What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2025-02-06 compared with 2024-02-07 · 248 added, 139 removed, 141 unchanged (73% of the section changed)

Business (Continued)

In 2022, CARB adopted new light-duty emissions standards applicable to vehicles beginning in model year 2026 as part of its new Advanced Clean Cars II (“ACC II”) regulations.

ACC II includes more stringent emissions standards and other new emissions requirements, with the stated goal of 100% electrification of new passenger cars and trucks by 2035.

EPA has yet to take final action on CARB’s request for a waiver of federal preemption for the ACC II standards, which will be necessary before they can be enforced.

The expected court ruling in the legal challenge to EPA’s reversal of the revocation of California’s authority could also impact EPA’s action on CARB’s request for a waiver of preemption for ACC II.

CARB has also adopted new emissions regulations applicable to model year 2024 and later heavy-duty engines, as well as extended heavy-duty warranty requirements beginning with model year 2022.

EPA has granted waivers of preemption for some of CARB’s heavy-duty standards, and is expected to grant or deny waivers for the remaining standards in 2024 (agency action which could be impacted by the outcome of the litigation over the waiver for CARB’s light-duty standards).

EPA itself has adopted more stringent heavy-duty criteria emissions standards, beginning with the 2027 model year, and proposed more stringent heavy-duty GHG emissions standards, also beginning with the 2027 model year, which are expected to be finalized in the first half of 2024.

These rules include more stringent emissions standards, as well as new requirements affecting durability testing, warranty, and OBD.

In Ford’s case, the heavy-duty emissions standards—as well as the fuel economy standards discussed below—primarily affect heavy-duty pickup trucks and vans, as well as vocational vehicles such as shuttle buses and delivery trucks.

As the heavy-duty standards increase in stringency, it may become more difficult to comply while continuing to offer a full lineup of heavy-duty trucks.

The new rules promulgated by EPA and CARB are expected to impose increased challenges and costs on Ford and other manufacturers of light-, medium-, and heavy-duty vehicles and engines.

Stringent federal or state agency fuel economy and GHG standards that are misaligned with market conditions could also force Ford to take various actions that could have substantial adverse effects on its sales volumes and operations.

Such actions could include restricting offerings of selected engines and popular options;

taking actions to increase sales of Ford’s most fuel-efficient vehicles;

and ultimately curtailing the production and sale of certain internal combustion vehicles, such as high-performance cars, utility vehicles, and/or full-size light trucks in order to maintain compliance.

The ongoing litigation challenging EPA and CARB standards and potential future federal reversals and rollbacks create risks for Ford’s planning and investing for compliance, or could also potentially relieve the burdens of misalignment of the standards with market conditions.

Compliance with automobile emissions standards depends in part on the widespread availability of high-quality and consistent automotive fuels that the vehicles were designed to use.

Legislative, regulatory, and judicial developments related to fuel quality at both the national and state levels could affect vehicle manufacturers’ warranty costs as well as their ability to comply with vehicle emissions standards.

California ZEV Requirements.

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

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

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

In ACC II, California has revised the ZEV regulation in a way that will continue to increase ZEV sales.

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

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

EPA must either decide that these revisions fall within the scope of prior waivers of federal preemption granted for CARB’s ZEV amendments or waive preemption for these standards before the standards can be enforced.

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

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

As of December 31, 2023, sixteen states have adopted California’s ZEV requirements.

Additionally, in 2023, California adopted new medium- and heavy-duty fleet purchase requirements that include a 100% ZEV manufacturer sales requirement starting in 2036.

Compliance with ZEV requirements depends on market conditions (including consumer preference for and the pricing of EVs) in each jurisdiction where the requirements apply (such as California and each opt-in state), technology readiness, and battery raw material availability as well as the availability of adequate infrastructure to support vehicle charging.

Federal Fuel Economy Requirements - Light-Duty Vehicles.

Federal law requires that light-duty vehicles meet minimum corporate average fuel economy (“CAFE”) standards set by the National Highway Traffic Safety Administration (“NHTSA”).

Manufacturers are subject to civil penalties if they fail to meet the CAFE standard in any model year, after taking into account all available credits for the preceding five model years and expected credits for the three succeeding model years.

The law requires NHTSA to promulgate and enforce separate CAFE standards applicable to each manufacturer’s fleet of domestic passenger cars, imported passenger cars, and light-duty trucks.

Business (Continued)

Because the vast majority of GHGs emitted by a vehicle are the result of fuel combustion, GHG emissions correspond closely with fuel economy.

Historically, NHTSA and EPA have therefore coordinated with each other on their fuel economy and GHG standards, respectively, to avoid potential inconsistencies.

Beginning with the 2012 model year, EPA and NHTSA jointly promulgated harmonized GHG and fuel economy regulations under what came to be known as the “One National Program” (“ONP”) framework, and California agreed that compliance with the federal program would satisfy compliance with its own GHG requirements, thereby avoiding a patchwork of federal and state standards.

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

These standards are subject to a legal challenge, with a court decision expected in 2024.

In 2023, NHTSA proposed increasingly stringent fuel economy standards for passenger cars and light trucks in model years 2027-2031 and heavy-duty pickup trucks and vans in model years 2030 through 2035.

NHTSA proposed these fuel economy standards separately from EPA’s proposed GHG standards for the same model years, and it is not clear whether the NHTSA and EPA standards will be aligned, or whether they will be aligned with CARB’s ACC II standards.

Different standards pose additional compliance burdens, including complexity and costs.

To some extent, Ford can manage and is managing these risks in the United States and elsewhere by purchasing emissions credits from other vehicle manufacturers when the cost of those credits is less than the financial impact of the product-led actions listed above.

Such credits are available only from other manufacturers and only to the extent those manufacturers exceed compliance requirements.

Credits will have limited availability and may not be adequate to completely eliminate the need for product-led actions.

Accordingly, we have made a strategic decision to enter into agreements to purchase regulatory compliance credits for current and future model years in various regions.

Our obligations under these agreements are dependent on the continued existence of an underlying regulatory compliance requirement in the applicable jurisdiction.

Further, the number of credits we may ultimately purchase is dependent on the sellers’ delivery of the credits.

In the fourth quarter of 2024, we entered into agreements for the purchase of about $500 million of regulatory compliance credits, and for full year 2024, we entered into agreements for the purchase of about $4.3 billion of such credits.

As of December 31, 2024, our outstanding purchase obligations under our compliance credit purchase agreements totaled about $4.2 billion.

During 2024, we recorded about $200 million of expense for our estimated utilization of regulatory compliance credits related to current compliance period volumes (e.g., model year, calendar year), which was allocated to Ford Blue and Ford Pro results.

Ford’s ability to optimize investments and planning for compliance is hampered by sudden or frequent changes in applicable emissions and fuel economy standards and ZEV requirements.

Such changes can include rescissions and reinstatements of Clean Air Act waivers for California, court decisions that change applicable regulatory requirements, and significant changes to the stringency of federal requirements with each subsequent administration.

Global Vehicle Emissions Standards and Fuel Economy

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

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

In addition, new requirements for tailpipe and non-tailpipe emissions will be included in the upcoming Euro 7 regulation and will be phased in beginning in November 2026 for new vehicle types and for all vehicles in November 2027.

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

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

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

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

There continues to be an increasing trend of city access restrictions for internal combustion engine powered vehicles.

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

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

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Other National Emissions Control Requirements.

Many countries, in an effort to address air quality and climate change concerns, are adopting previous versions of European or United Nations Economic Commission for Europe (“UN-ECE”) mobile source emission regulations.

Many countries, in an effort to address air quality and climate change concerns, have adopted previous versions of European or United Nations Economic Commission for Europe (“UN-ECE”) mobile source emission regulations.

Some countries have adopted more advanced regulations based on the most recent version of European or U.S.

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The more stringent level two (VI(b)) standard’s emissions limits, which are currently in place nationwide in China, are approximately 30-50% lower than the EU Stage VI limits, depending on the pollutants.

Both China Stage VII light-duty vehicles and heavy-duty vehicles emission regulations are expected to be drafted between 2024 and 2025, and the Ministry of Ecology and Environment has advised that the Stage VII regulations will have more stringent limits on pollutant emissions and will establish limits for greenhouse gas (primarily CO 2 ) tailpipe emissions.

Mexico and most countries in Central America, the Caribbean, and South America are evolving to implement more stringent requirements accepting Europe and U.S.

China’s Ministry of Ecology and Environment is currently drafting the China Stage VII emission standards, which are expected to impose significantly lower allowable emission levels for pollutants as compared to the Stage VI limits and be expanded to add GHGs.

Detailed proposals for these new standards are expected by the end of 2025.

Mexico and most countries in Central America, the Caribbean, and South America continue to evolve and implement more stringent requirements accepting Europe and U.S.

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

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

Other countries across Southeast Asia, the Middle East, and Australasia expect to introduce regulations based on EU Stage VI standards in the near term.

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

requirements and are anticipated to remain aligned with the new EPA rules that will be published in 2024 for 2027 model year and beyond.

Business (Continued)

countries across Southeast Asia, the Middle East, and Australasia expect to introduce regulations based on EU Stage VI standards in the near term.

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

requirements, and Canada accepts U.S.

EPA certifications of vehicles and engines prior to their sale in Canada.

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

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In the past, several European countries have conducted non-standard emission tests and published the results, and, in some cases, this supplemental testing has triggered investigations of manufacturers for possible defeat devices.

Testing is expected to continue on an ongoing basis.

Testing is expected to continue on an ongoing basis, with new testing methods continually under development.

In addition, plaintiffs’ attorneys are pursuing consumer class action lawsuits based on alleged excessive emissions from cars and trucks, which could, in turn, prompt further investigations by regulators.

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A penalty system applies to manufacturers failing to meet the individual CO 2 targets.

Pooling agreements between manufacturers to utilize credits are possible under certain conditions, and we have entered into such pooling agreements in order to comply with fuel economy regulations without paying a penalty and to enable other manufacturers to benefit from our positive CO 2 performance.

Pooling agreements between manufacturers to utilize credits are possible under certain conditions, and Ford has entered into such pooling agreements in order to comply with fuel economy regulations without paying a penalty and to enable other manufacturers to benefit from our positive CO 2 performance.

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

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

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

EU heavy-duty CO 2 regulations are being finalized and will also limit CO 2 fleet performance, with slightly different requirements.

The United Kingdom and Switzerland have introduced similar rules for light-duty vehicles, and the United Kingdom has adopted ZEV mandates as well as CO 2 fleet limits for non-ZEV vehicles starting in 2024.

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

The United Kingdom and Switzerland have introduced similar rules for light-duty vehicles, and the United Kingdom has adopted a ZEV mandate as well as CO 2 fleet limits for non-ZEV vehicles starting in 2024.

The EU Commission has introduced mandatory requirements for national authorities to conduct in-service verification testing on vehicles to measure their actual CO 2 emissions in the field.

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

As discussed above, the EU Commission has announced a “Green Deal” with more stringent requirements for CO 2 emissions (including stricter CO 2 fleet regulations) and other regulated emissions and include recycling and substance restrictions.

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Costs associated with new or incremental testing for WLTP are significant.

Business (Continued)

Some European countries have implemented or are considering other initiatives for reducing CO 2 vehicle emissions, including fiscal measures and CO 2 labeling to address country specific targets associated with the Paris Accord.

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

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

Business (Continued)

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

European regulators are also starting to look beyond tailpipe CO 2 emissions with new requirements for battery electric vehicles and life cycle assessments.

For example, the EU Battery Regulation, which came into effect in August 2024, introduces a range of new requirements, including that manufacturers calculate and declare the carbon footprint of their EV batteries and track their environmental performance throughout their life cycles.

Maximum carbon footprint thresholds are expected to be set in 2028.

Compliance with regulations like these will require manufacturers to navigate complex data collection, calculation, and reporting processes.

In addition to imposing strict emissions requirements, European regulations are increasingly including other sustainability requirements, such as reporting obligations and supply chain due diligence.

While these regulations are applicable in European jurisdictions, they often apply to global corporations and require adjustments in corporate processes, policies, and strategies, which may be costly.

For example, the Corporate Sustainability Reporting Directive requires companies to disclose how their business model and strategy align with limiting global warming to 1.5°C in line with the Paris Agreement.

While these regulations are applicable in European jurisdictions, they often apply to global corporations across jurisdictions and require adjustments in corporate processes, policies, and strategies, which may be costly.

For example, the Corporate Sustainability Reporting Directive requires companies to disclose the compatibility of their business model and strategy with limiting global warming to 1.5°C in line with the Paris Agreement.

Companies that fail to comply with these requirements could face significant monetary penalties and suffer reputational harm.

In 2023, the EU adopted the Carbon Border Adjustment Mechanism (“CBAM”), which will subject certain imported materials (such as iron, steel, and aluminum) to a carbon levy linked to the carbon price payable on domestic goods under the European Trading Scheme.

The CBAM could increase our costs of importing such materials and/or limit our ability to import lower cost materials from non-EU countries.

The EU CBAM could increase our costs of importing such materials from 2026 onwards and/or limit our ability to import lower cost materials from non-EU countries.

A similar CBAM is expected to be introduced in the United Kingdom in 2027.

Other National GHG and Fuel Economy Requirements.

Regional governments across the globe are considering implementing, and in some cases introducing, emissions regulations that align with CAFE standards.

The Canadian federal government regulates vehicle GHG emissions under the Canadian Environmental Protection Act.

In October 2014, the Canadian federal government published the final changes to the regulation for light-duty vehicles, which maintain alignment with U.S.

EPA vehicle GHG standards for the 2017-2025 model years.

The revised U.S.

EPA standards were automatically adopted in Canada by reference for the 2022-2026 model years, and draft amendments for a few standalone administrative elements not automatically adopted by reference were published in December 2022.

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

requirements, subject to any change in those requirements.

A majority of the U.S.

EPA light-duty vehicle standards are automatically adopted in Canada by reference to the United States Code of Federal Regulations, with a few standalone administrative elements.

Similarly, heavy-duty vehicle and engine GHG emissions regulations in Canada also incorporate U.S.

EPA rules by reference;

however, while currently aligned, model year emission targets are standalone in Canada’s heavy-duty vehicle and engine regulations and, therefore, are not automatically updated with any updates to U.S.

Ford expects that the federal government in Canada will continue to align its standards with the new EPA standards for the 2027 model year and beyond.

On December 20, 2023, the Canadian federal government also published light-duty ZEV sales requirements through amendments to the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations.

In 2023, the Canadian federal government also published light-duty ZEV sales requirements through amendments to the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations.

The amendments require annual sales percentages starting with 20% for the 2026 model year to 100% by the 2035 model year.

The federal government has also published its intent to develop ZEV sales requirements for heavy-duty vehicles beginning with the 2027 model year.

Both Quebec and British Columbia have regulations requiring that 100% of new vehicle sales be ZEVs by 2035, but finalized amendments in 2023 that increase their interim annual targets starting in 2025 and 2026.

The provinces of Quebec and British Columbia have regulations requiring that 100% of new vehicle sales be ZEVs by 2035.

Both provinces have also started developing heavy-duty ZEV mandates based on CARB’s standards.

Compliance with ZEV requirements depends heavily on market conditions that promote consumer preference for EVs, such as technology readiness, purchase incentives, and affordability, as well as the availability and reliability of adequate infrastructure to support vehicle charging.

In addition to the ZEV mandates, Quebec is also developing a regulation to ban the sale of light-duty internal combustion engine vehicles as of 2035, which is intended to capture only small manufacturers not already obligated under the ZEV mandate.

Other provinces have signaled their interest in light-duty ZEV sales regulations but are waiting to assess the provincial impact of the final federal ZEV regulations.

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

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

China set a target of 4.6L/100km for the 2025 passenger vehicle industry fuel consumption fleet average and is projecting a further fuel consumption reduction to a target of 3.5L/100km in 2030, based on the WLTP.

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

Future percentages are currently proposed as 45%, 50%, and 54% of the annual ICE plus NEV passenger vehicles production or import volumes for 2026, 2027, and 2028, respectively.

Demand for EVs continues to grow, at fluctuating rates.

As discussed below in Item 1A.

Risk Factors under “Ford may need to substantially modify its product plans and facilities to comply with safety, emissions, fuel economy, autonomous driving technology, environmental, and other regulations,” in addition to the rates of EV growth, production disruptions, stop ships, supply chain limitations, lower-than-planned market acceptance of our vehicles, and/or other circumstances may cause us to modify product plans or, in some cases, purchase credits in order to comply with emissions standards, fuel economy standards, or ZEV requirements.

In the fourth quarter of 2023, for example, we entered into an agreement to purchase about $700 million of regulatory compliance credits for future use in the United States, the ultimate number of which is dependent on the seller’s ability to deliver the credits.

Compliance with ZEV and emissions requirements depends heavily on market conditions that promote consumer preference for EVs, such as technology readiness, purchase incentives, and affordability, as well as the availability and reliability of adequate infrastructure to support vehicle charging.

In addition to the ZEV mandate, Quebec is also developing a regulation to ban the sale of light-duty internal combustion engine vehicles as of 2035.

Regional governments across the globe have adopted or are considering implementing, and in some cases introducing, emissions regulations that align with CAFE standards.

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

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

The credit mandates require OEMs to generate a specific amount of NEV credits each year based on a percentage of the OEM’s annual ICE vehicle production or import volume, with the percentage increasing year over year.

China also imposes a national standard governing fuel consumption limits for passenger vehicles that are produced and to be sold domestically in China.

An updated version of this national standard, which will impose more stringent fuel consumption limits, will be implemented in January 2026.

China is also drafting mandatory national standards for limits on electrical energy consumption of battery electric vehicles, which are expected to be implemented in early 2026.

It is also expected that later in 2025, China will start drafting a new national standard imposing electrical energy consumption limits on PHEVs as well.

Business (Continued)

South American countries are implementing stricter standards for vehicle energy efficiency and sustainability as well.

For example, in 2024, Brazil introduced its MOVER Program, which aims to significantly reduce carbon emissions from Brazil’s automotive fleet through financial incentives for investments in sustainable technologies.

In addition to setting stricter fuel economy targets starting in 2027, MOVER mandates new requirements for recyclability and GHG emission reporting.

As discussed above and below in Item 1A.

Risk Factors under “ Ford may need to substantially modify its product plans and facilities to comply with safety, emissions, fuel economy, autonomous driving technology, environmental, and other regulations,” in addition to the rates of EV growth, production disruptions, stop ships, supply chain limitations, lower-than-planned market acceptance of our vehicles, and/or other circumstances may cause us to modify product plans or, in some cases, purchase credits in order to comply with emissions standards, fuel economy standards, or ZEV requirements.

Vehicle Safety

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Similarly, federal and state regulatory requirements are growing quickly as lawmakers and regulators adapt to advancements in automation, ranging from driver-assistance technologies such as automatic braking to fully autonomous vehicles.

Autonomous vehicle and driver assist technologies continue to be scrutinized by the government, and actual or perceived failures or misuse of these technologies and features have led to government investigations and inquiries, including of Ford, which has responded to information requests from NHTSA and the National Transportation Safety Board about our hands-free highway driving system, BlueCruise.

Ford and other OEMs are required to report to NHTSA any crashes that meet NHTSA-defined criteria and occur when certain advanced driver assistance system features are in use.

Second, the Safety Act requires that defects related to motor vehicle safety be remedied through safety recall campaigns.

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

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

The GSR includes the mandatory introduction of multiple active and passive safety features, including cybersecurity requirements for all registrations, which began in 2024.

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

Electric vehicle safety continues to be an active area of regulation in the EU, with UN-ECE Regulation No.

100 establishing safety requirements for EVs and mandating certain testing of electrical powertrains.

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

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we are seeking new opportunities in bilateral negotiations that can potentially contribute to this goal.

Business (Continued)

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

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

In Canada, regulatory requirements are currently aligned with U.S.

In Canada, regulatory requirements are mostly aligned with U.S.

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

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

Final regulations for AMPs took effect in October 2023.

Draft regulations for ACTIVE are expected to be released in 2024 and will likely contain some reporting requirements that are unique to Canada.

In China, new standards regulating Intelligent and Connected Vehicles, vehicle cybersecurity, software updates, and Data Storage System for Automated Driving (“DSSAD”), which are more comprehensive than UN-ECE requirements, are expected to take effect in 2026, and in China, Malaysia, and South Korea, mandatory e-Call requirements are being drafted.

E-Call became mandatory in the UAE for new vehicles starting with the 2021 model year, and, following an update to its next generation e-Call regulations, will be required in Saudi Arabia beginning with the 2027 model year.

Business (Continued)

In 2021, Canada started preliminary consultations on several new proposed regulations.

Final regulations for Administrative Monetary Penalties took effect in 2023.

Draft regulations for Analysis of Technical Information for Vehicles and Equipment are expected to be released in 2025 and will likely contain some reporting requirements that are unique to Canada.

In China, new standards related to electronic architecture and devices (including e-Call and radio systems) are expected to take effect in 2027 or 2028, and will be more comprehensive than UN-ECE requirements.

Additionally, new mandatory national standards for intelligent connected vehicles governing vehicle information security, software updates, and autonomous driving data recording systems are currently under development in China and will take effect in January 2026.

Similarly, in the Middle East and Southeast Asia, legislators are focusing on regulating driver assistance and autonomous driving technologies, as well as cyber and data security for connected vehicles.

In Malaysia and South Korea, mandatory e-Call requirements are being drafted.

E-Call is mandatory in the UAE for new vehicles, and, following an update to its next generation e-Call regulations, will be required in Saudi Arabia beginning with the 2027 model year.

New Car Assessment Programs.

Organizations around the world rate and compare motor vehicles in NCAPs to provide consumers and businesses with additional information about the safety of new vehicles.

NCAPs use crash tests and other evaluations that are different than what is required by applicable regulations, and use stars to rate vehicle safety, with five stars awarded for the highest rating and one for the lowest.

NCAPs use crash tests and other evaluations that are different and often more stringent than what is required by applicable regulations.

Vehicle safety is rated using stars, with five stars awarded for the highest safety rating and one for the lowest.

Achieving high NCAP ratings, which may vary by country or region, can add complexity and cost to vehicles.

Similarly, environmental rating systems exist in various regions, e.g., Green NCAP in Europe.

In China, C-NCAP has a stringent rating structure to decrease the number of five-star ratings.

In Southeast Asia, an updated NCAP test and rating protocol is similarly forecast to be effective beginning in 2026, and is expected to put greater emphasis on assessment of driver assistance technologies.

In China, updated NCAP protocols were implemented in 2024, requiring more stringent assessment methods for both passive and active safety technologies and expanding the scope of such assessments to pick-up trucks and commercial vans.

In Southeast Asia and Latin America, an updated NCAP test and rating protocol is similarly forecast to be effective beginning in 2026 and is expected to put greater emphasis on assessment of driver assistance technologies.

These protocols impose additional requirements relating to testing, evaluation, and mandatory safety features, and compliance with them (or any subsequent updates to them) may be costly.

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Key topic areas include Compensation & Retention;

Diversity, Equity, and Inclusion (“DEI”);

Organization Design;

Talent Planning & Development;

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

and Inclusion and Culture.

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

The Compensation, Talent and Culture Committee maintains responsibility to review, discuss, and set strategic direction for various people-related business strategies, including:

compensation and benefit programs;

leadership succession planning;

and talent development programs.

compensation and benefit programs, leadership succession planning, inclusive culture, and talent development programs.

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

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

Business (Continued)

We verify compliance with regulatory requirements as well as our internal safety standards.

To prevent recurrence of workplace injuries, regular updates are provided to Company management on key safety issues, including safety key performance indicators (“KPI”), significant incidents, and high potential near misses.

Our safety team also participates in multi-industry benchmarking groups, within and outside the automotive sector, to share safety best practices and collaborate on common health and safety concerns.

Our Safety Record

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

Unfortunately, there was one employee fatality incident in 2023.

Robust corrective actions have been implemented to prevent recurrence and reduce risk to our employees and contractors working on site.

We continue to encourage accurate and detailed reporting of safety issues to reduce risk and improve workplace safety.

Business (Continued)

Diversity, Equity, and Inclusion

At Ford, we believe that creating and sustaining a culture of diversity, equity, and inclusion for all our employees is foundational to both achieving our Ford+ plan and treating employees with dignity and respect.

Ford offers 10 global Employee Resource Groups (“ERGs”) that represent various dimensions of our employee population, including race, ethnicity, gender, religion, sexual orientation and gender identity, disability, and generation with chapters throughout the world.

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

Ford empowers leaders to develop DEI action plans specific to the unique needs and culture of each function and region.

From an enterprise perspective, we have taken several concrete steps to further these efforts, including embedding DEI into our corporate strategy and governance, highlighting DEI in the expected behaviors that support Ford’s operating system, and forming an enterprise DEI Council composed of leaders to drive integration across employees, suppliers, dealers, and customers.

This holistic DEI strategy includes a strong focus on equity throughout the employee experience, monitoring the diversity within both internal and external talent pipelines, and DEI education.

Our diversity statistics include the following as of December 31, 2023:

27.9% of our salaried employees worldwide identify as females;

25.5% of our total salaried and hourly employees in the United States identify as female;

and 36.7% of our total salaried and hourly employees in the United States identify as a minority.

As a Company, we participate in multi-industry benchmarking groups, within and outside the automotive sector, to share safety best practices and collaborate on common health and safety concerns.

In 2024, there were zero employee fatality incidents globally.

Proactive initiatives and leading safety metrics have been implemented as we strive to prevent workplace injuries and reduce risk to our employees and contractors.

Building a Diverse and Inclusive Workplace

At Ford, we are committed to supporting and sustaining a respectful and inclusive workplace for all employees.

We believe this empowers every person to do their best work and ultimately achieve the Ford+ plan.

We actively recruit and hire the best talent and are proud that our workforce is made up of people with different backgrounds, perspectives, and experiences so we can deliver the best products and services for our customers around the world.

Ford offers 10 global Employee Resource Groups (“ERGs”) that represent various dimensions of our employee population, including, race, ethnicity, gender, religion, LGBTQ+, disability, veterans, and generation with chapters throughout the world.

All ERGs are open to all employees and are instrumental in providing a voice to our global workforce, while also providing valuable insights into the employee experience and product and service development.

We work to strengthen collaboration across the organization by embedding inclusion in the leadership behaviors that support the Ford operating system.

We also leverage the benefit of diversity by listening to the voices of our employees and stakeholders, which strengthen our workplace, systems, and offerings and ultimately drive value for the business.

Our workforce statistics include the following as of December 31, 2024:

28.0% of our salaried employees worldwide are women;

25.7% of our total salaried and hourly employees in the United States are women;

and 36.5% of our total salaried and hourly employees in the United States are underrepresented racial and ethnic groups.

Talent Attraction, Growth, and Capability Assessment

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Our leadership strategy equips our leaders with the capabilities to deliver business results and grow the talent needed to meet our organizational needs.

Employee Wellbeing Initiatives

Our global, holistic approach to wellbeing encompasses the financial, social, mental/emotional, physical, and professional needs of our employees.

Foundational to our wellbeing philosophy is providing a broad array of resources and solutions to educate employees, build capability, and meet individual and organizational wellbeing needs and goals.

Wellbeing is an integral part of our total rewards strategy as we work to address business and employee challenges through a multi-channel approach that provides our diverse populations and global regions flexibility and choice to meet their specific needs.

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

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

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

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

Competitive Benefit Programs

We provide employees with a competitive, comprehensive, and flexible set of benefits and resources to support their financial, social, mental/emotional, physical, and professional health.

Our comprehensive global benefits programs are designed to attract and retain top talent worldwide.

These programs include a wide range of resources and solutions to educate, empower, and support individual and organizational goals while being tailored to local regulations and employee needs across our diverse global workforce.

This comprehensive approach is integral to our total rewards strategy, addressing business and employee challenges through a multi-channel approach that provides diverse populations and global regions with flexible options to meet their specific goals.

Business (Continued)

We use data-driven insights gathered through surveys, focus groups, and claims data to understand employee challenges and prioritize our programs and resources.

Our benefits are regularly reviewed and adjusted to remain competitive within our respective markets and reflect evolving employee expectations.

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

Employee Sentiment Strategy

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Our approach is designed to capture sentiment and make it actionable for managers, leadership, and for the teams designing the tools, processes, and policies that impact the employee experience.

We use a mix of annual and real-time surveys designed to understand employee sentiment in areas such as:

people leader effectiveness, job satisfaction, DEI, wellbeing, overall satisfaction, strategy and execution, and Ford Operating System behaviors.

We use a mix of annual and real-time surveys designed to understand employee sentiment in areas such as people leader effectiveness, job satisfaction, inclusion, wellbeing, overall satisfaction, strategy and execution, and Ford Operating System behaviors.

A critical element of measuring sentiment is ensuring the data gets to those who are best positioned to use it to drive improvements in the employee experience.

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Total Company 177 171

Substantially all of the hourly employees in our Ford Blue, Ford Model e, and Ford Pro operations are represented by unions and covered by collective bargaining agreements.

In the United States, approximately 99% of these unionized hourly employees are represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW” or “United Auto Workers”).

In the United States, approximately 99% of our unionized hourly employees are covered by collective bargaining agreements and represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW” or “United Auto Workers”).

At December 31, 2024, approximately 56,500 hourly employees in the United States were represented by the UAW.

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and Legal and Regulatory Risks.

We have a global business, and conditions in our industry and the regions where we operate and sell our products and services may change quickly.

Accordingly, institutional stability is crucial to businesses like Ford as we make hiring and investment decisions, as well as to the smooth functioning of financial markets on which we depend.

Rapid policy change in our home market, the United States, is creating uncertainty in our operations and business outlook, and may remain a source of volatility in the future.

Operational Risks

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

Ford’s long-term success depends on delivering the Ford+ plan, including improving cost competitiveness.

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

Ford+ is our plan to thrive at the intersection of great vehicles, iconic brands, and innovative software and service, building Ford into a higher growth, higher margin, more capital efficient, and more durable company.

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

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

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

Our strategy involves providing customers freedom of choice to select the powertrain that best suits their needs and maintaining manufacturing flexibility at Ford to meet shifting customer demand.

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

If we are unable to optimize our capital allocation among vehicles (and propulsion systems among our vehicles), services, technology, and other calls on capital, make sufficient and timely progress to become competitive on cost and quality and ensure that progress is sustainable, or we are otherwise not successful in executing Ford+ (or are delayed for reasons outside of our control), we may not be able to realize the full benefits of our plan, which could have an adverse effect on our financial condition or results of operations.

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

Ford’s vehicles could be affected by defects that result in recall campaigns, increased warranty costs, or delays in new model launches, and the time it takes to improve the quality of our vehicles and services and reduce the costs associated therewith could continue to have an adverse effect on our business.

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

We may also be obligated to remedy defects or potentially recall our vehicles due to defective components provided to us by our suppliers, arising from their quality issues or otherwise.

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

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

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

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

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

In addition, NHTSA is considering action related to 52 million vehicles containing inflators from ARC Automotive and Delphi Automotive in the United States.

Ford has 2.5 million vehicles within this population.

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

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

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

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

The impact of such accruals will be reflected in our results of operations for the period in which the accrual is made, which could cause variability in our quarterly performance, while the cash flow impact may be reflected in a later period or periods.

For additional information regarding warranty and field service action costs, including our process for establishing our reserves, see “Critical Accounting Estimates” in Item 7 and Note 24 of the Notes to the Financial Statements.

If warranty costs are greater than anticipated as a result of increased vehicle and component complexity, the adoption of new technologies, the time it takes

Risk Factors (Continued)

to improve the quality of our products and services (or if such efforts are unsuccessful), implementation of additional remedies in the event the initial one is ineffective or parts are unavailable, or otherwise (including as a result of higher repair costs driven by inflation or other economic factors), such costs could continue to have an adverse effect on our financial condition or results of operations.

Furthermore, launch delays, recall actions, and increased warranty costs have adversely affected and could continue to adversely affect our reputation or the public perception and market acceptance of our products and services as discussed below under “ Ford’s new and existing products and digital, software, and physical services are subject to market acceptance and face significant competition from existing and new entrants in the automotive and digital and software services industries, and Ford’s reputation may be harmed based on positions it takes or if it is unable to achieve the initiatives it has announced.

” In an effort to improve quality, we have slowed down and may continue to slow down launches, which may result in lost sales, revenue, and profits and could have an adverse effect on our financial condition or results of operations.

From time to time, our inventory levels may be higher due to a number of different factors, including as a result of vehicles on hold for quality control, which may cause us to incur additional costs associated with those vehicles, e.g., repair costs for weather-related damage.

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

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

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

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

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

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

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

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

A shortage of, or our inability to acquire or find adequate suppliers of, key components or raw materials as a result of disruptions in the supply chain, import and export bans or tariffs imposed by the U.S.

or foreign governments, capacity constraints, limited availability, competition for those items within the automotive industry and other sectors, or otherwise can cause a significant disruption to our production schedule and have a substantial adverse effect on our financial condition or results of operations.

Further, as a result of lower-than-anticipated industrywide electric vehicle adoption rates or otherwise, suppliers of such raw materials or components may become distressed.

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

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

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

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

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

Ford’s production, as well as Ford’s suppliers’ production, and/or the ability to deliver products to consumers could be disrupted by labor issues, public health issues, natural or man-made disasters, adverse effects of climate change, financial distress, production difficulties, capacity limitations, or other factors.

A work stoppage or other limitation on production has occurred, and could in the future occur, at Ford’s facilities, at a facility in its supply chain, or at one of its logistics providers for any number of reasons, including as a result of labor issues, such as shortages of available employees, disputes under existing collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements, absenteeism, public health issues (e.g., COVID), stay-at-home orders, or in response to potential restructuring actions (e.g., plant closures);

as a result of supplier financial distress or other production constraints, such as limited quantities of components or raw materials, quality issues, capacity limitations, or other difficulties;

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

social unrest;

cybersecurity incidents;

or for other reasons.

A suspension or substantial curtailment of our manufacturing operations

Risk Factors (Continued)

could have a significant adverse effect on our financial condition and results of operations, as was the case in 2020, when, consistent with actions taken by governmental authorities, we idled our plants in regions around the world.

The duration of a suspension of manufacturing operations and a return to our full production schedule will vary.

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

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

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

The limited availability of components, labor shortages, public health emergencies, and supplier operating issues have led to intermittent interruptions in our supply chain and an inconsistent production schedule at our facilities.

This has exacerbated the disruption to our suppliers’ operations, which, in turn, has led to higher costs and production shortfalls.

As a result of this disrupted production schedule, we have received and continue to receive claims from our supply base for reimbursement of costs beyond our original agreed terms.

Upon receipt, we evaluate those claims, and, in certain circumstances, we have made payments to our suppliers, and this trend may continue.

Given the worldwide scope of our supply chain and operations, we and our suppliers face a risk of disruption or operating inefficiencies that may increase costs due to the adverse physical effects of climate change, which are predicted to increase the frequency and severity of weather and other natural events, e.g., wildfires, extended droughts, and extreme temperatures.

In addition, in the event a weather-related event, strike, international conflict, or other occurrence limits the ability of freight carriers to deliver components and other materials from suppliers to us or logistics providers to transport our vehicles for an extended period of time, it may increase our costs and delay or otherwise impact both our production operations and customers’ ability to receive our vehicles.

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

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

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

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

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

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

Ford may not realize the anticipated benefits of existing or pending strategic alliances, joint ventures, acquisitions, divestitures, or business strategies or the benefits may take longer than expected to materialize.

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

These initiatives typically involve enormous complexity, may require a significant amount of capital, and may involve a lengthy regulatory approval process.

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

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

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

Moreover, negative publicity, government investigations, or litigation involving a company with which we have a business or supply relationship may have an adverse effect on our reputation.

In order to secure critical materials for production of electric vehicles, we have entered into and may, in the future, enter into offtake agreements and other long-term purchase contracts with raw materials suppliers and make investments in certain raw material and battery suppliers;

however, we may not realize the anticipated benefits of these actions and our efforts to have such suppliers, particularly those in less developed markets, adopt Ford’s sustainability and other standards may be unsuccessful, which could have an adverse impact on our reputation.

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

For example, our efforts to evaluate and implement alternative distribution models and channels for our products and services from those we have

Risk Factors (Continued)

traditionally used may be challenged or may not succeed or be as successful as our historical arrangements.

External factors may also impact the success of our initiatives.

For example, our business and strategy are susceptible to tensions in U.S.-China relations and the rapid development of the Chinese electric vehicle industry, with domestic Chinese producers exporting to some key markets in which we operate.

In addition, as we implement our strategy to provide customers freedom of choice to select the powertrain that best suits their needs and maintain manufacturing flexibility to meet shifting customer demand, we have in the past taken, and may in the future take, actions such as not fully utilizing or reducing the capacity of our existing or future plants, reducing production hours or shifts, cancelling programs, or delaying launches, and we may become subject to claims by suppliers or other parties, incur charges related to impairments, asset write-downs, or inventory adjustments, or lose or become obligated to repay incentives as a result.

For example, we have taken, and may in the future take, such actions to better match the pace of electric vehicle adoption, which has been lower than anticipated industrywide.

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

Further, as our strategy evolves in an area, we may be unable to utilize or redeploy our existing assets or investments in that or other areas, which may lead to impairments and other cash and non-cash charges.

Moreover, we may continue to have financial exposure following a strategic divestiture or cessation of operations in a market.

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

Ford may not realize the anticipated benefits of restructuring actions and such actions may cause Ford to incur significant charges, disrupt our operations, or harm our reputation.

We continually review and evaluate our business to find opportunities to make our operations more efficient and reduce costs.

In doing so, we have taken, and may in the future take, restructuring actions, such as strategic divestitures or ceasing of operations in a market, particularly for those businesses where a path to sustained profitability is not feasible in light of the capital allocation requirements or for other reasons.

Our plans for implementing such actions may be accelerated by shifting industry dynamics and new entrants to our industries with which we must compete.

These actions may include employee separations, a reduced footprint (e.g., plant closures or smaller operations at existing plants or plants that are not yet on-line), operating our plants at less than full capacity (e.g., reducing shifts), or cancelling products or programs.

Such restructuring actions have caused us and may in the future cause us to incur significant costs;

record impairments or other charges;

subject us to potential claims from employees, suppliers, dealers, other counterparties, or governmental authorities (including a reduction or clawback of incentives);

disrupt our operations;

distract management from current operations;

or harm our reputation.

Further, we may not realize the expected benefits of such restructuring actions (e.g., anticipated cost savings), such benefits may be delayed, or market dynamics or other factors may have evolved such that we cannot obtain the original intended results of an action.

Failure to develop and deploy secure digital services that appeal to customers and grow our subscription rates could have a negative impact on Ford’s business.

A growing part of our business involves connectivity, digital and physical services, and integrated software services, and we are devoting significant resources to develop this business.

Further, we have announced our plans and expectations to grow subscription rates and for integrated services to become a larger portion of our revenue and earnings.

If we do not develop, deliver, and make available technologies that customers can easily adopt and use, fail to generate sufficient demand for our integrated software and digital services, or if customers do not opt to activate the modems in our vehicles, which would hinder our ability to offer and sell such services, we may not grow revenue in line with the costs we are investing or achieve profitability on our increasingly digitally-connected products.

For additional discussion on the market acceptance of our services, see below under “ Ford’s new and existing products and digital, software, and physical services are subject to market acceptance and face significant competition from existing and new entrants in the automotive and digital and software services industries, and Ford’s reputation may be harmed based on positions it takes or if it is unable to achieve the initiatives it has announced.

We contract with third parties to offer digital content to customers and license technologies for use in our software and digital services.

This includes the right to sell, or offer subscriptions to, third-party content, as well as the right to incorporate specific content into our own services;

however, continuation of these third-party licensing and other arrangements, or their renewal on commercially reasonable terms, is not guaranteed or may be unavailable.

Moreover, while we seek to grow our share of this business, third parties may be less inclined to continue developing or licensing software for Ford’s products or permit the Company to distribute their content, or such providers may offer competing products and services to the detriment of our business.

If we are unable to offer integrated software applications and digital services on competitive terms, it may reduce customer demand or increase our costs to provide such applications and services, which we may be unable to pass on to customers.

Alternatively, we may have to develop or license new content or technology to provide digital services, and there can be no assurance we would be able to develop or license such content or technology at a reasonable cost or in a timely manner, either of which could have a negative impact on our financial condition, results of operations, or reputation.

Risk Factors (Continued)

Sophisticated software integration may have issues that can unexpectedly interfere with the intended operation of hardware or other software products and services.

In addition, the services we offer can have quality issues and may, from time to time, experience outages, service slowdowns, or errors.

As a result, these services may not always perform as anticipated and may not meet customer expectations.

There can be no assurance we will be able to detect and remedy all issues and defects in the hardware, software, and services we offer, or successfully deliver over-the-air (“OTA”) updates.

Failure to do so on a timely basis could result in widespread technical and performance issues affecting our products and services.

For additional discussion on the risks associated with defects and quality issues, see above under “ Ford’s vehicles could be affected by defects that result in recall campaigns, increased warranty costs, or delays in new model launches, and the time it takes to improve the quality of our vehicles and services and reduce the costs associated therewith could continue to have an adverse effect on our business.

We continue to increase the number of BlueCruise (our hands-free highway driving system) enabled vehicles on the road and its growth and expansion remains an important part of our strategy.

We also face substantial competition in that area.

In addition, autonomous vehicle and driver assist technologies, including BlueCruise, continue to be scrutinized by government regulators and consumers, and actual or perceived failures or misuse of these technologies and features have led to government investigations and inquiries, including of Ford.

Such negative publicity of our products or those of our competitors could undermine consumer trust and negatively impact our subscription rates.

If we are unable to successfully develop and grow BlueCruise and other subscription services or build and maintain consumer trust in those offerings, we may be unable to recoup the investments we have made in those technologies and it could negatively impact our reputation, financial condition, and results of operations.

The actions of end users are generally beyond our control and some users may engage in fraudulent or abusive activities that involve our digital services.

These include unauthorized use of accounts through stolen credentials, failure to pay for services accessed, or other activities that violate our terms of service.

While we have implemented security measures intended to prevent unauthorized access to our digital services and related information systems, malicious entities have and will continue to attempt to gain unauthorized access to them.

If our efforts to detect such violations or our actions to control these types of fraud and abuse are not effective or timely, it may have an adverse effect on our financial condition, results of operations, or reputation.

For further information, see below under “ Operational information systems, security systems, vehicles, and services could be affected by cybersecurity incidents, ransomware attacks, and other disruptions and impact Ford, Ford Credit, their suppliers, and dealers.

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

The vast majority of the hourly employees in our manufacturing operations in the United States and Canada are represented by unions and covered by collective bargaining agreements.

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

Based on our current contracts with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) in the United States and Unifor in Canada ratified in 2023, we expect to have a significant increase in labor costs through the life of the contracts, and if we are unable to offset those costs, it could have a significant adverse effect on our business.

Some of our competitors do not have such collective bargaining agreements and are not subject to the same constraints.

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

These agreements in the United States, Canada, Europe, and other regions may restrict our ability to close plants and divest businesses.

In addition, to the extent companies in our global supply chain that are not currently parties to collective bargaining agreements enter into such agreements or otherwise increase their employees’ wages and benefits, any increased costs incurred by those suppliers may, in turn, increase our costs.

Ford’s ability to attract, develop, grow, support, and reward talent is critical to its success and competitiveness.

Our success depends on our ability to continue to attract, develop, grow, support, and reward talented and diverse employees with domain expertise in engineering, software, technology (including digital capabilities and connectivity), integrated services, supply chain, marketing, and finance, among other areas.

While we have been successful in attracting talent in recent years, as with any company, the ability to continue to attract talent is important, particularly in growth areas vital to our success such as software, electrification, and integrated services.

Competition for such talent is intense, which has led to an increase in compensation throughout a tight labor market, and, accordingly, may increase costs for companies.

In addition to attracting talent, we must also retain the talent needed to deliver our business objectives.

If we lose existing employees, are unable to attract talent with needed skills, or we are unable to develop existing employees, particularly with the introduction of new technologies and our focus on operational efficiency and quality, it could have a substantial adverse effect on our business.

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

What changed 10-K

Item 1. Business