FORD MOTOR CO 10-Q

Item 1. Financial Statements (Continued) FORD MOTOR COMPANY AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS NOTE 19. SEGMENT INFORMATION (Continued) Key financial information for the periods ended or at September 30 was as follows (in millions): Ford Blue Ford Model e Ford Pro Ford Next Ford Credit Corporate Other Interest on Debt Special Items Eliminations/Adjustments Total Third Quarter 2023 External revenues $ 25,587 $ 1,758 $ 13,829 $ 1 $ 2,625 $ 1 $ — $ — $ — $ 43,801 Intersegment revenues (a) 8,925 241 — — — — — — ( 9,166 ) — Total revenues $ 34,512 $ 1,999 $ 13,829 $ 1 $ 2,625 $ 1 $ — $ — $ ( 9,166 ) $ 43,801 Income/(Loss) before income taxes $ 1,718 $ ( 1,329 ) $ 1,654 $ ( 17 ) $ 358 $ ( 186 ) $ ( 324 ) $ ( 487 ) (b) $ — $ 1,387 Equity in net income/(loss) of affiliated companies 90 ( 9 ) 179 ( 5 ) 9 — — ( 1 ) — 263 Total assets 60,282 10,966 3,137 235 142,615 53,097 — — ( 2,259 ) (c) 268,073 Third Quarter 2024 External revenues $ 26,238 $ 1,173 $ 15,655 $ 2 $ 3,127 $ 1 $ — $ — $ — $ 46,196 Intersegment revenues (a) 10,577 74 — — — — — — ( 10,651 ) — Total revenues $ 36,815 $ 1,247 $ 15,655 $ 2 $ 3,127 $ 1 $ — $ — $ ( 10,651 ) $ 46,196 Income/(loss) before income taxes $ 1,627 $ ( 1,224 ) $ 1,814 $ ( 10 ) $ 544 $ ( 201 ) $ ( 272 ) $ ( 1,409 ) (d) $ — $ 869 Equity in net income/(loss) of affiliated companies 69 ( 13 ) 82 — 10 ( 1 ) — — — 147 Total assets 60,477 17,540 3,833 157 156,416 51,884 — — ( 3,260 ) (c) 287,047 Ford Blue Ford Model e Ford Pro Ford Next Ford Credit Corporate Other Interest on Debt Special Items Eliminations/Adjustments Total First Nine Months 2023 External revenues $ 75,713 $ 4,299 $ 42,667 $ 2 $ 7,541 $ 7 $ — $ — $ — $ 130,229 Intersegment revenues (a) 28,308 422 — — — — — — ( 28,730 ) — Total revenues $ 104,021 $ 4,721 $ 42,667 $ 2 $ 7,541 $ 7 $ — $ — $ ( 28,730 ) $ 130,229 Income/(Loss) before income taxes $ 6,649 $ ( 3,131 ) $ 5,411 $ ( 87 ) $ 1,051 $ ( 530 ) $ ( 936 ) $ ( 2,593 ) (b) $ — $ 5,834 Equity in net income/(loss) of affiliated companies 249 ( 15 ) 456 ( 23 ) 23 1 — ( 422 ) (e) — 269 First Nine Months 2024 External revenues $ 74,662 $ 2,437 $ 50,662 $ 5 $ 9,011 $ 4 $ — $ — $ — $ 136,781 Intersegment revenues (a) 33,624 207 — — — — — — ( 33,831 ) — Total revenues $ 108,286 $ 2,644 $ 50,662 $ 5 $ 9,011 $ 4 $ — $ — $ ( 33,831 ) $ 136,781 Income/(loss) before income taxes $ 3,703 $ ( 3,687 ) $ 7,386 $ ( 32 ) $ 1,213 $ ( 513 ) $ ( 820 ) $ ( 2,331 ) (f) $ — $ 4,919 Equity in net income/(loss) of affiliated companies 227 ( 52 ) 310 ( 2 ) 28 ( 1 ) — 1 — 511 __________ (a) Intersegment revenues only reflect finished vehicle transactions between Ford Blue, Ford Model e, and Ford Pro where there is an intersegment markup and are recognized at the time of the intersegment transaction. (b) Primarily reflects restructuring actions, mark-to-market adjustments for our global pension and OPEB plans, and an accrual for the Transit Connect customs matter (relating to certain Transit Connect vehicles produced between 2009 and 2013). (c) Primarily includes eliminations of intersegment transactions occurring in the ordinary course of business. (d) Primarily reflects a write-down of certain product-specific assets of $ 391 million and other expenses of $ 588 million related to the cancellation of a previously planned all-electric three-row SUV program, all of which was recorded in C ost of sales . The remaining items consist of pension curtailment costs and remeasurement losses (primarily related to hourly buyouts in North America) and continued restructuring actions in Europe. (e) Primarily reflects our share of charges from an equity method investment resulting from Ford’s ongoing restructuring actions in China. (f) Includes a write-down of certain product-specific assets of $ 391 million and other expenses of $ 588 million related to the cancellation of a previously planned all-electric three-row SUV program, all of which was recorded in Cost of sales . The amount also reflects restructuring actions in Europe, buyouts for hourly employees in North America, the extended duration of the Oakville Assembly Plant changeover, and pension curtailment and separation costs in North America and Europe. 34 ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. RECENT DEVELOPMENTS 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, we recorded about $1.1 billion of expenses in the third quarter of 2024 and may continue to incur expenses related to payments to our electric vehicle-related suppliers (battery, raw material, or otherwise), inventory adjustments, or other matters. The third quarter amount includes $979 million related to the cancellation of a previously announced all-electric three-row SUV program. We may incur additional expenses and cash expenditures of up to about $900 million related to the cancellation, the majority of which we expect to record by the first half of 2025. Further, significant unexpected changes in the EV demand environment have led, and may in the future lead, to incremental competitive pricing actions. These market dynamics may continue to occur, which could have a substantial impact on our business. In addition, slower-than-anticipated development of the electric vehicle market may impact our strategy to comply with regulatory standards, and, in some cases, we plan to utilize credits purchased from third parties to demonstrate regulatory compliance or we may need to modify our product offerings. See Item 1A. Risk Factors in our 2023 Form 10‑K Report and as updated by our subsequent filings with the SEC for a discussion of the risks related to lower-than-anticipated electric vehicle volumes and our planned transition to a greater mix of electric vehicles. 35 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) RESULTS OF OPERATIONS In the third quarter of 2024, the net income attributable to Ford Motor Company was $892 million, and Company adjusted EBIT was $2,550 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 19 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): Third Quarter First Nine Months 2023 2024 2023 2024 Restructuring (by Geography) Europe $ (42) $ (120) $ (463) $ (667) North America Hourly Buyouts — — — (260) China (126) — (881) — Other 33 — (114) — Subtotal Restructuring $ (135) $ (120) $ (1,458) $ (927) Other Items EV program cancellation $ — $ (979) $ — $ (979) Transit Connect customs matter (96) — (396) — Extended Oakville Assembly Plant Changeover — — — (246) EV program dispute — 19 — 19 Other (including gains/(losses) on investments) (8) (3) (184) 6 Subtotal Other Items $ (104) $ (963) $ (580) $ (1,200) Pension and OPEB Gain/(Loss) Pension and OPEB remeasurement $ (169) $ (168) $ (371) $ 15 Pension settlements, curtailments, and separations costs (79) (158) (184) (219) Subtotal Pension and OPEB Gain/(Loss) $ (248) $ (326) $ (555) $ (204) Total EBIT Special Items $ (487) $ (1,409) $ (2,593) $ (2,331) Provision for/(Benefit from) tax special items (a) $ (87) $ (343) $ (408) $ (533) __________ (a) Includes related tax effect on special items and tax special items. We recorded $1.4 billion of pre-tax special item charges in the third quarter of 2024, primarily reflecting a write-down of certain product-specific assets and other expenses related to the cancellation of a previously planned all-electric three-row SUV program, pension curtailment costs and remeasurement losses (primarily related to hourly buyouts in North America), and continued restructuring actions in Europe. In Note 19 of the Notes to the Financial Statements, special items are reflected as a separate reconciling item, as opposed to being allocated among our segments. This reflects the fact that management excludes these items from its review of operating segment results for purposes of measuring segment profitability and allocating resources. 36 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) COMPANY KEY METRICS The table below shows our third quarter and first nine months 2024 key metrics for the Company, compared to a year ago. Third Quarter First Nine Months 2023 2024 H / (L) 2023 2024 H / (L) GAAP Financial Measures Cash Flows from Operating Activities ($B) $ 4.6 $ 5.5 $ 0.9 $ 12.4 $ 12.4 $ — Revenue ($M) 43,801 46,196 5 % 130,229 136,781 5 % Net Income/(Loss) ($M) 1,199 892 $ (307) 4,873 4,055 $ (818) Net Income/(Loss) Margin (%) 2.7 % 1.9 % (0.8) ppts 3.7 % 3.0 % (0.8) ppts EPS (Diluted) $ 0.30 $ 0.22 $ (0.08) $ 1.21 $ 1.01 $ (0.20) Non-GAAP Financial Measures (a) Company Adj. Free Cash Flow ($B) $ 1.2 $ 3.2 $ 2.0 $ 4.8 $ 5.9 $ 1.1 Company Adj. EBIT ($M) 2,198 2,550 352 9,363 8,070 (1,293) Company Adj. EBIT Margin (%) 5.0 % 5.5 % 0.5 ppts 7.2 % 5.9 % (1.3) ppts Adjusted EPS (Diluted) $ 0.39 $ 0.49 $ 0.10 $ 1.73 $ 1.46 $ (0.27) Adjusted ROIC (Trailing Four Quarters) 15.1 % 11.4 % (3.7) ppts __________ (a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP. In the third quarter of 2024, our diluted earnings per share of Common and Class B Stock was $0.22, and our diluted adjusted earnings per share was $0.49. Net income/(loss) margin was 1.9% in the third quarter of 2024, down 0.8 percentage points from a year ago. Company adjusted EBIT margin was 5.5% in the third quarter of 2024, up 0.5 percentage points from a year ago. The table below shows our third quarter and first nine months 2024 net income/(loss) attributable to Ford and Company adjusted EBIT by segment. Third Quarter First Nine Months 2023 2024 H / (L) 2023 2024 H / (L) Ford Blue $ 1,718 $ 1,627 $ (91) $ 6,649 $ 3,703 $ (2,946) Ford Model e (1,329) (1,224) 105 (3,131) (3,687) (556) Ford Pro 1,654 1,814 160 5,411 7,386 1,975 Ford Next (17) (10) 7 (87) (32) 55 Ford Credit 358 544 186 1,051 1,213 162 Corporate Other (186) (201) (15) (530) (513) 17 Company Adjusted EBIT (a) 2,198 2,550 352 9,363 8,070 (1,293) Interest on Debt (324) (272) 52 (936) (820) 116 Special Items (487) (1,409) (922) (2,593) (2,331) 262 Taxes / Noncontrolling Interests (188) 23 211 (961) (864) 97 Net Income/(Loss) $ 1,199 $ 892 $ (307) $ 4,873 $ 4,055 $ (818) __________ (a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP. The year-over-year decrease of $307 million in net income was primarily driven by the three-row SUV EV program cancellation special item, offset partially by higher Company adjusted EBIT and lower tax expense. The year-over-year increase of $352 million in Company adjusted EBIT was driven by higher Ford Credit and Ford Pro EBIT and a lower Ford Model e EBIT loss, offset partially by lower Ford Blue EBIT. 37 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) The tables below and on the following pages provide third quarter and first nine months 2024 key metrics and the change in third quarter 2024 EBIT compared with third quarter 2023 by causal factor for each of our Ford Blue, Ford Model e, and Ford Pro segments. For a description of these causal factors, see Definitions and Information Regarding Ford Blue, Ford Model e, Ford Pro Causal Factors. Ford Blue Segment Third Quarter First Nine Months Key Metrics 2023 2024 H / (L) 2023 2024 H / (L) Wholesale Units (000) (a) 736 721 (15) 2,162 2,088 (74) Revenue ($M) $ 25,587 $ 26,238 $ 651 $ 75,713 $ 74,662 $ (1,051) EBIT ($M) 1,718 1,627 (91) 6,649 3,703 (2,946) EBIT Margin (%) 6.7 % 6.2 % (0.5) ppts 8.8 % 5.0 % (3.8) ppts __________ (a) Includes Ford and Lincoln brand and JMC brand vehicles produced and sold in China by our unconsolidated affiliates (about 124,000 units in Q3 2023 and 101,000 units in Q3 2024). Change in EBIT by Causal Factor (in millions) Third Quarter 2023 EBIT $ 1,718 Volume / Mix 13 Net Pricing 113 Cost 201 Exchange (369) Other (49) Third Quarter 2024 EBIT $ 1,627 In the third quarter of 2024, Ford Blue’s wholesales decreased 2% from a year ago, driven primarily by the end of production of the Edge in North America and fewer vehicles produced and sold in China by our unconsolidated affiliates, offset partially by higher Bronco and F-150 wholesales. Third quarter 2024 revenue increased 3%, driven primarily by higher wholesales excluding our unconsolidated affiliates in China, offset partially by unfavorable exchange. Ford Blue’s third quarter 2024 EBIT was $1.6 billion, a decrease of $91 million from a year ago, with an EBIT margin of 6.2%. The lower EBIT was primarily driven by unfavorable exchange and higher manufacturing cost, offset partially by lower warranty costs and higher net pricing. 38 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Ford Model e Segment Third Quarter First Nine Months Key Metrics 2023 2024 H / (L) 2023 2024 H / (L) Wholesale Units (000) 36 32 (4) 82 68 (14) Revenue ($M) $ 1,758 $ 1,173 $ (585) $ 4,299 $ 2,437 $ (1,862) EBIT ($M) (1,329) (1,224) 105 (3,131) (3,687) (556) EBIT Margin (%) (75.6) % (104.4) % (28.8) ppts (72.8) % (151.3) % (78.5) ppts Change in EBIT by Causal Factor (in millions) Third Quarter 2023 EBIT $ (1,329) Volume / Mix 37 Net Pricing (470) Cost 526 Exchange 11 Other 1 Third Quarter 2024 EBIT $ (1,224) In the third quarter of 2024, Ford Model e’s wholesales decreased 11% from a year ago to 32,000 units due to competitive market conditions. Third quarter 2024 revenue decreased 33%, reflecting a more competitive EV demand environment (including new entrants to the market), which resulted in lower net pricing and lower wholesales. Ford Model e’s third quarter 2024 EBIT loss was $1.2 billion, a $105 million improvement from a year ago, with an EBIT margin of negative 104.4%. The improved EBIT was primarily driven by lower costs (including lower battery-related raw material costs as well as other material costs and lower warranty), offset partially by unfavorable net pricing. Ford Pro Segment Third Quarter First Nine Months Key Metrics 2023 2024 H / (L) 2023 2024 H / (L) Wholesale Units (000) (a) 314 342 28 1,016 1,125 109 Revenue ($M) $ 13,829 $ 15,655 $ 1,826 $ 42,667 $ 50,662 $ 7,995 EBIT ($M) 1,654 1,814 160 5,411 7,386 1,975 EBIT Margin (%) 12.0 % 11.6 % (0.4) ppts 12.7 % 14.6 % 1.9 ppts __________ (a) Includes Ford brand vehicles produced and sold by our unconsolidated affiliate Ford Otosan in Türkiye (about 24,000 units in Q3 2023 and 21,000 units in Q3 2024). Change in EBIT by Causal Factor (in millions) Third Quarter 2023 EBIT $ 1,654 Volume / Mix 586 Net Pricing 252 Cost (613) Exchange 12 Other (77) Third Quarter 2024 EBIT $ 1,814 In the third quarter of 2024, Ford Pro’s wholesales increased 9% from a year ago more than explained by higher sales of the Transit family of vehicles and Super Duty. Third quarter 2024 revenue increased 13%, reflecting higher wholesales, favorable mix, and higher net pricing driven by continued strong demand for certain core Ford Pro products. Ford Pro’s third quarter 2024 EBIT was $1.8 billion, an increase of $160 million from a year ago, with an EBIT margin of 11.6%. The EBIT improvement was driven by favorable market factors, offset partially by higher warranty costs and growth-related structural costs. 39 Item 2. 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-period 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 • 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. Excludes transactions between Ford Blue, Ford Model e, and Ford Pro segments • Industry Volume and Market Share – based, in part, on estimated vehicle registrations; includes medium and heavy duty trucks • SAAR – seasonally adjusted annual rate 40 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Ford Next Segment The Ford Next segment primarily includes expenses and investments for emerging business initiatives aimed at creating value for Ford in vehicle-adjacent market segments. Ford Next’s third quarter 2024 EBIT loss was $10 million, a $7 million improvement from a year ago. Ford Credit Segment Ford Credit files periodic reports with the SEC that contain additional information regarding Ford Credit. The reports are available through Ford Credit’s website located at www.ford.com/finance/investor-center and can also be found on the SEC’s website located at www.sec.gov . The foregoing information regarding Ford Credit’s website and its content is for convenience only and not deemed to be incorporated by reference into this Report nor filed with the SEC. The tables below provide third quarter and first nine months 2024 key metrics and the change in third quarter 2024 EBT compared with third quarter 2023 by causal factor for the Ford Credit segment. For a description of these causal factors, see Definitions and Information Regarding Ford Credit Causal Factors. Third Quarter First Nine Months Key Metrics 2023 2024 H / (L) 2023 2024 H / (L) Total Net Receivables ($B) $ 126.3 $ 142.2 $ 15.9 Loss-to-Receivables (bps) (a) 38 57 19 32 48 16 Auction Values (b) $ 31,685 $ 31,265 (1) % $ 31,980 $ 29,770 (7) % EBT ($M) 358 544 $ 186 1,051 1,213 $ 162 ROE (%) 7.8 % 14.1 % 6.3 ppts 8.4 % 9.6 % 1.2 ppts Other Balance Sheet Metrics Debt ($B) $ 122.9 $ 136.7 $ 13.8 Net Liquidity ($B) 27.0 29.6 2.6 Financial Statement Leverage (to 1) 9.7 9.7 — __________ (a) U.S. retail financing only. (b) U.S. 36-month off-lease third quarter auction values at Q3 2024 mix and YTD amounts at YTD 2024 mix. Change in EBT by Causal Factor (in millions) Third Quarter 2023 EBT $ 358 Volume / Mix 37 Financing Margin 201 Credit Loss (26) Lease Residual (66) Exchange 1 Other 39 Third Quarter 2024 EBT $ 544 Ford Credit’s total net receivables of $142.2 billion were 13% higher than a year ago, explained primarily by higher consumer and non-consumer financing and a larger lease portfolio. The third quarter 2024 U.S. loss-to-receivables (“LTR”) ratio of 57 basis points increased from a year ago, reflecting increased loss severity and higher repossessions. U.S. auction values in the third quarter of 2024 were lower year over year. Ford Credit’s third quarter 2024 EBT of $544 million was $186 million higher than a year ago, explained primarily by higher financing margin and higher receivables, offset partially by lower expected auction values and higher return rates on existing operating leases. 41 Item 2. 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 of Part II of our 2023 Form 10-K Report • 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 of Part II of our 2023 Form 10-K Report • 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 42 Item 2. 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 43 Item 2. 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. In the third quarter of 2024, Corporate Other had a $201 million EBIT loss, compared to a $186 million EBIT loss a year ago. Interest on Debt Interest on Debt, which consists of interest expense on Company debt excluding Ford Credit, was $272 million in the third quarter of 2024, $52 million lower than a year ago. Taxes Our Provision for/(Benefit from) income taxes for the third quarter and first nine months of 2024 was a benefit of $27 million and a provision of $856 million, respectively, resulting in effective tax rates of negative 3.1% and 17.4%, respectively. During the third quarter of 2024, we recognized tax benefits from a change in our full-year forecast of tax expense, including benefits related to the write-down of certain product-specific manufacturing and vendor tooling assets classified as a special item. Our third quarter and first nine months of 2024 adjusted effective tax rates, which exclude special items, were 13.9% and 19.2%, respectively. 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. 44 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) LIQUIDITY AND CAPITAL RESOURCES At September 30, 2024, total balance sheet cash, cash equivalents, marketable securities, and restricted cash, including Ford Credit and entities held for sale, was $37.2 billion. We consider our key balance sheet metrics to be: (i) Company cash, which includes cash equivalents, marketable securities, and restricted cash, including cash held for sale, excluding Ford Credit’s cash, cash equivalents, marketable securities, and restricted cash; and (ii) Company liquidity, which includes Company cash, less restricted cash, and total available committed credit lines, excluding Ford Credit’s total available committed credit lines. Company excluding Ford Credit December 31, 2023 September 30, 2024 Balance Sheets ($B) Company Cash $ 28.8 $ 27.9 Liquidity 46.4 46.1 Debt (19.9) (20.6) Cash Net of Debt 8.9 7.3 Pension Funded Status ($B) (a) Funded Plans $ 2.1 $ 2.8 Unfunded Plans (4.4) (4.1) Total Global Pension $ (2.3) $ (1.3) Total Funded Status OPEB $ (4.7) $ (4.6) __________ (a) Balances at September 30, 2024 reflect net funded status at December 31, 2023, updated for: service and interest cost; expected return on assets; curtailments, settlements, and associated interim remeasurement (where applicable); separation expense; actual benefit payments; and cash contributions. The discount rate and rate of expected return assumptions are unchanged from year-end 2023. 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 September 30, 2024, we had Company cash of $27.9 billion and liquidity of $46.1 billion. At September 30, 2024, about 84% 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. 45 Item 2. 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” in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 of our 2023 Form 10-K Report) • Purchase of regulatory compliance credits • Marketing incentive payments to dealers • Payments for warranty and field service actions (for additional information, see Note 18 of the Notes to the Financial Statements herein) • Debt repayments (for additional information, see the Aggregate Contractual Obligations table in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 and Note 19 of the Notes the Financial Statements in our 2023 Form 10-K Report) • Discretionary and mandatory payments to our global pension plans (for additional information, see the Aggregate Contractual Obligations table in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 of our 2023 Form 10-K Report, the “Changes in Company Cash” section below, and Note 11 of the Notes to the Financial Statements herein) • Employee wages, benefits, and incentives • Operating lease payments (for additional information, see the Aggregate Contractual Obligations table in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 and Note 18 of the Notes to the Financial Statements in our 2023 Form 10-K Report) • 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 share-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 plan to utilize our liquidity (as described above) and our cash flows from business operations to fund our material cash requirements. 46 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) 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). 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 September 30, 2024 was higher than at December 31, 2023, reflecting higher in-plant and in-transit inventory, partially driven by new vehicle launches. 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 may also 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 or otherwise compensate the supplier in an amount determined by the contract. As of September 30, 2024, 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 $3.4 billion of purchase obligations and approximately $4.9 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 the event that we do not expect to consume all of the materials we are obligated to purchase pursuant to the terms of these agreements, we may sell the excess materials to a replacement purchaser or back to the supplier. The resale price may or may not be the same as the original purchase price, depending on then-current market conditions and negotiated terms. As a result, we have recorded, and may in the future record, accruals related to either the resale when the purchase price mechanism under our agreements is higher than the expected resale price of the excess materials or when we are required to otherwise compensate the supplier. Accruals recorded to date for such items have been immaterial. 47 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) As market conditions dictate, we have and may in the future enter into additional offtake agreements with raw material suppliers or renegotiate existing agreements. In addition, as mentioned above, we may seek to resell excess materials. 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 the first half of 2025. See Item 1A. Risk Factors in our 2023 Form 10-K Report and as updated by our subsequent filings with the SEC for a discussion of the risks related to our offtake agreements and other long-term purchase contracts. 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 September 30, 2024, the outstanding amount of Ford receivables that suppliers elected to sell to the SCF financial institutions was $211 million. The amount settled through the SCF program during the first nine months of 2024 was $1.1 billion. Changes in Company cash excluding Ford Credit are summarized below (in billions): Third Quarter First Nine Months 2023 2024 2023 2024 Company Excluding Ford Credit Company Adjusted EBIT excluding Ford Credit (a) $ 1.8 $ 2.0 $ 8.3 $ 6.9 Capital spending $ (2.2) $ (2.0) $ (5.9) $ (6.1) Depreciation and tooling amortization 1.3 1.2 3.9 3.8 Net spending $ (0.9) $ (0.7) $ (2.0) $ (2.3) Receivables $ (0.6) $ 0.2 $ (0.8) $ — Inventory (0.8) (0.5) (4.2) (2.3) Trade Payables 0.2 1.1 1.9 1.9 Changes in working capital $ (1.1) $ 0.8 $ (3.1) $ (0.4) Ford Credit distributions $ — $ 0.2 $ — $ 0.3 Interest on debt and cash taxes (0.4) (0.5) (1.7) (1.7) All other and timing differences 1.8 1.4 3.3 3.2 Company adjusted free cash flow (a) $ 1.2 $ 3.2 $ 4.8 $ 5.9 Restructuring $ (0.3) $ (0.2) $ (0.4) $ (0.7) Changes in debt — (0.1) (0.2) 0.3 Funded pension contributions (0.2) (0.3) (0.4) (1.0) Shareholder distributions (0.6) (0.6) (4.4) (2.8) All other (0.9) (0.7) (2.6) (2.7) Change in cash $ (0.8) $ 1.3 $ (3.2) $ (1.0) __________ (a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP. Note: Numbers may not sum due to rounding. Our third quarter 2024 Net cash provided by/(used in) operating activities was positive $5.5 billion, $0.9 billion higher than a year ago (see page 61 for additional information). The increase reflects higher working capital, offset partially by lower Ford Credit operating cash flow and lower net income. Company adjusted free cash flow was $3.2 billion, $2.0 billion higher than a year ago, primarily driven by working capital changes, adjusted EBIT improvement, and Ford Credit distributions, offset partially by all other and timing differences. Capital spending was $2.0 billion in the third quarter of 2024, a decrease of $0.2 billion from a year ago. We now expect full year 2024 capital spending to be in the range of $8 billion to $8.5 billion. 48 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Third quarter 2024 working capital impact was $0.8 billion, driven by higher trade payables, partially offset by higher inventory, each compared to June 30, 2024. All other and timing differences were positive $1.4 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). Cash outflows related to our warranty accruals are expected to occur over several years. In the third quarter and first nine months of 2024, we contributed $334 million and $967 million, respectively, to our global funded pension plans. We continue to expect to contribute about $1 billion to our global funded pension plans in 2024. Shareholder distributions (including cash dividends and anti-dilutive share repurchases) were $0.6 billion in the third quarter of 2024 and $2.8 billion for the first nine months of 2024. Available Credit Lines . Total Company committed credit lines, excluding Ford Credit, at September 30, 2024 were $20.2 billion, consisting of $13.5 billion of our corporate credit facility, $2.0 billion of our supplemental revolving credit facility, $2.5 billion of our 364-day revolving credit facility, and $2.2 billion of local credit facilities. At September 30, 2024, $1.8 billion of committed Company credit lines, excluding Ford Credit, was utilized under local credit facilities for our affiliates, and the full amount under each of our corporate, supplemental, and 364-day credit facilities was available. Lenders under our corporate credit facility have $25 million of commitments maturing on April 26, 2026, $3.4 billion of commitments maturing on April 22, 2027, $0.1 billion of commitments maturing on April 26, 2028, and $10.0 billion of commitments maturing on April 20, 2029. Lenders under our supplemental revolving credit facility have $2.0 billion of commitments maturing on April 22, 2027. Lenders under our 364-day revolving credit facility have $2.5 billion of commitments maturing on April 21, 2025. 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, carbon-free electricity consumption, and Ford Europe CO 2 tailpipe emissions. Prior to 2024, the specified targets related to global manufacturing facility greenhouse gas emissions, renewable electricity consumption, and Ford Europe CO 2 tailpipe emissions; Ford outperformed all three of these sustainability-linked metrics in 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. If our senior, unsecured, long-term debt does not maintain at least two investment grade ratings from Fitch, Moody’s, and S&P, the guarantees of certain subsidiaries will be required. 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. Debt. As shown in Note 12 of the Notes to the Financial Statements, at September 30, 2024, Company debt excluding Ford Credit was $20.6 billion. This balance is $0.7 billion higher than at December 31, 2023. 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 and Capital Resources - Ford Credit Segment” section of Item 2. Ford Credit is self-funding and its debt, which is used to fund its operations, is separate from our Company debt excluding Ford Credit. 49 Item 2. 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 ended the third quarter of 2024 with $29.6 billion of liquidity, up $3.9 billion from year-end. Ford Credit continues to have robust access to capital markets, completing $29 billion of public term issuances through October 25, 2024. Key elements of Ford Credit’s funding strategy include: • Maintain strong liquidity and funding diversity • Prudently access public markets • Continue to leverage retail deposits in Europe • Flexibility to increase asset-backed securities 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. The following table shows funding for Ford Credit’s net receivables (in billions): September 30, 2023 December 31, 2023 September 30, 2024 Funding Structure Term unsecured debt $ 50.7 $ 54.1 $ 61.7 Term asset-backed securities 55.9 58.0 56.3 Retail Deposits / Ford Interest Advantage 16.3 17.2 18.7 Other 2.2 1.4 0.1 Equity 12.6 13.4 14.0 Cash (11.4) (10.9) (8.6) Total Net Receivables $ 126.3 $ 133.2 $ 142.2 Securitized Funding as Percent of Total Debt 45.5 % 44.9 % 41.2 % Net receivables of $142.2 billion at September 30, 2024 were funded primarily with term unsecured debt and term asset-backed securities. Securitized funding as a percent of total debt was 41.2% as of September 30, 2024. Public Term Funding Plan. The following table shows Ford Credit’s issuances for full year 2022 and 2023, planned issuances for full year 2024, and its global public term funding issuances through October 25, 2024, excluding short-term funding programs (in billions): 2022 Actual 2023 Actual 2024 Forecast Through October 25 Unsecured $ 6 $ 14 $ 16 - 19 $ 16 Securitizations (a) 10 14 14 - 16 13 Total public $ 16 $ 28 $ 30 - 35 $ 29 __________ (a) See Definitions and Information Regarding Ford Credit Causal Factors section. For 2024, Ford Credit now projects full year public term funding in the range of $30 billion to $35 billion. 50 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Liquidity. The following table shows Ford Credit’s liquidity sources and utilization (in billions): September 30, 2023 December 31, 2023 September 30, 2024 Liquidity Sources (a) Cash $ 11.6 $ 10.9 $ 8.6 Committed asset-backed facilities 42.3 42.9 44.6 Other unsecured credit facilities 2.4 2.4 1.8 Total liquidity sources $ 56.3 $ 56.2 $ 55.0 Utilization of Liquidity (a) Securitization and restricted cash $ (2.9) $ (2.8) $ (3.1) Committed asset-backed facilities (25.8) (27.5) (22.5) Other unsecured credit facilities (0.7) (0.4) (0.1) Total utilization of liquidity $ (29.4) $ (30.7) $ (25.7) Available liquidity $ 26.9 $ 25.5 $ 29.3 Other adjustments 0.1 0.2 0.3 Net liquidity available for use $ 27.0 $ 25.7 $ 29.6 __________ (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 September 30, 2024, Ford Credit’s net liquidity available for use was $29.6 billion, $3.9 billion higher than year-end 2023, primarily reflecting strong access to public funding markets resulting in lower utilization of committed asset-backed facilities. At September 30, 2024, Ford Credit’s liquidity sources, including cash, committed asset-backed facilities, and unsecured credit facilities, totaled $55.0 billion, down $1.2 billion from year-end 2023, primarily explained by lower cash due to higher receivables. 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 “Aggregate Contractual Obligations” table in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 and Note 19 of the Notes to the Financial Statements in our 2023 Form 10-K Report). 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. 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. Refer to the “Liquidity and Capital Resources - Ford Credit Segment - Funding and Liquidity Risks” section of Item 7 of Part II of our 2023 Form 10-K Report for more information. 51 Item 2. 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): September 30, 2023 December 31, 2023 September 30, 2024 Leverage Calculation Debt $ 122.9 $ 129.3 $ 136.7 Equity (a) 12.6 13.4 14.0 Financial statement leverage (to 1) 9.7 9.7 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 September 30, 2024, 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. 52 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Total Company Pension Plans - Funded Balances. As of September 30, 2024, our total Company pension underfunded status reported on our consolidated balance sheets was $1.3 billion and reflects the net funded status at December 31, 2023, updated for: service and interest cost; expected return on assets; curtailments, settlements, and associated interim remeasurement (where applicable); separation expense; actual benefit payments; and cash contributions. For plans without interim remeasurement, the discount rate and rate of expected return assumptions are unchanged from year-end 2023. 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 periods shown (in billions): Four Quarters Ending September 30, 2023 September 30, 2024 Adjusted Net Operating Profit/(Loss) After Cash Tax Net income/(loss) attributable to Ford $ 6.2 $ 3.5 Add: Noncontrolling interest (0.3) — Less: Income tax (0.9) 0.5 Add: Cash tax (1.1) (1.3) Less: Interest on debt (1.3) (1.2) Less: Total pension/OPEB income/(cost) (1.2) (2.7) Add: Pension/OPEB service costs (0.7) (0.6) Net operating profit/(loss) after cash tax $ 7.5 $ 5.1 Less: Special items (excl. pension/OPEB) pre-tax (2.7) (2.8) Adjusted net operating profit/(loss) after cash tax $ 10.2 $ 8.0 Invested Capital Equity $ 44.3 $ 44.3 Debt (excl. Ford Credit) 19.8 20.6 Net pension and OPEB liability 4.6 5.9 Invested capital (end of period) $ 68.6 $ 70.8 Average invested capital $ 67.5 $ 69.7 ROIC (a) 11.1 % 7.4 % Adjusted ROIC (Non-GAAP) (b) 15.1 % 11.4 % __________ (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. 53 Item 2. 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. There have been no rating actions taken by these NRSROs since the filing of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024. 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- 54 Item 2. 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 October 28, 2024. The guidance is based on our expectations as of October 28, 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 our 2023 Form 10-K Report and as updated by our subsequent filings with the SEC. 2024 Guidance Total Company Adjusted EBIT (a) About $10 billion Adjusted Free Cash Flow (a) $7.5 - $8.5 billion Capital spending $8 - $8.5 billion Ford Credit EBT About $1.6 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 now expect adjusted EBIT of about $10 billion and adjusted free cash flow of $7.5 billion to $8.5 billion, including lower-than-planned volume in the second half of 2024 for Ford Pro and Ford Blue due to supplier disruptions. On a segment basis, we now expect: • Ford Pro EBIT of about $9 billion driven by continued growth and favorable mix as well as continued pricing strength on core products • Ford Blue EBIT of about $5 billion, reflecting a balanced market equation and higher product, manufacturing, and warranty costs, offset partially by cost efficiencies • Ford Model e EBIT loss of about $5 billion driven by continued pricing pressure and investments in new electric vehicles • Ford Credit EBT of about $1.6 billion Our outlook for 2024 assumes: • Flat to modest U.S. industry growth at 16 million to 16.5 million • Full year of all-new Super Duty, which drives positive pricing and mix in Ford Pro • Lower industry pricing • $2 billion of cost reductions in material, freight, and manufacturing 55