Adjusted Free Cash Flow (a) About $6 billion

Adjusted Free Cash Flow (a) $6.5 - $7 billion

Capital spending $8 - $9 billion

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(a) When we provide guidance for adjusted EBIT and adjusted free cash flow, we do not provide guidance for the most comparable GAAP measures because, as described in more detail below in “Non-GAAP Measures That Supplement GAAP Measures,” they include items that are difficult to predict with reasonable certainty.

For full-year 2023, we continue to expect adjusted EBIT of $9 billion to $11 billion and adjusted free cash flow of about $6 billion.

For full-year 2023, we now expect adjusted EBIT of $11 billion to $12 billion, primarily reflecting stronger net pricing, and adjusted free cash flow of $6.5 billion to $7 billion.

On a segment basis, we expect:

• Ford Blue to deliver full-year EBIT of about $7 billion.

Cost improvements and higher industry volumes will likely be offset partially by pricing headwinds, as inventory stocks continue to normalize and industry incentives rise throughout the year, along with adverse exchange.

• Ford Model e to report an EBIT loss of around $3 billion, largely reflecting disciplined investments in new products and capacity.

• Ford Pro’s EBIT to nearly double from full-year 2022 to around $6 billion.

The gain is driven by improved pricing and volume, including the benefits from the launch of our all-new Super Duty.

• Ford Pro EBIT approaching $8 billion, more than double full-year 2022, from significant year-over-year improvement in pricing and volume.

• Ford Blue EBIT of about $8 billion, with higher volumes and stronger mix more than offsetting any potential pricing headwinds.

• Ford Model e to report an EBIT loss of about $4.5 billion, reflecting the pricing environment, disciplined investments in new products and capacity, supplier-related launch costs, and warranty expenses.

• Ford Credit EBT to be about $1.3 billion.

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• Global economic uncertainty

• Higher industrywide customer incentives as vehicle supply and demand rebalances

• Lower past service pension income and exchange

• Growth-related investments (e.g., customer experience, connected services, and capital expenditures)

• Improvement in the supply chain and higher industry volume with a seasonally adjusted annual rate (“SAAR”) of about 15 million in the United States and about 13 million in Europe

• Launch of our all-new Super Duty

• Lower cost of goods sold, including materials and commodities

• Inflationary pressures

• Higher industrywide customer incentives and continued EV pricing pressure

• Increased warranty costs

• Lower past service pension income

• Certain costs associated with union contract negotiations

• Improved supply chain

• Higher industry volumes

• All-new Super Duty

• Lower commodity costs

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

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Net Income/(Loss) Reconciliation to Adjusted EBIT ($M)

First Quarter

Second Quarter First Half

2022 2023 2022 2023

Net income/(loss) attributable to Ford (GAAP) $ 667 $ 1,917 $ (2,443) $ 3,674

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Earnings per Share Reconciliation to Adjusted Earnings per Share

First Quarter

Second Quarter First Half

2022 2023 2022 2023

Diluted After-Tax Results ($M)

Diluted after-tax results (GAAP) $ 667 $ 1,917 $ (2,443) $ 3,674

Impact of pre-tax and tax special items (4,674) (768)

Impact of pre-tax and tax special items (a) (2,082) (1,012) (6,756) (1,722)

Adjusted net income/(loss) – diluted (Non-GAAP) $ 2,749 $ 2,929 $ 4,313 $ 5,396

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Diluted shares 4,052 4,041 4,057 4,035

Earnings/(Loss) per share – diluted (GAAP) (a) $ (0.78) $ 0.44

Earnings/(Loss) per share – diluted (GAAP) (b) $ 0.16 $ 0.47 $ (0.61) $ 0.91

Net impact of adjustments (0.52) (0.25) (1.67) (0.43)

Adjusted earnings/(loss) per share – diluted (Non-GAAP) $ 0.68 $ 0.72 $ 1.06 $ 1.34

(a) The first quarter of 2022 calculation excludes 56 million shares of net dilutive options, unvested restricted stock units, unvested restricted stock shares, and convertible debt due to their anti-dilutive effect.

(a) Includes adjustment for noncontrolling interest in 2023.

(b) The first half 2022 calculation excludes 43 million shares of net dilutive options, unvested restricted stock units, unvested restricted stock shares, and convertible debt due to their anti-dilutive effect.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Effective Tax Rate Reconciliation to Adjusted Effective Tax Rate

First Quarter

Second Quarter First Half

2022 2023 2022 2023 Memo:

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Adjusted effective tax rate (Non-GAAP) 20.2 % 12.9 % 21.2 % 16.6 % 18.7 %

(a) The first quarter of 2022 reflects the tax consequences of unrealized losses on marketable securities.

(a) The first half of 2022 reflects the tax consequences of unrealized losses on marketable securities.

Full Year 2022 reflects the tax consequences of unrealized losses on marketable securities and fourth quarter favorable changes in our valuation allowances.

Net Cash Provided by/(Used in) Operating Activities Reconciliation to Company Adjusted Free Cash Flow ($M)

First Quarter

Second Quarter First Half

2022 2023 2022 2023

Net cash provided by/(used in) operating activities (GAAP) $ 2,947 $ 5,035 $ 1,863 $ 7,835

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The following tables provide supplemental cash flow information (in millions):

For the period ended March 31, 2023

First Quarter

For the period ended June 30, 2023

Cash flows from operating activities Company excluding Ford Credit Ford Credit Eliminations Consolidated

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The following table provides supplemental income statement information (in millions):

For the period ended March 31, 2023

First Quarter

For the period ended June 30, 2023

Second Quarter

Company excluding Ford Credit Ford Credit Consolidated

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Net income/(loss) attributable to Ford Motor Company $ 1,622 $ 295 $ 1,917

For the period ended June 30, 2023

Company excluding Ford Credit Ford Credit Consolidated

Revenues $ 81,512 $ 4,916 $ 86,428

Total costs and expenses 77,396 4,458 81,854

Operating income/(loss) 4,116 458 4,574

Interest expense on Company debt excluding Ford Credit 612 — 612

Other income/(loss), net 258 221 479

Equity in net income/(loss) of affiliated companies (8) 14 6

Income/(Loss) before income taxes 3,754 693 4,447

Provision for/(Benefit from) income taxes 610 158 768

Net income/(loss) 3,144 535 3,679

Income/(Loss) attributable to noncontrolling interests 5 — 5

Net income/(loss) attributable to Ford Motor Company $ 3,139 $ 535 $ 3,674

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

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The following tables provide supplemental balance sheet information (in millions):

March 31, 2023

June 30, 2023

Assets Company excluding Ford Credit Ford Credit Eliminations Consolidated

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Selected Other Information.

At March 31, 2023, total equity attributable to Ford was $42.4 billion, a decrease of $0.8 billion compared with December 31, 2022.

At June 30, 2023, total equity attributable to Ford was $43.7 billion, an increase of $0.5 billion compared with December 31, 2022.

The detail for this change is shown below (in billions):

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Other comprehensive income/(loss), net 0.4

Total $ (0.8)

Common stock issued (including share-based compensation impacts) 0.2

Sales by Type.

The following table shows first quarter 2023 U.S.

The following table shows second quarter 2023 U.S.

sales volume and U.S.

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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-Q

Item 2. Management’s Discussion and Analysis