FORD MOTOR CO 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (Continued) Issuer Purchases of Equity Securities In the fourth quarter of 2023, we completed a modest anti-dilutive share repurchase program to offset the dilutive effect of share-based compensation granted during 2023. The program authorized repurchases of up to 51 million shares of Ford Common Stock. As shown in the rightmost column of the table below, we do not intend to make any further purchases under this program because its anti-dilutive purpose was fulfilled after purchasing only 31 million shares. Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly-Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2023 through October 31, 2023 — $ — — — November 1, 2023 through November 30, 2023 6,713,291 10.25 6,713,291 44,286,709 December 1, 2023 through December 31, 2023 24,286,709 10.95 24,286,709 20,000,000 (a) Total / Average 31,000,000 $ 10.80 31,000,000 __________ (a) The share repurchase program announced November 20, 2023 authorized repurchases of up to 51 million shares of Ford Common Stock. Although we have repurchased 31 million shares and the program was authorized for up to 51 million, we do not intend to make any further purchases under this program because its anti-dilutive purpose has been fulfilled. In December 2023, our Board of Directors approved a modest anti-dilutive share repurchase program to offset the dilutive effect of share-based compensation expected to be granted during 2024. The program authorizes repurchases of up to 53 million shares of Ford Common Stock. The Company may repurchase shares of Common Stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to satisfy the conditions of Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions. The timing and total amount of repurchases of Ford Common Stock under this program will depend upon business, economic, and market conditions, corporate, legal, and regulatory requirements, prevailing stock prices, trading volume, and other considerations. The share repurchase program may be suspended or discontinued at any time, and does not obligate the Company to acquire any amount of Common Stock. To the extent the Company elects to make purchases under the share repurchase program, the Company expects to utilize its existing cash and cash equivalents to fund such repurchases. Dividends The table below shows the dividends we paid per share of Common and Class B Stock for each quarterly period in 2022 and 2023: 2022 2023 First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter (a) Second Quarter Third Quarter Fourth Quarter Dividends per share of Ford Common and Class B Stock $ 0.10 $ 0.10 $ 0.15 $ 0.15 $ 0.80 $ 0.15 $ 0.15 $ 0.15 __________ (a) In the first quarter of 2023, in addition to a regular dividend of $0.15 per share, we paid a supplemental dividend of $0.65 per share. On February 6, 2024, we declared a regular dividend of $0.15 per share and a supplemental dividend of $0.18 per share. Subject to legally available funds, we intend to continue to pay a regular quarterly cash dividend on our outstanding Common Stock and Class B Stock. The declaration and payment of future dividends is at the sole discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, available cash, and current and anticipated cash needs. ITEM 6. [Reserved.] 39 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Key Trends and Economic Factors Affecting Ford and the Automotive Industry Production and Supply Chain. Although we saw improvements in our supply chain throughout 2023, including easing of the semiconductor shortage, we continue to face some production issues due to, among other things, labor shortages at our suppliers. Moreover, 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. Currency Exchange Rate Volatility. Globally, central banks have begun shifting from tightening policy by raising interest rates to holding rates steady or, in some markets, beginning to cut rates. As they do, they need to carefully balance the risk that inflation remains elevated against the heightened financial and economic risks associated with high interest rates. This is notable for many emerging markets, which may also face increased exposure to commodity prices and political instability, contributing to unpredictable movements in the value of their exchange rates. In addition to direct impacts on the financial flows of global automotive companies, currency movements can also impact pricing of vehicles exported to overseas markets. In most markets, exchange rates are market-determined, and all are impacted by many different macroeconomic and policy factors, and thus likely to remain volatile. However, in some markets, exchange rates are heavily influenced or controlled by governments. Pricing Pressure. Despite vehicle pricing remaining elevated over the last year due to strong demand, supply shortages, and inflationary costs, we have already observed moderation in the rate of new and used vehicle price increases as auto production recovers from the semiconductor shortage, but it is unclear whether prices will decline fully to pre-COVID-19 pandemic levels. Over the long term, intense competition and excess capacity are likely to put downward pressure on inflation-adjusted prices for similarly-contented vehicles and contribute to a challenging pricing environment for the automotive industry in most major markets. Electric Vehicle Market. Although we continue to invest in our electric vehicle strategy, we have observed lower-than-anticipated industrywide electric vehicle adoption rates and near-term pricing pressures, which has led us and may in the future lead us to adjust our spending, production, and/or product launches to better match the pace of electric vehicle adoption. As a result of the lower-than-anticipated adoption rates, near-term pricing pressures, and other factors, we recorded about $0.7 billion of charges in 2023 and may continue to incur charges, which could be substantial, related to payments to our electric vehicle-related suppliers (battery, raw material, or otherwise), inventory adjustments, or other matters. See Item 1A. Risk Factors for additional discussion of the risks related to lower-than-anticipated electric vehicle volumes and our planned transition to a greater mix of electric vehicles. Commodity and Energy Prices. Prices for commodities remain volatile. In some cases, spot prices for various commodities have recently diverged somewhat, as anticipated weakening in global industrial activity mitigates price increases for base metals such as steel and aluminum, while precious metals (e.g., palladium), and raw materials that are used in batteries for electric vehicles (e.g., lithium, cobalt, nickel, graphite, and manganese, among other materials, for batteries) remain elevated. The net impact on us and our suppliers has been higher material costs overall. To help ensure supply of raw materials for critical components (e.g., batteries), we, like others in the industry, have entered into multi-year sourcing agreements and may enter into additional agreements. Similar dynamics are impacting energy markets, with Europe particularly exposed to the risk of both higher prices and constraints on supply of natural gas due to the ongoing conflict in Ukraine. Such shortages may impact facilities operated by us or our suppliers, which could have an impact on us in Europe and other regions. In the long term, the outcome of de-carbonization and electrification of the vehicle fleet may depress oil demand, but the global energy transition will also contribute to ongoing volatility of oil and other energy prices. Vehicle Profitability. Our financial results depend on the profitability of the vehicles we sell, which may vary significantly by vehicle line. In general, larger vehicles tend to command higher prices and be more profitable than smaller vehicles. For example, in Ford Blue, our larger, more profitable vehicles had an average contribution margin that was 139% of our total average contribution margin across all vehicles, whereas our smaller vehicles had significantly lower contribution margins. In addition, government regulations aimed at reducing emissions and increasing fuel efficiency (e.g., ZEV mandates and low emission zones), and other factors that accelerate the transition to electrified vehicles, may increase the cost of vehicles by more than the perceived benefit to consumers and dampen margins. 40 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Trade Policy. To the extent governments in various regions implement or intensify barriers to imports, such as erecting tariff or non-tariff barriers or manipulating their currency, and provide advantages to local exporters selling into the global marketplace, there can be a significant negative impact on manufacturers based in other markets. While we believe the long-term trend will support the growth of free trade, we will continue to monitor and address the developing role that geopolitical, climate, and labor concerns are playing in trade relations. Inflation and Interest Rates. We continue to see near-term impacts on our business due to inflation, including ongoing global price pressures in the wake of geopolitical volatility, driving up energy prices, freight premiums, and other operating costs above normal rates. Although headline inflation in the United States and Europe appears to have peaked, as gasoline and natural gas prices recede from the latest spike, core inflation (excluding food and energy prices) remains elevated and is a source of continued cost pressure on businesses and households. Interest rates have increased significantly as central banks in developed countries attempt to subdue inflation while government deficits and debt remain at high levels in many global markets. Accordingly, the eventual implications of higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital for the business. At Ford Credit, rising interest rates may impact its ability to source funding and offer financing at competitive rates, which could reduce its financing margin. Revenue Company excluding Ford Credit revenue is generated primarily by sales of vehicles, parts, accessories, and services from our Ford Blue, Ford Model e, and Ford Pro segments. Revenue is recorded when control is transferred to our customers (generally, our dealers and distributors). For the majority of sales, this occurs when products are shipped from our manufacturing facilities. However, we defer a portion of the consideration received when there is a separate future or stand-ready performance obligation, such as extended service contracts or ongoing vehicle connectivity. Revenue related to extended service contracts is recognized over the term of the agreement in proportion to the costs we expect to incur in satisfying the contract obligations; revenue related to other future or stand-ready performance obligations is generally recognized on a straight-line basis over the period in which services are expected to be performed. Vehicles sold to daily rental car companies with an obligation to repurchase at an agreed upon amount, exercisable at the option of the customer, are accounted for as operating leases, with lease revenue recognized over the term of the lease. Proceeds from the sale of vehicles at auction are recognized in revenue upon transfer of control of the vehicle to the buyer. Most of the vehicles sold by us to our dealers and distributors are financed at wholesale by Ford Credit. Upon Ford Credit originating the wholesale receivable related to a dealer’s purchase of a vehicle, Ford Credit pays cash to the relevant Ford entity in payment of the dealer’s obligation for the purchase price of the vehicle. The dealer then pays the wholesale finance receivable to Ford Credit when it sells the vehicle to a retail customer. Our Ford Credit segment revenue is generated primarily from interest on finance receivables and revenue from operating leases. Revenue from interest on finance receivables is recognized over the term of the receivable using the interest method and includes the amortization of certain deferred origination costs. Revenue from operating leases is recognized on a straight-line basis over the term of the lease. Transactions between Ford Credit and our other segments occur in the ordinary course of business. For example, we offer special retail financing and lease incentives to dealers’ customers who choose to finance or lease our vehicles from Ford Credit. The cost for these incentives is included in our estimate of variable consideration at the date the related vehicle sales to our dealers are recorded. In order to compensate Ford Credit for the lower interest or lease payments offered to the retail customer, we pay the discounted value of the incentive directly to Ford Credit when it originates the retail finance or lease contract with the dealer’s customer. Ford Credit recognizes the incentive amount over the life of retail finance contracts as an element of financing revenue and over the life of lease contracts as a reduction to depreciation. See Note 1 of the Notes to the Financial Statements for a more detailed discussion of transactions between Ford Credit and our other segments. 41 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Costs and Expenses Our income statement classifies our Company excluding Ford Credit total costs and expenses into two categories: (i) cost of sales, and (ii) selling, administrative, and other expenses. We include within cost of sales those costs related to the development, production, and distribution of our vehicles, parts, accessories, and services. Specifically, we include in cost of sales each of the following: material costs (including commodity costs); freight costs; warranty, including product recall costs; labor and other costs related to the development and production of our vehicles and connectivity, parts, accessories, and services; depreciation and amortization; and other associated costs. We include within selling, administrative, and other expenses labor and other costs not directly related to the development and production of our vehicles, parts, accessories, and services, including such expenses as advertising and sales promotion costs. Certain of our costs, such as material costs, generally vary directly with changes in volume and mix of production. In our industry, production volume often varies significantly from quarter to quarter and year to year. Quarterly production volumes experience seasonal shifts throughout the year (including peak retail sales seasons and the impact on production of model changeover and new product launches). Annual production volumes are heavily impacted by external economic factors, including the pace of economic growth and factors such as the availability of consumer credit and cost of fuel. As a result, we analyze the profit impact of certain cost changes holding constant present-year volume and mix and currency exchange, in order to evaluate our cost trends absent the impact of varying production and currency exchange levels. We analyze these cost changes in the following categories: • Contribution Costs – these costs typically vary with production volume. These costs include material (including commodity), warranty, and freight and duty costs. • Structural Costs – these costs typically do not have a directly proportionate relationship to production volume. These costs include manufacturing; vehicle and software engineering; spending-related; advertising and sales promotion; administrative, information technology, and selling; and pension and OPEB costs. While contribution costs generally vary directly in proportion to production volume, elements within our structural costs category are impacted to differing degrees by changes in production volume. We also have varying degrees of discretion when it comes to controlling the different elements within our structural costs. For example, depreciation and amortization expense largely is associated with prior capital spending decisions. On the other hand, while labor costs do not vary directly with production volume, manufacturing labor costs may be impacted by changes in volume, for example when we increase overtime, add a production shift, or add personnel to support volume increases. Other structural costs, such as advertising or engineering costs, do not necessarily have a directly proportionate relationship to production volume. Our structural costs generally are within our discretion, although to varying degrees, and can be adjusted over time in response to external factors. We consider certain structural costs to be a direct investment in future growth and revenue. For example, structural costs are necessary to grow our business and improve profitability, invest in new products and technologies, respond to increasing industry sales volume, and grow our market share. Cost of sales and Selling, administrative, and other expenses for full year 2023 were $161.3 billion. Company excluding Ford Credit’s total material and commodity costs make up the largest portion of these costs and expenses, followed by structural costs. Although material costs are our largest absolute cost, our margins can be affected significantly by changes in any category of costs. 42 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) RESULTS OF OPERATIONS - 2023 The net income attributable to Ford Motor Company was $4,347 million in 2023. Company adjusted EBIT was $10,416 million. Net income/(loss) includes certain items (“special items”) that are excluded from Company adjusted EBIT. These items are discussed in more detail in Note 26 of the Notes to the Financial Statements. We report special items separately to allow investors analyzing our results to identify certain infrequent significant items that they may wish to exclude when considering the trend of ongoing operating results. Our pre-tax and tax special items were as follows (in millions): 2022 2023 Restructuring (by Geography) China $ (380) $ (958) Europe (151) (978) Ford Credit - Brazil (155) — Other (a) (436) (87) Subtotal Restructuring $ (1,122) $ (2,023) Other Items Gain/(loss) on Rivian investment $ (7,377) $ (31) AV strategy including Argo impairment (2,812) — Transit Connect customs matter — (396) Russia suspension of operations/asset write-off (158) — Patent matters related to prior calendar years (124) 8 EV program dispute — (143) Other (including gains/(losses) on investments) (170) (165) Subtotal Other Items $ (10,641) $ (727) Pension and OPEB Gain/(Loss) Pension and OPEB remeasurement $ 29 $ (2,058) Pension settlements and curtailments (438) (339) Subtotal Pension and OPEB Gain/(Loss) $ (409) $ (2,397) Total EBIT Special Items $ (12,172) $ (5,147) Provision for/(Benefit from) tax special items (b) $ (2,573) $ (1,273) __________ (a) 2022 includes $298 million related to restructuring charges in India and $198 million in North America. 2023 includes $28 million related to restructuring charges in India and $41 million in North America. (b) Includes related tax effect on special items and tax special items. We recorded $5.1 billion of pre-tax special item charges in 2023, driven primarily by pension and OPEB remeasurement, restructuring actions in Europe and China, and the Transit Connect customs matter. In Note 26 of the Notes to the Financial Statements, special items are reflected as a separate reconciling item, as opposed to being allocated among our segments. This reflects the fact that management excludes these items from its review of operating segment results for purposes of measuring segment profitability and allocating resources. 43 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) COMPANY KEY METRICS The table below shows our full year 2023 key metrics for the Company compared to a year ago. 2022 2023 H / (L) GAAP Financial Measures Cash Flows from Operating Activities ($B) $ 6.9 $ 14.9 $ 8.1 Revenue ($M) 158,057 176,191 11 % Net Income/(Loss) ($M) (1,981) 4,347 6,328 Net Income/(Loss) Margin (%) (1.3) % 2.5 % 3.7 ppts EPS (Diluted) $ (0.49) $ 1.08 $ 1.57 Non-GAAP Financial Measures (a) Company Adj. Free Cash Flow ($B) $ 9.1 $ 6.8 $ (2.3) Company Adj. EBIT ($M) 10,415 10,416 1 Company Adj. EBIT Margin (%) 6.6 % 5.9 % (0.7) ppts Adjusted EPS (Diluted) $ 1.88 $ 2.01 $ 0.13 Adjusted ROIC (Trailing Four Quarters) 11.2 % 13.9 % 2.7 ppts __________ (a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP. In 2023, our diluted earnings per share of Common and Class B Stock was $1.08 and our diluted adjusted earnings per share was $2.01. Net income/(loss) margin was 2.5% in 2023, up from negative 1.3% a year ago. Company adjusted EBIT margin was 5.9% in 2023, down from 6.6% a year ago. The table below shows our full year 2023 net income/(loss) attributable to Ford and Company adjusted EBIT by segment (in millions). 2022 2023 H / (L) Ford Blue $ 6,847 $ 7,462 $ 615 Ford Model e (2,133) (4,701) (2,568) Ford Pro 3,222 7,222 4,000 Ford Next (926) (138) 788 Ford Credit 2,657 1,331 (1,326) Corporate Other 748 (760) (1,508) Company Adjusted EBIT (a) 10,415 10,416 1 Interest on Debt (1,259) (1,302) (43) Special Items (12,172) (5,147) 7,025 Taxes / Noncontrolling Interests 1,035 380 (655) Net Income/(Loss) $ (1,981) $ 4,347 $ 6,328 __________ (a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP. The year-over-year increase of $6.3 billion in net income/(loss) in 2023 was primarily driven by the non-recurrences of the mark-to-market net loss on our Rivian investment and the impairment on our Argo investment (both of which were included in special items in 2022), partially offset by a pension and OPEB remeasurement loss and higher charges for restructuring actions in Europe and China. The flat year-over-year Company adjusted EBIT primarily reflects higher Ford Pro and Ford Blue EBIT and a lower EBIT loss in Ford Next. Offsets included higher EBIT losses in Ford Model e, lower past service pension and OPEB income in Corporate Other, and lower Ford Credit EBT. 44 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) The tables below and on the following pages provide full year 2023 key metrics and the change in full year 2023 EBIT compared with full year 2022 by causal factor for each of our Ford Blue, Ford Model e, and Ford Pro segments. For a description of these causal factors, see Definitions and Information Regarding Ford Blue, Ford Model e, Ford Pro Causal Factors . Ford Blue Segment 2022 2023 H / (L) Key Metrics Wholesale Units (000) (a) 2,834 2,920 86 Revenue ($M) $ 94,762 $ 101,934 $ 7,172 EBIT ($M) 6,847 7,462 615 EBIT Margin (%) 7.2 % 7.3 % 0.1 ppts __________ (a) Includes Ford and Lincoln brand and JMC brand vehicles produced and sold in China by our unconsolidated affiliates (about 484,000 units in 2022 and 455,000 units in 2023) Change in EBIT by Causal Factor (in millions) 2022 Full Year EBIT $ 6,847 Volume / Mix 2,544 Net Pricing 235 Cost (1,558) Exchange (462) Other (144) 2023 Full Year EBIT 7,462 In 2023, Ford Blue’s wholesales increased 3% from a year ago, primarily reflecting an improvement in production-related supply constraints, offset partially by ceasing production of EcoSport and Fiesta small vehicles and production losses during the UAW strike. Full year 2023 revenue increased 8%, driven by higher wholesales, favorable mix, and higher net pricing, offset partially by weaker currencies. Ford Blue’s 2023 full year EBIT was $7.5 billion, an increase of $615 million from a year ago, with an EBIT margin of 7.3%. The EBIT improvement was driven primarily by favorable mix, lower commodity costs, higher wholesales and net pricing. Partial offsets primarily include higher warranty costs (reflecting inflationary cost pressures and increased field service actions), higher material costs related to new products, higher structural costs and supplemental compensation (including the impact of the new UAW collective bargaining agreement), and weaker currencies. 45 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Ford Model e Segment 2022 2023 H / (L) Key Metrics Wholesale Units (000) 96 116 20 Revenue ($M) $ 5,253 $ 5,897 $ 644 EBIT ($M) (2,133) (4,701) (2,568) EBIT Margin (%) (40.6) % (79.7) % (39.1) ppts Change in EBIT by Causal Factor (in millions) 2022 Full Year EBIT $ (2,133) Volume / Mix (32) Net Pricing (1,005) Cost (1,765) Exchange 84 Other 150 2023 Full Year EBIT $ (4,701) In 2023, Ford Model e’s wholesales increased 20% from a year ago, primarily reflecting higher production of F-150 Lightning. Full year 2023 revenue increased 12%, driven by higher wholesales, offset partially by lower net pricing. Ford Model e’s 2023 full year EBIT loss was $4.7 billion, a $2.6 billion higher loss than a year ago, with an EBIT margin of negative 79.7%. The EBIT deterioration was primarily driven by lower net pricing, higher material cost (including volume-related obligations for batteries of about $310 million, inflationary cost increases, and higher launch-related supplier costs), higher volume/capacity-related manufacturing and spending-related costs, higher warranty costs, and higher engineering costs for future programs, offset partially by lower commodity costs and stronger currencies. Ford Pro Segment 2022 2023 H / (L) Key Metrics Wholesale Units (000) (a) 1,301 1,377 76 Revenue ($M) $ 48,939 $ 58,058 $ 9,119 EBIT ($M) 3,222 7,222 4,000 EBIT Margin (%) 6.6 % 12.4 % 5.9 ppts __________ (a) Includes Ford brand vehicles produced and sold by our unconsolidated affiliate Ford Otosan in Türkiye (about 76,000 units in 2022 and 90,000 units in 2023). Change in EBIT by Causal Factor (in millions) 2022 Full Year EBIT $ 3,222 Volume / Mix (331) Net Pricing 7,067 Cost (2,353) Exchange 27 Other (410) 2023 Full Year EBIT $ 7,222 In 2023, Ford Pro’s wholesales increased 6% from a year ago, primarily reflecting an improvement in production-related supply constraints, offset partially by production losses during the UAW strike. Full year 2023 revenue increased 19%, driven by higher net pricing and wholesales, offset partially by unfavorable mix. Ford Pro’s 2023 full year EBIT was $7.2 billion, an increase of $4.0 billion from a year ago, with an EBIT margin of 12.4%. The EBIT improvement was driven by higher net pricing, lower commodity costs, and higher wholesales. Partial offsets primarily include higher material costs (related to inflationary cost pressures, new products, and about $80 million of volume-related obligations for batteries), higher warranty costs (reflecting inflationary cost pressures and increased field service actions), and higher structural costs (including volume-related) and supplemental compensation (including the impact of the new UAW collective bargaining agreement). 46 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Definitions and Information Regarding Ford Blue, Ford Model e, and Ford Pro Causal Factors In general, we measure year-over-year change in Ford Blue, Ford Model e, and Ford Pro segment EBIT using the causal factors listed below, with net pricing and cost variances calculated at present-year volume and mix and exchange: • Market Factors (exclude the impact of unconsolidated affiliate wholesale units): ◦ Volume and Mix – primarily measures EBIT variance from changes in wholesale unit volumes (at prior-year average contribution margin per unit) driven by changes in industry volume, market share, and dealer stocks, as well as the EBIT variance resulting from changes in product mix, including mix among vehicle lines and mix of trim levels and options within a vehicle line ◦ Net Pricing – primarily measures EBIT variance driven by changes in wholesale unit prices to dealers and marketing incentive programs such as rebate programs, low-rate financing offers, special lease offers, and stock adjustments on dealer inventory • Cost: ◦ Contribution Costs – primarily measures EBIT variance driven by per-unit changes in cost categories that typically vary with volume, such as material costs (including commodity and component costs), warranty expense, and freight and duty costs ◦ Structural Costs – primarily measures EBIT variance driven by absolute change in cost categories that typically do not have a directly proportionate relationship to production volume. Structural costs include the following cost categories: ▪ Manufacturing, Including Volume-Related - consists primarily of costs for hourly and salaried manufacturing personnel, plant overhead (such as utilities and taxes), and new product launch expense. These costs could be affected by volume for operating pattern actions such as overtime, line-speed, and shift schedules ▪ Engineering and Connectivity – consists primarily of costs for vehicle and software engineering personnel, prototype materials, testing, and outside engineering and software services ▪ Spending-Related – consists primarily of depreciation and amortization of our manufacturing and engineering assets, but also includes asset retirements and operating leases ▪ Advertising and Sales Promotions – includes costs for advertising, marketing programs, brand promotions, customer mailings and promotional events, and auto shows ▪ Administrative, Information Technology, and Selling – includes primarily costs for salaried personnel and purchased services related to our staff activities, information technology, and selling functions ▪ Pension and OPEB – consists primarily of past service pension costs and other postretirement employee benefit costs • Exchange – primarily measures EBIT variance driven by one or more of the following: (i) transactions denominated in currencies other than the functional currencies of the relevant entities, (ii) effects of converting functional currency income to U.S. dollars, (iii) effects of remeasuring monetary assets and liabilities of the relevant entities in currencies other than their functional currency, or (iv) results of our foreign currency hedging • Other – includes a variety of items, such as parts and services earnings, royalties, government incentives, and compensation-related changes In addition, definitions and calculations used in this report include: • Wholesales and Revenue – wholesale unit volumes include all Ford and Lincoln badged units (whether produced by Ford or by an unconsolidated affiliate) that are sold to dealerships or others, units manufactured by Ford that are sold to other manufacturers, units distributed by Ford for other manufacturers, and local brand units produced by our China joint venture, Jiangling Motors Corporation, Ltd. (“JMC”), that are sold to dealerships or others. Vehicles sold to daily rental car companies that are subject to a guaranteed repurchase option (i.e., rental repurchase), as well as other sales of finished vehicles for which the recognition of revenue is deferred (e.g., consignments), also are included in wholesale unit volumes. Revenue from certain vehicles in wholesale unit volumes (specifically, Ford badged vehicles produced and distributed by our unconsolidated affiliates, as well as JMC brand vehicles) are not included in our revenue • Industry Volume and Market Share – based, in part, on estimated vehicle registrations; includes medium and heavy duty trucks • SAAR – seasonally adjusted annual rate 47 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Ford Next Segment 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 2023 EBIT loss was $138 million, a $788 million improvement from a year ago. Ford Next has evolved from primarily investing in the development of autonomous vehicle capabilities to focus exclusively on incubating and launching new businesses creating strategic value for Ford. 48 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Ford Credit Segment The tables below provide full year 2023 key metrics and the change in full year 2023 EBT compared with full year 2022 by causal factor for the Ford Credit segment. For a description of these causal factors, see Definitions and Information Regarding Ford Credit Causal Factors . 2022 2023 H / (L) GAAP Financial Measures Total Net Receivables ($B) $ 122 $ 133 $ 11 Loss-to-Receivables (bps) (a) 14 35 21 Auction Values (b) $ 32,410 $ 30,005 (7) % EBT ($M) 2,657 1,331 $ (1,326) ROE (%) 16 % 11 % (5) ppts Other Balance Sheet Metrics Debt ($B) $ 119 $ 129 9 % Net Liquidity ($B) 21 26 22 % Financial Statement Leverage (to 1) 10 9.7 (0.3) __________ (a) U.S. retail financing only. (b) U.S. 36-month off-lease auction values at full year 2023 mix. Change in EBT by Causal Factor (in millions) 2022 Full Year EBT $ 2,657 Volume / Mix 153 Financing Margin (493) Credit Loss (239) Lease Residual (466) Exchange 18 Other (299) 2023 Full Year EBT $ 1,331 Total net receivables at December 31, 2023 were 9% higher than a year ago, primarily reflecting higher consumer and non-consumer financing and currency exchange rates, partially offset by fewer operating leases. Ford Credit’s loss metrics continue to normalize from historic lows. Ford Credit’s U.S. 36-month auction values for off-lease vehicles were down 7% from a year ago. We are planning for full year 2024 auction values to decrease as vehicle availability continues to improve. Ford Credit’s 2023 EBT of $1,331 million was $1,326 million lower than a year ago, reflecting lower financing margin, non-recurrence of supplemental depreciation and credit loss reserve releases, lower lease residual performance, unfavorable derivative market valuation, and higher credit losses. 49 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Definitions and Information Regarding Ford Credit Causal Factors In general, we measure year-over-year changes in Ford Credit’s EBT using the causal factors listed below: • Volume and Mix: ◦ Volume primarily measures changes in net financing margin driven by changes in average net receivables excluding the allowance for credit losses at prior period financing margin yield (defined below in financing margin) at prior period exchange rates. Volume changes are primarily driven by the volume of new and used vehicles sold and leased, the extent to which Ford Credit purchases retail financing and operating lease contracts, the extent to which Ford Credit provides wholesale financing, the sales price of the vehicles financed, the level of dealer inventories, Ford-sponsored special financing programs available exclusively through Ford Credit, and the availability of cost-effective funding ◦ Mix primarily measures changes in net financing margin driven by period-over-period changes in the composition of Ford Credit’s average net receivables excluding the allowance for credit losses by product within each region • Financing Margin: ◦ Financing margin variance is the period-over-period change in financing margin yield multiplied by the present period average net receivables excluding the allowance for credit losses at prior period exchange rates. This calculation is performed at the product and country level and then aggregated. Financing margin yield equals revenue, less interest expense and scheduled depreciation for the period, divided by average net receivables excluding the allowance for credit losses for the same period ◦ Financing margin changes are driven by changes in revenue and interest expense. Changes in revenue are primarily driven by the level of market interest rates, cost assumptions in pricing, mix of business, and competitive environment. Changes in interest expense are primarily driven by the level of market interest rates, borrowing spreads, and asset-liability management • Credit Loss: ◦ Credit loss is the change in the provision for credit losses at prior period exchange rates. For analysis purposes, management splits the provision for credit losses into net charge-offs and the change in the allowance for credit losses ◦ Net charge-off changes are primarily driven by the number of repossessions, severity per repossession, and recoveries. Changes in the allowance for credit losses are primarily driven by changes in historical trends in credit losses and recoveries, changes in the composition and size of Ford Credit’s present portfolio, changes in trends in historical used vehicle values, and changes in forward looking macroeconomic conditions. For additional information, refer to the “Critical Accounting Estimates - Allowance for Credit Losses” section of Item 7 • Lease Residual: ◦ Lease residual measures changes to residual performance at prior period exchange rates. For analysis purposes, management splits residual performance primarily into residual gains and losses, and the change in accumulated supplemental depreciation ◦ Residual gain and loss changes are primarily driven by the number of vehicles returned to Ford Credit and sold, and the difference between the auction value and the depreciated value (which includes both base and accumulated supplemental depreciation) of the vehicles sold. Changes in accumulated supplemental depreciation are primarily driven by changes in Ford Credit’s estimate of the expected auction value at the end of the lease term, and changes in Ford Credit’s estimate of the number of vehicles that will be returned to it and sold. Depreciation on vehicles subject to operating leases includes early termination losses on operating leases due to customer default events. For additional information, refer to the “Critical Accounting Estimates - Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 • Exchange: ◦ Reflects changes in EBT driven by the effects of converting functional currency income to U.S. dollars • Other: ◦ Primarily includes operating expenses, other revenue, insurance expenses, and other income/(loss) at prior period exchange rates ◦ Changes in operating expenses are primarily driven by salaried personnel costs, facilities costs, and costs associated with the origination and servicing of customer contracts ◦ In general, other income/(loss) changes are primarily driven by changes in earnings related to market valuation adjustments to derivatives (primarily related to movements in interest rates) and other miscellaneous items 50 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) In addition, the following definitions and calculations apply to Ford Credit when used in this Report: • Cash (as shown in the Funding Structure and Liquidity tables) – Cash, cash equivalents, marketable securities, and restricted cash, excluding amounts related to insurance activities • Debt (as shown in the Key Metrics and Leverage tables) – Debt on Ford Credit’s balance sheets. Includes debt issued in securitizations and payable only out of collections on the underlying securitized assets and related enhancements. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions • Earnings Before Taxes (“EBT” ) – Reflects Ford Credit’s income before income taxes • Loss-to-Receivables (“LTR”) Ratio – LTR ratio is calculated using net charge-offs divided by average finance receivables, excluding unearned interest supplements and the allowance for credit losses • Return on Equity (“ROE” ) (as shown in the Key Metrics table) – Reflects return on equity calculated by annualizing net income for the period and dividing by monthly average equity for the period • Securitization and Restricted Cash (as shown in the Liquidity table) – Securitization cash is held for the benefit of the securitization investors (for example, a reserve fund). Restricted cash primarily includes cash held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements • Securitizations (as shown in the Public Term Funding Plan table) – Public securitization transactions, Rule 144A offerings sponsored by Ford Credit, and widely distributed offerings by Ford Credit Canada • Term Asset-Backed Securities (as shown in the Funding Structure table) – Obligations issued in securitization transactions that are payable only out of collections on the underlying securitized assets and related enhancements • Total Net Receivables (as shown in the Key Metrics table) – Includes finance receivables (retail financing and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance sheets and are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations of Ford Credit or the claims of Ford Credit’s other creditors 51 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Corporate Other Corporate Other primarily includes corporate governance expenses, past service pension and OPEB income and expense, interest income (excluding Ford Credit interest income and interest earned on our extended service contract portfolio) and gains and losses from our cash, cash equivalents, and marketable securities (excluding gains and losses on investments in equity securities), and foreign exchange derivatives gains and losses associated with intercompany lending. Corporate governance expenses are primarily administrative, delivering benefit on behalf of the global enterprise, that are not allocated to operating segments. These include expenses related to setting and directing global policy, providing oversight and stewardship, and promoting the Company’s interests. For full year 2023, Corporate Other had a $760 million EBIT loss, compared with $748 million of positive EBIT in 2022. The EBIT deterioration was driven by lower past service pension and OPEB income, partially offset by higher Company excluding Ford Credit interest income, reflecting higher interest rates. Interest on Debt Interest on Debt consists of interest expense on Company debt excluding Ford Credit. Our full year 2023 interest expense on Company debt excluding Ford Credit was $1,302 million, $43 million higher than in 2022. Taxes Our Provision for/(Benefit from) income taxes for full year 2023 was a $362 million benefit, resulting in an effective tax rate of negative 9.1%. This includes benefits arising from U.S. research tax credits and legal entity restructuring within our leasing operations and China. Our full year 2023 adjusted effective tax rate, which excludes special items, was 10.0%. We regularly review our organizational structure and income tax elections for affiliates in non-U.S. and U.S. tax jurisdictions, which may result in changes in affiliates that are included in or excluded from our U.S. tax return. Any future changes to our structure, as well as any changes in income tax laws in the countries that we operate, could cause increases or decreases to our deferred tax balances and related valuation allowances. 52 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) RESULTS OF OPERATIONS - 2022 The net loss attributable to Ford Motor Company was $1,981 million in 2022. Company adjusted EBIT was $10,415 million. Net income/(loss) includes certain items (“special items”) that are excluded from Company adjusted EBIT. These items are discussed in more detail in Note 26 of the Notes to the Financial Statements. We report special items separately to allow investors analyzing our results to identify certain infrequent significant items that they may wish to exclude when considering the trend of ongoing operating results. Our pre-tax and tax special items were as follows (in millions): 2021 2022 Global Redesign Europe $ (530) $ (151) India (468) (298) South America (803) 53 China (including Taiwan) 150 (380) North America (72) (198) Other 3 7 Subtotal Global Redesign $ (1,720) $ (967) Other Items Gain/(loss) on Rivian investment $ 9,096 $ (7,377) Debt extinguishment premium (1,692) (135) AV strategy including Argo impairment — (2,812) Ford Credit – Brazil restructuring 14 (155) Russia suspension of operations/asset write-off — (158) Patent matters related to prior calendar years — (124) Other 82 (35) Subtotal Other Items $ 7,500 $ (10,796) Pension and OPEB Gain/(Loss) Pension and OPEB remeasurement $ 3,873 $ 29 Pension settlements and curtailments (70) (438) Subtotal Pension and OPEB Gain/(Loss) $ 3,803 $ (409) Total EBIT Special Items $ 9,583 $ (12,172) Cash effect of Global Redesign (incl. separations) $ (1,935) $ (377) Provision for/(Benefit from) tax special items (a) $ (1,924) $ (2,573) __________ (a) Includes related tax effect on special items and tax special items. For full year 2022, we recorded $12.2 billion of pre-tax special item charges, driven by a $7.4 billion mark-to-market net loss on our Rivian investment and a $2.7 billion impairment on our Argo investment. In Note 26 of the Notes to the Financial Statements, special items are reflected as a separate reconciling item, as opposed to being allocated among our segments. This reflects the fact that management excludes these items from its review of operating segment results for purposes of measuring segment profitability and allocating resources. 53 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) COMPANY KEY METRICS The table below shows our full year 2022 key metrics for the Company compared with full year 2021. 2021 2022 H / (L) GAAP Financial Measures Cash Flows from Operating Activities ($B) $ 15.8 $ 6.9 $ (8.9) Revenue ($M) 136,341 158,057 16 % Net Income/(Loss) ($M) 17,937 (1,981) $ (19,918) Net Income/(Loss) Margin (%) 13.2 % (1.3) % (14.4) ppts EPS (Diluted) $ 4.45 $ (0.49) $ (4.94) Non-GAAP Financial Measures (a) Company Adj. Free Cash Flow ($B) $ 4.6 $ 9.1 $ 4.5 Company Adj. EBIT ($M) 10,000 10,415 415 Company Adj. EBIT Margin (%) 7.3 % 6.6 % (0.7) ppts Adjusted EPS (Diluted) $ 1.59 $ 1.88 $ 0.29 Adjusted ROIC (Trailing Four Quarters) 9.8 % 11.2 % 1.4 ppts __________ (a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP. In 2022, our diluted earnings per share of Common and Class B Stock was a loss of $0.49 and our diluted adjusted earnings per share was $1.88. Net income/(loss) margin was negative 1.3% in 2022, down from 13.2% in 2021. Company adjusted EBIT margin was 6.6% in 2022, down from 7.3% in 2021. The table below shows our full year 2022 net income/(loss) attributable to Ford and Company adjusted EBIT by segment (in millions). 2021 2022 H / (L) Ford Blue $ 3,293 $ 6,847 $ 3,554 Ford Model e (892) (2,133) (1,241) Ford Pro 2,665 3,222 557 Ford Next (1,030) (926) 104 Ford Credit 4,717 2,657 (2,060) Corporate Other 1,247 748 (499) Company Adjusted EBIT (a) 10,000 10,415 415 Interest on Debt (1,803) (1,259) 544 Special Items 9,583 (12,172) (21,755) Taxes / Noncontrolling Interests 157 1,035 878 Net Income/(Loss) $ 17,937 $ (1,981) $ (19,918) __________ (a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP. The year-over-year decrease of $19.9 billion in net income/(loss) in 2022 includes the effect of special items, including the mark-to-market net loss on our Rivian investment and the impairment on our Argo investment. The year-over-year increase of $415 million in Company adjusted EBIT primarily reflects higher Ford Blue and Ford Pro EBIT, offset partially by lower Ford Credit EBT, higher EBIT losses in Ford Model e, and lower past service pension and OPEB income in Corporate Other. 54 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Ford Blue Segment The tables below and on the following pages provide full year 2022 key metrics and the change in full year 2022 EBIT compared with full year 2021 by causal factor for each of our Ford Blue, Ford Model e, and Ford Pro segments. For a description of these causal factors, see Definitions and Information Regarding Ford Blue, Ford Model e, and Ford Pro Causal Factors. 2021 2022 H / (L) Key Metrics Wholesale Units (000) (a) 2,694 2,834 140 Revenue ($M) $ 80,377 $ 94,762 $ 14,385 EBIT ($M) 3,293 6,847 3,554 EBIT Margin (%) 4.1 % 7.2 % 3.1 ppts __________ (a) Includes Ford and Lincoln brand and JMC brand vehicles produced and sold in China by our unconsolidated affiliates (about 633,000 units in 2021 and 484,000 units in 2022). Change in EBIT by Causal Factor (in millions) 2021 Full Year EBIT $ 3,293 Volume / Mix 3,323 Net Pricing 6,181 Cost (5,329) Exchange (229) Other (392) 2022 Full Year EBIT $ 6,847 In 2022, Ford Blue’s wholesales increased 5% from 2021, primarily reflecting an improvement in production-related supply constraints and a full year of Bronco and Maverick production, offset partially by our India restructuring, suspension of our joint venture in Russia, and COVID-related restrictions in China. Full year 2022 revenue increased 18%, driven by higher net pricing and wholesales, offset partially by weaker currencies. Ford Blue’s full year 2022 EBIT was $6.8 billion, an increase of $3.6 billion from 2021, with an EBIT margin of 7.2%. The EBIT improvement was driven by higher net pricing and higher wholesales, offset partially by inflationary increases on commodity, material, and freight costs, higher warranty costs, higher structural costs, and weaker currencies. 55 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Ford Model e Segment 2021 2022 H / (L) Key Metrics Wholesale Units (000) 61 96 35 Revenue ($M) $ 3,098 $ 5,253 $ 2,155 EBIT ($M) (892) (2,133) (1,241) EBIT Margin (%) (28.8) % (40.6) % (11.8) ppts Change in EBIT by Causal Factor (in millions) 2021 Full Year EBIT $ (892) Volume / Mix — Net Pricing 418 Cost (1,553) Exchange (94) Other (12) 2022 Full Year EBIT $ (2,133) In 2022, Ford Model e’s wholesales increased 58% from 2021, primarily reflecting the launch of the F-150 Lightning and incremental Mach-E production. Full year 2022 revenue increased 70%, driven by higher wholesales and net pricing. Model e’s full year 2022 EBIT loss was $2.1 billion, a $1.2 billion higher loss than in 2021, with an EBIT margin of negative 40.6%. The lower EBIT was primarily driven by inflationary increases on commodity, material, and freight costs, higher structural costs (including higher engineering cost for future programs), and unfavorable mix. Partial offsets included higher net pricing and wholesales. Ford Pro Segment 2021 2022 H / (L) Key Metrics Wholesale Units (000) (a) 1,187 1,301 114 Revenue ($M) $ 42,649 $ 48,939 $ 6,290 EBIT ($M) 2,665 3,222 557 EBIT Margin (%) 6.2 % 6.6 % 0.3 ppts __________ (a) Includes Ford brand vehicles produced and sold by our unconsolidated affiliate Ford Otosan in Türkiye (about 61,000 units in 2021 and 76,000 units in 2022). Change in EBIT by Causal Factor (in millions) 2021 Full Year EBIT $ 2,665 Volume / Mix 1,016 Net Pricing 4,267 Cost (4,547) Exchange (156) Other (23) 2022 Full Year EBIT $ 3,222 In 2022, Ford Pro’s wholesales increased 10% from 2021, primarily reflecting an improvement in production-related supply constraints. Full year 2022 revenue increased 15%, driven by higher net pricing and wholesales, offset partially by weaker currencies. Ford Pro’s full year 2022 EBIT was $3.2 billion, an increase of $557 million from 2021, with an EBIT margin of 6.6%. The EBIT improvement was driven by higher net pricing and wholesales, offset partially by inflationary increases on commodity, material, and freight costs, higher structural costs, and unfavorable mix. 56 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Ford Next Segment In our Ford Next segment (formerly Mobility), our 2022 EBIT loss improved $104 million from 2021. The $926 million EBIT loss reflected our strategic investments in our autonomous vehicle capabilities and support of our mobility initiatives. Ford Credit Segment The tables below provide full year 2022 key metrics and the change in full year 2022 EBT compared with full year 2021 by causal factor for the Ford Credit segment. 2021 2022 H / (L) GAAP Financial Measures Total Net Receivables ($B) $ 118 $ 122 $ 5 Loss-to-Receivables (bps) (a) 6 14 8 Auction Values (b) $ 30,785 $ 32,410 5 % EBT ($M) 4,717 2,657 $ (2,060) ROE (%) 32 % 16 % (16) ppts Other Balance Sheet Metrics Debt ($B) $ 118 $ 119 1 % Net Liquidity ($B) 32 21 (34) % Financial Statement Leverage (to 1) 9.5 10 0.5 __________ (a) U.S. retail financing only. (b) U.S. 36-month off-lease auction values at full year 2023 mix. Change in EBT by Causal Factor (in millions) 2021 Full Year EBT $ 4,717 Volume / Mix (218) Financing Margin (600) Credit Loss (348) Lease Residual (907) Exchange (25) Other 38 2022 Full Year EBT $ 2,657 Total net receivables at December 31, 2022 were 3% higher than at December 31, 2021, primarily reflecting higher non-consumer financing, offset partially by fewer operating leases, lower consumer financing, and currency exchange rates. Ford Credit’s loss metrics reflected healthy and stable consumer credit conditions and strong auction values. Ford Credit’s U.S. 36-month auction values for off-lease vehicles were up 5% from 2021, reflecting strong demand for used vehicles, including the impact of lower new vehicle production due to the semiconductor shortage. Ford Credit’s 2022 EBT of $2,657 million was $2,060 million lower than 2021, reflecting lower credit loss and lease residual reserve releases, lower financing margin, and lower lease return rates. 57 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Corporate Other For full year 2022, Corporate Other EBIT was $748 million, compared with EBIT of $1,247 million in 2021. The deterioration was driven by lower past service pension and OPEB income. Interest on Debt Our full year 2022 interest expense on Company debt excluding Ford Credit was $1,259 million, $544 million lower than in 2021, primarily explained by U.S. debt restructuring actions taken in the fourth quarter of 2021 and during 2022. Taxes Our Provision for/(Benefit from) income taxes for full year 2022 was a $864 million benefit, resulting in an effective tax rate of 28.6%. This includes benefits arising from the reversal of U.S. valuation allowances, primarily as a result of planning actions. Our full year 2022 adjusted effective tax rate, which excludes special items, was 18.7%. 58 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) LIQUIDITY AND CAPITAL RESOURCES At December 31, 2023, total balance sheet cash, cash equivalents, marketable securities, and restricted cash, including Ford Credit and entities held for sale, was $40.4 billion. We consider our key balance sheet metrics to be: (i) Company cash, which includes cash equivalents, marketable securities, and restricted cash, including cash held for sale, excluding Ford Credit’s cash, cash equivalents, marketable securities, and restricted cash; and (ii) Company liquidity, which includes Company cash, less restricted cash, and total available committed credit lines, excluding Ford Credit’s total available committed credit lines. Company excluding Ford Credit December 31, 2022 December 31, 2023 Balance Sheets ($B) Company Cash $ 32.3 $ 28.8 Liquidity 48.0 46.4 Debt (19.9) (19.9) Cash Net of Debt 12.3 8.9 Pension Funded Status ($B) Funded Plans $ 4.1 $ 2.1 Unfunded Plans (4.3) (4.4) Total Global Pension $ (0.2) $ (2.3) Total Funded Status OPEB $ (4.5) $ (4.7) Liquidity . Our key priority is to maintain a strong balance sheet to withstand potential stress scenarios, while having resources available to invest in and grow our business. At December 31, 2023, we had Company cash of $28.8 billion and liquidity of $46.4 billion. At December 31, 2023, about 90% of Company cash was held by consolidated entities domiciled in the United States. To be prepared for an economic downturn and other stress scenarios, 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 or operating environment. Our Company cash investments primarily include U.S. Department of Treasury obligations, federal agency securities, bank time deposits with investment-grade institutions, investment-grade corporate securities, investment-grade commercial paper, and debt obligations of a select group of non-U.S. governments, non-U.S. governmental agencies, and supranational institutions. The average maturity of these investments is approximately one year and adjusted based on market conditions and liquidity needs. We monitor our Company cash levels and average maturity on a daily basis. 59 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Material Cash Requirements. Our material cash requirements include: • Capital expenditures (for additional information, see the “Changes in Company Cash” section below) and other payments for engineering, software, product development, and implementation of our plans for electric vehicles • Purchase of raw materials and components to support the manufacturing and sale of vehicles (including electric vehicles), parts, and accessories (for additional information, see the Aggregate Contractual Obligations table and the accompanying description of our “Purchase obligations” below) • Marketing incentive payments to dealers • Payments for warranty and field service actions (for additional information, see Note 25 of the Notes to the Financial Statements) • Debt repayments (for additional information, see the Aggregate Contractual Obligations table below and Note 19 of the Notes the Financial Statements) • Discretionary and mandatory payments to our global pension plans (for additional information, see the Aggregate Contractual Obligations table below, the “Changes in Company Cash” section below, and Note 17 of the Notes to the Financial Statements) • Employee wages, benefits, and incentives • Operating lease payments (for additional information, see the Aggregate Contractual Obligations table below and Note 18 of the Notes to the Financial Statements) • Cash effects related to the restructuring of our business • Strategic acquisitions and investments to grow our business, including electrification Subject to approval by our Board of Directors, shareholder distributions in the form of dividend payments and/or a share repurchase program (including share repurchases to offset the anti-dilutive effect of increased shared-based compensation) may require the expenditure of a material amount of cash. We target shareholder distributions of 40% to 50% of adjusted free cash flow. Moreover, we may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, e.g., legal contingencies, uncertain tax positions, and other matters. We are party to many contractual obligations involving commitments to make payments to third parties, and, as noted above, such commitments require a material amount of cash. Most of these are debt obligations incurred by our Ford Credit segment. In addition, as part of our normal business practices, we enter into contracts with suppliers for purchases of certain raw materials, components, and services to facilitate adequate supply of these materials and services. These arrangements, including multi-year offtake commitments, may contain fixed or minimum quantity purchase requirements. “Purchase obligations” in the Aggregate Contractual Obligations table below are defined as off-balance sheet agreements to purchase goods or services that are enforceable and legally binding on the Company and that specify all significant terms; however, as we purchase raw materials and components beyond the minimum amounts required by the “Purchase obligations,” our material cash requirements for these items are higher than what is reflected in the Aggregate Contractual Obligations table. For additional information on the timing of these payments and the impact on our working capital, see the “Changes in Company Cash” section below. 60 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) The table below summarizes our aggregate contractual obligations as of December 31, 2023 (in millions): Payments Due by Period 2024 2025 - 2026 2027 - 2028 Thereafter Total Company excluding Ford Credit On-balance sheet Long-term debt (a) $ 85 $ 4,999 $ 1,523 $ 12,667 $ 19,274 Interest payments relating to long-term debt (b) 962 1,786 1,520 9,509 13,777 Finance leases (c) 67 183 144 498 892 Operating leases (d) 543 783 431 335 2,092 Pension funding (e) 195 397 402 — 994 Off-balance sheet Purchase obligations (f) 1,579 2,470 860 692 5,601 Total Company excluding Ford Credit 3,431 10,618 4,880 23,701 42,630 Ford Credit On-balance sheet Long-term debt (a) 30,606 53,650 18,756 9,103 112,115 Interest payments relating to long-term debt (b) 4,709 5,163 2,135 992 12,999 Operating leases 15 20 9 — 44 Off-balance sheet Purchase obligations 12 45 58 — 115 Total Ford Credit 35,342 58,878 20,958 10,095 125,273 Total Company $ 38,773 $ 69,496 $ 25,838 $ 33,796 $ 167,903 __________ (a) Excludes unamortized debt discounts/premiums, unamortized debt issuance costs, and fair value adjustments. (b) Long-term debt may have fixed or variable interest rates. For long-term debt with variable-rate interest, we estimate the future interest payments based on projected market interest rates for various floating-rate benchmarks received from third parties. (c) Includes interest payments of $254 million. (d) Excludes approximately $449 million in future lease payments for various operating leases commencing in a future period. (e) Amounts represent our estimate of contractually obligated contributions to the Ford-Werke plan. See Note 17 of the Notes to the Financial Statements for further information regarding our expected pension contributions. (f) Purchase obligations under existing offtake agreements for scarce raw materials are not included in the table above. As of December 31, 2023, our estimated expenditures for the maximum quantity that we are committed to purchase under these offtake agreements through 2035, subject to certain conditions, consist of approximately $4.5 billion of purchase obligations and approximately $8 billion of contingent purchase obligations based on our present forecast. However, our forecast could fluctuate from period to period based on market prices, which could result in significant increases or decreases in our estimate. The actual price paid for these materials will be recorded on our balance sheet at the time of purchase. In addition, as market conditions dictate, we may enter into additional offtake agreements with raw material suppliers or seek to renegotiate existing agreements. For additional information, see the discussion of our offtake agreements below on page 62. We plan to utilize our liquidity (as described above) and our cash flows from business operations to fund our material cash requirements. Changes in Company Cash. In managing our business, we classify changes in Company cash into operating and non-operating items. Operating items include: Company adjusted EBIT excluding Ford Credit EBT, capital spending, depreciation and tooling amortization, changes in working capital, Ford Credit distributions, interest on debt, cash taxes, and all other and timing differences (including timing differences between accrual-based EBIT and associated cash flows). Non-operating items include: restructuring costs, changes in Company debt excluding Ford Credit, contributions to funded pension plans, shareholder distributions, and other items (including gains and losses on investments in equity securities, acquisitions and divestitures, equity investments, and other transactions with Ford Credit). 61 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) With respect to “Changes in working capital,” in general, the Company excluding Ford Credit carries relatively low trade receivables compared with our trade payables because the majority of our wholesales are financed (primarily by Ford Credit) immediately upon the sale of vehicles to dealers, which generally occurs shortly after being produced. In contrast, our trade payables are based primarily on industry-standard production supplier payment terms of about 45 days. As a result, our cash flow deteriorates if wholesale volumes (and the corresponding revenue) decrease while trade payables continue to become due. Conversely, our cash flow improves if wholesale volumes (and the corresponding revenue) increase while new trade payables are generally not due for about 45 days. For example, the suspension of production at most of our assembly plants and lower industry volumes due to COVID-19 in early 2020 resulted in an initial deterioration of our cash flow, while the subsequent resumption of manufacturing operations and return to pre-COVID-19 production levels at most of our assembly plants resulted in a subsequent improvement of our cash flow. Even in normal economic conditions, however, these working capital balances generally are subject to seasonal changes that can impact cash flow. For example, we typically experience cash flow timing differences associated with inventories and payables due to our annual shutdown periods when production, and therefore inventories and wholesale volumes, are usually at their lowest levels, while payables continue to come due and be paid. 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 December 31, 2023 was higher than at December 31, 2022, primarily reflecting higher in-transit 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. Such actions could have a short-term adverse impact on our cash and increase our inventory. Moreover, in order to secure critical materials for production of electric vehicles, we have entered into and we may, in the future, enter into offtake agreements with raw material suppliers and make investments in certain raw material and battery suppliers, including contributing up to a maximum of $6.6 billion in capital to BlueOval SK, LLC over a five-year period ending in 2026. Our actual capital outlay could vary significantly based on the final project costs and potential financing opportunities. Such investments could have an additional adverse impact on our cash in the near-term. The terms of the offtake agreements we have entered into, and those we may enter into in the future, vary by transaction, though they generally obligate us to purchase a certain percentage or minimum amount of output produced by the counterparty over an agreed upon period of time. The purchase price mechanism included in the offtake agreement is typically based on the market price of the material at the time of delivery. The terms also may include conditions to our obligation to purchase the materials, such as quality or minimum output. Subject to satisfaction of those conditions, we will be obligated to purchase the materials at the cost determined by the purchase price mechanism. 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. Unlike our historical arrangements with suppliers, under multi-year offtake agreements, the risks associated with lower-than-expected electric vehicle production volumes or changes in battery technology that reduce the need for certain raw materials are borne by Ford rather than our suppliers. Accordingly, in the event we do not purchase the materials pursuant to the terms of these agreements and we are unable to restructure an agreement or an alternate purchaser is unable to be found, Ford retains its obligation for the cost of those materials. For additional discussion of the risks related to our offtake agreements and other long-term purchase contracts, see “Item 1A. Risk Factors.” Financial institutions participate in a supply chain finance (“SCF”) program that enables our suppliers, at their sole discretion, to sell their Ford receivables (i.e., our payment obligations to the suppliers) to the financial institutions on a non-recourse basis in order to be paid earlier than our payment terms provide. Our suppliers’ voluntary inclusion of invoices in the SCF program has no bearing on our payment terms, the amounts we pay, or our liquidity. 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 December 31, 2023, the outstanding amount of Ford receivables that suppliers elected to sell to the SCF financial institutions was $220 million. The amount settled through the SCF program during 2023 was $1.8 billion. 62 Item 7. 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): December 31, 2021 December 31, 2022 December 31, 2023 Company Excluding Ford Credit Company Adjusted EBIT excluding Ford Credit (a) $ 5.3 $ 7.8 $ 9.1 Capital spending $ (6.2) $ (6.5) $ (8.2) Depreciation and tooling amortization 5.1 5.2 5.3 Net spending $ (1.1) $ (1.3) $ (2.9) Receivables $ (0.2) $ (1.0) $ (1.0) Inventory (1.8) (2.5) (1.2) Trade Payables 0.3 3.7 (0.2) Changes in working capital $ (1.7) $ 0.2 $ (2.4) Ford Credit distributions $ 7.5 $ 2.1 $ — Interest on debt and cash taxes (2.3) (1.7) (2.2) All other and timing differences (3.1) 1.9 5.2 Company adjusted free cash flow (a) $ 4.6 $ 9.1 $ 6.8 Restructuring $ (1.9) $ (0.4) $ (0.9) Changes in debt (3.7) (0.4) (0.2) Funded pension contributions (0.8) (0.6) (0.6) Shareholder distributions (0.4) (2.5) (5.3) All other (b) 7.9 (9.5) (3.2) Change in cash $ 5.7 $ (4.3) $ (3.4) __________ (a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP. (b) 2021 includes our investment in Rivian of $10.6 billion and cash premium paid of $(1.6) billion associated with repurchasing and redeeming $7.6 billion of higher-coupon debt. 2022 includes a $7.4 billion loss on our Rivian investment. 2023 includes $2.6 billion of capital contributions to BlueOval SK, LLC. Note: Numbers may not sum due to rounding. Our full year 2023 Net cash provided by/(used in) operating activities was positive $14.9 billion, an increase of $8.1 billion from a year ago (see page 78 for additional information). The year-over-year increase was primarily driven by higher net income. Company adjusted free cash flow was $6.8 billion, $2.3 billion lower than a year ago. An improvement in Company adjusted EBIT excluding Ford Credit and timing differences were more than offset by the non-repeat of working capital improvements and Ford Credit distributions, as well as higher capital spending. Capital spending was $8.2 billion in 2023, $1.6 billion higher than a year ago, and is expected to be in the range of $8 billion to $9.5 billion in 2024. The full year 2023 working capital impact was $2.4 billion negative, driven by an increase in inventory and receivables. All other and timing differences were positive $5.2 billion. Timing differences include differences between accrual-based EBIT and the associated cash flows (e.g., marketing incentive and warranty payments to dealers, JV equity income, compensation payments, and pension and OPEB income or expense). Shareholder distributions (including cash dividends and anti-dilutive share repurchases) were $5.3 billion in 2023. On February 6, 2024, we declared a regular dividend of $0.15 per share and a supplemental dividend of $0.18 per share. 63 Item 7. 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 December 31, 2023 were $19.4 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 $2.2 billion of local credit facilities. At December 31, 2023, the utilized portion of the corporate credit facility was $18 million, representing amounts utilized for letters of credit. In addition, $1.8 billion of committed Company credit lines, excluding Ford Credit, was utilized under local credit facilities for our affiliates as of December 31, 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. On August 17, 2023, we entered into a new 364-day revolving credit facility, with $4 billion of commitments maturing on August 15, 2024. At the time we entered into this credit facility, it provided additional working capital flexibility to manage through uncertainties in the present environment, including a potential labor disruption. With the ratification of the new UAW contract, this credit facility was terminated as of November 24, 2023. 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. Ford outperformed the 2022 targets for all three of the sustainability-linked metrics, which favorably impacted pricing beginning in the third quarter of 2023 . The corporate credit facility is unsecured and free of material adverse change conditions to borrowing, restrictive financial covenants (for example, interest or fixed-charge coverage ratio, debt-to-equity ratio, and minimum net worth requirements), and credit rating triggers that could limit our ability to obtain funding or trigger early repayment. The corporate credit facility contains a liquidity covenant that requires us to maintain a minimum of $4 billion in aggregate of domestic cash, cash equivalents, and loaned and marketable securities and/or availability under the corporate credit facility, supplemental revolving credit facility, and 364-day revolving credit facility. The terms and conditions of the supplemental and 364-day revolving credit facilities are consistent with our corporate credit facility. Ford Credit has been designated as a subsidiary borrower under the corporate credit facility and the 364-day revolving credit facility. Each of the corporate credit facility, supplemental revolving credit facility, and 364-day revolving credit facility include a covenant that requires us to provide guarantees from certain of our subsidiaries in the event that our senior, unsecured, long-term debt does not maintain at least two investment grade ratings from Fitch, Moody’s, and S&P. On October 30, 2023, following the upgrade by S&P of our senior, unsecured, long-term debt credit rating to BBB-, the unsecured guarantees provided by the following subsidiaries to the lenders under the credit facilities were released: Ford Component Sales, LLC; Ford European Holdings Inc.; Ford Global Technologies, LLC; Ford Holdings LLC (the parent company of Ford Credit); Ford International Capital LLC; Ford Mexico Holdings LLC; Ford Motor Service Company; Ford Next LLC; Ford Trading Company, LLC; and Ford Van Dyke Investment Fund, Inc. Debt. As shown in Note 19 of the Notes to the Financial Statements, at December 31, 2023, Company debt excluding Ford Credit was $19.9 billion, unchanged from December 31, 2022. Leverage. We manage Company debt (excluding Ford Credit) levels with a leverage framework that targets investment grade credit ratings through a normal business cycle. The leverage framework includes a ratio of total Company debt (excluding Ford Credit), underfunded pension liabilities, operating leases, and other adjustments, divided by Company adjusted EBIT (excluding Ford Credit EBT), and further adjusted to exclude depreciation and tooling amortization (excluding Ford Credit). Ford Credit’s leverage is calculated as a separate business as described in the “Liquidity - Ford Credit Segment” section of Item 7. Ford Credit is self-funding and its debt, which is used to fund its operations, is separate from our Company debt excluding Ford Credit. 64 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Ford Credit Segment Ford Credit remains well capitalized with a strong balance sheet and funding diversified across platforms and markets. Ford Credit continues to have robust access to the capital markets, and ended 2023 with $25.7 billion of liquidity, up $4.6 billion from 2022. Key elements of Ford Credit’s funding strategy include: • Maintain strong liquidity and funding diversity • Prudently access public markets • Continue to leverage retail deposit funding in Europe • Flexibility to increase ABS mix as needed; preserving assets and committed capacity • Target financial statement leverage of 9:1 to 10:1 • Maintain self-liquidating balance sheet Ford Credit’s liquidity profile continues to be diverse, robust, and focused on maintaining liquidity levels that meet its business and funding requirements. Ford Credit regularly stress tests its balance sheet and liquidity to ensure that it can continue to meet its financial obligations through economic cycles. Funding Sources. Ford Credit’s funding sources include primarily unsecured debt and securitization transactions (including other structured financings). Ford Credit issues both short-term and long-term debt that is held by both institutional and retail investors, with long-term debt having an original maturity of more than 12 months. Ford Credit sponsors a number of securitization programs that can be structured to provide both short-term and long-term funding through institutional investors and other financial institutions in the United States and international capital markets. Ford Credit obtains unsecured funding from the sale of demand notes under its Ford Interest Advantage program and through the retail deposit programs at FCE Bank plc (“FCE”) and Ford Bank GmbH (“Ford Bank”). At December 31, 2023, the principal amount outstanding of Ford Interest Advantage notes, which may be redeemed at any time at the option of the holders thereof without restriction, and FCE and Ford Bank deposits was $17.2 billion. Ford Credit maintains multiple sources of readily available liquidity to fund the payment of its unsecured short-term debt obligations. The following table shows funding for Ford Credit’s net receivables (in billions): December 31, 2021 December 31, 2022 December 31, 2023 Funding Structure Term unsecured debt $ 59.4 $ 48.3 $ 54.1 Term asset-backed securities 45.4 56.4 58.0 Retail Deposits / Ford Interest Advantage 12.9 14.3 17.2 Other (0.1) 2.7 1.4 Equity 12.4 11.9 13.4 Adjustments for cash (12.5) (11.3) (10.9) Total Net Receivables $ 117.5 $ 122.3 $ 133.2 Securitized Funding as Percent of Total Debt 38.5 % 47.4 % 44.9 % Net receivables of $133.2 billion at December 31, 2023 were funded primarily with term unsecured debt and term asset-backed securities. Securitized funding as a percent of total debt was 44.9% as of December 31, 2023. 65 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Public Term Funding Plan. The following table shows Ford Credit’s issuances for full year 2021, 2022, and 2023, and its planned issuances for full year 2024, excluding short-term funding programs (in billions): 2021 Actual 2022 Actual 2023 Actual 2024 Forecast Unsecured $ 5 $ 6 $ 14 $ 14 - 17 Securitizations 9 10 14 13 - 16 Total public $ 14 $ 16 $ 28 $ 27 - 33 In 2023, Ford Credit completed $28 billion of public term funding. For 2024, Ford Credit projects full year public term funding in the range of $27 billion to $33 billion. Through February 5, 2024, we completed $5 billion of public term issuances. Liquidity. The following table shows Ford Credit’s liquidity sources and utilization (in billions): December 31, 2021 December 31, 2022 December 31, 2023 Liquidity Sources (a) Cash $ 12.5 $ 11.3 $ 10.9 Committed asset-backed facilities 37.1 37.4 42.9 Other unsecured credit facilities 2.7 2.3 2.4 Total liquidity sources $ 52.3 $ 51.0 $ 56.2 Utilization of Liquidity (a) Securitization cash and restricted cash $ (3.9) $ (2.9) $ (2.8) Committed asset-backed facilities (12.5) (26.6) (27.5) Other unsecured credit facilities (1.0) (0.8) (0.4) Total utilization of liquidity $ (17.4) $ (30.3) $ (30.7) Gross liquidity $ 34.9 $ 20.7 $ 25.5 Asset-backed capacity in excess of eligible receivables and other adjustments (2.8) 0.4 0.2 Net liquidity available for use $ 32.1 $ 21.1 $ 25.7 __________ (a) See Definitions and Information Regarding Ford Credit Causal Factors section. 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 December 31, 2023, Ford Credit’s net liquidity available for use was $25.7 billion, $4.6 billion higher than year-end 2022, reflecting strong access to public funding markets and the addition of $5.5 billion in committed asset-backed capacity. Ford Credit’s sources of liquidity include cash, committed asset-backed facilities, and unsecured credit facilities. At December 31, 2023, Ford Credit’s liquidity sources, including cash, committed asset-backed facilities, and unsecured credit facilities, totaled $56.2 billion, up $5.2 billion from year-end 2022. Material Cash Requirements. Ford Credit’s material cash requirements include: (1) the purchase of retail financing and operating lease contracts from dealers and providing wholesale financing for dealers to finance new and used vehicles; and (2) debt repayments (for additional information on debt, see the “Balance Sheet Liquidity Profile” section below, the “Material Cash Requirements” section in “Liquidity and Capital Resources - Company excluding Ford Credit” above, and Note 19 of the Notes to the Financial Statements). In addition, subject to approval by Ford Credit’s Board of Directors, shareholder distributions may require the expenditure of a material amount of cash. Moreover, Ford Credit may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, e.g., legal contingencies, uncertain tax positions, and other matters. Ford Credit plans to utilize its liquidity (as described above) and its cash flows from business operations to fund its material cash requirements. 66 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Balance Sheet Liquidity Profile. Ford Credit defines its balance sheet liquidity profile as the cumulative maturities, including the impact of expected prepayments and allowance for credit losses, of its finance receivables, investment in operating leases, and cash, less the cumulative debt maturities over upcoming annual periods. Ford Credit’s balance sheet is inherently liquid because of the short-term nature of its finance receivables, investment in operating leases, and cash. Ford Credit ensures its cumulative debt maturities have a longer tenor than its cumulative asset maturities. This positive maturity profile is intended to provide Ford Credit with additional liquidity after all of its assets have been funded and is in addition to liquidity available to protect for stress scenarios. The following table shows Ford Credit’s cumulative maturities for assets and total debt for the periods presented and unsecured long-term debt maturities in the individual periods presented (in billions): 2024 2025 2026 2027 and Beyond Balance Sheet Liquidity Profile Assets (a) $ 76 $ 104 $ 126 $ 149 Total debt (b) 61 88 105 131 Memo: Unsecured long-term debt maturities 12 13 11 21 __________ (a) Includes gross finance receivables less the allowance for credit losses (including certain finance receivables that are reclassified in consolidation to Trade and other receivables ), investment in operating leases net of accumulated depreciation, cash and cash equivalents, and marketable securities (excluding amounts related to insurance activities). Amounts shown include the impact of expected prepayments. (b) Excludes unamortized debt (discount)/premium, unamortized issuance costs, and fair value adjustments. Maturities of investment in operating leases consist primarily of the portion of rental payments attributable to depreciation over the remaining life of the lease and the expected residual value at lease termination. Maturities of finance receivables and investment in operating leases in the table above include expected prepayments for Ford Credit’s retail installment sale contracts and investment in operating leases. The table above also reflects adjustments to debt maturities to match the asset-backed debt maturities with the underlying asset maturities. All wholesale securitization transactions and wholesale receivables are shown maturing in the next 12 months, even if the maturities extend beyond 2024. The retail securitization transactions under certain committed asset-backed facilities are assumed to amortize immediately rather than amortizing after the expiration of the commitment period. As of December 31, 2023, Ford Credit had $149 billion of assets, $68 billion of which were unencumbered. Funding and Liquidity Risks. Ford Credit’s funding plan is subject to risks and uncertainties, many of which are beyond its control, including disruption in the capital markets that could impact both unsecured debt and asset-backed securities issuance and the effects of regulatory changes on the financial markets. Despite Ford Credit’s diverse sources of funding and liquidity, its ability to maintain liquidity may be affected by, among others, the following factors (not necessarily listed in order of importance or probability of occurrence): • Prolonged disruption of the debt and securitization markets; • Global capital markets volatility; • Credit ratings assigned to Ford and Ford Credit; • Market capacity for Ford- and Ford Credit-sponsored investments; • General demand for the type of securities Ford Credit offers; • Ford Credit’s ability to continue funding through asset-backed financing structures; • Performance of the underlying assets within Ford Credit’s asset-backed financing structures; • Inability to obtain hedging instruments; • Accounting and regulatory changes; and • Ford Credit’s ability to maintain credit facilities and committed asset-backed facilities. Stress Tests. Ford Credit regularly conducts stress testing on its funding and liquidity sources to ensure it can continue to meet financial obligations and support the sale of Ford and Lincoln vehicles during firm-specific and market-wide stress events. Stress tests are intended to quantify the potential impact of various adverse scenarios on the balance sheet and liquidity. These scenarios include assumptions on access to unsecured and secured debt markets, runoff of short-term funding, and ability to renew expiring liquidity commitments and are measured over various time periods, including 30 days, 90 days, and longer term. Ford Credit’s stress test does not assume any additional funding, liquidity, or capital support from Ford. Ford Credit routinely develops contingency funding plans as part of its liquidity stress testing. 67 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Leverage. Ford Credit uses leverage, or the debt-to-equity ratio, to make various business decisions, including evaluating and establishing pricing for finance receivable and operating lease financing, and assessing its capital structure. The table below shows the calculation of Ford Credit’s financial statement leverage (in billions): December 31, 2021 December 31, 2022 December 31, 2023 Leverage Calculation Debt $ 117.7 $ 119.0 $ 129.3 Equity (a) 12.4 11.9 13.4 Financial statement leverage (to 1) 9.5 10.0 9.7 __________ (a) Total shareholder’s interest reported on Ford Credit’s balance sheets. Ford Credit plans its leverage by considering market conditions and the risk characteristics of its business. At December 31, 2023, Ford Credit’s financial statement leverage was 9.7:1. Ford Credit targets financial statement leverage in the range of 9:1 to 10:1. 68 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Total Company Pension Plan Contributions and Strategy. Our strategy is to reduce the risk of our funded defined benefit pension plans, including minimizing the volatility of the value of our pension assets relative to pension liabilities and the need for unplanned use of capital resources to fund the plans. The strategy reduces balance sheet, cash flow, and income exposures and, in turn, reduces our risk profile. Going forward, we expect to: • Limit our pension contributions to offset ongoing service cost, ensure our funded plans remain fully funded in aggregate, and meet regulatory requirements, if any; • Minimize the volatility of the value of our pension assets relative to pension obligations and ensure assets are sufficient to pay plan benefits; and • Evaluate strategic actions to reduce pension liabilities, such as plan design changes, curtailments, or settlements 2022 2023 2023 H / (L) 2022 Pension Funded Status ($B) U.S. Plans $ 0.1 $ (1.3) $ (1.4) Non-U.S. Plans (0.3) (1.0) (0.7) Total Global Pension $ (0.2) $ (2.3) $ (2.1) Year-End Discount Rate (Weighted Average) U.S. Plans 5.51 % 5.17 % (34) bps Non-U.S. Plans 4.42 % 3.98 % (44) bps Actual Asset Returns U.S. Plans (21.20) % 7.41 % 28.61 ppts Non-U.S. Plans (25.40) % 5.56 % 30.96 ppts Pension - Funded Plans Only ($B) Funded Status $ 4.1 $ 2.1 $ (2.0) Contributions for Funded Plans 0.6 0.6 — Worldwide, our defined benefit pension plans were underfunded by $2.3 billion at December 31, 2023, a deterioration of $2.1 billion from December 31, 2022, primarily reflecting the impact of lower discount rates compared to year-end 2022 and pension benefit enhancements as part of the collective bargaining agreements in the United States and Canada, partially offset by asset gains in excess of our assumptions. Of the $2.3 billion underfunded status at year-end 2023, our funded plans were $2.1 billion overfunded and our unfunded plans were $4.4 billion underfunded. These unfunded plans are “pay as you go” with benefits paid from Company cash and primarily include certain plans in Germany and U.S. defined benefit plans for senior management. The fixed income mix was 76% in our U.S. plans and 78% in our non-U.S. plans at year-end 2023. In 2023, we contributed $592 million to our global funded pension plans, an increase of $25 million compared with 2022. During 2024, we expect to contribute about $1 billion of cash to our global funded pension plans. We also expect to make about $400 million of benefit payments to participants in unfunded plans. Based on current assumptions and regulations, we do not expect to have a legal requirement to fund our major U.S. plans in 2024. Our global funded plans remain fully funded in aggregate, demonstrating the effectiveness of our de-risking strategy and our commitment to a strong balance sheet. For a detailed discussion of our pension plans, refer to the “Critical Accounting Estimates - Pensions and Other Postretirement Employee Benefits” section of Item 7 of Part II of our 2023 Form 10-K Report and Note 17 of the Notes to the Financial Statements. 69 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Return on Invested Capital (“ROIC”). We analyze total Company performance using an adjusted ROIC financial metric based on an after-tax rolling four quarter average. The following table contains the calculation of our ROIC for the years shown (in billions): December 31, 2021 December 31, 2022 December 31, 2023 Adjusted Net Operating Profit/(Loss) After Cash Tax Net income/(loss) attributable to Ford $ 17.9 $ (2.0) $ 4.3 Add: Noncontrolling interest — (0.2) — Less: Income tax 0.1 0.9 0.4 Add: Cash tax (0.6) (0.8) (1.0) Less: Interest on debt (1.8) (1.3) (1.3) Less: Total pension / OPEB income / (cost) 4.9 0.4 (3.1) Add: Pension / OPEB service costs (1.1) (1.0) (0.6) Net operating profit/(loss) after cash tax $ 13.0 $ (3.9) $ 6.7 Less: Special items (excl. pension / OPEB) pre-tax 5.9 (11.7) (2.7) Adjusted net operating profit/(loss) after cash tax $ 7.1 $ 7.8 $ 9.5 Invested Capital Equity $ 48.6 $ 43.2 $ 42.8 Debt (excl. Ford Credit) 20.4 19.9 19.9 Net pension and OPEB liability 6.4 4.7 7.0 Invested capital (end of period) $ 75.4 $ 67.8 $ 69.8 Average invested capital $ 72.1 $ 70.0 $ 68.1 ROIC (a) 18.0 % (5.6) % 9.9 % Adjusted ROIC (Non-GAAP) (b) 9.8 % 11.2 % 13.9 % __________ (a) Calculated as the sum of net operating profit/(loss) after cash tax from the last four quarters, divided by the average invested capital over the last four quarters. (b) Calculated as the sum of adjusted net operating profit/(loss) after cash tax from the last four quarters, divided by the average invested capital over the last four quarters. Note: Numbers may not sum due to rounding. 70 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) CREDIT RATINGS Our short-term and long-term debt is rated by four credit rating agencies designated as nationally recognized statistical rating organizations (“NRSROs”) by the U.S. Securities and Exchange Commission: DBRS, Fitch, Moody’s, and S&P. In several markets, locally recognized rating agencies also rate us. A credit rating reflects an assessment by the rating agency of the credit risk associated with a corporate entity or particular securities issued by that entity. Rating agencies’ ratings of us are based on information provided by us and other sources. Credit ratings are not recommendations to buy, sell, or hold securities and are subject to revision or withdrawal at any time by the assigning rating agency. Each rating agency may have different criteria for evaluating company risk and, therefore, ratings should be evaluated independently for each rating agency. The following rating actions were taken by these NRSROs since the filing of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023: • On October 30, 2023, S&P upgraded the credit ratings for Ford and Ford Credit to BBB- from BB+ and revised the outlook to stable from positive. The following table summarizes certain of the credit ratings and outlook presently assigned by these four NRSROs: NRSRO RATINGS Ford Ford Credit NRSROs Issuer Default / Corporate / Issuer Rating Long-Term Senior Unsecured Outlook / Trend Long-Term Senior Unsecured Short-Term Unsecured Outlook / Trend Minimum Long-Term Investment Grade Rating DBRS BBB (low) BBB (low) Stable BBB (low) R-2 (low) Stable BBB (low) Fitch BBB- BBB- Stable BBB- F3 Stable BBB- Moody’s N/A Ba1 Stable Ba1 NP Stable Baa3 S&P BBB- BBB- Stable BBB- A-3 Stable BBB- 71 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) OUTLOOK We provided 2024 Company guidance in our earnings release furnished on Form 8-K dated February 6, 2024. The guidance is based on our expectations as of February 6, 2024, 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 Part I. 2024 Guidance Total Company Adjusted EBIT (a) $10 - $12 billion Adjusted Free Cash Flow (a) $6 - $7 billion Capital spending $8 - $9.5 billion Ford Credit EBT About $1.5 billion __________ (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 2024, we expect adjusted EBIT of $10 billion to $12 billion and adjusted free cash flow of $6 billion to $7 billion. On a segment basis, we expect: • Ford Pro EBIT of $8 billion to $9 billion driven by continued growth and favorable mix, partially offset by moderated pricing • Ford Blue EBIT of $7 billion to $7.5 billion, reflecting a balanced market equation, including the impact of our all-new F-150 launch; we also expect costs to be flat as we offset higher labor and product cost with efficiencies • Ford Model e EBIT loss of $5 billion to $5.5 billion, primarily driven by continued pricing pressure and investments in next generation vehicles • Ford Credit EBT of about $1.5 billion Our outlook for 2024 assumes: • Flat to modest U.S. industry growth at 16 million to 16.5 million • Non-recurrence of the UAW strike • Full year of all-new Super Duty, which drives positive pricing and mix in Ford Pro • Lower industry pricing as supply and demand normalize • $2 billion benefit from cost reduction initiatives, offsetting higher labor and major product refresh actions 72