What changed in this filing

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Item 1. Financial Statements

2023-10-27 compared with 2023-07-28 · 180 added, 110 removed, 525 unchanged (36% of the section changed)

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NOTES TO THE FINANCIAL STATEMENTS

EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES

We generally record costs associated with voluntary separations at the time of employee acceptance.

We record costs associated with involuntary separation programs when management has approved the plan for separation, the affected employees are identified, and it is unlikely that actions required to complete the separation plan will change significantly.

Costs associated with benefits that are contingent on the employee continuing to provide service are accrued over the required service period.

Company Excluding Ford Credit

Employee separation actions and exit and disposal activities include employee separation costs, facility and other asset-related charges (e.g., impairment, accelerated depreciation), dealer and supplier payments, other statutory and contractual obligations, and other expenses, which are recorded in Cost of sales and Selling, administrative, and other expenses.

Below are actions that have been initiated:

Exited manufacturing operations in 2021 resulting in the closure of facilities in Camaçari, Taubaté, and Troller.

A sale of the Taubaté plant was completed in the second quarter of 2023

Ceased vehicle manufacturing in Sanand in the fourth quarter of 2021 and ceased manufacturing in Chennai in the third quarter of 2022.

A sale of the Sanand vehicle assembly and powertrain plants was completed in the first quarter of 2023 (see Note 17)

Ceased production of the Mondeo at the Valencia plant in the first quarter of 2022

Ceased development of certain product programs in the first half of 2023

In addition, we are continuing to reduce our global workforce and take other restructuring actions, including the separation of salaried workers as announced during 2023.

The following table summarizes the activities for the periods ended September 30, which are recorded in Other liabilities and deferred revenue (in millions):

Third Quarter First Nine Months

2022 2023 2022 2023

Beginning balance $ 691 $ 1,277 $ 950 $ 588

Changes in accruals (a) 329 148 445 1,067

Payments ( 188 ) ( 298 ) ( 539 ) ( 493 )

Foreign currency translation and other ( 21 ) ( 54 ) ( 45 ) ( 89 )

Ending balance $ 811 $ 1,073 $ 811 $ 1,073

(a) Excludes pension costs of $ 11 million and $ 58 million in the third quarter of 2022 and 2023, respectively, and $ 27 million and $ 117 million in the first nine months of 2022 and 2023, respectively.

We recorded $ 35 million and $ 101 million in the third quarter and first nine months of 2022, respectively, for accelerated depreciation, impairment of our India assets, and other non-cash items and recognized a $ 38 million pre-tax net gain on sale of assets during the first nine months of 2022.

We recorded $ 0 and $ 50 million in the third quarter and first nine months of 2023, respectively, for accelerated depreciation and other non-cash items.

In addition, we recognized a $ 4 million and $ 23 million pre-tax net gain on sale of assets in the third quarter and first nine months of 2023, respectively.

We recorded costs of $ 535 million and $ 1.2 billion in the first nine months of 2022 and 2023, respectively, related to the actions above.

We estimate that we will incur about $ 1.5 billion in total charges in 2023 related to such actions, primarily attributable to employee separations and supplier settlements.

In October 2023, we announced that 1,000 positions will be retained as part of a planned new technology center at our Saarlouis facility in Germany after 2025.

Accordingly, we will engage in discussions with our Social Partners related to the remaining affected positions at the Saarlouis Body and Assembly Plant.

Our plans for the site beyond the 1,000 positions are uncertain, and there are no existing employee benefit programs covering non-voluntary separations.

Therefore, potential future charges are not included in the estimate of total charges to be incurred in 2023 but could be significant once decisions are made.

In addition, we continue to review our global businesses and may take additional restructuring actions where a path to sustained profitability is not feasible when considering the capital allocation required for those businesses.

Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES (Continued)

Accumulated foreign currency translation losses included in Accumulated other comprehensive income/(loss) at June 30, 2023 of $ 223 million are associated with Ford Credit’s investments in Brazil and Argentina that have ceased operations.

Accumulated foreign currency translation losses included in Accumulated other comprehensive income/(loss) at September 30, 2023 of $ 223 million are associated with Ford Credit’s investments in Brazil and Argentina that have ceased operations.

We expect to reclassify these losses to income upon substantially complete liquidation of Ford Credit’s investments, which may occur over multiple reporting periods.

In the second quarter and first half of 2022, we reclassified losses of $ 36 million and $ 155 million, respectively, to Other income/(loss), net , upon the liquidation of three investments in Brazil.

Although the timing for the completion of the remaining actions is uncertain, we expect the majority of losses to be recognized in 2024 or later.

In the first nine months of 2022, we reclassified losses of $ 155 million to Other income/(loss), net , upon the liquidation of three investments in Brazil.

ACQUISITIONS AND DIVESTITURES

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Argo AI, LLC (“Argo AI”).

In October 2022, Ford and Volkswagen AG (“VW”), who held equal interests that together comprised a majority ownership of Argo AI, initiated the process of exiting the joint development of highly automated driving technology (L4) through Argo AI.

In the third quarter of 2022, Ford made the strategic decision to shift our capital spending from L4 technology being developed by Argo AI to advanced L2/L3 systems, which we believe will ultimately be essential to achieve profitable commercialization of L4 autonomy at scale in the future.

We determined that Argo AI no longer had value as a going concern, and as a result, we reassessed the carrying value of our investment as of September 30, 2022.

Our valuation assumed an orderly conclusion of operations at Argo AI, in which the cash required to satisfy the remaining obligations would consume all of Argo AI’s remaining capital.

In addition, we assessed whether Argo AI’s technology components have value in isolation, and we concluded that the cost to integrate into currently anticipated technology ecosystems would be prohibitive.

Accordingly, we recorded a $ 2.7 billion pre-tax impairment in the third quarter of 2022.

The non-cash charge was reported in Equity in net income/(loss) of affiliated companies .

In the fourth quarter of 2022, Ford and Volkswagen AG, who held equal interests that together comprised a majority ownership of Argo AI, initiated the process of exiting the joint development of highly automated driving technology (L4) through Argo AI.

At December 31, 2022, the carrying value of our equity method investment in Argo AI was $ 0 , and we had $ 65 million in Other liabilities and deferred revenue related to our funding commitment for our share of Argo AI’s expenses previously incurred.

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On January 10, 2023, we completed the sale of the plants to Tata.

Ford will continue to operate the powertrain facility by leasing back the associated land and building.

Ford continues to operate the powertrain facility by leasing back the associated land and building.

As a result of the sale transaction, we derecognized the fixed assets and recognized the powertrain facility operating lease right-of-use asset and related lease liability in the first quarter of 2023.

The fair value of the cash consideration received approximated the carrying value of the fixed assets at the time of sale.

Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

ACQUISITIONS AND DIVESTITURES (Continued)

Ford Romania S.R.L.

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The fair value of consideration received, consisting of cash and a note receivable, approximated the carrying value of Ford Romania at the time of sale.

The Ford Romania plant in Craiova, Romania will continue to manufacture Ford-branded vehicles for Ford and Ford Otosan.

The Ford Romania plant in Craiova, Romania continues to manufacture Ford-branded vehicles for Ford and Ford Otosan.

Ford’s portion of the output is expected to be significant;

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ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

The changes in the balances for each component of accumulated other comprehensive income/(loss) attributable to Ford Motor Company for the periods ended June 30 were as follows (in millions):

Second Quarter First Half

The changes in the balances for each component of accumulated other comprehensive income/(loss) attributable to Ford Motor Company for the periods ended September 30 were as follows (in millions):

Third Quarter First Nine Months

2022 2023 2022 2023

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Tax/(Tax benefit) 1 1 3 6

Net (gains)/losses reclassified from AOCI to net income

Net (gains)/losses reclassified from AOCI to net income (b) 4 5 10 20

Other comprehensive income/(loss), net of tax ( 148 ) 28 ( 484 ) 94

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Translation impact on non-U.S.

8 ( 1 ) 11 ( 3 )

Other comprehensive income/(loss), net of tax 13 7 33 13

Ending balance $ ( 2,607 ) $ ( 2,597 ) $ ( 2,607 ) $ ( 2,597 )

Total AOCI ending balance at June 30 $ ( 9,473 ) $ ( 8,924 ) $ ( 9,473 ) $ ( 8,924 )

Total AOCI ending balance at September 30 $ ( 10,193 ) $ ( 8,933 ) $ ( 10,193 ) $ ( 8,933 )

(a) We do not recognize deferred taxes for a majority of the foreign currency translation gains and losses because we do not anticipate reversal in the foreseeable future.

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(b) Reclassified to Other income/(loss), net .

(c) Excludes a $ 3 million gain and a $ 1 million loss in the third quarter and first nine months of 2022, respectively, and a $ 2 million loss and $ 2 million gain in the third quarter and first nine months of 2023, respectively, related to noncontrolling interest.

(d) Reclassified to Cost of sales .

During the next twelve months, we expect to reclassify existing net losses on cash flow hedges of $ 139 million (see Note 15).

During the next twelve months, we expect to reclassify existing net gains on cash flow hedges of $ 97 million (see Note 15).

Financial Statements (Continued)

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Certain of our affiliates are variable interest entities in which we are not the primary beneficiary.

Our maximum exposure to any potential losses associated with these unconsolidated affiliates is limited to our equity investments, accounts receivable, loans, and guarantees and was $ 1.0 billion and $ 2.1 billion at December 31, 2022 and June 30, 2023, respectively.

Of these amounts, guarantees of $ 113 million at both December 31, 2022 and June 30, 2023 related to certain obligations of our VIEs also are included in Note 20.

Our maximum exposure to any potential losses associated with these unconsolidated affiliates is limited to our equity investments, accounts receivable, loans, and guarantees and was $ 1.0 billion and $ 3.0 billion at December 31, 2022 and September 30, 2023, respectively.

Of these amounts, guarantees of $ 113 million at both December 31, 2022 and September 30, 2023 related to certain obligations of our VIEs also are included in Note 20.

On July 13, 2022, Ford, SK On Co., Ltd., and SK Battery America, Inc.

(a wholly owned subsidiary of SK On) completed the creation of BlueOval SK, LLC, a 50/ 50 joint venture that will build and operate electric vehicle battery plants in Tennessee and Kentucky to supply batteries to Ford and Ford affiliates.

BlueOval SK is a variable interest entity of which we are not the primary beneficiary, and we use the equity method of accounting for our investment.

As of June 30, 2023, Ford has contributed to BlueOval SK $ 1.6 billion of its agreed capital contribution of up to $ 6.6 billion through 2026, subject to any adjustments agreed to by the parties.

(a wholly owned subsidiary of SK On) completed the creation of BlueOval SK, LLC (“BOSK”), a 50/ 50 joint venture that will build and operate electric vehicle battery plants in Tennessee and Kentucky to supply batteries to Ford and Ford affiliates.

BOSK is a variable interest entity of which we are not the primary beneficiary, and we use the equity method of accounting for our investment.

As of September 30, 2023, Ford has contributed to BOSK $ 2.2 billion of its agreed capital contribution of up to $ 6.6 billion through 2026, subject to any adjustments agreed to by the parties.

Financial Statements (Continued)

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Subsequent to initial recognition, the guarantee liability is adjusted at each reporting period to reflect the current estimate of expected payments resulting from possible default events over the remaining life of the guarantee.

The maximum potential payments for financial guarantees were $ 518 million and $ 576 million at December 31, 2022 and June 30, 2023, respectively.

The carrying value of recorded liabilities related to financial guarantees was $ 31 million and $ 47 million at December 31, 2022 and June 30, 2023, respectively.

The maximum potential payments for financial guarantees were $ 518 million and $ 561 million at December 31, 2022 and September 30, 2023, respectively.

The carrying value of recorded liabilities related to financial guarantees was $ 31 million and $ 39 million at December 31, 2022 and September 30, 2023, respectively.

Our financial guarantees consist of debt and lease obligations of certain joint ventures, as well as certain financial obligations of outside third parties, including suppliers, to support our business and economic growth.

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We regularly review our performance risk under these arrangements, and in the event it becomes probable we will be required to perform under a guarantee or indemnity, the amount of probable payment is recorded.

The maximum potential payments for non-financial guarantees were $ 273 million and $ 77 million at December 31, 2022 and June 30, 2023, respectively.

The carrying value of recorded liabilities related to non-financial guarantees was $ 0 at both December 31, 2022 and June 30, 2023.

Included in the $ 77 million of maximum potential payments at June 30, 2023 are guarantees for the resale value of vehicles sold in certain arrangements to daily rental companies.

The maximum potential payment of $ 71 million as of June 30, 2023 represents the total proceeds we guarantee the rental company will receive on resale.

The maximum potential payments for non-financial guarantees were $ 273 million and $ 8 million at December 31, 2022 and September 30, 2023, respectively.

The carrying value of recorded liabilities related to non-financial guarantees was $ 0 at both December 31, 2022 and September 30, 2023.

Included in the $ 8 million of maximum potential payments at September 30, 2023 are guarantees for the resale value of vehicles sold in certain arrangements to daily rental companies.

The maximum potential payment of $ 2 million as of September 30, 2023 represents the total proceeds we guarantee the rental company will receive on resale.

Reflecting our present estimate of proceeds the rental companies will receive on resale from third parties, we do not expect we will have to pay under the guarantee.

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Our estimate of reasonably possible loss in excess of our accruals for all material matters currently reflects indirect tax and customs matters, for which we estimate the aggregate risk to be a range of up to a bout $ 1.4 billion.

In addition, we have a reasonably possible risk of loss related to supplier claims for an EV program in Europe.

Because the matter is preliminary, we cannot estimate the amount of the potential loss or predict the outcome and cannot provide reasonable assurance that it will not have a material adverse effect on us.

As noted, the litigation process is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance.

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Recoveries are reported in Trade and other receivables, net and Other assets.

The estimate of our future warranty and field service action costs, net of estimated supplier recoveries, for the periods ended June 30 was as follows (in millions):

The estimate of our future warranty and field service action costs, net of estimated supplier recoveries, for the periods ended September 30 was as follows (in millions):

First Nine Months

Beginning balance $ 8,451 $ 9,193

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Vendor tooling dedicated to producing EV parts is reported in Ford Model e.

There are no Ford manufacturing assets or vendor tooling reported in Ford Pro.

There are no Ford manufacturing or vendor tooling assets reported in Ford Pro.

Regardless of the segment reporting the asset, depreciation and amortization expense is reflected on the basis of production volume and reported in the segment that reports the external vehicle sale.

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SEGMENT INFORMATION (Continued)

Key financial information for the periods ended or at June 30 was as follows (in millions):

Key financial information for the periods ended or at September 30 was as follows (in millions):

Ford Blue Ford Model e Ford Pro Ford Next Ford Credit Corporate

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on Debt Special Items Eliminations/Adjustments Total

Second Quarter 2022

Third Quarter 2022

External revenues $ 23,824 $ 1,401 $ 11,961 $ 11 $ 2,187 $ 8 $ — $ — $ — $ 39,392

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Income/(Loss) before income taxes $ 1,466 $ ( 612 ) $ 402 $ ( 244 ) $ 599 $ 192 $ ( 321 ) $ ( 2,607 ) (b) $ — $ ( 1,125 )

Equity in net income/(loss) of affiliated companies 76 ( 3 ) 84 ( 83 ) 4 — — ( 20 ) — 58

Total assets 56,047 3,670 2,016 3,284 127,493 54,566 — — ( 1,321 ) (c) 245,755

Second Quarter 2023

Equity in net income/(loss) of affiliated companies 80 ( 4 ) 109 ( 87 ) 8 — — ( 2,732 ) (c) — ( 2,626 )

Total assets 55,897 4,407 2,139 415 127,088 57,972 — — ( 999 ) (d) 246,919

Third Quarter 2023

External revenues $ 25,587 $ 1,758 $ 13,829 $ 1 $ 2,625 $ 1 $ — $ — $ — $ 43,801

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Total revenues $ 34,512 $ 1,999 $ 13,829 $ 1 $ 2,625 $ 1 $ — $ — $ ( 9,166 ) $ 43,801

Income/(loss) before income taxes $ 2,308 $ ( 1,080 ) $ 2,391 $ ( 26 ) $ 390 $ ( 197 ) $ ( 304 ) $ ( 1,194 ) (d) $ — $ 2,288

Equity in net income/(loss) of affiliated companies 104 ( 3 ) 160 ( 6 ) 7 1 — ( 387 ) (e) — ( 124 )

Total assets 58,475 9,420 2,754 253 143,155 54,063 — — ( 2,129 ) (c) 265,991

Income/(loss) before income taxes $ 1,718 $ ( 1,329 ) $ 1,654 $ ( 17 ) $ 358 $ ( 186 ) $ ( 324 ) $ ( 487 ) (e) $ — $ 1,387

Equity in net income/(loss) of affiliated companies 90 ( 9 ) 179 ( 5 ) 9 — — ( 1 ) — 263

Total assets 60,282 10,966 3,137 235 142,615 53,097 — — ( 2,259 ) (d) 268,073

Ford Blue Ford Model e Ford Pro Ford Next Ford Credit Corporate

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on Debt Special Items Eliminations/Adjustments Total

First Half 2022

First Nine Months 2022

External revenues $ 68,468 $ 3,693 $ 35,033 $ 120 $ 6,724 $ 20 $ — $ — $ — $ 114,058

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Income/(Loss) before income taxes $ 5,298 $ ( 1,502 ) $ 1,772 $ ( 707 ) $ 2,466 $ 524 $ ( 941 ) $ ( 11,092 ) (b) $ — $ ( 4,182 )

Equity in net income/(loss) of affiliated companies 132 ( 5 ) 169 ( 158 ) 10 1 — ( 124 ) (f) — 25

First Half 2023

Equity in net income/(loss) of affiliated companies 212 ( 9 ) 278 ( 245 ) 18 1 — ( 2,856 ) (c) — ( 2,601 )

First Nine Months 2023

External revenues $ 75,713 $ 4,299 $ 42,667 $ 2 $ 7,541 $ 7 $ — $ — $ — $ 130,229

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Total revenues $ 104,021 $ 4,721 $ 42,667 $ 2 $ 7,541 $ 7 $ — $ — $ ( 28,730 ) $ 130,229

Income/(loss) before income taxes $ 4,931 $ ( 1,802 ) $ 3,757 $ ( 70 ) $ 693 $ ( 344 ) $ ( 612 ) $ ( 2,106 ) (d) $ — $ 4,447

Equity in net income/(loss) of affiliated companies 159 ( 6 ) 277 ( 18 ) 14 1 — ( 421 ) (e) — 6

Income/(loss) before income taxes $ 6,649 $ ( 3,131 ) $ 5,411 $ ( 87 ) $ 1,051 $ ( 530 ) $ ( 936 ) $ ( 2,593 ) (e) $ — $ 5,834

Equity in net income/(loss) of affiliated companies 249 ( 15 ) 456 ( 23 ) 23 1 — ( 422 ) (f) — 269

(a) Intersegment revenues only reflect finished vehicle transactions between Ford Blue, Ford Model e, and Ford Pro where there is an intersegment markup and are recognized at the time of the intersegment transaction.

(b) Primarily reflects gains/(losses) on our Rivian investment.

(d) Primarily reflects restructuring actions, mark-to-market adjustments for our global pension and OPEB plans, and an accrual for the Transit Connect customs matter (relating to certain Transit Connect vehicles produced between 2009 and 2013).

(e) Primarily reflects our share of charges from an equity method investment resulting from Ford’s ongoing restructuring actions in China.

(f) Primarily reflects the full impairment of our Ford Sollers Netherlands B.V.

(the parent company of our joint venture in Russia) equity method investment, resulting from the ongoing regulatory and economic uncertainty in Russia.

(b) Primarily reflects gains/(losses) on our Rivian investment and the impairment of our Argo AI equity method investment.

(d) Primarily includes eliminations of intersegment transactions occurring in the ordinary course of business.

(e) Primarily reflects restructuring actions, mark-to-market adjustments for our global pension and OPEB plans, and an accrual for the Transit Connect customs matter.

(f) Primarily reflects our share of charges from an equity method investment resulting from Ford's ongoing restructuring actions in China.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

RECENT DEVELOPMENTS

On September 14, 2023, our collective bargaining agreement with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) in the United States will expire, and on September 18, 2023, our collective bargaining agreement with Unifor in Canada will expire, which will require negotiation of new agreements.

Risk Factors in our 2022 Form 10-K Report and as updated by our subsequent filings with the SEC for a discussion of the risks related to production disruptions.

UAW and Unifor

Following the expiration of the agreement, negotiations with the UAW continued;

however, UAW strikes at our Michigan Assembly Plant (where we produce the Ranger and Bronco), Chicago Assembly Plant (where we produce the Explorer and Aviator), and Kentucky Truck Plant (where we produce the Super Duty, Expedition, and Navigator) led to the cessation of production at those facilities and impacted operations at additional Ford plants that support or rely on the production operations at the three strike locations.

In the third quarter of 2023, the UAW strike had an adjusted EBIT impact of about $100 million.

Although a tentative agreement has been reached with the UAW, it is still subject to union ratification.

As a result, the ultimate impact on our business, including our suppliers, remains uncertain and could have a substantial adverse effect on our financial results for full-year 2023.

Overall, we expect the unit impact from the strike for Ford as of October 26, 2023 to be around 80,000 units, which would reduce 2023 adjusted EBIT by about $1.3 billion.

Risk Factors in our 2022 Form 10-K Report and as updated by our subsequent filings with the SEC for additional discussion of the risks related to production disruptions.

In addition, based on the tentative agreement that has been reached with the UAW, we expect to have a significant increase in labor costs through the life of the contract.

On September 24, 2023, Unifor-represented employees in Canada ratified a new three-year collective bargaining agreement with Ford.

Electric Vehicle Market

Although we continue to invest significant capital in our electric vehicle strategy, we have observed lower-than-anticipated industrywide electric vehicle adoption rates and near-term pricing pressures, which may lead us to adjust our spending and/or production to better match the pace of electric vehicle adoption.

As a result of the lower-than-anticipated adoption rates, we accrued about $0.2 billion of charges in the third quarter of 2023 and may continue to incur charges, which could be substantial, for payments to our electric vehicle-related suppliers (battery, raw material, and otherwise).

Typically, our supplier contracts are annual commitments;

however, in certain instances, we have entered into long-term offtake agreements and other purchase contracts to acquire materials necessary for the production of our electric vehicles.

In instances where a contract is unable to be restructured or an alternate purchaser is unable to be found, Ford, rather than our suppliers, bears the risks associated with lower-than-expected electric vehicle production volumes that reduce the need for those materials.

For additional information on our offtake agreements, see the Liquidity and Capital Resources section below.

In addition, slower-than-anticipated development of the electric vehicle market may impact our strategy to comply with regulatory standards, and, in some cases, we plan to utilize credits purchased from third parties to demonstrate regulatory compliance or we may need to modify our product offerings.

Risk Factors in our 2022 Form 10-K Report and as updated by our subsequent filings with the SEC for a discussion of the risks related to lower-than-anticipated electric vehicle volumes and our planned transition to a greater mix of electric vehicles.

We have received and continue to receive claims from our supply base related to inflationary pressure and production disruption.

Upon receipt, we evaluate those claims, and, in certain circumstances, in order to ensure continuity of supply and mitigate the impact on our production, have made payments to our suppliers, sometimes under duress.

We continue to reevaluate our supply base and sourcing decisions and may in the future incur charges to improve flexibility and cost competitiveness.

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

RESULTS OF OPERATIONS

In the second quarter of 2023, the net income attributable to Ford Motor Company was $1,917 million, and Company adjusted EBIT was $3,786 million.

In the third quarter of 2023, the net income attributable to Ford Motor Company was $1,199 million, and Company adjusted EBIT was $2,198 million.

Net income/(loss) includes certain items (“special items”) that are excluded from Company adjusted EBIT.

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Our pre-tax and tax special items were as follows (in millions):

Second Quarter First Half

Third Quarter First Nine Months

2022 2023 2022 2023

Restructuring (by Geography)

Europe $ (27) $ (51) $ (49) $ (421)

China $ (17) $ (126) $ (37) $ (881)

Europe (12) (42) (61) (463)

Ford Credit - Brazil — — (155) —

Other (68) (159) (104) (147)

Other (a) (362) 33 (466) (114)

Subtotal Restructuring $ (391) $ (135) $ (719) $ (1,458)

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$ 646 $ — $ (7,250) $ (31)

AV strategy including Argo impairment (2,708) — (2,708) —

Transit Connect customs matter — (96) — (396)

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Total EBIT Special Items $ (2,607) $ (487) $ (11,092) $ (2,593)

Provision for/(Benefit from) tax special items (a) $ (537) $ (177) $ (1,729) $ (321)

(a) Includes related tax effect on special items and tax special items.

We recorded $1.2 billion of pre-tax special item charges in the second quarter of 2023, driven primarily by restructuring actions in China and an accrual for the Transit Connect customs matter (relating to certain Transit Connect vehicles produced between 2009 and 2013).

Provision for/(Benefit from) tax special items (b) $ (544) $ (87) $ (2,273) $ (408)

(a) Includes $180 million and $175 million in the third quarter of 2022 and $210 million and $250 million in the first nine months of 2022 of North America and India restructuring charges, respectively.

(b) Includes related tax effect on special items and tax special items.

We recorded $487 million of pre-tax special item charges in the third quarter of 2023, driven primarily by pension and OPEB remeasurement, restructuring actions in China, and the Transit Connect customs matter.

In Note 21 of the Notes to the Financial Statements, special items are reflected as a separate reconciling item, as opposed to being allocated among our segments.

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COMPANY KEY METRICS

The table below shows our second quarter 2023 key metrics for the Company, compared to a year ago.

Second Quarter First Half

The table below shows our third quarter and first nine months 2023 key metrics for the Company, compared to a year ago.

Third Quarter First Nine Months

2022 2023 H / (L) 2022 2023 H / (L)

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

In the second quarter of 2023, our diluted earnings per share of Common and Class B Stock was $0.47, and our diluted adjusted earnings per share was $0.72.

Net income/(loss) margin was 4.3% in the second quarter of 2023, up 2.6 percentage points from a year ago.

Company adjusted EBIT margin was 8.4% in the second quarter of 2023, down 0.8 percentage points from a year ago.

The year-over-year increase of $1.3 billion in net income in the second quarter of 2023 was primarily driven by the non-recurrence of a mark-to-market loss on our Rivian investment (included in special items in the second quarter of 2022), offset partially by higher restructuring and pension expense in the second quarter of 2023 (also included in special items).

The year-over-year increase of $64 million in Company adjusted EBIT was driven by higher Ford Pro EBIT and a lower EBIT loss in Ford Next.

Partial offsets include higher EBIT losses in Ford Model e, lower Ford Blue EBIT and Ford Credit EBT, and lower past service pension and OPEB income in Corporate Other.

The table below shows our second quarter and first half 2023 net income/(loss) attributable to Ford and Company adjusted EBIT by segment.

Second Quarter First Half

In the third quarter of 2023, our diluted earnings per share of Common and Class B Stock was $0.30, and our diluted adjusted earnings per share was $0.39.

Net income/(loss) margin was 2.7% in the third quarter of 2023, up 4.8 percentage points from a year ago.

Company adjusted EBIT margin was 5.0% in the third quarter of 2023, up 0.4 percentage points from a year ago.

The year-over-year increase of $2.0 billion in net income in the third quarter of 2023 was primarily driven by the non-recurrence of an impairment on our Argo investment (included in special items in the third quarter of 2022) and higher adjusted EBIT, offset partially by the non-recurrence of a mark-to-market gain on our Rivian investment (also included in special items in the third quarter of 2022).

The year-over-year increase of $395 million in Company adjusted EBIT was driven by higher Ford Pro and Ford Blue EBIT and a lower EBIT loss in Ford Next.

Partial offsets included higher EBIT losses in Ford Model e, lower past service pension and OPEB income in Corporate Other, and lower Ford Credit EBT.

The table below shows our third quarter and first nine months 2023 net income/(loss) attributable to Ford and Company adjusted EBIT by segment.

Third Quarter First Nine Months

2022 2023 H / (L) 2022 2023 H / (L)

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

The tables below and on the following pages provide second quarter and first half 2023 key metrics and the change in second quarter 2023 EBIT compared with second quarter 2022 by causal factor for each of our segments.

The tables below and on the following pages provide third quarter and first nine months 2023 key metrics and the change in third quarter 2023 EBIT compared with third quarter 2022 by causal factor for each of our segments.

For a description of these causal factors, see Definitions and Information Regarding Ford Blue, Ford Model e, Ford Pro Causal Factors.

Ford Blue Segment

Second Quarter First Half

Third Quarter First Nine Months

Key Metrics 2022 2023 H / (L) 2022 2023 H / (L)

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Change in EBIT by Causal Factor (in millions)

Second Quarter 2022 EBIT $ 2,504

Third Quarter 2022 EBIT

Volume / Mix 34

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Exchange (138)

Second Quarter 2023 EBIT $ 2,308

In the second quarter of 2023, Ford Blue’s wholesales increased 7% from a year ago driven by improvements in production-related supply constraints.

Second quarter 2023 revenue increased 5%, driven by higher wholesales.

Ford Blue’s second quarter 2023 EBIT was $2.3 billion, a decrease of $196 million from a year ago, with an EBIT margin of 9.2%.

The lower EBIT was driven by weaker currencies and the non-recurrence of an insurance claim recovery in the second quarter of 2022 (included in Other), offset partially by higher wholesales, higher net pricing, and improved cost, primarily driven by improved commodity costs.

Third Quarter 2023 EBIT

In the third quarter of 2023, Ford Blue’s wholesales decreased 0.6% from a year ago.

Third quarter 2023 revenue increased 7%, driven by favorable mix and higher net pricing.

Ford Blue’s third quarter 2023 EBIT was $1.7 billion, an increase of $252 million from a year ago, with an EBIT margin of 6.7%.

The higher EBIT was driven by lower commodity costs and higher net pricing, offset partially by higher warranty costs (reflecting an increase for field service actions and inflationary cost pressures) and higher material costs for new products.

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

Ford Model e Segment

Second Quarter First Half

Third Quarter First Nine Months

Key Metrics 2022 2023 H / (L) 2022 2023 H / (L)

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Change in EBIT by Causal Factor (in millions)

Second Quarter 2022 EBIT $ (510)

Third Quarter 2022 EBIT

Volume / Mix (44)

Net Pricing (208)

Second Quarter 2023 EBIT $ (1,080)

In the second quarter of 2023, Ford Model e’s wholesales increased 44% from a year ago, reflecting increased production capacity for Mustang Mach-E and a full quarter of F-150 Lightning production, which launched in late April 2022.

Second quarter 2023 revenue increased 39%, primarily driven by higher wholesales, offset partially by lower net pricing.

Ford Model e’s second quarter 2023 EBIT loss was $1.1 billion, a $570 million higher loss than a year ago, with an EBIT margin of negative 58.9%.

The lower EBIT was primarily driven by lower net pricing, higher launch-related supplier costs, as well as higher warranty, engineering, spending-related, and selling, general & administrative costs.

Exchange (19)

Third Quarter 2023 EBIT

In the third quarter of 2023, Ford Model e’s wholesales increased 44% from a year ago, reflecting increased production capacity for Mustang Mach-E.

Third quarter 2023 revenue increased 26%, primarily driven by higher wholesales, offset partially by lower net pricing and unfavorable mix.

Ford Model e’s third quarter 2023 EBIT loss was $1.3 billion, a $717 million higher loss than a year ago, with an EBIT margin of negative 75.6%.

The lower EBIT was primarily driven by higher material costs (including about $160 million of volume related obligations for batteries and certain other commodities), lower net pricing, higher field service action warranty costs, and higher volume/capacity-related manufacturing costs, offset partially by lower commodity costs.

Ford Pro Segment

Second Quarter First Half

Third Quarter First Nine Months

Key Metrics 2022 2023 H / (L) 2022 2023 H / (L)

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Change in EBIT by Causal Factor (in millions)

Second Quarter 2022 EBIT $ 879

Third Quarter 2022 EBIT

Volume / Mix (352)

Net Pricing 1,874

Exchange (65)

Second Quarter 2023 EBIT $ 2,391

In the second quarter of 2023, Ford Pro’s wholesales increased 8% from a year ago driven by improvements in production-related supply constraints and new product launches.

Second quarter 2023 revenue increased 22%, driven by higher net pricing and wholesales.

Ford Pro’s second quarter 2023 EBIT was $2.4 billion, an increase of $1.5 billion from a year ago, with an EBIT margin of 15.3%.

The improvement in EBIT was driven by higher net pricing and wholesales, and lower commodity costs.

Partial offsets included higher material cost for new products, higher warranty costs (primarily driven by inflationary cost pressures), and the non-recurrence of an insurance claim recovery in the second quarter of 2022 (included in Other).

Third Quarter 2023 EBIT

In the third quarter of 2023, Ford Pro’s wholesales decreased 2% from a year ago, driven by new product launch changeover and production-related supply constraints.

Third quarter 2023 revenue increased 16%, driven by higher net pricing, partially offset by lower volume.

Ford Pro’s third quarter 2023 EBIT was $1.7 billion, an increase of $1.3 billion from a year ago, with an EBIT margin of 12.0%.

The improvement in EBIT was driven by higher net pricing and lower commodity costs.

Partial offsets included lower wholesales and higher costs, including warranty (reflecting inflationary cost increases on repairs and for field service actions), higher material costs for new products, as well as volume related obligations for batteries and certain other commodities (about $60 million).

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

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The Ford Next segment (formerly Mobility) primarily includes expenses and investments for emerging business initiatives aimed at creating value for Ford in vehicle-adjacent market segments.

In this segment, our second quarter 2023 EBIT loss was $26 million, a $195 million improvement from a year ago.

In this segment, our third quarter 2023 EBIT loss was $17 million, a $227 million improvement from a year ago.

Ford Next has evolved from primarily investing in the development of autonomous vehicle capabilities to focus exclusively on incubating and launching new businesses creating strategic value for Ford.

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The foregoing information regarding Ford Credit’s website and its content is for convenience only and not deemed to be incorporated by reference into this Report nor filed with the SEC.

The tables below provide second quarter and first half 2023 key metrics and the change in second quarter 2023 EBT compared with second quarter 2022 by causal factor for the Ford Credit segment.

The tables below provide third quarter and first nine months 2023 key metrics and the change in third quarter 2023 EBT compared with third quarter 2022 by causal factor for the Ford Credit segment.

For a description of these causal factors, see Definitions and Information Regarding Ford Credit Causal Factors.

Second Quarter First Half

Third Quarter First Nine Months

Key Metrics 2022 2023 H / (L) 2022 2023 H / (L)

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retail financing only.

36-month off-lease second quarter auction values at Q2 2023 mix and YTD amounts at 2023 YTD mix.

36-month off-lease third quarter auction values at Q3 2023 mix and YTD amounts at 2023 YTD mix.

Change in EBT by Causal Factor (in millions)

Second Quarter 2022 EBT $ 939

Third Quarter 2022 EBT

Volume / Mix 50

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Lease Residual (97)

Second Quarter 2023 EBT $ 390

Ford Credit’s total net receivables of $126 billion were $10 billion higher than a year ago, reflecting the impact of increased non-consumer financing and consumer financing, partially offset by fewer operating leases.

loss-to-receivables (“LTR”) ratio remained at a low level in the second quarter of 2023, at 21 basis points, though higher than a year ago as losses begin to normalize from historic lows.

auction values in the second quarter of 2023 were lower compared to a year ago.

Ford Credit’s second quarter 2023 EBT of $390 million was $549 million lower than a year ago, explained primarily by lower financing margin due to higher borrowing costs, the non-recurrence of prior year credit loss reserve releases and higher credit losses, unfavorable lease residual performance, and unfavorable market valuation adjustments to derivatives (included in Other).

Third Quarter 2023 EBT

Ford Credit’s total net receivables of $126 billion were 9% higher than a year ago, reflecting the impact of increased non-consumer and consumer financing, partially offset by a smaller lease portfolio.

loss-to-receivables (“LTR”) ratio remained at a low level in the third quarter of 2023, at 38 basis points, though higher than a year ago as losses continue to normalize from historic lows.

auction values in the third quarter of 2023 were lower compared to a year ago.

Ford Credit’s third quarter 2023 EBT of $358 million was $241 million lower than a year ago, explained primarily by lower lease residual performance, the non-recurrence of derivative market valuation adjustment gains (included in Other), lower financing margin due to higher borrowing costs, and higher credit losses.

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

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These include expenses related to setting and directing global policy, providing oversight and stewardship, and promoting the Company’s interests.

In the second quarter of 2023, Corporate Other had a $197 million loss, compared with a $131 million profit a year ago.

In the third quarter of 2023, Corporate Other had a $186 million loss, compared with a $192 million profit a year ago.

The loss was driven by lower past service pension and OPEB income, which was partially offset by higher Company excluding Ford Credit interest income due to increases in interest rates (primarily Fed Funds).

Interest on Debt

Interest on Debt, which consists of interest expense on Company debt excluding Ford Credit, was $304 million in the second quarter of 2023, $8 million lower than a year ago.

Our Provision for/(Benefit from) income taxes for the second quarter and first half of 2023 was a provision of $272 million and $768 million, respectively.

Interest on Debt, which consists of interest expense on Company debt excluding Ford Credit, was $324 million in the third quarter of 2023, $3 million higher than a year ago.

Our Provision for/(Benefit from) income taxes for the third quarter and first nine months of 2023 was a provision of $214 million and $982 million, respectively.

This resulted in effective tax rates of 15.4% and 16.8%, respectively.

Our second quarter and first half of 2023 adjusted effective tax rates, which exclude special items, were 12.9% and 16.6%, respectively.

Our third quarter and first nine months of 2023 adjusted effective tax rates, which exclude special items, were 16.1% and 16.5%, respectively.

We regularly review our organizational structure and income tax elections for affiliates in non-U.S.

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LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2023, total balance sheet cash, cash equivalents, marketable securities, and restricted cash, including Ford Credit and entities held for sale, was $43.0 billion.

At September 30, 2023, total balance sheet cash, cash equivalents, marketable securities, and restricted cash, including Ford Credit and entities held for sale, was $41.3 billion.

We consider our key balance sheet metrics to be:

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Company excluding Ford Credit

2022 June 30,

2022 September 30,

Balance Sheets ($B)

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Total Funded Status OPEB $ (4.5) $ (4.4)

(a) Balances at June 30, 2023 reflect net funded status at December 31, 2022, updated for service and interest cost;

(a) Balances at September 30, 2023 reflect net funded status at December 31, 2022, updated for service and interest cost;

expected return on assets;

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The discount rate and rate of expected return assumptions are unchanged from year-end 2022.

One of our key priorities is to maintain a strong balance sheet, while at the same time having resources available to invest in and grow our business.

At June 30, 2023, we had Company cash of $29.8 billion and liquidity of $47.3 billion.

At June 30, 2023, about 90% of Company cash was held by consolidated entities domiciled in the United States.

To be prepared for an economic downturn, we target an ongoing Company cash balance at or above $20 billion plus significant additional liquidity above our Company cash target.

One of our key priorities is to maintain a strong balance sheet to withstand potential stress scenarios, while having resources available to invest in and grow our business.

At September 30, 2023, we had Company cash of $29.1 billion and liquidity of $50.6 billion.

At September 30, 2023, about 87% of Company cash was held by consolidated entities domiciled in the United States.

To be prepared for an economic downturn and other stress scenarios, including potential labor disruptions, we target an ongoing Company cash balance at or above $20 billion plus significant additional liquidity above our Company cash target.

We expect to have periods when we will be above or below this amount due to:

(i) future cash flow expectations, such as for investments in future opportunities, capital investments, debt maturities, pension contributions, or restructuring requirements, (ii) short-term timing differences, and (iii) changes in the global economic environment.

Our Company cash investments primarily include 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 1. Financial Statements