Item 16. Form 10-K Summary.

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Ford has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

FORD MOTOR COMPANY

By:	/s/ Cathy O’Callaghan
	Cathy O’Callaghan, Controller
	(principal accounting officer)
Date:	February 5, 2020

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of Ford and in the capacities on the date indicated:

Signature		Title		Date
/s/ WILLIAM CLAY FORD, JR.		Director, Chairman of the Board, Executive Chairman, Chair of the Office of the Chairman and Chief Executive, and Chair of the Finance Committee		February 5, 2020
William Clay Ford, Jr.
/s/ JAMES P. HACKETT		Director, President and Chief Executive Officer		February 5, 2020
James P. Hackett		(principal executive officer)
STEPHEN G. BUTLER*		Director and Chair of the Audit Committee		February 5, 2020
Stephen G. Butler
KIMBERLY A. CASIANO*		Director		February 5, 2020
Kimberly A. Casiano
ANTHONY F. EARLEY, JR.*		Director and Chair of the Compensation Committee		February 5, 2020
Anthony F. Earley, Jr.
EDSEL B. FORD II*		Director		February 5, 2020
Edsel B. Ford II
WILLIAM W. HELMAN IV*		Director and Chair of the Sustainability and Innovation Committee		February 5, 2020
William W. Helman IV
WILLIAM E. KENNARD*		Director and Chair of the Nominating and Governance Committee		February 5, 2020
William E. Kennard
JOHN C. LECHLEITER*		Director		February 5, 2020
John C. Lechleiter
BETH E. MOONEY*		Director		February 5, 2020
Beth E. Mooney
JOHN L. THORNTON*		Director		February 5, 2020
John L. Thornton

Signature		Title		Date
JOHN B. VEIHMEYER*		Director		February 5, 2020
John B. Veihmeyer
LYNN M. VOJVODICH*		Director		February 5, 2020
Lynn M. Vojvodich
JOHN S. WEINBERG*		Director		February 5, 2020
John S. Weinberg
/s/ TIM STONE		Chief Financial Officer		February 5, 2020
Tim Stone		(principal financial officer)
/s/ CATHY O’CALLAGHAN		Controller		February 5, 2020
Cathy O’Callaghan		(principal accounting officer)
*By: /s/ JONATHAN E. OSGOOD				February 5, 2020
Jonathan E. Osgood
Attorney-in-Fact

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Ford Motor Company

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of Ford Motor Company and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company changed its method for reporting early termination losses related to customer defaults on Ford Credit’s vehicles subject to operating leases and the manner in which it accounts for leases, respectively, in 2019.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

FS-1

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Consumer Collective Allowance for Credit Losses

As described in Note 11 to the consolidated financial statements, the Company had consumer finance receivables of $73,560 million collectively evaluated for impairment, for which an allowance of $478 million was recorded as of December 31, 2019. The consumer collective allowance for credit losses represents the estimate of the probable credit loss inherent in consumer finance receivables as of the balance sheet date. Management estimates the allowance for credit losses on consumer receivables using a combination of measurement models (collective loss-to-receivables and loss projection models) and management judgment. The key assumptions used in the process of estimating the consumer collective allowance for credit losses are frequency, loss severity, and loss emergence period. After establishing the collective and specific allowance for credit losses, if management believes the allowance does not reflect all losses inherent in the portfolio due to changes in recent economic trends and conditions, or other relevant factors, an adjustment is made based on management judgment.

The principal considerations for our determination that performing procedures relating to the consumer collective allowance for credit losses is a critical audit matter are there was significant judgment by management in determining the consumer collective allowance for credit losses, including the frequency, loss severity, and loss emergence period assumptions, which led to a high degree of auditor judgment, subjectivity, and effort in performing procedures over these assumptions. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing procedures and evaluating the audit evidence obtained from these procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls related to management’s consumer collective allowance for credit losses estimation process. These procedures also included, among others, testing management’s process for determining the consumer collective allowance for credit losses, including evaluating the appropriateness of the models used to estimate the allowance, the reasonableness of management’s frequency, loss severity, and loss emergence period assumptions, and testing the completeness and accuracy of underlying data supporting the assumptions and models. Additionally, the procedures included the involvement of professionals with specialized skill and knowledge to assist in evaluating the appropriateness of the models.

FS-2

Defined Benefit Pension Plan Obligations and Benefit Cost

As described in Note 18 to the consolidated financial statements, the Company has defined pension benefit obligations of $81,045 million (comprised of $45,672 million and $35,373 million for its U.S. plans and non-U.S. plans, respectively) as of December 31, 2019, and pre-tax net periodic benefit cost (“benefit cost”) of $1,890 million (comprised of $(706) million of benefit income and $2,596 million of benefit cost for its U.S. plans and non-U.S. plans, respectively) for the year ended December 31, 2019. Management remeasures defined benefit pension plan obligations at least annually as of December 31 based on the present value of projected future benefit payments for all participants for services rendered to date. Actuarial gains and losses resulting from plan remeasurement are recognized in net periodic benefit cost in the period of the remeasurement. The measurement of projected future benefits is dependent on the provisions of each specific plan, demographics of the group covered by the plan, and other key measurement assumptions including the discount rate and the average rate of increase in compensation. The assumptions used to determine the benefit cost include discount rate-service cost, effective interest rate on benefit obligation, expected long-term rate of return on assets, and average rate of increase in compensation.

The principal considerations for our determination that performing procedures relating to defined benefit pension plan obligations and benefit cost is a critical audit matter are there was significant judgment by management when developing assumptions used in the estimation of the defined benefit pension obligations and benefit cost, which led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate the significant assumptions. In addition to the demographics of the group covered by the plan, significant assumptions include the discount rate and the average rate of increase in compensation used in determining the benefit obligation and the discount rate-service cost, the effective interest rate on benefit obligation, and the average rate of increase in compensation used in determining the benefit cost. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the determination of the defined benefit pension plan obligations and benefit cost. These procedures also included, among others, evaluating the Company’s historical experience and expectations of future experience to evaluate the reasonableness of the average rate of increase in compensation. Additionally, professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the actuarial model, as well as the reasonableness of significant assumptions including demographics of the group covered by the plan, the discount rate used in determining the benefit obligation and the discount rate-service cost and the effective interest rate on benefit obligation used in determining the benefit cost.

FS-3

Warranty and Field Service Actions Accrual (United States)

As described in Note 27 to the consolidated financial statements, the Company recorded an accrual for estimated future warranty and field service action costs, net of estimated supplier recoveries (“warranty accrual”), of $5,702 million as of December 31, 2019, of which the United States comprises a significant portion. Management accrues the estimated cost of both base warranty coverages and field service actions at the time of sale. Management establishes their estimate of base warranty obligations using a patterned estimation model, using historical information regarding the nature, frequency, and average cost of claims for each vehicle line by model year. Management establishes their estimates of field service action obligations using a patterned estimation model, using historical information regarding the nature, frequency, severity, and average cost of claims for each model year.

The principal considerations for our determination that performing procedures relating to the warranty accrual for the United States is a critical audit matter are there was significant judgment by management in the estimation of the accrual and development of the patterned estimation model, which led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate the estimation model and significant assumptions, including the frequency and average cost of claims. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls related to the estimate of the warranty accrual for the United States. These procedures also included, among others, evaluating the reasonableness of significant assumptions used by management to develop the warranty accrual for the United States, including the frequency and average cost of claims, in part by considering the historical experience of the Company. Additionally, professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the model as well as the reasonableness of certain significant assumptions.

/s/ PricewaterhouseCoopers LLP

Detroit, Michigan

February 5, 2020

We have served as the Company’s auditor since 1946.

FS-4

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

	For the years ended December 31,
	2017				2018				2019
Cash flows from operating activities
Net income	$	7,757			$	3,695			$	84
Depreciation and tooling amortization	9,241				9,385				9,689
Other amortization	(669		)		(972		)		(1,199		)
Held-for-sale impairment charges	—				—				804
Provision for credit and insurance losses	598				504				413
Pension and other postretirement employee benefits (“OPEB”) expense/(income)	(608		)		400				2,625
Equity investment dividends received in excess of (earnings)/losses	240				206				203
Foreign currency adjustments	(403		)		529				(54		)
Net (gain)/loss on changes in investments in affiliates	(7		)		(42		)		(29		)
Stock compensation	246				191				228
Provision for deferred income taxes	(350		)		(197		)		(1,370		)
Decrease/(Increase) in finance receivables (wholesale and other)	(836		)		(2,408		)		1,554
Decrease/(Increase) in accounts receivable and other assets	(2,297		)		(2,239		)		(816		)
Decrease/(Increase) in inventory	(970		)		(828		)		206
Increase/(Decrease) in accounts payable and accrued and other liabilities	6,089				6,781				5,260
Other	65				17				41
Net cash provided by/(used in) operating activities	18,096				15,022				17,639
Cash flows from investing activities
Capital spending	(7,049		)		(7,785		)		(7,632		)
Acquisitions of finance receivables and operating leases	(59,354		)		(62,924		)		(55,576		)
Collections of finance receivables and operating leases	44,641				50,880				50,182
Purchases of marketable securities and other investments	(27,567		)		(17,140		)		(17,472		)
Sales and maturities of marketable and other investments	29,898				20,527				16,929
Settlements of derivatives	100				358				(114		)
Other	(29		)		(177		)		(38		)
Net cash provided by/(used in) investing activities	(19,360		)		(16,261		)		(13,721		)
Cash flows from financing activities
Cash payments for dividends and dividend equivalents	(2,584		)		(2,905		)		(2,389		)
Purchases of common stock	(131		)		(164		)		(237		)
Net changes in short-term debt	1,229				(2,819		)		(1,384		)
Proceeds from issuance of long-term debt	45,801				50,130				47,604
Principal payments on long-term debt	(40,770		)		(44,172		)		(46,497		)
Other	(151		)		(192		)		(226		)
Net cash provided by/(used in) financing activities	3,394				(122		)		(3,129		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	489				(370		)		45
Net increase/(decrease) in cash, cash equivalents, and restricted cash	$	2,619			$	(1,731	)		$	834
Cash, cash equivalents, and restricted cash at beginning of period (Note 9)	$	16,019			$	18,638			$	16,907
Net increase/(decrease) in cash, cash equivalents, and restricted cash	2,619				(1,731		)		834
Cash, cash equivalents, and restricted cash at end of period (Note 9)	$	18,638			$	16,907			$	17,741

The accompanying notes are part of the consolidated financial statements.

FS-5

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENT

(in millions, except per share amounts)

	For the years ended December 31,
	2017				2018				2019
Revenues
Automotive	$	145,653			$	148,294			$	143,599
Ford Credit	11,113				12,018				12,260
Mobility	10				26				41
Total revenues (Note 4)	156,776				160,338				155,900
Costs and expenses
Cost of sales	131,321				136,269				134,693
Selling, administrative, and other expenses	11,527				11,403				11,161
Ford Credit interest, operating, and other expenses	9,047				9,463				9,472
Total costs and expenses	151,895				157,135				155,326
Operating income	4,881				3,203				574
Interest expense on Automotive debt	1,133				1,171				963
Interest expense on Other debt	57				57				57
Other income/(loss), net (Note 5)	3,267				2,247				(226		)
Equity in net income of affiliated companies	1,201				123				32
Income/(Loss) before income taxes	8,159				4,345				(640		)
Provision for/(Benefit from) income taxes (Note 7)	402				650				(724		)
Net income	7,757				3,695				84
Less: Income attributable to noncontrolling interests	26				18				37
Net income attributable to Ford Motor Company	$	7,731			$	3,677			$	47
EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 8)
Basic income	$	1.94			$	0.93			$	0.01
Diluted income	1.93				0.92				0.01
Weighted-average shares used in computation of earnings per share
Basic shares	3,975				3,974				3,972
Diluted shares	3,998				3,998				4,004

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)

	For the years ended December 31,
	2017				2018				2019
Net income	$	7,757			$	3,695			$	84
Other comprehensive income/(loss), net of tax (Note 25)
Foreign currency translation	314				(523		)		174
Marketable securities	(34		)		(11		)		130
Derivative instruments	(265		)		183				(689		)
Pension and other postretirement benefits	37				(56		)		23
Total other comprehensive income/(loss), net of tax	52				(407		)		(362		)
Comprehensive income/(loss)	7,809				3,288				(278		)
Less: Comprehensive income/(loss) attributable to noncontrolling interests	24				18				37
Comprehensive income/(loss) attributable to Ford Motor Company	$	7,785			$	3,270			$	(315	)

The accompanying notes are part of the consolidated financial statements.

FS-6

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)

	December 31, 2018				December 31, 2019
ASSETS
Cash and cash equivalents (Note 9)	$	16,718			$	17,504
Marketable securities (Note 9)	17,233				17,147
Ford Credit finance receivables, net (Note 10)	54,353				53,651
Trade and other receivables, less allowances of $94 and $63	11,195				9,237
Inventories (Note 12)	11,220				10,786
Assets held for sale (Note 10 and Note 24)	—				2,383
Other assets	3,930				3,339
Total current assets	114,649				114,047
Ford Credit finance receivables, net (Note 10)	55,544				53,703
Net investment in operating leases (Note 13)	29,119				29,230
Net property (Note 14)	36,178				36,469
Equity in net assets of affiliated companies (Note 15)	2,709				2,519
Deferred income taxes (Note 7)	10,412				11,863
Other assets	7,929				10,706
Total assets	$	256,540			$	258,537
LIABILITIES
Payables	$	21,520			$	20,673
Other liabilities and deferred revenue (Note 17)	20,556				22,987
Automotive debt payable within one year (Note 20)	2,314				1,445
Ford Credit debt payable within one year (Note 20)	51,179				52,371
Other debt payable within one year (Note 20)	—				130
Liabilities held for sale (Note 24)	—				526
Total current liabilities	95,569				98,132
Other liabilities and deferred revenue (Note 17)	23,588				25,324
Automotive long-term debt (Note 20)	11,233				13,233
Ford Credit long-term debt (Note 20)	88,887				87,658
Other long-term debt (Note 20)	600				470
Deferred income taxes (Note 7)	597				490
Total liabilities	220,474				225,307
Redeemable noncontrolling interest (Note 23)	100				—
EQUITY
Common Stock, par value $.01 per share (4,011 million shares issued of 6 billion authorized)	40				40
Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized)	1				1
Capital in excess of par value of stock	22,006				22,165
Retained earnings	22,668				20,320
Accumulated other comprehensive income/(loss) (Note 25)	(7,366		)		(7,728		)
Treasury stock	(1,417		)		(1,613		)
Total equity attributable to Ford Motor Company	35,932				33,185
Equity attributable to noncontrolling interests	34				45
Total equity	35,966				33,230
Total liabilities and equity	$	256,540			$	258,537

The following table includes assets to be used to settle liabilities of the consolidated variable interest entities (“VIEs”). These assets and liabilities are included in the consolidated balance sheet above. See Note 26 for additional information on our VIEs.

	December 31, 2018				December 31, 2019
ASSETS
Cash and cash equivalents	$	2,728			$	3,202
Ford Credit finance receivables, net	58,662				58,478
Net investment in operating leases	16,332				14,883
Other assets	27				12
LIABILITIES
Other liabilities and deferred revenue	$	24			$	19
Debt	53,269				50,865

The accompanying notes are part of the consolidated financial statements.

FS-7

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

(in millions)

	Equity Attributable to Ford Motor Company
	Capital Stock				Cap. in Excess of Par Value of Stock				Retained Earnings/(Accumulated Deficit)				Accumulated Other Comprehensive Income/(Loss) (Note 25)				Treasury Stock				Total				Equity Attributable to Non-controlling Interests				Total Equity
Balance at December 31, 2016	$	41			$	21,630			$	16,193			$	(7,013	)		$	(1,122	)		$	29,729			$	17			$	29,746
Adoption of accounting standards	—				6				566				—				—				572				—				572
Net income	—				—				7,731				—				—				7,731				26				7,757
Other comprehensive income/(loss), net of tax	—				—				—				54				—				54				(2		)		52
Common stock issued (including share-based compensation impacts)	—				207				—				—				—				207				—				207
Treasury stock/other	—				—				—				—				(131		)		(131		)		(2		)		(133		)
Cash dividends declared (a)	—				—				(2,584		)		—				—				(2,584		)		(11		)		(2,595		)
Balance at December 31, 2017	$	41			$	21,843			$	21,906			$	(6,959	)		$	(1,253	)		$	35,578			$	28			$	35,606
Balance at December 31, 2017	$	41			$	21,843			$	21,906			$	(6,959	)		$	(1,253	)		$	35,578			$	28			$	35,606
Net income	—				—				3,677				—				—				3,677				18				3,695
Other comprehensive income/(loss), net of tax	—				—				—				(407		)		—				(407		)		—				(407		)
Common stock issued (including share-based compensation impacts)	—				163				—				—				—				163				—				163
Treasury stock/other	—				—				—				—				(164		)		(164		)		—				(164		)
Dividend and dividend equivalents declared (a)	—				—				(2,915		)		—				—				(2,915		)		(12		)		(2,927		)
Balance at December 31, 2018	$	41			$	22,006			$	22,668			$	(7,366	)		$	(1,417	)		$	35,932			$	34			$	35,966
Balance at December 31, 2018	$	41			$	22,006			$	22,668			$	(7,366	)		$	(1,417	)		$	35,932			$	34			$	35,966
Adoption of accounting standards	—				—				13				—				—				13				—				13
Net income	—				—				47				—				—				47				37				84
Other comprehensive income/(loss), net of tax	—				—				—				(362		)		—				(362		)		—				(362		)
Common stock issued (including share-based compensation impacts)	—				159				—				—				—				159				—				159
Treasury stock/other	—				—				—				—				(196		)		(196		)		(26		)		(222		)
Dividend and dividend equivalents declared (a)	—				—				(2,408		)		—				—				(2,408		)		—				(2,408		)
Balance at December 31, 2019	$	41			$	22,165			$	20,320			$	(7,728	)		$	(1,613	)		$	33,185			$	45			$	33,230

(a) We declared dividends per share of Common and Class B Stock of $0.65, $0.73, and $0.60 per share in 2017, 2018, and 2019, respectively.

The accompanying notes are part of the consolidated financial statements.

FS-8

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents

Footnote		Page
Note 1	Presentation	FS-10
Note 2	Summary of Significant Accounting Policies	FS-11
Note 3	New Accounting Standards	FS-16
Note 4	Revenue	FS-18
Note 5	Other Income/(Loss)	FS-20
Note 6	Share-Based Compensation	FS-20
Note 7	Income Taxes	FS-22
Note 8	Capital Stock and Earnings Per Share	FS-25
Note 9	Cash, Cash Equivalents, and Marketable Securities	FS-26
Note 10	Ford Credit Finance Receivables	FS-29
Note 11	Ford Credit Allowance for Credit Losses	FS-34
Note 12	Inventories	FS-37
Note 13	Net Investment in Operating Leases	FS-37
Note 14	Net Property	FS-38
Note 15	Equity in Net Assets of Affiliated Companies	FS-39
Note 16	Other Investments	FS-40
Note 17	Other Liabilities and Deferred Revenue	FS-40
Note 18	Retirement Benefits	FS-41
Note 19	Lease Commitments	FS-48
Note 20	Debt and Commitments	FS-50
Note 21	Derivative Financial Instruments and Hedging Activities	FS-54
Note 22	Employee Separation Actions and Exit and Disposal Activities	FS-58
Note 23	Redeemable Noncontrolling Interest	FS-59
Note 24	Held-for-Sale Operations	FS-59
Note 25	Accumulated Other Comprehensive Income/(Loss)	FS-61
Note 26	Variable Interest Entities	FS-62
Note 27	Commitments and Contingencies	FS-63
Note 28	Segment Information	FS-65
Note 29	Selected Quarterly Financial Data (unaudited)	FS-67

FS-9

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION

For purposes of this report, “Ford,” the “Company,” “we,” “our,” “us,” or similar references mean Ford Motor Company, our consolidated subsidiaries, and our consolidated VIEs of which we are the primary beneficiary, unless the context requires otherwise. We also make reference to Ford Motor Credit Company LLC, herein referenced to as Ford Credit. Our consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”).

Certain Transactions Between Automotive, Mobility, and Ford Credit

Intersegment transactions occur in the ordinary course of business. Additional detail regarding certain transactions and the effect on each segment at December 31 was as follows (in billions):

	2018												2019
	Automotive				Mobility				Ford Credit				Automotive				Mobility				Ford Credit
Trade and other receivables (a)									$	6.8											$	4.9
Unearned interest supplements and residual support (b)									(6.8		)										(6.7		)
Finance receivables and other (c)									2.1												2.1
Intersegment receivables/(payables)	$	(1.2	)		$	(1.1	)		2.3				$	(2.6	)		$	0.1			2.5

---

(a)	Automotive receivables (generated primarily from vehicle and parts sales to third parties) sold to Ford Credit.

(b)	Automotive pays amounts to Ford Credit at the point of retail financing or lease origination which represent interest supplements and residual support.

(c)	Primarily receivables with entities that are consolidated subsidiaries of Ford.

Change in Accounting

As of January 1, 2019, we changed our accounting method for reporting early termination losses related to customer defaults on Ford Credit’s operating leases. Previously, we presented the early termination loss reserve on operating leases due to customer default events as part of the allowance for credit losses within Net investment in operating leases. We now consider the effects of operating lease early terminations when determining depreciation estimates, which are included as part of accumulated depreciation within Net investment in operating leases. We believe this change in accounting method is preferable as the characterization of these changes is better reflected as depreciation.

We have retrospectively applied this change in accounting method to all prior periods. At December 31, 2018, this reclassification increased accumulated depreciation and decreased allowance for credit losses by $78 million within Net investment in operating leases. This change had no impact on our consolidated income statement, consolidated balance sheet, or total cash flows from operating activities in the consolidated statement of cash flows for the years presented.

FS-10

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

For each accounting topic that is addressed in its own note, the description of the accounting policy may be found in the related note. Other significant accounting policies are described below.

Use of Estimates

The preparation of financial statements requires us to make estimates and assumptions that affect our results. Estimates are used to account for certain items such as marketing accruals, warranty costs, employee benefit programs, etc. Estimates are based on assumptions that we believe are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.

Foreign Currency

We remeasure monetary assets and liabilities denominated in a currency that is different than a reporting entity’s functional currency from the transactional currency to the legal entity’s functional currency. The effect of this remeasurement process and the results of our foreign currency hedging activities are reported in Cost of sales and Other income/(loss), net and were $307 million, $(121) million, and $108 million, for the years ended 2017, 2018, and 2019, respectively.

Generally, our foreign subsidiaries use the local currency as their functional currency. We translate the assets and liabilities of our foreign subsidiaries from their respective functional currencies to U.S. dollars using end-of-period exchange rates. Changes in the carrying value of these assets and liabilities attributable to fluctuations in exchange rates are recognized in Foreign currency translation, a component of Other comprehensive income/(Ioss), net of tax. Upon sale or upon complete or substantially complete liquidation of an investment in a foreign subsidiary, the amount of accumulated foreign currency translation related to the entity is reclassified to income and recognized as part of the gain or loss on the investment.

Cash Equivalents

Cash and cash equivalents are highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of change in value due to interest rate, quoted price, or penalty on withdrawal. A debt security is classified as a cash equivalent if it meets these criteria and if it has a remaining time to maturity of three months or less from the date of acquisition. Amounts on deposit and available upon demand, or negotiated to provide for daily liquidity without penalty, are classified as Cash and cash equivalents. Time deposits, certificates of deposit, and money market accounts that meet the above criteria are reported at par value on our consolidated balance sheet.

Restricted Cash

Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements are recorded in Other assets in the non-current assets section of our consolidated balance sheet. Our Automotive segment restricted cash balances primarily include various escrow agreements related to legal, insurance, customs, and environmental matters. Our Ford Credit segment restricted cash balances primarily include cash held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements. Mobility segment restricted cash balances primarily include cash held under the terms of certain contractual agreements. Restricted cash does not include required minimum balances or cash securing debt issued through securitization transactions.

Marketable Securities

Investments in securities with a maturity date greater than three months at the date of purchase and other securities for which there is more than an insignificant risk of change in value due to interest rate, quoted price, or penalty on withdrawal are classified as Marketable securities.

Realized gains and losses and interest income on all of our marketable securities and unrealized gains and losses on securities not classified as available for sale are recorded in Other income/(loss), net. Unrealized gains and losses on available for sale securities are recognized in Unrealized gains and losses on securities, a component of Other comprehensive income/(loss), net of tax. Realized gains and losses and reclassifications of accumulated other comprehensive income into net income are measured using the specific identification method.

FS-11

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

On a quarterly basis, we review our available-for-sale securities for impairment. If we conclude that any of these investments are impaired, we determine whether such impairment is other-than-temporary. Factors we consider to make such determination include the duration and severity of the impairment, the reason for the decline in value, and the potential recovery period and our intent to sell. If any impairment is considered other-than-temporary, we will write down the asset to its fair value and record the corresponding charge in Other income/(loss), net.

Trade Receivables

Trade and other receivables consists primarily of Automotive segment receivables from contracts with customers for the sale of vehicles, parts, and accessories. Trade receivables initially are recorded at the transaction amount and are typically outstanding for less than 30 days. Each reporting period, we evaluate the collectibility of the receivables and record an allowance for doubtful accounts representing our estimate of the probable losses. Additions to the allowance for doubtful accounts are made by recording charges to bad debt expense reported in Selling, administrative, and other expenses.

Net Intangible Assets and Goodwill

Indefinite-lived intangible assets and goodwill are not amortized but are tested for impairment annually or more frequently if events or circumstances indicate the assets may be impaired. Goodwill impairment testing is also performed following an allocation of goodwill to a business to be disposed or a change in reporting units. We test for impairment by assessing qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset or the reporting unit allocated the goodwill is less than its carrying amount. If the qualitative assessment indicates a possible impairment, the carrying value of the asset or reporting unit is compared with its fair value. Fair value is measured relying primarily on the income approach by applying a discounted cash flow method, the market approach using market values or multiples, and/or third-party valuations. We capitalize and amortize our finite-lived intangible assets over their estimated useful lives.

Intangible assets are comprised primarily of licensing and advertising agreements, land rights, patents, customer contracts, and technology. The net carrying amount of our intangible assets was $178 million and $188 million at December 31, 2018 and 2019, respectively.

The net carrying amount of goodwill was $264 million and $278 million at December 31, 2018 and 2019, respectively.

For the periods presented, we have not recorded any material impairments for indefinite-lived intangibles or goodwill.

The carrying amount of intangible assets and goodwill is reported in Other assets in the non-current assets section of our consolidated balance sheet.

Held-and-Used Long-Lived Asset Impairment

We test long-lived asset groups for recoverability when changes in circumstances indicate the carrying value may not be recoverable. Events that trigger a test for recoverability include material adverse changes in projected revenues and expenses, present cash flow losses combined with a history of cash flow losses and a forecast that demonstrates significant continuing losses, significant negative industry or economic trends, a current expectation that a long-lived asset group will be disposed of significantly before the end of its useful life, a significant adverse change in the manner in which an asset group is used or in its physical condition, or when there is a change in the asset grouping. When a triggering event occurs, a test for recoverability is performed, comparing projected undiscounted future cash flows to the carrying value of the asset group. If the test for recoverability identifies a possible impairment, the asset group’s fair value is measured relying primarily on a discounted cash flow method. To the extent available, we will also consider third-party valuations of our long-lived assets that were prepared for other business purposes. An impairment charge is recognized for the amount by which the carrying value of the asset group exceeds its estimated fair value. When an impairment loss is recognized for assets to be held and used, the adjusted carrying amount of those assets is depreciated over their remaining useful life. For the periods presented, we have not recorded any impairments.

FS-12

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Held-for-Sale Asset Impairment

We perform an impairment test on a disposal group to be discontinued, held for sale, or otherwise disposed when we have committed to an action and the action is expected to be completed within twelve months. We estimate fair value to approximate the expected proceeds to be received, less cost to sell, and compare it to the carrying value of the disposal group. An impairment charge is recognized when the carrying value exceeds the estimated fair value (see Note 24).

Fair Value Measurements

We measure fair value of our financial instruments, including those held within our pension plans, using various valuation methods and prioritize the use of observable inputs. The use of observable and unobservable inputs and their significance in measuring fair value are reflected in our fair value hierarchy.

•	Level 1 - inputs include quoted prices for identical instruments and are the most observable

•	Level 2 - inputs include quoted prices for similar instruments and observable inputs such as interest rates, currency exchange rates, and yield curves

•	Level 3 - inputs include data not observable in the market and reflect management judgment about the assumptions market participants would use in pricing the instruments

Fixed income securities, equities, commingled funds, derivative financial instruments, and alternative assets are remeasured and presented within our consolidated financial statements at fair value on a recurring basis. Finance receivables and debt are measured at fair value for the purpose of disclosure. Other assets and liabilities are measured at fair value on a nonrecurring basis.

Transfers into and transfers out of the hierarchy levels are recognized as if they had taken place at the end of the reporting period.

Valuation Method

Fixed Income Securities. Fixed income securities primarily include government securities, government agency securities, corporate bonds, and asset-backed securities. We generally measure the fair value using prices obtained from pricing services or quotes from dealers that make markets in such securities. Pricing methods and inputs to valuation models used by the pricing services depend on the security type (i.e., asset class). Where possible, fair values are generated using market inputs including quoted prices (the closing price in an exchange market), bid prices (the price at which a buyer stands ready to purchase), and other market information. For fixed income securities that are not actively traded, the pricing services use alternative methods to determine fair value for the securities, including quotes for similar fixed income securities, matrix pricing, discounted cash flow using benchmark curves, or other factors. In certain cases, when market data are not available, we may use broker quotes or pricing services that use proprietary pricing models to determine fair value. The proprietary models incorporate unobservable inputs primarily consisting of prepayment curves, discount rates, default assumptions, recovery rates, yield assumptions, and credit spread assumptions.

An annual review is performed on the security prices received from our pricing services, which includes discussion and analysis of the inputs used by the pricing services to value our securities. The price of certain securities sold close to the quarter end are also compared to the price of the same security at the balance sheet date to ensure the reported fair value is reasonable.

Equities. Equity securities are primarily exchange-traded and are valued based on the closing bid, official close, or last trade pricing on an active exchange. If closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price. Securities that are thinly traded or delisted are valued using unobservable pricing data.

Commingled Funds. Fixed income and public equity securities may each be combined into commingled fund investments. Most commingled funds are valued to reflect our interest in the fund based on the reported year-end net asset value (“NAV”).

FS-13

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Derivative Financial Instruments. Exchange-traded derivatives for which market quotations are readily available are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. Over-the-counter derivatives are not exchange traded and are valued using independent pricing services or industry-standard valuation models such as a discounted cash flow. When discounted cash flow models are used, projected future cash flows are discounted to a present value using market-based expectations for interest rates, foreign exchange rates, commodity prices, and the contractual terms of the derivative instruments. The discount rate used is the relevant benchmark interest rate (e.g., LIBOR, SONIA) plus an adjustment for non-performance risk. The adjustment reflects the full credit default swap (“CDS”) spread applied to a net exposure, by counterparty, considering the master netting agreements and any posted collateral. We use our counterparty’s CDS spread when we are in a net asset position and our own CDS spread when we are in a net liability position. In cases where market data is not available we use broker quotes and models (e.g., Black-Scholes) to determine fair value. This includes situations where there is lack of liquidity for a particular currency or commodity, or when the instrument is longer dated.

Alternative Assets. Hedge funds generally hold liquid and readily-priced securities, such as public equities, exchange-traded derivatives, and corporate bonds. Private equity and real estate investments are less liquid. External investment managers typically report valuations reflecting initial cost or updated appraisals, which are adjusted for cash flows, and realized and unrealized gains/losses. All alternative assets are valued at the NAV provided by the investment sponsor or third party administrator, as they do not have readily-available market quotations. Valuations may be lagged up to six months. The NAV will be adjusted for cash flows (additional investments or contributions, and distributions) through year end. We may make further adjustments for any known substantive valuation changes not reflected in the NAV.

The Ford-Werke GmbH (“Ford-Werke”) defined benefit plan is primarily funded through a group insurance contract (see Note 18). We measure the fair value of the insurance asset by projecting expected future cash flows from the contract and discounting them to present value based on current market rates including an assessment for non-performance risk of the insurance company. The assumptions used to project expected future cash flows are based on actuarial estimates and are unobservable; therefore, the contract is categorized within Level 3 of the hierarchy.

Finance Receivables. We measure finance receivables at fair value using internal valuation models (see Note 10). These models project future cash flows of financing contracts based on scheduled contract payments (including principal and interest). The projected cash flows are discounted to present value based on assumptions regarding credit losses, pre-payment speed, and applicable spreads to approximate current rates. Our assumptions regarding pre-payment speed and credit losses are based on historical performance. The fair value of finance receivables is categorized within Level 3 of the hierarchy.

On a nonrecurring basis, we also measure at fair value retail contracts greater than 120 days past due or deemed to be uncollectible, and individual dealer loans probable of foreclosure. We use the fair value of collateral, adjusted for estimated costs to sell, to determine the fair value of our receivables. The collateral for a retail financing or wholesale receivable is the vehicle financed, and for dealer loans is real estate or other property.

The fair value of collateral for retail receivables is calculated as the outstanding receivable balances multiplied by the average recovery value percentage. The fair value of collateral for wholesale receivables is based on the wholesale market value or liquidation value for new and used vehicles. The fair value of collateral for dealer loans is determined by reviewing various appraisals, which include total adjusted appraised value of land and improvements, alternate use appraised value, broker’s opinion of value, and purchase offers.

Debt. We measure debt at fair value using quoted prices for our own debt with approximately the same remaining maturities (see Note 20). Where quoted prices are not available, we estimate fair value using discounted cash flows and market-based expectations for interest rates, credit risk, and the contractual terms of the debt instruments. For certain short-term debt with an original maturity date of one year or less, we assume that book value is a reasonable approximation of the debt’s fair value. The fair value of debt is categorized within Level 2 of the hierarchy.

FS-14

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Finance and Lease Incentives

We routinely sponsor special retail financing and lease incentives to dealers’ customers who choose to finance or lease Ford or Lincoln vehicles with Ford Credit. The cost for these incentives is included in our estimate of variable consideration when the vehicle is sold to the dealer. Ford Credit records a reduction to the finance receivable or reduces the cost of the vehicle operating lease when it records the underlying finance contract and we transfer to Ford Credit the amount of the incentive on behalf of the dealer’s customer. See Note 1 for additional information regarding transactions between Automotive and Ford Credit. The Ford Credit segment recognized interest revenue of $2 billion, $2.4 billion, and $2.5 billion in 2017, 2018, and 2019, respectively, and lower depreciation of $2.1 billion, $2.4 billion, and $2.6 billion in 2017, 2018, and 2019, respectively, associated with these incentives.

Supplier Price Adjustments

We frequently negotiate price adjustments with our suppliers throughout a production cycle, even after receiving production material. These price adjustments relate to changes in design specification or other commercial terms such as economics, productivity, and competitive pricing. We recognize price adjustments when we reach final agreement with our suppliers. In general, we avoid direct price changes in consideration of future business; however, when these occur, our policy is to defer the recognition of any such price change given explicitly in consideration of future business where guaranteed volumes are specified.

Government Incentives

We receive incentives from U.S. and non-U.S. governmental entities in the form of tax rebates or credits, grants, and loans. Government incentives are recorded in our consolidated financial statements in accordance with their purpose as a reduction of expense, a reduction of the cost of the capital investment, or other income. The benefit is generally recorded when all conditions attached to the incentive have been met and there is reasonable assurance of receipt.

Employee Bonus and Lump-Sum Payments

Effective November 15, 2019, we signed a new agreement with the International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (“UAW”) covering approximately 56,000 employees in the United States. The agreement established wages, benefits, and a variety of bonus payments for covered employees over a four-year period.

Performance-based and inflation-protection employee bonuses are accrued throughout the period in which services are provided and the bonuses are earned. Lump-sum cash bonuses paid in connection with signing a union contract are recognized in the period that the contract negotiations are finalized and ratified. These amounts are reported in Cost of sales.

Selected Other Costs

Engineering, research, and development expenses are reported in Cost of sales and primarily consist of salaries, materials, and associated costs. Engineering, research, and development costs are expensed as incurred when performed internally or when performed by a supplier if we guarantee reimbursement. Advertising costs are reported in Selling, administrative, and other expenses and are expensed as incurred. Engineering, research, development, and advertising expenses for the years ended December 31 were as follows (in billions):

	2017				2018				2019
Engineering, research, and development	$	8.0			$	8.2			$	7.4
Advertising	4.1				4.0				3.6

FS-15

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards

Accounting Standards Update (“ASU”) 2016-02, Leases. On January 1, 2019, we adopted Accounting Standards Codification 842 and all the related amendments (“new lease standard”) using the modified retrospective method. We recognized the cumulative effect of initially applying the new lease standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the lease accounting standard in effect for those periods. We do not expect the adoption of the new lease standard to have a material impact to our net income on an ongoing basis.

The new lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We elected the practical expedients permitted under the transition guidance of the new standard that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. We did not reassess whether any contracts or land easements entered into prior to adoption are leases or contain leases.

The cumulative effect of the changes made to our consolidated balance sheet at January 1, 2019, for the adoption of

ASU 2016-02, Leases, was as follows (in millions):

		Balance at December 31, 2018				Adjustments due to ASU 2016-02				Balance at January 1, 2019
Balance sheet
Assets
Other assets, current		$	3,930			$	(8	)		$	3,922
Other assets, non-current		7,929				1,324				9,253
Deferred income taxes		10,412				(4		)		10,408
Liabilities
Other liabilities and deferred revenue, current		20,556				316				20,872
Other liabilities and deferred revenue, non-current		23,588				983				24,571
Equity
Retained earnings		22,668				13				22,681

We also adopted the following ASUs during 2019, none of which had a material impact to our consolidated financial statements or financial statement disclosures:

ASU			Effective Date
2018-17	Targeted Improvements to Related Party Guidance for Variable Interest Entities		January 1, 2019
2018-16	Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes		January 1, 2019
2018-13	Fair Value Measurement - Changes to the Disclosure Requirements for Fair Value Measurement		January 1, 2019
2018-08	Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made		January 1, 2019
2018-07	Stock Compensation - Improvements to Nonemployee Share-Based Payment Accounting		January 1, 2019
2018-02	Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (a)		January 1, 2019
2018-14	Changes to the Disclosure Requirements for Defined Benefit Plans		December 31, 2019

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(a)	Ford did not elect to reclassify the income tax effects of the Tax Cuts and Jobs Act from Accumulated other comprehensive income/(loss) to Retained earnings.

FS-16

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. NEW ACCOUNTING STANDARDS (Continued)

Accounting Standards Issued But Not Yet Adopted

The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and

determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements.

ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments. In June 2016, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard which replaces the current incurred loss impairment method with a method that reflects expected credit losses. The new standard and the related amendments were effective on January 1, 2020. Based on our current portfolio and forecasts of future macroeconomic conditions, we estimate that the allowance for credit losses reported in Ford Credit finance receivables, net on our consolidated balance sheet will increase by about $250 million at adoption. We will record the cumulative effect of initially applying the new standard as an adjustment to the opening balance of Retained earnings. The increase is primarily for our consumer portfolio, as it will cover expected credit losses over the full remaining expected life of the receivables.

FS-17

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. REVENUE

The following tables disaggregate our revenue by major source for the years ended December 31 (in millions):

	2017
	Automotive				Mobility				Ford Credit				Consolidated
Vehicles, parts, and accessories	$	140,171			$	—			$	—			$	140,171
Used vehicles	2,956				—				—				2,956
Extended service contracts	1,236				—				—				1,236
Other revenue	815				10				219				1,044
Revenues from sales and services	145,178				10				219				145,407
Leasing income	475				—				5,552				6,027
Financing income	—				—				5,184				5,184
Insurance income	—				—				158				158
Total revenues	$	145,653			$	10			$	11,113			$	156,776

	2018
	Automotive				Mobility				Ford Credit				Consolidated
Vehicles, parts, and accessories	$	142,532			$	—			$	—			$	142,532
Used vehicles	3,022				—				—				3,022
Extended service contracts	1,323				—				—				1,323
Other revenue	879				26				218				1,123
Revenues from sales and services	147,756				26				218				148,000
Leasing income	538				—				5,795				6,333
Financing income	—				—				5,841				5,841
Insurance income	—				—				164				164
Total revenues	$	148,294			$	26			$	12,018			$	160,338

	2019
	Automotive				Mobility				Ford Credit				Consolidated
Vehicles, parts, and accessories	$	137,659			$	—			$	—			$	137,659
Used vehicles	3,307				—				—				3,307
Extended service contracts	1,376				—				—				1,376
Other revenue	811				41				204				1,056
Revenues from sales and services	143,153				41				204				143,398
Leasing income	446				—				5,899				6,345
Financing income	—				—				5,996				5,996
Insurance income	—				—				161				161
Total revenues	$	143,599			$	41			$	12,260			$	155,900

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of our vehicles, parts, accessories, or services. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The expected costs associated with our base warranties and field service actions continue to be recognized as expense when the products are sold (see Note 27). We recognize revenue for vehicle service contracts that extend mechanical and maintenance coverages beyond our base warranties over the life of the contract. We do not have any material significant payment terms as payment is received at or shortly after the point of sale.

FS-18

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. REVENUE (Continued)

Automotive Segment

Vehicles, Parts, and Accessories. For the majority of vehicles, parts, and accessories, we transfer control and recognize a sale when we ship the product from our manufacturing facility to our customer (dealers and distributors). We receive cash equal to the invoice price for most vehicle sales at the time of wholesale. When the vehicle sale is financed by our wholly-owned subsidiary Ford Credit, the dealer pays Ford Credit when it sells the vehicle to the retail customer (see Note 10). Payment terms on part sales to dealers, distributors, and retailers range from 30 to 120 days. The amount of consideration we receive and revenue we recognize varies with changes in return rights and marketing incentives we offer to our customers and their customers. When we give our dealers the right to return eligible parts and accessories, we estimate the expected returns based on an analysis of historical experience. Estimates of marketing incentives are based on expected retail and fleet sales volumes, mix of products to be sold, and incentive programs to be offered. Customer acceptance of products and programs, as well as other market conditions, will impact these estimates. We adjust our estimate of revenue at the earlier of when the value of consideration we expect to receive changes or when the consideration becomes fixed. As a result of changes in our estimate of marketing incentives, during 2017, 2018, and 2019 we recorded a decrease of $887 million, $903 million, and $844 million, respectively, related to revenue recognized in prior annual periods.

Depending on the terms of the arrangement, we may also defer the recognition of a portion of the consideration received because we have to satisfy a future obligation (e.g., free extended service contracts). We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. We have elected to recognize the cost for freight and shipping when control over vehicles, parts, or accessories have transferred to the customer as an expense in Cost of sales.

We sell vehicles to daily rental companies and guarantee that we will pay them the difference between an agreed amount and the value they are able to realize upon resale. At the time of transfer of vehicles to the daily rental companies, we record the probable amount we will pay under the guarantee to Other liabilities and deferred revenue (see Note 27).

Used Vehicles. We sell used vehicles both at auction and through our consolidated dealerships. Proceeds from the sale of these vehicles are recognized in Automotive revenues upon transfer of control of the vehicle to the customer and the related vehicle carrying value is recognized in Cost of sales.

Extended Service Contracts. We sell separately priced service contracts that extend mechanical and maintenance coverages beyond our base warranty agreements to vehicle owners. The separately priced service contracts range from 12 to 120 months. We receive payment at contract inception and recognize revenue over the term of the agreement in proportion to the costs we expect to incur in satisfying the contract obligations. We had a balance of $3.8 billion and $4 billion of unearned revenue associated with outstanding contracts reported in Other liabilities and deferred revenue at December 31, 2017 and 2018, respectively. We recognized $1.1 billion of the unearned amounts as revenue during each of the years ended December 31, 2018 and 2019. At December 31, 2019, the unearned amount was $4.2 billion. We expect to recognize approximately $1.2 billion of the unearned amount in 2020, $1.1 billion in 2021, and $1.9 billion thereafter.

We record a premium deficiency reserve to the extent we estimate the future costs associated with these contracts exceed the unrecognized revenue. Amounts paid to dealers to obtain these contracts are deferred and recorded as Other assets. These costs are amortized to expense consistent with how the related revenue is recognized. We had a balance of $247 million and $270 million in deferred costs as of December 31, 2018 and 2019, respectively. We recognized $63 million, $73 million, and $74 million of amortization during the years ended December 31, 2017, 2018, and 2019, respectively.

Other Revenue. Other revenue consists primarily of net commissions received for serving as the agent in facilitating the sale of a third party’s products or services to our customers, payments for vehicle-related design and testing services we perform for others, and revenue associated with various Mobility operations. We have applied the practical expedient to recognize Automotive revenues for vehicle-related design and testing services over the two to three year term of these agreements in proportion to the amount we have the right to invoice.

FS-19

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. REVENUE (Continued)

Leasing Income. We sell vehicles to daily rental companies with an obligation to repurchase the vehicles for a guaranteed amount, exercisable at the option of the customer. The transactions are accounted for as operating leases. Upon the transfer of vehicles to the daily rental companies, we record proceeds received in Other liabilities and deferred revenue. The difference between the proceeds received and the guaranteed repurchase amount is recorded in Automotive revenues over the term of the lease using a straight-line method. The cost of the vehicle is recorded in Net investment in operating leases on our consolidated balance sheet and the difference between the cost of the vehicle and the estimated auction value is depreciated in Cost of sales over the term of the lease.

Ford Credit Segment

Leasing Income. Ford Credit offers leasing plans to retail consumers through Ford and Lincoln brand dealers who originate the leases. Ford Credit records an operating lease upon purchase of a vehicle subject to a lease from the dealer. The retail consumer makes lease payments representing the difference between Ford Credit’s purchase price of the vehicle and the contractual residual value of the vehicle, plus lease fees that we recognize on a straight-line basis over the term of the lease agreement. Depreciation and the gain or loss upon disposition of the vehicle is recorded in Ford Credit interest, operating, and other expenses.

Financing Income. Ford Credit originates and purchases finance installment contracts. Financing income represents interest earned on the finance receivables (including sales-type and direct financing leases). Interest is recognized using the interest method and includes the amortization of certain direct origination costs.

Insurance Income. Income from insurance contracts is recognized evenly over the term of the agreement. Insurance commission revenue is recognized on a net basis at the time of sale of the third party’s product or service to our customer.

NOTE 5. OTHER INCOME/(LOSS)

The amounts included in Other income/(loss), net for the years ended December 31 were as follows (in millions):

	2017				2018				2019
Net periodic pension and OPEB income/(cost), excluding service cost	$	1,757			$	786			$	(1,602	)
Investment-related interest income	459				667				809
Interest income/(expense) on income taxes	2				33				(29		)
Realized and unrealized gains/(losses) on cash equivalents, marketable securities, and other investments	(23		)		115				144
Gains/(Losses) on changes in investments in affiliates	14				42				20
Gains/(Losses) on extinguishment of debt	—				—				(55		)
Royalty income	678				491				381
Other	380				113				106
Total	$	3,267			$	2,247			$	(226	)

NOTE 6. SHARE-BASED COMPENSATION

Under our Long-Term Incentive Plans, we may issue restricted stock units (“RSUs”), restricted stock shares (“RSSs”), and stock options. RSUs and RSSs consist of time-based and performance-based awards. The number of shares that may be granted in any year is limited to 2% of our issued and outstanding Common Stock as of December 31 of the prior calendar year. The limit may be increased up to 3% in any year, with a corresponding reduction in shares available for grants in future years. Granted RSUs generally cliff vest or ratably vest over a three-year service period. Performance-based RSUs have two components: one based on internal financial performance metrics, and the other based on total shareholder return relative to an industrial and automotive peer group. At the time of vesting, RSU awards are net settled (shares are withheld to cover the employee tax obligation).

FS-20

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. SHARE-BASED COMPENSATION (Continued)

The fair value of both the time-based and the internal performance metrics portion of the performance-based RSUs and RSSs is determined using the closing price of our Common Stock at grant date. The weighted average per unit grant date fair value for the years ended December 31, 2017, 2018, and 2019 was $12.37, $9.89, and $8.99, respectively.

The fair value of time-based RSUs and RSSs is expensed over the shorter of the vesting period, using the graded vesting method, or the time period an employee becomes eligible to retain the award at retirement. The fair value of performance-based RSUs and RSSs is expensed over the shorter of the performance or required service periods based on the best available estimate of the number of shares expected to vest as measured against the performance metrics. Changes in estimates are recorded as a cumulative adjustment in the period of change. We have elected to recognize forfeitures as an adjustment to compensation expense for all RSUs and RSSs in the same period as the forfeitures occur. Expense is recorded in Selling, administrative, and other expenses.

The fair value of vested RSUs and RSSs as well as the compensation cost for the years ended December 31 was as follows (in millions):

	2017				2018				2019
Fair value of vested shares	$	175			$	187			$	231
Compensation cost (a)	193				162				190

---

(a)	Net of tax benefit of $52 million, $29 million, and $38 million in 2017, 2018, and 2019, respectively.

As of December 31, 2019, there was approximately $101 million in unrecognized compensation cost related to non-vested RSUs and RSSs. This expense will be recognized over a weighted average period of 1.8 years.

The performance-based RSUs granted in March 2017, 2018, and 2019 include a relative Total Shareholder Return (“TSR”) metric. We estimate the fair value of the TSR component of the performance-based RSUs using a Monte Carlo simulation. Inputs and assumptions used to calculate the fair value at grant date were as follows:

	2017				2018				2019
Fair value per stock award	$	12.44			$	9.03			$	9.66
Grant date stock price	12.66				10.40				8.81
Assumptions:
Ford’s stock price expected volatility (a)	23.4		%		22.9		%		24.1		%
Expected average volatility of peer companies (a)	26.0				25.4				25.8
Risk-free interest rate	1.57				2.46				2.57
Dividend yield	4.74				N/A				N/A

---

(a)	Expected volatility based on three years of daily closing share price changes ending on the grant date.

During 2019, activity for RSUs and RSSs was as follows (in millions, except for weighted average fair value):

	Shares			Weighted- Average Fair Value
Outstanding, beginning of year	64.1			$	10.80
Granted (a)	31.2			8.99
Vested (a)	(20.0	)		11.56
Forfeited	(6.0	)		12.24
Outstanding, end of year (b)	69.3			9.90

---

(a)	Includes shares awarded to non-employee directors.

(b)	Excludes 848,168 non-employee director shares that were vested, but unissued at December 31, 2019.

Stock Options

As of March 31, 2017, all of our outstanding stock options were fully vested. The last of our outstanding stock options will expire in July 2024, if not exercised sooner. We measure the fair value of our stock options using the Black-Scholes option-pricing model and record expense in Selling, administrative, and other expenses.

FS-21

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. INCOME TAXES

We recognize income tax-related penalties in Provision for/(Benefit from) income taxes on our consolidated income statement. We recognize income tax-related interest income and interest expense in Other income/(loss), net on our consolidated income statement.

We account for U.S. tax on global intangible low-tax income in the period incurred.

Valuation of Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying value of assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards on a taxing jurisdiction basis. We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which we expect the temporary differences to be recovered or paid.

Our accounting for deferred tax consequences represents our best estimate of the likely future tax consequences of events that have been recognized on our consolidated financial statements or tax returns and their future probability. In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets. If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, we record a valuation allowance.

Components of Income Taxes

Components of income taxes excluding cumulative effects of changes in accounting principles, other comprehensive income, and equity in net results of affiliated companies accounted for after-tax, for the years ended December 31 were as follows:

	2017				2018				2019
Income/(Loss) before income taxes (in millions)
U.S.	$	4,861			$	2,051			$	2,656
Non-U.S.	3,298				2,294				(3,296		)
Total	$	8,159			$	4,345			$	(640	)
Provision for/(Benefit from) income taxes (in millions)
Current
Federal	$	(125	)		$	75			$	(101	)
Non-U.S.	868				690				738
State and local	85				(6		)		33
Total current	828				759				670
Deferred
Federal	(1,214		)		(360		)		(1,190		)
Non-U.S.	593				239				(70		)
State and local	195				12				(134		)
Total deferred	(426		)		(109		)		(1,394		)
Total	$	402			$	650			$	(724	)
Reconciliation of effective tax rate
U.S. statutory rate	35.0		%		21.0		%		21.0		%
Non-U.S. tax rates under U.S. rates	(4.9		)		(1.2		)		46.9
State and local income taxes	2.2				2.0				12.4
General business credits	(3.6		)		(9.2		)		67.0
Dispositions and restructurings	(11.7		)		4.6				45.5
U.S. tax on non-U.S. earnings	(7.0		)		8.1				(49.2		)
Prior year settlements and claims	(0.2		)		1.1				(5.0		)
Tax incentives	—				—				20.7
Enacted change in tax laws	(8.2		)		(3.0		)		(12.5		)
Valuation allowances	5.6				(9.6		)		(18.7		)
Other	(2.3		)		1.2				(15.0		)
Effective rate	4.9		%		15.0		%		113.1		%

FS-22

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. INCOME TAXES (Continued)

On December 22, 2017, the Tax Cuts and Jobs Act (H.R. 1) was signed into law. This act includes, among other items, a permanent reduction to the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018, and requires immediate taxation of accumulated, unremitted non-U.S. earnings. As a result, at December 31, 2017, we recognized a tax benefit of $739 million from revaluing U.S. net deferred tax liabilities and tax expense of $219 million to record U.S. tax on unremitted non-U.S. earnings. For the years ended December 31, 2018 and 2019, our tax provision includes additional benefit of $123 million and additional expense of $95 million, respectively, related to the impact of the act and subsequently issued Treasury regulations on our global operations.

At December 31, 2019, $8.1 billion of non-U.S. earnings are considered indefinitely reinvested in operations outside the United States, for which deferred taxes have not been provided. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested basis differences is not practicable.

Components of Deferred Tax Assets and Liabilities

The components of deferred tax assets and liabilities at December 31 were as follows (in millions):

	2018				2019
Deferred tax assets
Employee benefit plans	$	4,039			$	4,125
Net operating loss carryforwards	1,825				1,726
Tax credit carryforwards	9,199				9,335
Research expenditures	437				619
Dealer and dealers’ customer allowances and claims	1,552				1,724
Other foreign deferred tax assets	648				799
All other	1,765				1,781
Total gross deferred tax assets	19,465				20,109
Less: Valuation allowances	(973		)		(843		)
Total net deferred tax assets	18,492				19,266
Deferred tax liabilities
Leasing transactions	3,215				2,694
Depreciation and amortization (excluding leasing transactions)	2,865				3,094
Finance receivables	639				584
Other foreign deferred tax liabilities	948				608
All other	1,010				913
Total deferred tax liabilities	8,677				7,893
Net deferred tax assets/(liabilities)	$	9,815			$	11,373

At December 31, 2019, we have a valuation allowance of $843 million primarily related to deferred tax assets in various non-U.S. operations.

Deferred tax assets for net operating losses and other temporary differences related to certain non-U.S. operations have not been recorded as a result of elections to tax these operations simultaneously in U.S. tax returns. Reversal of these elections would result in the recognition of $9.5 billion of deferred tax assets, subject to valuation allowance testing.

Operating loss carryforwards for tax purposes were $4.3 billion at December 31, 2019, resulting in a deferred tax asset of $1.7 billion. There is no expiration date for $2.5 billion of these losses. A substantial portion of the remaining losses will expire beyond 2023. Tax credits available to offset future tax liabilities are $9.3 billion. Approximately half of these credits have a remaining carryforward period of seven years or more. Tax benefits of operating loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and available tax planning strategies. In our evaluation, we anticipate making tax elections that change the order of tax credit carryforward utilization on U.S. tax returns.

FS-23

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. INCOME TAXES (Continued)

Other

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 were as follows (in millions):

	2018				2019
Beginning balance	$	2,063			$	2,047
Increase – tax positions in prior periods	90				169
Increase – tax positions in current period	45				24
Decrease – tax positions in prior periods	(133		)		(239		)
Settlements	—				(57		)
Lapse of statute of limitations	—				—
Foreign currency translation adjustment	(18		)		(1		)
Ending balance	$	2,047			$	1,943

The amount of unrecognized tax benefits that would affect the effective tax rate if recognized was $2 billion and $1.9 billion at December 31, 2018 and 2019, respectively.

Examinations by tax authorities have been completed through 2004 in Germany, 2011 in Canada, 2011 in the United States, and 2014 in China and the United Kingdom. Although examinations have been completed in these jurisdictions, limited transfer pricing disputes exist for years dating back to 2005.

Net interest on income taxes was $2 million and $33 million of income and $29 million of expense for the years ended December 31, 2017, 2018, and 2019, respectively. These were reported in Other income/(loss), net in our consolidated income statement. Net payables for tax related interest were $29 million and $58 million as of December 31, 2018 and 2019, respectively.

Cash paid for income taxes was $586 million, $821 million, and $599 million in 2017, 2018, and 2019, respectively.

FS-24

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. CAPITAL STOCK AND EARNINGS PER SHARE

All general voting power is vested in the holders of Common Stock and Class B Stock. Holders of our Common Stock have 60% of the general voting power and holders of our Class B Stock are entitled to such number of votes per share as will give them the remaining 40%. Shares of Common Stock and Class B Stock share equally in dividends when and as paid, with stock dividends payable in shares of stock of the class held.

If liquidated, each share of Common Stock is entitled to the first $0.50 available for distribution to holders of Common Stock and Class B Stock, each share of Class B Stock is entitled to the next $1.00 so available, each share of Common Stock is entitled to the next $0.50 so available, and each share of Common and Class B Stock is entitled to an equal amount thereafter.

We present both basic and diluted earnings per share (“EPS”) amounts in our financial reporting. Basic EPS excludes dilution and is computed by dividing Net income attributable to Ford Motor Company by the weighted-average number of Common and Class B Stock outstanding for the period. Diluted EPS reflects the maximum potential dilution that could occur from our share-based compensation, including “in-the-money” stock options, unvested restricted stock units, and unvested restricted stock shares. Potentially dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period.

Earnings Per Share Attributable to Ford Motor Company Common and Class B Stock

Basic and diluted income per share were calculated using the following (in millions):

	2017				2018				2019
Basic and Diluted Income Attributable to Ford Motor Company
Basic income	$	7,731			$	3,677			$	47
Diluted income	7,731				3,677				47
Basic and Diluted Shares
Basic shares (average shares outstanding)	3,975				3,974				3,972
Net dilutive options, unvested restricted stock units, and unvested restricted stock shares	23				24				32
Diluted shares	3,998				3,998				4,004

FS-25

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

The fair values of cash, cash equivalents, and marketable securities measured at fair value on a recurring basis were as follows (in millions):

			December 31, 2018
	Fair Value Level		Automotive				Mobility				Ford Credit				Consolidated
Cash and cash equivalents
U.S. government	1		$	220			$	—			$	139			$	359
U.S. government agencies	2		496				—				25				521
Non-U.S. government and agencies	2		169				—				114				283
Corporate debt	2		174				—				884				1,058
Total marketable securities classified as cash equivalents			1,059				—				1,162				2,221
Cash, time deposits, and money market funds			5,999				53				8,445				14,497
Total cash and cash equivalents			$	7,058			$	53			$	9,607			$	16,718
Marketable securities
U.S. government	1		$	3,014			$	—			$	289			$	3,303
U.S. government agencies	2		1,953				—				65				2,018
Non-U.S. government and agencies	2		4,674				—				610				5,284
Corporate debt	2		5,614				—				198				5,812
Equities (a)	1		424				—				—				424
Other marketable securities	2		246				—				146				392
Total marketable securities			$	15,925			$	—			$	1,308			$	17,233
Restricted Cash			$	16			$	33			$	140			$	189
			December 31, 2019
	Fair Value Level		Automotive				Mobility				Ford Credit				Consolidated
Cash and cash equivalents
U.S. government	1		$	520			$	—			$	—			$	520
U.S. government agencies	2		125				—				—				125
Non-U.S. government and agencies	2		601				—				350				951
Corporate debt	2		642				—				604				1,246
Total marketable securities classified as cash equivalents			1,888				—				954				2,842
Cash, time deposits, and money market funds			6,432				117				8,113				14,662
Total cash and cash equivalents			$	8,320			$	117			$	9,067			$	17,504
Marketable securities
U.S. government	1		$	2,930			$	—			$	195			$	3,125
U.S. government agencies	2		1,548				—				210				1,758
Non-U.S. government and agencies	2		4,217				—				2,408				6,625
Corporate debt	2		4,802				—				193				4,995
Equities (a)	1		81				—				—				81
Other marketable securities	2		273				—				290				563
Total marketable securities			$	13,851			$	—			$	3,296			$	17,147
Restricted Cash			$	15			$	21			$	139			$	175
Cash, cash equivalents, and restricted cash in held-for-sale assets			$	—			$	—			$	62			$	62

---

(a)	Net unrealized gains/losses on equities were a $25 million gain and a $44 million loss at December 31, 2018 and 2019, respectively.

FS-26

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

The cash equivalents and marketable securities accounted for as available-for-sale (“AFS”) securities were as follows (in millions):

	December 31, 2018
																	Fair Value of Securities with Contractual Maturities
	Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value				Within 1 Year				After 1 Year through 5 Years				After 5 Years
Automotive
U.S. government	$	2,933			$	5			$	(10	)		$	2,928			$	1,714			$	1,214			$	—
U.S. government agencies	1,920				—				(18		)		1,902				797				1,087				18
Non-U.S. government and agencies	3,841				4				(37		)		3,808				194				3,614				—
Corporate debt	4,010				3				(33		)		3,980				1,148				2,830				2
Other marketable securities	207				—				—				207				1				134				72
Total	$	12,911			$	12			$	(98	)		$	12,825			$	3,854			$	8,879			$	92
	December 31, 2019
																	Fair Value of Securities with Contractual Maturities
	Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value				Within 1 Year				After 1 Year through 5 Years				After 5 Years
Automotive
U.S. government	$	2,839			$	11			$	(1	)		$	2,849			$	1,028			$	1,772			$	49
U.S. government agencies	1,445				2				(1		)		1,446				830				589				27
Non-U.S. government and agencies	3,925				20				(1		)		3,944				1,546				2,398				—
Corporate debt	5,029				53				—				5,082				1,837				3,245				—
Other marketable securities	230				1				—				231				—				149				82
Total	$	13,468			$	87			$	(3	)		$	13,552			$	5,241			$	8,153			$	158

Sales proceeds and gross realized gains/losses from the sale of AFS securities for the years ended December 31 were as follows (in millions):

	2017				2018				2019
Automotive
Sales proceeds	$	3,315			$	5,512			$	5,753
Gross realized gains	3				1				13
Gross realized losses	8				21				10

FS-27

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

The present fair values and gross unrealized losses for cash equivalents and marketable securities accounted for as AFS securities that were in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position, were as follows (in millions):

	December 31, 2018
	Less than 1 year								1 Year or Greater								Total
	Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Automotive
U.S. government	$	199			$	(1	)		$	1,637			$	(9	)		$	1,836			$	(10	)
U.S. government agencies	193				(1		)		1,596				(17		)		1,789				(18		)
Non-U.S. government and agencies	341				(1		)		2,445				(36		)		2,786				(37		)
Corporate debt	1,816				(16		)		856				(17		)		2,672				(33		)
Other marketable securities	125				—				—				—				125				—
Total	$	2,674			$	(19	)		$	6,534			$	(79	)		$	9,208			$	(98	)
	December 31, 2019
	Less than 1 year								1 Year or Greater								Total
	Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Automotive
U.S. government	$	183			$	(1	)		$	50			$	—			$	233			$	(1	)
U.S. government agencies	370				(1		)		344				—				714				(1		)
Non-U.S. government and agencies	463				—				390				(1		)		853				(1		)
Corporate debt	29				—				53				—				82				—
Other marketable securities	59				—				17				—				76				—
Total	$	1,104			$	(2	)		$	854			$	(1	)		$	1,958			$	(3	)

During the years ended December 31, 2017, 2018, and 2019, we did not recognize any other-than-temporary impairment losses.

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash as reported in the consolidated statement of cash flows were as follows (in millions):

	December 31, 2018				December 31, 2019
Cash and cash equivalents	$	16,718			$	17,504
Restricted cash (a)	189				175
Cash, cash equivalents, and restricted cash in held-for-sale assets	—				62
Total cash, cash equivalents, and restricted cash	$	16,907			$	17,741

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(a)	Included in Other assets in the non-current assets section of our consolidated balance sheet.

FS-28

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. FORD CREDIT FINANCE RECEIVABLES

Ford Credit manages finance receivables as “consumer” and “non-consumer” portfolios. The receivables are generally secured by the vehicles, inventory, or other property being financed.

Finance receivables are recorded at time of origination or purchase at fair value and are subsequently reported at amortized cost, net of any allowance for credit losses.

Consumer Portfolio. Receivables in this portfolio include products offered to individuals and businesses that finance the acquisition of Ford and Lincoln vehicles from dealers for personal or commercial use. Retail financing includes retail installment contracts for new and used vehicles and finance leases with retail customers, government entities, daily rental companies, and fleet customers.

Non-Consumer Portfolio. Receivables in this portfolio include products offered to automotive dealers. Dealer financing includes wholesale loans to dealers to finance the purchase of vehicle inventory, also known as floorplan financing, as well as loans to dealers to finance working capital and improvements to dealership facilities, finance the purchase of dealership real estate, and finance other dealer programs. Wholesale financing is approximately 94% of dealer financing.

Finance Receivables Classification

Finance receivables are accounted for as held-for-investment (“HFI”) if Ford Credit has the intent and ability to hold the receivables for the foreseeable future or until maturity or payoff. The determination of intent and ability to hold for the foreseeable future is highly judgmental and requires Ford Credit to make good faith estimates based on all information available at the time of origination or purchase. If Ford Credit does not have the intent and ability to hold the receivables, then the receivables are classified as held-for-sale (“HFS”).

Each quarter, Ford Credit makes a determination of whether it is probable that finance receivables originated or purchased during the quarter will be held for the foreseeable future based on historical receivables sale experience, internal forecasts and budgets, as well as other relevant, reliable information available through the date of evaluation. For purposes of this determination, probable means at least 70% likely and, consistent with the budgeting and forecasting period, the foreseeable future means twelve months. Ford Credit classifies receivables on a receivable-by-receivable basis. Specific receivables included in off-balance sheet sale transactions are generally not identified until the month in which the sale occurs.

Held-for-Investment. Finance receivables classified as HFI are recorded at the time of origination or purchase at fair value and are subsequently reported at amortized cost, net of any allowance for credit losses. Cash flows from finance receivables, excluding wholesale and other receivables, that were originally classified as HFI are recorded as an investing activity. Cash flows from wholesale and other receivables are recorded as an operating activity.

Held-for-Sale. Finance receivables classified as HFS are carried at the lower of cost or fair value. Cash flows resulting from the origination or purchase and sale of HFS receivables are recorded as an operating activity in Decrease/(Increase) in finance receivables (wholesale and other). Once a decision has been made to sell receivables that were originally classified as HFI, the receivables are reclassified as HFS and carried at the lower of cost or fair value. The valuation adjustment, if applicable, is recorded in Other income/(loss), net to recognize the receivables at the lower of cost or fair value.

At December 31, 2019, Ford Credit determined that it is probable that it will not hold certain retail financing and wholesale finance receivables for more than the following twelve months. The value of the finance receivables considered HFS at December 31, 2019 was $1.5 billion. Included within this amount is $1.2 billion of Forso Nordic AB (“Forso”) finance receivables, whose operations have been classified as HFS (see Note 24).

FS-29

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. FORD CREDIT FINANCE RECEIVABLES (Continued)

Finance receivables, net at December 31 were as follows (in millions):

	2018				2019
Consumer
Retail installment contracts, gross	$	70,874			$	68,905
Finance leases, gross	8,748				8,566
Retail financing, gross	79,622				77,471
Unearned interest supplements	(3,508		)		(3,589		)
Consumer finance receivables	76,114				73,882
Non-Consumer
Dealer financing	34,372				33,985
Non-Consumer finance receivables	34,372				33,985
Total recorded investment	$	110,486			$	107,867
Recorded investment in finance receivables	$	110,486			$	107,867
Allowance for credit losses	(589		)		(513		)
Finance receivables, net	$	109,897			$	107,354
Current portion	$	54,353			$	53,651
Non-current portion	55,544				53,703
Finance receivables, net	$	109,897			$	107,354
Net finance receivables subject to fair value (a)	$	101,471			$	99,168
Fair value (b)	100,877				99,297

---

(a)	Net finance receivables subject to fair value exclude finance leases. Previously, certain consumer financing products in Europe were classified as retail installment contracts. These products are now classified as finance leases. Comparative information has been revised to reflect this change.

(b)	The fair value of finance receivables is categorized within Level 3 of the hierarchy.

Ford Credit’s finance leases are comprised of sales-type and direct financing leases. These financings include primarily lease plans for terms of 24 to 60 months. Financing revenue from finance leases was $375 million and $380 million for the years ended December 31, 2018 and 2019, respectively, and is included in Ford Credit revenues on the consolidated income statement.

The amounts contractually due on Ford Credit’s finance lease receivables at December 31 were as follows (in millions):

		2019
2020		$	1,911
2021		1,853
2022		1,418
2023		673
2024		83
Thereafter		—
Total future cash payments		5,938
Less: Present value discount		(287		)
Finance lease receivables		$	5,651

FS-30

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. FORD CREDIT FINANCE RECEIVABLES (Continued)

The reconciliation from finance lease receivables to finance leases, gross and finance leases, net at December 31 was as follows (in millions):

		2019
Finance lease receivables		$	5,651
Unguaranteed residual assets		2,795
Initial direct costs		120
Finance leases, gross		8,566
Unearned interest supplements from Ford and affiliated companies		(363		)
Allowance for credit losses		(17		)
Finance leases, net		$	8,186

At December 31, 2018 and 2019, accrued interest was $264 million and $251 million, respectively, which we report in Other assets in the current assets section of our consolidated balance sheet.

Included in the recorded investment in finance receivables at December 31, 2018 and 2019 were consumer receivables of $40.7 billion and $38.3 billion, respectively, and non-consumer receivables of $25.7 billion and $26.8 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. The receivables 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 or the claims of Ford Credit’s other creditors. 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 (see Note 26).

Aging

For all finance receivables, Ford Credit defines “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date. The recorded investment of consumer receivables greater than 90 days past due and still accruing interest was $20 million at December 31, 2018. At December 31, 2019, there were no balances greater than 90 days past due that were still accruing interest.

The aging analysis of Ford Credit’s finance receivables balances at December 31 was as follows (in millions):

	2018				2019
Consumer
31-60 days past due	$	859			$	839
61-90 days past due	123				126
91-120 days past due	39				40
Greater than 120 days past due	39				35
Total past due	1,060				1,040
Current	75,054				72,842
Consumer finance receivables	76,114				73,882
Non-Consumer
Total past due	76				62
Current	34,296				33,923
Non-Consumer finance receivables	34,372				33,985
Total recorded investment	$	110,486			$	107,867

FS-31

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. FORD CREDIT FINANCE RECEIVABLES (Continued)

Credit Quality

Consumer Portfolio. When originating consumer receivables, Ford Credit uses a proprietary scoring system that measures credit quality using information in the credit application, proposed contract terms, credit bureau data, and other information. After a proprietary risk score is generated, Ford Credit decides whether to originate a contract using a decision process based on a judgmental evaluation of the applicant, the credit application, the proposed contract terms, credit bureau information (e.g., FICO score), proprietary risk score, and other information. The evaluation emphasizes the applicant’s ability to pay and creditworthiness focusing on payment, affordability, applicant credit history, and stability as key considerations.

After origination, Ford Credit reviews the credit quality of retail financing based on customer payment activity. As each customer develops a payment history, an internally developed behavioral scoring model is used to assist in determining the best collection strategies, which allows Ford Credit to focus collection activity on higher-risk accounts. These models are used to refine our risk-based staffing model to ensure collection resources are aligned with portfolio risk. Based on data from this scoring model, contracts are categorized by collection risk. Ford Credit’s collection models evaluate several factors, including origination characteristics, updated credit bureau data, and payment patterns.

Credit quality ratings for consumer receivables are based on aging. Consumer receivables credit quality ratings are as follows:

•	Pass – current to 60 days past due;

•	Special Mention – 61 to 120 days past due and in intensified collection status; and

•	Substandard – greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged off, as measured using the fair value of collateral less costs to sell.

Non-Consumer Portfolio. Ford Credit extends credit to dealers primarily in the form of lines of credit to purchase new Ford and Lincoln vehicles as well as used vehicles. Payment is required when the dealer has sold the vehicle. Each non-consumer lending request is evaluated by considering the borrower’s financial condition and the underlying collateral securing the loan. Ford Credit uses a proprietary model to assign each dealer a risk rating. This model uses historical dealer performance data to identify key factors about a dealer that are considered most significant in predicting a dealer’s ability to meet its financial obligations. Ford Credit also considers numerous other financial and qualitative factors of the dealer’s operations, including capitalization and leverage, liquidity and cash flow, profitability, and credit history with ourselves and other creditors.

Dealers are assigned to one of four groups according to risk ratings as follows:

•	Group I – strong to superior financial metrics;

•	Group II – fair to favorable financial metrics;

•	Group III – marginal to weak financial metrics; and

•	Group IV – poor financial metrics, including dealers classified as uncollectible.

Ford Credit generally suspends credit lines and extend no further funding to dealers classified in Group IV.

Ford Credit regularly reviews the model to confirm the continued business significance and statistical predictability of the model and may make updates to improve the performance of the model. In addition, they regularly audit dealer inventory and dealer sales records to verify that the dealer is in possession of the financed vehicles and is promptly paying each receivable following the sale of the financed vehicle. The frequency of on-site vehicle inventory audits depends primarily on the dealer’s risk rating. Under Ford Credit’s policies, on-site vehicle inventory audits of low-risk dealers are conducted only as circumstances warrant. On-site vehicle inventory audits of higher-risk dealers are conducted with increased frequency based primarily on the dealer’s risk rating, but also considering the results of electronic monitoring of the dealer’s performance, including daily payment verifications and monthly analysis of the dealer’s financial statements, payoffs, aged inventory, over credit line and delinquency reports. Ford Credit typically performs a credit review of each dealer annually and more frequently reviews certain dealers based on the dealer’s risk rating and total exposure. Ford Credit adjusts the dealer’s risk rating, if necessary.

FS-32

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. FORD CREDIT FINANCE RECEIVABLES (Continued)

The credit quality of dealer financing receivables is evaluated based on our internal dealer risk rating analysis. A dealer has the same risk rating for its entire dealer financing regardless of the type of financing.

The credit quality analysis of dealer financing receivables at December 31 was as follows (in millions):

	2018				2019
Dealer Financing
Group I	$	27,032			$	26,281
Group II	5,635				5,407
Group III	1,576				2,108
Group IV	129				189
Total recorded investment	$	34,372			$	33,985

Impaired Receivables. Impaired consumer receivables include accounts that have been rewritten or modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code that are considered to be Troubled Debt Restructurings (“TDRs”), as well as all accounts greater than 120 days past due. Impaired non-consumer receivables represent accounts with dealers that have weak or poor financial metrics or dealer financing that has been modified in TDRs. The recorded investment of consumer receivables that were impaired at December 31, 2018 and 2019 was $370 million and $322 million, or 0.5% and 0.4% of consumer receivables, respectively. The recorded investment of non-consumer receivables that were impaired at December 31, 2018 and 2019 was $129 million and $189 million, or 0.4% and 0.6% of non-consumer receivables, respectively. Impaired finance receivables are evaluated both collectively and specifically.

The accrual of revenue is discontinued at the time a receivable is determined to be uncollectible or when it is 90 days past due. Accounts may be restored to accrual status only when a customer settles all past-due deficiency balances and future payments are reasonably assured. For receivables in non-accrual status, subsequent financing revenue is recognized only to the extent a payment is received. Payments are generally applied first to outstanding interest and then to the unpaid principal balance.

A restructuring of debt constitutes a TDR if a concession is granted to a debtor for economic or legal reasons related to the debtor’s financial difficulties that Ford Credit otherwise would not consider. Consumer and non-consumer receivables that have a modified interest rate below market rate or that were modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code, except non-consumer receivables that are current with minimal risk of loss, are considered to be TDRs. Ford Credit does not grant concessions on the principal balance of our receivables. If a receivable is modified in a reorganization proceeding, all payment requirements of the reorganization plan need to be met before remaining balances are forgiven. Finance receivables involved in TDRs are specifically assessed for impairment.

FS-33

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 11. FORD CREDIT ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses represents an estimate of the probable credit loss inherent in finance receivables as of the balance sheet date. The adequacy of the allowance for credit losses is assessed quarterly and the assumptions and models used in establishing the allowance are evaluated regularly. Because credit losses may vary substantially over time, estimating credit losses requires a number of assumptions about matters that are uncertain. The majority of credit losses are attributable to Ford Credit’s consumer receivables.

Additions to the allowance for credit losses are made by recording charges to Ford Credit interest, operating, and other expenses on our consolidated income statement. The uncollectible portion of finance receivables are charged to the allowance for credit losses at the earlier of when an account is deemed to be uncollectible or when an account is 120 days delinquent, taking into consideration the financial condition of the customer or borrower, the value of the collateral, recourse to guarantors, and other factors.

In the event Ford Credit repossesses the collateral, the receivable is charged off and the collateral is recorded at its estimated fair value less costs to sell and reported in Other assets on our consolidated balance sheet. Charge-offs on finance receivables include uncollected amounts related to principal, interest, late fees, and other allowable charges. Recoveries on finance receivables previously charged off as uncollectible are credited to the allowance for credit losses.

Consumer

Ford Credit estimates the allowance for credit losses on consumer receivables using a combination of measurement models and management judgment. The models consider factors such as historical trends in credit losses and recoveries (including key metrics such as delinquencies, repossessions, and bankruptcies), the composition of the present portfolio (including vehicle brand, term, risk evaluation, and new/used vehicles), trends in historical used vehicle values, and economic conditions. Estimates from these models rely on historical information and may not fully reflect losses inherent in the present portfolio. Therefore, Ford Credit may adjust the estimate to reflect management judgment regarding observable changes in recent economic trends and conditions, portfolio composition, and other relevant factors.

Ford Credit makes projections of two key assumptions to assist in estimating the consumer allowance for credit losses:

•	Frequency - number of finance receivables contracts that are expected to default over the loss emergence period (“LEP”), measured as repossessions; and

•	Loss severity - expected difference between the amount a customer owes when the finance contract is charged off and the amount received, net of expenses, from selling the repossessed vehicle.

Collective Allowance for Credit Losses. The collective allowance is evaluated primarily using a collective loss-to-receivables (“LTR”) model that, based on historical experience, indicates credit losses have been incurred in the portfolio even though the particular accounts that are uncollectible cannot be specifically identified. The LTR model is based on the most recent years of history. An LTR for each product is calculated by dividing credit losses (i.e., charge-offs net of recoveries) by average net finance receivables, excluding unearned interest supplements and allowance for credit losses. The average LTR that is calculated for each product is multiplied by the end-of-period balances for that given product.

The largest markets also use a loss projection model to estimate losses inherent in the portfolio. The loss projection model applies recent monthly performance metrics, stratified by contract type (retail installment sale contract or finance lease), contract term (e.g., 60 months), and risk rating to the active portfolio to estimate the losses that have been incurred.

The LEP is an assumption within the models and represents the average amount of time between when a loss event first occurs to when it is charged off. This time period starts when the consumer begins to experience financial difficulty. It is evidenced, typically through delinquency, before eventually resulting in a charge-off. The LEP is a multiplier in the calculation of the collective consumer allowance for credit losses.

For accounts greater than 120 days past due, the uncollectible portion is charged off, such that the remaining recorded investment is equal to the estimated fair value of the collateral less costs to sell.

FS-34

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 11. FORD CREDIT ALLOWANCE FOR CREDIT LOSSES (Continued)

Specific Allowance for Impaired Receivables. Consumer receivables involved in TDRs are specifically assessed for impairment. A specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the contract’s original effective interest rate or the fair value of any collateral adjusted for estimated costs to sell.

After establishing the collective and specific allowance for credit losses, if management believes the allowance does not reflect all losses inherent in the portfolio due to changes in recent economic trends and conditions, or other relevant factors, an adjustment is made based on management judgment.

Non-Consumer

Ford Credit estimates the allowance for credit losses for non-consumer receivables based on historical LTR ratios, expected future cash flows, and the fair value of collateral.

Collective Allowance for Credit Losses. Ford Credit estimates an allowance for non-consumer receivables that are not specifically identified as impaired using an LTR model for each financing product based on historical experience. This LTR is an average of the most recent historical experience and is calculated consistent with the consumer receivables LTR approach. All accounts that are specifically identified as impaired are excluded from the calculation of the non-specific or collective allowance.

Specific Allowance for Impaired Receivables. Dealer financing is evaluated by segmenting individual loans by the risk characteristics of the loan (such as the amount of the loan, the nature of the collateral, and the financial status of the debtor). The loans are analyzed to determine whether individual loans are impaired, and a specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the loan’s original effective interest rate or the fair value of the collateral adjusted for estimated costs to sell.

After establishing the collective and the specific allowance for credit losses, if management believes the allowance does not reflect all losses inherent in the portfolio due to changes in recent economic trends and conditions, or other relevant factors, an adjustment is made based on management judgment.

FS-35

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 11. FORD CREDIT ALLOWANCE FOR CREDIT LOSSES (Continued)

An analysis of the allowance for credit losses related to finance receivables for the years ended December 31 was as follows (in millions):

	2018
	Consumer				Non-Consumer				Total
Allowance for credit losses
Beginning balance	$	582			$	15			$	597
Charge-offs (a)	(528		)		(67		)		(595		)
Recoveries	163				7				170
Provision for credit losses	359				68				427
Other	(10		)		—				(10		)
Ending balance	$	566			$	23			$	589
Analysis of ending balance of allowance for credit losses
Collective impairment allowance	$	546			$	14			$	560
Specific impairment allowance	20				9				29
Ending balance	566				23				589
Analysis of ending balance of finance receivables
Collectively evaluated for impairment	75,744				34,243				109,987
Specifically evaluated for impairment	370				129				499
Recorded investment	76,114				34,372				110,486
Ending balance, net of allowance for credit losses	$	75,548			$	34,349			$	109,897

---

(a)	Non-consumer charge-offs primarily reflect a U.S. dealer’s floorplan inventory and dealer loan determined to be uncollectible.

	2019
	Consumer				Non-Consumer				Total
Allowance for credit losses
Beginning balance	$	566			$	23			$	589
Charge-offs	(527		)		(22		)		(549		)
Recoveries	168				10				178
Provision for credit losses	291				5				296
Other	(2		)		1				(1		)
Ending balance	$	496			$	17			$	513
Analysis of ending balance of allowance for credit losses
Collective impairment allowance	$	478			$	15			$	493
Specific impairment allowance	18				2				20
Ending balance	496				17				513
Analysis of ending balance of finance receivables
Collectively evaluated for impairment	73,560				33,796				107,356
Specifically evaluated for impairment	322				189				511
Recorded investment	73,882				33,985				107,867
Ending balance, net of allowance for credit losses	$	73,386			$	33,968			$	107,354

FS-36

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 12. INVENTORIES

All inventories are stated at the lower of cost or net realizable value. Cost of our inventories is determined by costing methods that approximate a first-in, first-out (“FIFO”) basis. Inventories at December 31 were as follows (in millions):

	2018				2019
Raw materials, work-in-process, and supplies	$	4,536			$	4,402
Finished products	6,684				6,384
Total inventories	$	11,220			$	10,786

NOTE 13. NET INVESTMENT IN OPERATING LEASES

Net investment in operating leases consists primarily of lease contracts for vehicles with individuals, daily rental companies, government entities, and fleet customers. Assets subject to operating leases are depreciated using the straight-line method over the term of the lease to reduce the asset to its estimated residual value. Estimated residual values are based on assumptions for used vehicle prices at lease termination and the number of vehicles that are expected to be returned.

The net investment in operating leases at December 31 was as follows (in millions):

	2018				2019
Automotive Segment
Vehicles, net of depreciation	$	1,705			$	1,612
Ford Credit Segment
Vehicles and other equipment, at cost (a)	33,557				33,386
Accumulated depreciation	(6,143		)		(5,768		)
Total Ford Credit Segment	27,414				27,618
Total	$	29,119			$	29,230

---

(a)

Includes Ford Credit’s operating lease assets of $16.3 billion and $14.9 billion at December 31, 2018 and 2019, respectively, that have been included in securitization transactions. These net investments in operating leases are available only for payment of the debt or other obligations issued or arising in the securitization transactions; they are not available to pay other obligations or the claims of other creditors.

Ford Credit Segment

Included in Ford Credit interest, operating, and other expense is operating lease depreciation expense, which includes gains and losses on disposal of assets. Operating lease depreciation expense for the years ended December 31 was as follows (in millions):

	2017				2018				2019
Operating lease depreciation expense	$	4,254			$	3,972			$	3,635

Included in Ford Credit revenues are rents on operating leases. The amounts contractually due for minimum rentals on operating leases at December 31, 2018 were as follows (in millions):

	2019				2020				2021				2022				Thereafter				Total
Minimum rentals on operating leases	$	4,708			$	2,929			$	1,083			$	83			$	6			$	8,809

The amounts contractually due on operating leases at December 31, 2019 were as follows (in millions):

	2020				2021				2022				2023				Thereafter				Total
Operating lease payments	$	4,705			$	2,898			$	1,011			$	78			$	5			$	8,697

FS-37

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 14. NET PROPERTY

Net property is reported at cost, net of accumulated depreciation, which includes impairments. We capitalize new assets when we expect to use the asset for more than one year. Routine maintenance and repair costs are expensed when incurred.

Property and equipment are depreciated primarily using the straight-line method over the estimated useful life of the asset. Useful lives range from 3 years to 36 years. The estimated useful lives generally are 14.5 years for machinery and equipment, 8 years for software, 30 years for land improvements, and 36 years for buildings. Tooling generally is amortized over the expected life of a product program using a straight-line method.

Net property at December 31 was as follows (in millions):

	2018				2019
Land	$	445			$	421
Buildings and land improvements	11,477				11,900
Machinery, equipment, and other	38,720				38,939
Software	3,349				3,691
Construction in progress	2,066				1,710
Total land, plant and equipment, and other	56,057				56,661
Accumulated depreciation	(30,243		)		(31,020		)
Net land, plant and equipment, and other	25,814				25,641
Tooling, net of amortization	10,364				10,828
Total	$	36,178			$	36,469

Property-related expenses, excluding net investment in operating leases, for the years ended December 31 were as follows (in millions):

	2017				2018				2019
Depreciation and other amortization	$	2,292			$	2,504			$	3,449
Tooling amortization	2,695				2,909				3,409
Total (a)	$	4,987			$	5,413			$	6,858
Maintenance and rearrangement	$	1,970			$	1,994			$	1,963

---

(a)	Includes impairment of held-for-sale long-lived assets in 2019. See Note 24 for additional information.

FS-38

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 15. EQUITY IN NET ASSETS OF AFFILIATED COMPANIES

We use the equity method of accounting for our investments in entities over which we do not have control, but over whose operating and financial policies we are able to exercise significant influence.

Our carrying value and ownership percentages of our equity method investments at December 31 were as follows

(in millions, except percentages):

	Investment Balance								Ownership Percentage
	2018				2019				2019
Changan Ford Automobile Corporation, Limited (a)	$	950			$	672			50	%
Jiangling Motors Corporation, Limited	543				544				32
AutoAlliance (Thailand) Co., Ltd.	431				435				50
Ford Otomotiv Sanayi Anonim Sirketi	247				274				41
Getrag Ford Transmissions GmbH	236				209				50
Ford Sollers Netherlands B.V. (See Note 22)	—				93				49
FFS Finance South Africa (Pty) Limited	81				88				50
Ionity Holding GmbH & Co. KG	42				58				25
Other	179				146				Various
Total	$	2,709			$	2,519

---

(a)	In 2019, Changan Ford Automobile Corporation, Limited recorded a long-lived asset impairment charge, our share of which was $99 million and is included in Equity in net income of affiliated companies.

We recorded $1.4 billion, $330 million, and $244 million of dividends from these affiliated companies for the years ended December 31, 2017, 2018, and 2019, respectively.

A summary of the total financial results, as reported by our equity method investees, in the aggregate at December 31 was as follows (in millions):

Summarized Balance Sheet					2018				2019
Current assets					$	8,277			$	8,884
Non-current assets					9,733				10,381
Total assets					$	18,010			$	19,265
Current liabilities					$	9,190			$	9,357
Non-current liabilities					3,149				4,333
Total liabilities					$	12,339			$	13,690
Equity attributable to noncontrolling interests					$	11			$	12
	For the years ended December 31,
Summarized Income Statement	2017				2018				2019
Total revenue	$	35,172			$	27,196			$	22,750
Income before income taxes	2,980				484				111
Net income	2,584				463				209

FS-39

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 15. EQUITY IN NET ASSETS OF AFFILIATED COMPANIES (Continued)

In the ordinary course of business, we buy/sell various products and services including vehicles, parts, and components to/from our equity method investees. In addition, we receive royalty income.

Transactions with equity method investees reported for the years ended or at December 31 were as follows (in millions):

	For the years ended December 31,
Income Statement	2017				2018				2019
Sales	$	4,481			$	4,426			$	3,541
Purchases	9,422				10,477				10,106
Royalty income	583				374				250

Balance Sheet	2018				2019
Receivables	$	634			$	785
Payables	663				694

NOTE 16. OTHER INVESTMENTS

We have investments in entities for which we do not have the ability to exercise significant influence and fair values are not readily available. We have elected to record these investments at cost (less impairment, if any), adjusted for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We report the carrying value of these investments in Other assets in the non-current assets section of our consolidated balance sheet. These investments were $250 million and $1.2 billion at December 31, 2018 and 2019, respectively. The increase from December 31, 2018 primarily reflects our investments in Rivian made during 2019. It also includes adjustments for observable price events on our investments, none of which were material.

NOTE 17. OTHER LIABILITIES AND DEFERRED REVENUE

Other liabilities and deferred revenue at December 31 were as follows (in millions):

	2018				2019
Current
Dealer and dealers’ customer allowances and claims	$	11,369			$	13,113
Deferred revenue	2,095				2,091
Employee benefit plans	1,755				1,857
Accrued interest	988				1,128
OPEB	339				332
Pension	204				185
Operating lease liabilities	—				367
Other	3,806				3,914
Total current other liabilities and deferred revenue	$	20,556			$	22,987
Non-current
Pension	$	9,423			$	9,878
OPEB	5,220				5,740
Dealer and dealers’ customer allowances and claims	2,497				1,921
Deferred revenue	3,985				4,191
Operating lease liabilities	—				1,047
Employee benefit plans	1,080				1,104
Other	1,383				1,443
Total non-current other liabilities and deferred revenue	$	23,588			$	25,324

FS-40

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. RETIREMENT BENEFITS

Defined benefit pension and OPEB plan obligations are remeasured at least annually as of December 31 based on the present value of projected future benefit payments for all participants for services rendered to date. The measurement of projected future benefits is dependent on the provisions of each specific plan, demographics of the group covered by the plan, and other key measurement assumptions. For plans that provide benefits dependent on salary assumptions, we include a projection of salary growth in our measurements. No assumption is made regarding any potential future changes to benefit provisions beyond those to which we are presently committed (e.g., in existing labor contracts).

Net periodic benefit costs, including service cost, interest cost, and expected return on assets are determined using assumptions regarding the benefit obligation and the fair value of plan assets (where applicable) as of the beginning of each year. We have elected to use a fair value of plan assets to calculate the expected return on assets in net periodic benefit cost. The funded status of the benefit plans, which represents the difference between the benefit obligation and fair value of plan assets, is calculated on a plan-by-plan basis. The benefit obligation and related funded status are determined using assumptions as of the end of each year. Actuarial gains and losses resulting from plan remeasurement are recognized in net periodic benefit cost in the period of the remeasurement. The impact of a retroactive plan amendment is recorded in Accumulated other comprehensive income/(loss), and is amortized as a component of net periodic cost, generally over the remaining service period of the active employees. The service cost component is included in Cost of sales and Selling, administrative and other expenses. Other components of net periodic benefit cost/(income) are included in Other income/(loss), net on our consolidated income statement.

A curtailment results from an event that significantly reduces the expected years of future service or eliminates the accrual of defined benefits for the future services of a significant number of employees. A curtailment gain is recorded when the employees who are entitled to a benefit terminate their employment, or when a plan suspension or amendment that results in a curtailment gain is adopted. A curtailment loss is recorded when it becomes probable a curtailment loss will occur. We recognize settlement expense when the costs associated with all settlements during the year exceed the interest component of net periodic cost for the affected plan. Expense from curtailments and settlements is recorded in Other income/(loss), net.

Defined Benefit Pension Plans. We have defined benefit pension plans covering hourly and salaried employees in the United States, Canada, United Kingdom, Germany, and other locations. The largest portion of our worldwide obligation is associated with our U.S. plans. Virtually all of our worldwide defined benefit plans are closed to new participants.

In general, our defined benefit pension plans are funded (i.e., have restricted assets from which benefits are paid). Our unfunded defined benefit pension plans are treated on a “pay as you go” basis with benefit payments from general Company cash. These unfunded plans primarily include certain plans in Germany and the U.S. defined benefit plans for senior management.

OPEB. We have defined benefit OPEB plans, primarily certain health care and life insurance benefits, covering hourly and salaried employees in the United States, Canada, and other locations. The largest portion of our worldwide obligation is associated with our U.S. plans. Our OPEB plans are unfunded and the benefits are paid from general Company cash.

Defined Contribution and Savings Plans. We also have defined contribution and savings plans for hourly and salaried employees in the United States and other locations. Company contributions to these plans, if any, are made from general Company cash and are expensed as incurred. The expense for our worldwide defined contribution and savings plans was $377 million, $393 million, and $444 million for the years ended December 31, 2017, 2018, and 2019, respectively. This includes the expense for Company-matching contributions to our primary employee savings plan in the United States of $142 million, $143 million, and $143 million for the years ended December 31, 2017, 2018, and 2019, respectively. The 2019 expense also reflects a one-time contribution of $33 million to certain eligible employees as part of the UAW collective bargaining agreement.

FS-41

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. RETIREMENT BENEFITS (Continued)

Defined Benefit Plans – Expense and Status

The assumptions used to determine benefit obligation and net periodic benefit cost/(income) were as follows:

	Pension Benefits
	U.S. Plans						Non-U.S. Plans						Worldwide OPEB
	2018			2019			2018			2019			2018			2019
Weighted Average Assumptions at December 31
Discount rate	4.29	%		3.32	%		2.48	%		1.74	%		4.17	%		3.30	%
Average rate of increase in compensation	3.50			3.50			3.37			3.37			3.44			3.44
Weighted Average Assumptions Used to Determine Net Benefit Cost for the Year Ended December 31
Discount rate - Service cost	3.67	%		4.17	%		2.39	%		2.52	%		3.70	%		4.34	%
Effective interest rate on benefit obligation	3.22			3.75			2.02			2.21			3.27			3.87
Expected long-term rate of return on assets	6.75			6.75			4.51			4.18			—			—
Average rate of increase in compensation	3.50			3.50			3.37			3.37			3.44			3.44

The pre-tax net periodic benefit cost/(income) for our defined benefit pension and OPEB plans for the years ended December 31 was as follows (in millions):

	Pension Benefits
	U.S. Plans												Non-U.S. Plans												Worldwide OPEB
	2017				2018				2019				2017				2018				2019				2017				2018				2019
Service cost	$	534			$	544			$	474			$	566			$	588			$	506			$	49			$	54			$	43
Interest cost	1,525				1,466				1,570				671				684				691				197				195				211
Expected return on assets	(2,734		)		(2,887		)		(2,657		)		(1,375		)		(1,295		)		(1,124		)		—				—				—
Amortization of prior service costs/(credits)	143				143				87				37				25				33				(120		)		(109		)		(70		)
Net remeasurement (gain)/loss	(538		)		1,294				(135		)		407				(76		)		2,084				293				(366		)		551
Separation programs/other	74				53				22				18				103				398				2				1				—
Settlements and curtailments	(354		)		(15		)		(67		)		(3		)		(2		)		8				—				—				—
Net periodic benefit cost/(income)	$	(1,350	)		$	598			$	(706	)		$	321			$	27			$	2,596			$	421			$	(225	)		$	735

As part of our ongoing global redesign activities, we recognized separation pension expense of $415 million and settlement and curtailment gains of $104 million related to separation programs in 2019. Until our global redesign actions are completed, we anticipate further adjustments to our plans in subsequent periods.

In the fourth quarter of 2019, we transferred our Netherlands pension obligation and related plan assets to an insurance company, resulting in a settlement loss of $57 million, offset partially by a curtailment gain of $12 million.

FS-42

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. RETIREMENT BENEFITS (Continued)

The year-end status of these plans was as follows (in millions):

		Pension Benefits
		U.S. Plans								Non-U.S. Plans								Worldwide OPEB
		2018				2019				2018				2019				2018				2019
Change in Benefit Obligation
Benefit obligation at January 1		$	46,340			$	42,269			$	34,098			$	31,079			$	6,169			$	5,559
Service cost		544				474				588				506				54				43
Interest cost		1,466				1,570				684				691				195				211
Amendments		—				—				135				10				—				—
Separation programs/other		9				(24		)		97				391				1				3
Curtailments		(15		)		—				(2		)		(43		)		—				—
Settlements		—				(966		)		(16		)		(272		)		—				—
Plan participant contributions		25				23				19				17				17				3
Benefits paid		(2,880		)		(2,615		)		(1,316		)		(1,395		)		(372		)		(367		)
Foreign exchange translation		—				—				(1,858		)		501				(139		)		69
Actuarial (gain)/loss		(3,220		)		4,941				(1,350		)		3,888				(366		)		551
Benefit obligation at December 31		42,269				45,672				31,079				35,373				5,559				6,072
Change in Plan Assets
Fair value of plan assets at January 1		44,160				39,774				29,657				27,273				—				—
Actual return on plan assets		(1,627		)		7,800				21				2,935				—				—
Company contributions		140				284				629				789				—				—
Plan participant contributions		25				23				19				17				—				—
Benefits paid		(2,880		)		(2,615		)		(1,316		)		(1,395		)		—				—
Settlements		—				(966		)		(16		)		(330		)		—				—
Foreign exchange translation		—				—				(1,708		)		678				—				—
Other		(44		)		(47		)		(13		)		(9		)		—				—
Fair value of plan assets at December 31		39,774				44,253				27,273				29,958				—				—
Funded status at December 31		$	(2,495	)		$	(1,419	)		$	(3,806	)		$	(5,415	)		$	(5,559	)		$	(6,072	)
Amounts Recognized on the Balance Sheet
Prepaid assets		$	165			$	911			$	3,161			$	2,318			$	—			$	—
Other liabilities		(2,660		)		(2,330		)		(6,967		)		(7,733		)		(5,559		)		(6,072		)
Total		$	(2,495	)		$	(1,419	)		$	(3,806	)		$	(5,415	)		$	(5,559	)		$	(6,072	)
Amounts Recognized in Accumulated Other Comprehensive Loss (pre-tax)
Unamortized prior service costs/(credits)		$	95			$	8			$	285			$	274			$	97			$	29
Pension Plans in which Accumulated Benefit Obligation Exceeds Plan Assets at December 31
Accumulated benefit obligation		$	1,965			$	2,141			$	10,904			$	12,421
Fair value of plan assets		137				156				5,232				5,948
Accumulated Benefit Obligation at December 31		$	41,312			$	44,578			$	27,787			$	32,106
Pension Plans in which Projected Benefit Obligation Exceeds Plan Assets at December 31
Projected benefit obligation		$	20,529			$	22,085			$	12,321			$	13,864
Fair value of plan assets		17,872				19,755				5,357				6,131
Projected Benefit Obligation at December 31		$	42,269			$	45,672			$	31,079			$	35,373

FS-43

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. RETIREMENT BENEFITS (Continued)

The actuarial (gain)/loss for our pension benefit obligations in 2018 and 2019 was primarily related to changes in discount rates.

Pension Plan Contributions

Our policy for funded pension plans is to contribute annually, at a minimum, amounts required by applicable laws and regulations. We may make contributions beyond those legally required.

In 2019, we contributed $730 million (including $140 million in discretionary contributions in the United States) to our global funded pension plans and made $342 million of benefit payments to participants in unfunded plans. During 2020, we expect to contribute between $600 million and $800 million of cash to our global funded pension plans. We also expect to make about $300 million of benefit payments to participants in unfunded plans. Based on current assumptions and regulations, we do not expect to have a legal requirement to contribute to our major U.S. pension plans in 2020.

Expected Future Benefit Payments

The expected future benefit payments at December 31, 2019 were as follows (in millions):

		Benefit Payments
		Pension
		U.S. Plans				Non-U.S. Plans				Worldwide OPEB
2020		$	2,820			$	1,440			$	340
2021		2,790				1,240				330
2022		2,770				1,250				330
2023		2,780				1,260				330
2024		2,810				1,280				330
2025-2029		13,970				6,670				1,630

Pension Plan Asset Information

Investment Objective and Strategies. Our investment objectives for the U.S. plans are to minimize the volatility of the value of our U.S. pension assets relative to U.S. pension obligations and to ensure assets are sufficient to pay plan benefits. Our U.S. target asset allocations are 80% fixed income and 20% growth assets (primarily hedge funds, real estate, private equity, and public equity). Our largest non-U.S. plans (United Kingdom and Canada) have similar investment objectives to the U.S. plans.

Investment strategies and policies for the U.S. plans and the largest non-U.S. plans reflect a balance of risk-reducing and return-seeking considerations. The objective of minimizing the volatility of assets relative to obligations is addressed primarily through asset-liability matching, asset diversification, and hedging. The fixed income target asset allocation matches the bond-like and long-dated nature of the pension obligations. Assets are broadly diversified within asset classes to achieve risk-adjusted returns that in total lower asset volatility relative to the obligations. Strategies to address the goal of ensuring sufficient assets to pay benefits include target allocations to a broad array of asset classes, and strategies within asset classes that provide adequate returns, diversification, and liquidity.

FS-44

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. RETIREMENT BENEFITS (Continued)

Derivatives are permitted for fixed income investment and public equity managers to use as efficient substitutes for traditional securities and to manage exposure to interest rate and foreign exchange risks. Interest rate and foreign currency derivative instruments are used for the purpose of hedging changes in the fair value of assets that result from interest rate changes and currency fluctuations. Interest rate derivatives also are used to adjust portfolio duration. Derivatives may not be used to leverage or to alter the economic exposure to an asset class outside the scope of the mandate an investment manager has been given. Alternative investment managers are permitted to employ leverage (including through the use of derivatives or other tools) that may alter economic exposure.

Alternative investments execute diverse strategies that provide exposure to a broad range of hedge fund strategies, equity investments in private companies, and investments in private property funds.

Significant Concentrations of Risk. Significant concentrations of risk in our plan assets relate to interest rates, growth assets, and operating risks. In order to minimize asset volatility relative to the obligations, the majority of plan assets are allocated to fixed income investments which are exposed to interest rate risk. Rate increases generally will result in a decline in the value of fixed income assets, while reducing the present value of the obligations. Conversely, rate decreases generally will increase the value of fixed income assets, offsetting the related increase in the obligations.

In order to ensure assets are sufficient to pay benefits, a portion of plan assets is allocated to growth assets that are expected over time to earn higher returns with more volatility than fixed income investments which more closely match pension obligations. Within growth assets, risk is mitigated by constructing a portfolio that is broadly diversified by asset class, investment strategy, manager, style, and process.

Operating risks include the risks of inadequate diversification and weak controls. To mitigate these risks, investments are diversified across and within asset classes in support of investment objectives. Policies and practices to address operating risks include ongoing manager oversight (e.g., style adherence, team strength, firm health, and internal risk controls), plan and asset class investment guidelines and instructions that are communicated to managers, and periodic compliance reviews to ensure adherence.

At year-end 2019, Ford securities comprised less than 1% of our plan assets.

Expected Long-Term Rate of Return on Assets. The long-term return assumption at year-end 2019 is 6.50% for the U.S. plans, 3.50% for the U.K. plans, and 4.75% for the Canadian plans, and averages 3.67% for all non-U.S. plans. A generally consistent approach is used worldwide to develop this assumption. This approach considers primarily inputs from a range of advisors for long-term capital market returns, inflation, bond yields, and other variables, adjusted for specific aspects of our investment strategy by plan. Historical returns also are considered where appropriate. The assumption is based on consideration of all inputs, with a focus on long-term trends to avoid short-term market influences.

FS-45

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. RETIREMENT BENEFITS (Continued)

The fair value of our defined benefit pension plan assets (including dividends and interest receivables of $340 million and $115 million for U.S. and non-U.S. plans, respectively) by asset category at December 31 was as follows (in millions):

	2018
	U.S. Plans																				Non-U.S. Plans
	Level 1				Level 2				Level 3				Assets measured at NAV (a)				Total				Level 1				Level 2				Level 3				Assets measured at NAV (a)				Total
Asset Category
Equity
U.S. companies	$	1,246			$	17			$	—			$	—			$	1,263			$	1,146			$	103			$	—			$	—			$	1,249
International companies	787				10				1				—				798				894				134				1				—				1,029
Total equity	2,033				27				1				—				2,061				2,040				237				1				—				2,278
Fixed Income
U.S. government and agencies	7,915				2,317				—				—				10,232				415				148				—				—				563
Non-U.S. government	—				1,073				—				—				1,073				—				14,871				—				—				14,871
Corporate bonds	—				19,905				—				—				19,905				—				2,875				—				—				2,875
Mortgage/other asset-backed	—				474				—				—				474				—				286				—				—				286
Commingled funds	—				94				—				—				94				—				268				—				—				268
Derivative financial instruments, net	9				43				—				—				52				13				(46		)		—				—				(33		)
Total fixed income	7,924				23,906				—				—				31,830				428				18,402				—				—				18,830
Alternatives
Hedge funds	—				—				—				3,217				3,217				—				—				—				1,143				1,143
Private equity	—				—				—				2,046				2,046				—				—				—				687				687
Real estate	—				—				—				1,242				1,242				—				—				—				413				413
Total alternatives	—				—				—				6,505				6,505				—				—				—				2,243				2,243
Cash, cash equivalents, and repurchase agreements (b)	354				—				—				—				354				(641		)		—				—				—				(641		)
Other (c)	(976		)		—				—				—				(976		)		(685		)		—				5,248				—				4,563
Total assets at fair value	$	9,335			$	23,933			$	1			$	6,505			$	39,774			$	1,142			$	18,639			$	5,249			$	2,243			$	27,273

---

(a)	Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

(b)	Primarily short-term investment funds to provide liquidity to plan investment managers, cash held to pay benefits, and repurchase agreements valued at $(1.7) billion in U.S. plans and $(1.4) billion in non-U.S. plans.

(c)	For U.S. plans, amounts related to net pending security (purchases)/sales and net pending foreign currency purchases/(sales). For non-U.S plans, primarily Ford-Werke, plan assets (insurance contract valued at $4.3 billion at year-end 2018) and amounts related to net pending security (purchases)/sales and net pending foreign currency purchases/(sales).

FS-46

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. RETIREMENT BENEFITS (Continued)

The fair value of our defined benefit pension plan assets (including dividends and interest receivables of $322 million and $102 million for U.S. and non-U.S. plans, respectively) by asset category at December 31 was as follows (in millions):

	2019
	U.S. Plans																				Non-U.S. Plans
	Level 1				Level 2				Level 3				Assets measured at NAV (a)				Total				Level 1				Level 2				Level 3				Assets measured at NAV (a)				Total
Asset Category
Equity
U.S. companies	$	1,542			$	20			$	—			$	—			$	1,562			$	1,059			$	43			$	—			$	—			$	1,102
International companies	971				9				1				—				981				850				58				3				—				911
Total equity	2,513				29				1				—				2,543				1,909				101				3				—				2,013
Fixed Income
U.S. government and agencies	8,965				2,823				—				—				11,788				380				94				—				—				474
Non-U.S. government	—				1,321				16				—				1,337				—				18,256				—				—				18,256
Corporate bonds	—				23,717				—				—				23,717				—				3,089				35				—				3,124
Mortgage/other asset-backed	—				527				—				—				527				—				565				69				—				634
Commingled funds	—				191				—				—				191				—				174				1				—				175
Derivative financial instruments, net	(9		)		(147		)		—				—				(156		)		15				103				(56		)		—				62
Total fixed income	8,956				28,432				16				—				37,404				395				22,281				49				—				22,725
Alternatives
Hedge funds	—				—				—				2,961				2,961				—				—				—				1,207				1,207
Private equity	—				—				—				1,884				1,884				—				—				—				695				695
Real estate	—				—				—				1,193				1,193				—				—				—				325				325
Total alternatives	—				—				—				6,038				6,038				—				—				—				2,227				2,227
Cash, cash equivalents, and repurchase agreements (b)	(195		)		—				—				—				(195		)		(1,765		)		—				—				—				(1,765		)
Other (c)	(1,537		)		—				—				—				(1,537		)		(762		)		—				5,520				—				4,758
Total assets at fair value	$	9,737			$	28,461			$	17			$	6,038			$	44,253			$	(223	)		$	22,382			$	5,572			$	2,227			$	29,958

---

(a)	Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

(b)	Primarily short-term investment funds to provide liquidity to plan investment managers, cash held to pay benefits, and repurchase agreements valued at $(1.9) billion in U.S. plans and $(2.5) billion in non-U.S. plans.

(c)	For U.S. plans, amounts related to net pending security (purchases)/sales and net pending foreign currency purchases/(sales). For non-U.S plans, primarily Ford-Werke, plan assets (insurance contract valued at $4.5 billion at year-end 2019) and amounts related to net pending security (purchases)/sales and net pending foreign currency purchases/(sales).

FS-47

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. RETIREMENT BENEFITS (Continued)

The following table summarizes the changes in Level 3 defined benefit pension plan assets measured at fair value on a recurring basis for the years ended December 31 (in millions):

	2018
					Return on plan assets
	Fair Value at January 1				Attributable to Assets Held at December 31				Attributable to Assets Sold				Net Purchases/ (Settlements)				Transfers Into/ (Out of) Level 3				Fair Value at December 31
U.S. Plans	$	5			$	—			$	(5	)		$	4			$	(3	)		$	1
Non-U.S. Plans (a)	5,633				(384		)		1				(1		)		—				5,249
	2019
					Return on plan assets
	Fair Value at January 1				Attributable to Assets Held at December 31				Attributable to Assets Sold				Net Purchases/ (Settlements)				Transfers Into/ (Out of) Level 3				Fair Value at December 31
U.S. Plans	$	1			$	1			$	—			$	15			$	—			$	17
Non-U.S. Plans (a)	5,249				215				(5		)		113				—				5,572

---

(a)	Primarily Ford-Werke plan assets (insurance contract valued at $4.3 billion and $4.5 billion at year-end 2018 and 2019, respectively).

NOTE 19. LEASE COMMITMENTS

We lease land, dealership facilities, offices, distribution centers, warehouses, and equipment under agreements with contractual periods ranging from less than one year to 40 years. Many of our leases contain one or more options to extend. In certain dealership lease agreements, we are the tenant and we sublease the site to a dealer. In the event the sublease is terminated, we have the option to terminate the head lease. We include options that we are reasonably certain to exercise in our evaluation of the lease term after considering all relevant economic and financial factors.

Leases that are economically similar to the purchase of an asset are classified as finance leases. The leased (“right-of-use”) assets in finance lease arrangements are reported in Net property on our consolidated balance sheet. Otherwise, the leases are classified as operating leases and reported in Other assets in the non-current assets section of our consolidated balance sheet.

For the majority of our leases commencing on or after January 1, 2019, we do not separate the non-lease components (e.g., maintenance and operating services) from the lease components to which they relate. Instead, non-lease components are included in the measurement of the lease liabilities. However, we do separate lease and non-lease components for contracts containing a significant service component (e.g., energy performance contracts). We calculate the initial lease liability as the present value of fixed payments not yet paid and variable payments that are based on a market rate or an index (e.g., CPI), measured at commencement. The majority of our leases are discounted using our incremental borrowing rate because the rate implicit in the lease is not readily determinable. All other variable payments are expensed as incurred.

FS-48

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. LEASE COMMITMENTS (Continued)

Lease right-of-use assets and liabilities at December 31 were as follows (in millions):

		2019
Operating leases
Other assets, non-current		$	1,415
Other liabilities and deferred revenue, current		$	367
Other liabilities and deferred revenue, non-current		1,047
Total operating lease liabilities		$	1,414
Finance leases
Property and equipment, gross		$	252
Accumulated depreciation		(43		)
Property and equipment, net		$	209
Automotive debt payable within one year		$	92
Automotive long-term debt		85
Total finance lease liabilities		$	177

Minimum non-cancellable operating lease commitments at December 31, 2018 were as follows (in millions):

		Operating Leases
2019		$	363
2020		271
2021		193
2022		141
2023		106
Thereafter		437
Total		$	1,511

The amounts contractually due on our lease liabilities as of December 31, 2019 were as follows (in millions):

		Operating Leases				Finance Leases (a)
2020		$	406			$	96
2021		306				35
2022		219				21
2023		156				16
2024		114				10
Thereafter		387				10
Total		1,588				188
Less: Present value discount		174				11
Total lease liabilities		$	1,414			$	177

---

(a)	Excludes approximately $400 million in future lease payments for a 20-year finance lease commencing in a future period.

FS-49

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. LEASE COMMITMENTS (Continued)

Supplemental cash flow information related to leases for the year ended December 31 was as follows (in millions):

		2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases		$	460
Operating cash flows from finance leases		6
Financing cash flows from finance leases		35
Right-of-use assets obtained in exchange for lease liabilities
Operating leases		$	527
Finance leases		43

The components of lease expense for the year ended December 31 were as follows (in millions):

		2019
Operating lease expense		$	467
Variable lease expense		53
Sublease income		(16		)
Finance lease expense
Amortization of right-of-use assets		15
Interest on lease liabilities		6
Total lease expense		$	525

The weighted average remaining lease term and weighted average discount rate at December 31 were as follows:

		2019
Weighted average remaining lease term (years)
Operating leases		6.3
Finance leases		3.0
Weighted average discount rate
Operating leases		3.4	%
Finance leases		3.3	%

NOTE 20. DEBT AND COMMITMENTS

Our debt consists of short-term and long-term secured and unsecured debt securities, and secured and unsecured borrowings from banks and other lenders. Debt issuances are placed directly by us or through securities dealers or underwriters and are held by institutional and retail investors. In addition, Ford Credit sponsors securitization programs that provide short-term and long-term asset-backed financing through institutional investors in the U.S. and international capital markets.

Debt is reported on our consolidated balance sheet at par value adjusted for unamortized discount or premium, unamortized issuance costs, and adjustments related to designated fair value hedging (see Note 21). Discounts, premiums, and costs directly related to the issuance of debt are capitalized and amortized over the life of the debt or to the put date and are recorded in interest expense using the effective interest method. Gains and losses on the extinguishment of debt are recorded in Other income/(loss), net.

FS-50

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. DEBT AND COMMITMENTS (Continued)

The carrying value of Automotive, Ford Credit, and Other debt at December 31 was as follows (in millions):

									Interest Rates
									Average Contractual						Average Effective (a)
Automotive	2018				2019				2018			2019			2018			2019
Debt payable within one year
Short-term	$	614			$	315			2.9	%		1.5	%		2.9	%		1.5	%
Long-term payable within one year
U.S. Department of Energy Advanced Technology Vehicles Manufacturing (“DOE ATVM”) Incentive Program	591				591
Other debt	1,125				540
Unamortized (discount)/premium	(16		)		(1		)
Total debt payable within one year	2,314				1,445
Long-term debt payable after one year
Public unsecured debt securities	9,033				10,583
DOE ATVM Incentive Program	1,470				880
Delayed draw term loan	—				1,500
Other debt	1,026				547
Unamortized (discount)/premium	(224		)		(161		)
Unamortized issuance costs	(72		)		(116		)
Total long-term debt payable after one year	11,233				13,233				5.2	%	(b)	5.2	%	(b)	5.7	%	(b)	5.3	%	(b)
Total Automotive	$	13,547			$	14,678
Fair value of Automotive debt (c)	$	13,319			$	15,606
Ford Credit
Debt payable within one year
Short-term	$	14,705			$	13,717			3.5	%		2.8	%		3.5	%		2.8	%
Long-term payable within one year
Unsecured debt	14,373				15,062
Asset-backed debt	22,130				23,609
Unamortized (discount)/premium	2				1
Unamortized issuance costs	(16		)		(17		)
Fair value adjustments (d)	(15		)		(1		)
Total debt payable within one year	51,179				52,371
Long-term debt payable after one year
Unsecured debt	52,409				55,148
Asset-backed debt	36,844				32,162
Unamortized (discount)/premium	—				6
Unamortized issuance costs	(195		)		(197		)
Fair value adjustments (d)	(171		)		539
Total long-term debt payable after one year	88,887				87,658				2.8	%	(b)	3.0	%	(b)	2.8	%	(b)	3.0	%	(b)
Total Ford Credit	$	140,066			$	140,029
Fair value of Ford Credit debt (c)	$	138,809			$	141,678
Other
Long-term debt payable within one year	$	—			$	130
Long-term debt payable after one year
Unsecured debt	604				474
Unamortized (discount)/premium	(3		)		(3		)
Unamortized issuance costs	(1		)		(1		)
Total long-term debt payable after one year	600				470				9.3	%	(b)	9.3	%	(b)	9.2	%	(b)	9.2	%	(b)
Total Other	$	600			$	600
Fair value of Other debt	$	697			$	720

---

(a)	Average effective rates reflect the average contractual interest rate plus amortization of discounts, premiums, and issuance costs.

(b)	Includes interest on long-term debt payable within one year and after one year.

(c)	At December 31, 2018 and 2019, the fair value of debt includes $458 million and $315 million of Automotive short-term debt and $13.8 billion and $12.8 billion of Ford Credit short-term debt, respectively, carried at cost which approximates fair value. All debt is categorized within Level 2 of the fair value hierarchy.

(d)	These adjustments relate to designated fair value hedges. The carrying value of hedged debt was $38 billion and $39.4 billion at December 31, 2018 and 2019, respectively.

FS-51

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. DEBT AND COMMITMENTS (Continued)

Cash paid for interest was $1.1 billion, $1.2 billion, and $1 billion in 2017, 2018, and 2019, respectively, on Automotive and Other debt. Cash paid for interest was $2.9 billion, $3.5 billion, and $4.1 billion in 2017, 2018, and 2019, respectively, on Ford Credit debt.

Maturities

Debt maturities at December 31, 2019 were as follows (in millions):

	2020				2021				2022				2023				2024				Thereafter				Adjustments				Total Debt Maturities
Automotive
Public unsecured debt securities	$	—			$	—			$	86			$	—			$	—			$	10,497			$	(234	)		$	10,349
DOE ATVM Incentive Program	591				591				289				—				—				—				—				1,471
Delayed draw term loan	—				—				1,500				—				—				—				—				1,500
Short-term and other debt	855				128				100				151				30				138				(44		)		1,358
Total	$	1,446			$	719			$	1,975			$	151			$	30			$	10,635			$	(278	)		$	14,678
Ford Credit
Unsecured debt	$	27,898			$	16,893			$	12,827			$	7,054			$	8,101			$	10,273			$	395			$	83,441
Asset-backed debt	24,490				14,371				8,925				3,476				2,505				2,885				(64		)		56,588
Total	$	52,388			$	31,264			$	21,752			$	10,530			$	10,606			$	13,158			$	331			$	140,029
Other
Unsecured debt	$	130			$	180			$	—			$	—			$	—			$	294			$	(4	)		$	600

Automotive Segment

Public Unsecured Debt Securities

Our public unsecured debt securities outstanding at December 31 were as follows (in millions):

	Aggregate Principal Amount Outstanding
Title of Security	2018				2019
8 7/8% Debentures due January 15, 2022	$	86			$	86
7 1/8% Debentures due November 15, 2025	209				209
7 1/2% Debentures due August 1, 2026	193				193
6 5/8% Debentures due February 15, 2028	104				104
6 5/8% Debentures due October 1, 2028 (a)	638				638
6 3/8% Debentures due February 1, 2029 (a)	260				260
7.45% GLOBLS due July 16, 2031 (a)	1,794				1,794
8.900% Debentures due January 15, 2032	151				151
9.95% Debentures due February 15, 2032	4				4
7.75% Debentures due June 15, 2043	73				73
7.40% Debentures due November 1, 2046	398				398
9.980% Debentures due February 15, 2047	181				181
7.70% Debentures due May 15, 2097	142				142
4.346% Notes due December 8, 2026	1,500				1,500
4.75% Notes due January 15, 2043	2,000				2,000
5.291% Notes due December 8, 2046	1,300				1,300
6.20% Notes due June 1, 2059	—				750
6.00% Notes due December 1, 2059	—				800
Total public unsecured debt securities (b)	$	9,033			$	10,583

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(a)	Listed on the Luxembourg Exchange and on the Singapore Exchange.

(b)	Excludes 9.215% Debentures due September 15, 2021 with an outstanding balance at December 31, 2019 of $180 million. The proceeds from these securities were on-lent by Ford to Ford Holdings and are reported as Other long-term debt.

FS-52

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. DEBT AND COMMITMENTS (Continued)

DOE ATVM Incentive Program

In September 2009, we entered into a Loan Arrangement and Reimbursement Agreement with the DOE, under which we borrowed through multiple draws $5.9 billion to finance certain costs for fuel-efficient, advanced-technology vehicles. At December 31, 2019, an aggregate $1.5 billion was outstanding. The principal amount of the ATVM loan bears interest at a blended rate based on the U.S. Treasury yield curve at the time each draw was made (with the weighted-average interest rate on all such draws being about 2.3% per annum). The ATVM loan is repayable in equal quarterly installments of $148 million, which began in September 2012 and will end in June 2022.

Automotive Credit Facilities

Total Company committed credit lines, excluding Ford Credit, at December 31, 2019 were $14.9 billion, consisting of $10.4 billion of our corporate credit facility, $3.5 billion of our supplemental credit facility, and $1 billion of local credit facilities. At December 31, 2019, the utilized portion of the corporate credit facility was $27 million, representing amounts utilized for letters of credit. At December 31, 2019, the utilized portion of the local credit facilities was $200 million. The utilized portion of our supplemental credit facility is described below.

Lenders under our corporate credit facility have commitments to us totaling $13.4 billion, with 25% of the commitments maturing on April 30, 2022 and 75% of the commitments maturing on April 30, 2024. We have allocated $3 billion of commitments to Ford Credit on an irrevocable and exclusive basis to support its liquidity. We would guarantee any borrowings by Ford Credit under the corporate credit facility.

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. 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 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.

In 2019, we entered into a $3.5 billion supplemental credit facility. The terms and conditions of the supplemental credit facility are consistent with our corporate credit facility; however, unlike our corporate credit facility, the supplemental credit facility is intended to be utilized and includes a $2 billion revolving facility maturing on April 30, 2022 and a $1.5 billion delayed draw term loan facility maturing on December 31, 2022. We drew all $1.5 billion under the term loan facility in 2019.

Ford Credit Segment

Asset-Backed Debt

At December 31, 2019, the carrying value of our asset-backed debt was $56.6 billion. This secured debt is issued by Ford Credit and includes asset-backed securities used to fund operations and maintain liquidity. Assets securing the related debt issued as part of all our securitization transactions are included in our consolidated results and are based upon the legal transfer of the underlying assets in order to reflect legal ownership and the beneficial ownership of the debt holder. The third-party investors in the securitization transactions have legal recourse only to the assets securing the debt and do not have such recourse to us, except for the customary representation and warranty provisions or when we are counterparty to certain derivative transactions of the special purpose entities (“SPEs”). In addition, the cash flows generated by the assets are restricted only to pay such liabilities; Ford Credit retains the right to residual cash flows. See Note 26 for additional information.

FS-53

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. DEBT AND COMMITMENTS (Continued)

Although not contractually required, we regularly support our wholesale securitization programs by repurchasing receivables of a dealer from a SPE when the dealer’s performance is at risk, which transfers the corresponding risk of loss from the SPE to us. In order to continue to fund the wholesale receivables, we also may contribute additional cash or wholesale receivables if the collateral falls below required levels. There were no balances of cash related to these contributions at December 31, 2018 and 2019. Contributions ranged from $0 to $179 million during 2018 and there were none in 2019.

SPEs that are exposed to interest rate or currency risk may reduce their risks by entering into derivative transactions. In certain instances, we have entered into derivative transactions with the counterparty to protect the counterparty from risks absorbed through derivative transactions with the SPEs. Derivative income/(expense) related to the derivative transactions that support Ford Credit’s securitization programs were $60 million, $(17) million, and $75 million for the years ended December 31, 2017, 2018, and 2019, respectively. See Note 21 for additional information regarding the accounting for derivatives.

Interest expense on securitization debt was $955 million, $1.4 billion, and $1.6 billion in 2017, 2018, and 2019, respectively.

The assets and liabilities related to our asset-backed debt arrangements included in our consolidated financial statements at December 31 were as follows (in billions):

	2018				2019
Assets
Cash and cash equivalents	$	3.0			$	3.5
Finance receivables, net	66.2				64.9
Net investment in operating leases	16.3				14.9
Liabilities
Debt (a)	$	59.8			$	56.6

---

(a)	Debt is net of unamortized discount and issuance costs.

Committed Credit Facilities

At December 31, 2019, Ford Credit’s committed capacity totaled $42.6 billion, compared with $41.4 billion at December 31, 2018. Ford Credit’s committed capacity is primarily comprised of unsecured credit facilities with financial institutions, committed asset-backed security lines from bank-sponsored commercial paper conduits and other financial institutions, and allocated commitments under the corporate credit facility.

NOTE 21. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, our operations are exposed to global market risks, including the effect of changes in foreign currency exchange rates, certain commodity prices, and interest rates. To manage these risks, we enter into highly effective derivative contracts:

•	Foreign currency exchange contracts, including forwards, that are used to manage foreign exchange exposure;

•	Commodity contracts, including forwards, that are used to manage commodity price risk;

•	Interest rate contracts, including swaps, that are used to manage the effects of interest rate fluctuations; and

•	Cross-currency interest rate swap contracts that are used to manage foreign currency and interest rate exposures on foreign-denominated debt.

Our derivatives are over-the-counter customized derivative transactions and are not exchange-traded. We review our hedging program, derivative positions, and overall risk management strategy on a regular basis.

Derivative Financial Instruments and Hedge Accounting. Derivatives are reported on our consolidated balance sheet at fair value and presented on a gross basis. Derivative assets are reported in Other assets and derivative liabilities are reported in Payables and Other liabilities and deferred revenue.

FS-54

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 21. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

We have elected to apply hedge accounting to certain derivatives. Derivatives that are designated in hedging relationships are evaluated for effectiveness using regression analysis at the time they are designated and throughout the hedge period. Some derivatives do not qualify for hedge accounting; for others, we elect not to apply hedge accounting.

Cash Flow Hedges. Our Automotive segment has designated certain forward contracts as cash flow hedges of forecasted transactions with exposure to foreign currency exchange and commodity price risks.

Changes in the fair value of cash flow hedges are deferred in Accumulated other comprehensive income/(loss) and are recognized in Cost of sales when the hedged item affects earnings. Our policy is to de-designate foreign currency exchange cash flow hedges prior to the time forecasted transactions are recognized as assets or liabilities on the balance sheet and report subsequent changes in fair value through Cost of sales. If it becomes probable that the originally forecasted transaction will not occur, the related amount included in Accumulated other comprehensive income/(loss) is reclassified and recognized in earnings. The cash flows associated with hedges designated until maturity are reported in Net cash provided by/(used in) operating activities on our consolidated statement of cash flows. Our cash flow hedges mature within three years.

Fair Value Hedges. Our Ford Credit segment uses derivatives to reduce the risk of changes in the fair value of debt. We have designated certain receive-fixed, pay-float interest rate swaps as fair value hedges of fixed-rate debt. The risk being hedged is the risk of changes in the fair value of the hedged debt attributable to changes in the benchmark interest rate. If the hedge relationship is deemed to be highly effective, we report the changes in the fair value of the hedged debt related to the risk being hedged in Ford Credit debt and Ford Credit interest, operating, and other expenses. Net interest settlements and accruals, and the fair value changes on hedging instruments are reported in Ford Credit interest, operating, and other expenses. The cash flows associated with fair value hedges are reported in Net cash provided by/(used in) operating activities on our consolidated statement of cash flows.

When a fair value hedge is de-designated, or when the derivative is terminated before maturity, the fair value adjustment to the hedged debt continues to be reported as part of the carrying value of the debt and is recognized in Ford Credit interest, operating, and other expenses over its remaining life.

Derivatives Not Designated as Hedging Instruments. Automotive reports changes in the fair value of derivatives not designated as hedging instruments through Cost of sales. Cash flows associated with non-designated or de-designated derivatives are reported in Net cash provided by/(used in) investing activities on our consolidated statement of cash flows.

Our Ford Credit segment reports the gains/(losses) on derivatives not designated as hedging instruments in Other income/(loss), net. Cash flows associated with non-designated or de-designated derivatives are reported in Net cash provided by/(used in) investing activities on our consolidated statement of cash flows.

Normal Purchases and Normal Sales Classification. We have elected to apply the normal purchases and normal sales classification for physical supply contracts that are entered into for the purpose of procuring commodities to be used in production over a reasonable period in the normal course of our business.

FS-55

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 21. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Income Effect of Derivative Financial Instruments

The gains/(losses), by hedge designation, reported in income for the years ended December 31 were as follows (in millions):

	2017				2018				2019
Cash flow hedges (a)
Reclassified from AOCI to Cost of sales
Foreign currency exchange contracts	$	456			$	50			$	29
Commodity contracts	—				—				(32		)
Fair value hedges
Interest rate contracts
Net interest settlements and accruals on hedging instruments	217				10				(16		)
Fair value changes on hedging instruments (b)	(268		)		(155		)		706
Fair value changes on hedged debt (b)	267				153				(694		)
Derivatives not designated as hedging instruments
Foreign currency exchange contracts (c)	(662		)		398				84
Cross-currency interest rate swap contracts	103				(244		)		(229		)
Interest rate contracts	58				(84		)		(13		)
Commodity contracts	74				(96		)		—
Total	$	245			$	32			$	(165	)

---

(a)	For 2017, 2018, and 2019, a $134 million gain, a $288 million gain, and a $839 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax related to foreign currency contracts. For 2019, a $36 million loss was reported in Other comprehensive income/(loss), net of tax related to commodity contracts.

(b)	For 2017, the fair value changes on hedging instruments and on hedged debt were reported in Other income/(loss), net; effective 2018, these amounts were reported in Ford Credit interest, operating, and other expenses.

(c)	For 2017, 2018, and 2019, a $512 million loss, a $235 million gain, and a $32 million gain were reported in Cost of sales and a $150 million loss, a $163 million gain, and a $52 million gain were reported in Other income/(loss), net, respectively.

FS-56

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 21. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

Derivative assets and liabilities are reported on our consolidated balance sheet at fair value and are presented on a gross basis. The notional amounts of the derivative instruments do not necessarily represent amounts exchanged by the parties and are not a direct measure of our financial exposure. We also enter into master agreements with counterparties that may allow for netting of exposures in the event of default or breach of the counterparty agreement.

The fair value of our derivative instruments and the associated notional amounts, presented gross, at December 31 were as follows (in millions):

	2018												2019
	Notional				Fair Value of Assets				Fair Value of Liabilities				Notional				Fair Value of Assets				Fair Value of Liabilities
Cash flow hedges
Foreign currency exchange contracts	$	15,972			$	391			$	110			$	15,349			$	47			$	493
Commodity contracts	327				—				20				673				5				29
Fair value hedges
Interest rate contracts	22,989				158				208				26,577				702				19
Derivatives not designated as hedging instruments
Foreign currency exchange contracts	20,695				202				99				19,350				58				270
Cross-currency interest rate swap contracts	5,235				232				157				5,849				134				67
Interest rate contracts	76,904				235				274				68,914				275				191
Commodity contracts	638				3				45				467				9				9
Total derivative financial instruments, gross (a) (b)	$	142,760			$	1,221			$	913			$	137,179			$	1,230			$	1,078
Current portion					$	681			$	601							$	390			$	772
Non-current portion					540				312								840				306
Total derivative financial instruments, gross					$	1,221			$	913							$	1,230			$	1,078

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(a)	At December 31, 2018 and 2019, we held collateral of $19 million and $18 million, and we posted collateral of $59 million and $78 million, respectively.

(b)	At December 31, 2018 and 2019, the fair value of assets and liabilities available for counterparty netting was $434 million and $269 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

FS-57

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 22. EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES

We record costs associated with voluntary separations at the time of employee acceptance, unless the acceptance requires explicit approval by the Company. We record costs associated with involuntary separation programs when management has approved the plan for separation, the affected employees are identified, and it is unlikely that actions required to complete the separation plan will change significantly. Costs associated with benefits that are contingent on the employee continuing to provide service are accrued over the required service period.

Automotive Segment

As previously announced, we are executing a global redesign of our business. Redesign-related activities, including employee separation costs, payments to dealers and suppliers, and other charges, are recorded in Cost of sales and Selling, administrative, and other expenses. Below are actions we have initiated as part of the redesign.

Brazil. In February 2019, Ford Motor Company Brasil Ltda. (“Ford Brazil”), our subsidiary in Brazil, committed to a plan to exit the commercial heavy truck business in South America. As a result, Ford Brazil ceased production at the São Bernardo do Campo plant in Brazil during 2019.

Russia. In March 2019, Ford Sollers Netherlands B.V. (“Ford Sollers”), a joint venture between Ford and Sollers PJSC (“Sollers”) in which Ford had control, announced its plan to restructure its business in Russia to focus exclusively on commercial vehicles and to exit the passenger car segment. As a result of these actions, Ford acquired 100% ownership of Ford Sollers and ceased production at the Naberezhnye Chelny and St. Petersburg vehicle assembly plants and the Elabuga engine plant during the second quarter of 2019.

Subsequent to completion of the restructuring actions, in July 2019, Ford sold a 51% controlling interest in the restructured entity to Sollers, which resulted in deconsolidation of the Ford Sollers subsidiary. Our continued involvement in Ford Sollers is accounted for as an equity method investment.

United Kingdom. In June 2019, Ford Motor Company Limited (“Ford of Britain), a subsidiary of Ford, announced its plan to exit the Ford Bridgend plant in South Wales in 2020.

India. In the third quarter of 2019, Ford committed to a plan to sell specific net assets in our India Automotive operations. See Note 24 for more information concerning this plan.

Other Global Redesign Actions. In 2018, we announced our plan to end production at the Ford Aquitane Industries plant in Bordeaux, France, and in March 2019, we announced our plan to phase-out the production of the C-Max at the Saarlouis Body and Assembly Plant in Germany. Furthermore, we are reducing our global workforce and taking other restructuring actions.

The following table summarizes the redesign-related activities for the year ended December 31, which are recorded in Other liabilities and deferred revenue (in millions):

		2019
Beginning balance		$	291
Changes in accruals (a)		1,382
Payments		(911		)
Foreign currency translation		(28		)
Ending balance		$	734

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(a) Excludes pension costs of $311 million in 2019.

We also recorded $1.4 billion in 2019 for the impairment of our held-for-sale India Automotive operations, accelerated depreciation, and other non-cash items. We estimate that we will incur total charges in 2020 that range between $900 million and $1.4 billion related to the actions above, primarily attributable to employee separations, accelerated depreciation, and dealer and supplier settlements.

FS-58

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 23. REDEEMABLE NONCONTROLLING INTEREST

We formed the Ford Sollers joint venture with Sollers in October 2011 to operate in Russia. The value of the redeemable noncontrolling interest, reflecting redemption features embedded in the 50% equity interest in the joint venture held by Sollers, reported in the mezzanine section of our consolidated balance sheet at December 31, 2018 was $100 million. The redeemable noncontrolling interest became exercisable beginning on January 1, 2019, and Sollers exercised its option in March 2019 for a value of $135 million. The $35 million increase in value from December 2018 was reported in Income/(Loss) attributable to noncontrolling interests on our consolidated income statement during the first quarter of 2019. We purchased the noncontrolling interest from Sollers in the second quarter of 2019, derecognized the redeemable noncontrolling interest balance, and restructured our Russian operations. Subsequent to completion of the restructuring actions, in July 2019, we sold a 51% controlling interest in the restructured operations to Sollers, which resulted in deconsolidation of our Ford Sollers subsidiary. See Note 22 for more information concerning the restructuring of our business in Russia.

NOTE 24. HELD-FOR-SALE OPERATIONS

Automotive Segment

In the third quarter of 2019, we committed to a plan to sell specific net assets in our India Automotive operations. We entered into a definitive agreement to form a joint venture with Mahindra & Mahindra Limited (“Mahindra”), with Mahindra owning a 51% controlling stake and Ford owning a 49% stake. Under the terms of the transaction, which is expected to close mid-2020, we will sell certain India Automotive operations to the joint venture. Accordingly, we have reported the assets and liabilities of these operations as held for sale and ceased depreciation and amortization of those assets.

The assets and liabilities of our India Automotive operations classified as held for sale for the year ended December 31 were as follows (in millions):

		2019
Assets
Trade and other receivables, net		$	269
Inventories		208
Other assets, current		147
Net property		279
Other assets, non-current		10
Total assets of held-for-sale operations		913
Less: Intercompany asset balances		(228		)
Automotive segment total assets of held-for-sale operations (a)		$	685
Liabilities
Payables		$	461
Other liabilities and deferred revenue, current		71
Automotive debt payable within one year		90
Other liabilities and deferred revenue, non-current		28
Total liabilities of held-for-sale operations		650
Less: Intercompany liability balances		(169		)
Automotive segment total liabilities of held-for-sale operations (a)		$	481

---

(a)	As of December 31, 2019, intercompany items and transactions have been eliminated on the consolidated balance sheet. Upon closing, the buyer will assume the intercompany assets and liabilities. Accordingly, we have presented those balances in the table for informational purposes.

FS-59

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 24. HELD-FOR-SALE OPERATIONS (Continued)

We recognized a pre-tax impairment charge of $804 million reported in Cost of sales in 2019 to adjust the carrying value of the held-for-sale assets to fair value less cost to sell. The value is measured on a nonrecurring basis and categorized within Level 3 of the fair value hierarchy. We determined fair value using a market approach, estimated based on expected proceeds to be received, which we conclude is most representative of the value of the assets given the current market conditions, the characteristics of viable market participants, and the pending sales transaction. The transaction is subject to regulatory approvals and satisfaction of other closing conditions that may impact the final proceeds received.

Ford Credit Segment

In the fourth quarter of 2019, Ford Credit committed to a plan to sell its operations in Forso, a wholly owned subsidiary of Ford Credit, which provides retail and dealer financing in Denmark, Finland, Norway, and Sweden. Ford Credit expects to complete the sale of Forso in the first quarter of 2020.

The assets and liabilities of the Forso operations classified as held for sale for the year ended December 31 were as follows (in millions):

		2019
Assets
Cash and cash equivalents		$	61
Ford Credit finance receivables, net, current		516
Trade and other receivables, net		8
Other assets, current		106
Ford Credit finance receivables, net, non-current		715
Net property		2
Deferred income taxes		9
Other assets, non-current		1
Total assets of held-for-sale operations		1,418
Less: Intercompany asset balances		(2		)
Ford Credit segment total assets of held-for-sale operations (a)		$	1,416
Liabilities
Payables		$	34
Other liabilities and deferred revenue, current		8
Ford Credit long-term debt		1,254
Deferred income taxes		23
Total liabilities of held-for-sale operations		1,319
Less: Intercompany liability balances		(1,274		)
Ford Credit segment total liabilities of held-for-sale operations (a)		$	45

---

(a)	As of December 31, 2019, intercompany items and transactions have been eliminated on the consolidated balance sheet. Upon closing, the buyer will assume the intercompany assets and liabilities. Accordingly, we have presented those balances in the table for informational purposes.

Ford Credit recognized a pre-tax fair value impairment charge of $20 million, reported in Other income/(loss), net, as a result of the pending sale. The fair value is measured on a non-recurring basis and categorized within Level 3 of the fair value hierarchy. We determined fair value using a market approach, estimated based on our expected proceeds to be received, which we conclude is most representative of the value of the assets.

FS-60

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 25. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

The changes in the balances for each component of accumulated other comprehensive income/(loss) attributable to Ford Motor Company for the years ended December 31 were as follows (in millions):

	2017				2018				2019
Foreign currency translation
Beginning balance	$	(4,593	)		$	(4,277	)		$	(4,800	)
Gains/(Losses) on foreign currency translation	38				(435		)		181
Less: Tax/(Tax benefit) (a)	(294		)		91				6
Net gains/(losses) on foreign currency translation	332				(526		)		175
(Gains)/Losses reclassified from AOCI to net income (b)	(16		)		3				(1		)
Other comprehensive income/(loss), net of tax	316				(523		)		174
Ending balance	$	(4,277	)		$	(4,800	)		$	(4,626	)
Marketable securities
Beginning balance	$	(14	)		$	(48	)		$	(59	)
Gains/(Losses) on available for sale securities	(53		)		(37		)		173
Less: Tax/(Tax benefit)	(15		)		(8		)		40
Net gains/(losses) on available for sale securities	(38		)		(29		)		133
(Gains)/Losses reclassified from AOCI to net income	5				20				(3		)
Less: Tax/(Tax benefit)	1				2				—
Net (gains)/losses reclassified from AOCI to net income	4				18				(3		)
Other comprehensive income/(loss), net of tax	(34		)		(11		)		130
Ending balance	$	(48	)		$	(59	)		$	71
Derivative instruments
Beginning balance	$	283			$	18			$	201
Gains/(Losses) on derivative instruments	134				288				(875		)
Less: Tax/(Tax benefit)	80				65				(180		)
Net gains/(losses) on derivative instruments	54				223				(695		)
(Gains)/Losses reclassified from AOCI to net income	(456		)		(50		)		3
Less: Tax/(Tax benefit)	(137		)		(10		)		(3		)
Net (gains)/losses reclassified from AOCI to net income (c)	(319		)		(40		)		6
Other comprehensive income/(loss), net of tax	(265		)		183				(689		)
Ending balance	$	18			$	201			$	(488	)
Pension and other postretirement benefits
Beginning balance	$	(2,689	)		$	(2,652	)		$	(2,708	)
Prior service (costs)/credits arising during the period	5				(135		)		(15		)
Less: Tax/(Tax benefit)	—				(23		)		(2		)
Net prior service (costs)/credits arising during the period	5				(112		)		(13		)
Amortization and recognition of prior service costs/(credits) (d)	60				59				50
Less: Tax/(Tax benefit)	20				13				10
Net prior service costs/(credits) reclassified from AOCI to net income	40				46				40
Translation impact on non-U.S. plans	(8		)		10				(4		)
Other comprehensive income/(loss), net of tax	37				(56		)		23
Ending balance	$	(2,652	)		$	(2,708	)		$	(2,685	)
Total AOCI ending balance at December 31	$	(6,959	)		$	(7,366	)		$	(7,728	)

---

(a)

We do not recognize deferred taxes for a majority of the foreign currency translation gains and losses because we do not anticipate reversal in the foreseeable future. However, we have made elections to tax certain non-U.S. operations simultaneously in U.S. tax returns, and have recorded deferred taxes for temporary differences that will reverse, independent of repatriation plans, on U.S. tax returns. Taxes or tax benefits resulting from foreign currency translation of the temporary differences are recorded in Other comprehensive income/(loss), net of tax.

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

(c)	Reclassified to Cost of sales. During the next twelve months we expect to reclassify existing net losses on cash flow hedges of $344 million. See Note 21 for additional information.

(d)	Amortization and recognition of prior service costs/(credits) is included in the computation of net periodic pension cost/(income). See Note 18 for additional information.

FS-61

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 26. VARIABLE INTEREST ENTITIES

A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support, or (ii) has equity investors who lack the characteristics of a controlling financial interest. We consolidate VIEs of which we are the primary beneficiary. We consider ourselves the primary beneficiary of a VIE when we have both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. Assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against our general assets. Liabilities recognized as a result of consolidating these VIEs do not represent additional claims on our general assets; rather, they represent claims against the specific assets of the consolidated VIEs.

We have the power to direct the significant activities of an entity when our management has the ability to make key operating decisions, such as decisions regarding capital or product investment or manufacturing production schedules. For securitization entities, we have the power to direct significant activities when we have the ability to exercise discretion in the servicing of financial assets (including general collection activity on current and non-current accounts and loss mitigation efforts including repossession and sale of collateral), issue additional debt, exercise a unilateral call option, add assets to revolving structures, or control investment decisions.

VIEs of Which We are Not the Primary Beneficiary

Certain of our joint ventures are VIEs, in which the power to direct economically significant activities is shared with the joint venture partner. Our investments in these joint ventures are accounted for as equity method investments. Our maximum exposure to any potential losses associated with these joint ventures is limited to our investment, including loans, and was $237 million and $209 million at December 31, 2018 and 2019, respectively.

VIEs of Which We are the Primary Beneficiary

Securitization Entities. Through Ford Credit, we securitize, transfer, and service financial assets associated with consumer finance receivables, operating leases, and wholesale loans. Our securitization transactions typically involve the legal transfer of financial assets to bankruptcy remote SPEs. We generally retain economic interests in the asset-backed securitization transactions, which are retained in the form of senior or subordinated interests, cash reserve accounts, residual interests, and servicing rights. For accounting purposes, we are precluded from recording the transfers of assets in securitization transactions as sales.

In most cases, the bankruptcy remote SPEs meet the definition of VIEs for which we have determined we have both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity that could be significant, and would therefore also be consolidated. We account for all securitization transactions as if they were secured financing and therefore the assets, liabilities, and related activity of these transactions are consolidated in our financial results and are included in amounts presented on the face of our consolidated balance sheet. See Note 20 for additional information on the accounting for asset-backed debt and the assets securing this debt.

FS-62

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 27. COMMITMENTS AND CONTINGENCIES

Commitments and contingencies primarily consist of guarantees and indemnifications, litigation and claims, and warranty.

Guarantees and Indemnifications

The maximum potential payments and the carrying value of recorded liabilities related to guarantees and limited indemnities at December 31 were as follows (in millions):

	2018				2019
Maximum potential payments	$	1,163			$	749
Carrying value of recorded liabilities related to guarantees and limited indemnities	351				233

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

We guarantee the resale value of vehicles sold in certain arrangements to daily rental companies. The maximum potential payment of $582 million as of December 31, 2019 included in the table above represents the total proceeds we guarantee the rental company will receive on re-sale. Reflecting our present estimate of proceeds the rental companies will receive on resale from third parties, we have recorded $199 million as our best estimate of the amount we will have to pay under the guarantee.

We also guarantee debt and lease obligations of certain joint ventures, as well as certain financial obligations of outside third parties, including suppliers, to support our business and economic growth. Expiration dates vary through 2033, and guarantees will terminate on payment and/or cancellation of the underlying obligation. A payment by us would be triggered by failure of the joint venture or other third party to fulfill its obligation covered by the guarantee. In some circumstances, we are entitled to recover from a third party amounts paid by us under the guarantee. However, our ability to enforce these rights is sometimes stayed until the guaranteed party is paid in full, and may be limited in the event of insolvency of the third party or other circumstances.

In the ordinary course of business, we execute contracts involving indemnifications standard in the industry and indemnifications specific to a transaction, such as the sale of a business. These indemnifications might include and are not limited to claims relating to any of the following: environmental, tax, and shareholder matters; intellectual property rights; power generation contracts; governmental regulations and employment-related matters; dealer, supplier, and other commercial contractual relationships; and financial matters, such as securitizations. Performance under these indemnities generally would be triggered by a breach of terms of the contract or by a third-party claim. While some of these indemnifications are limited in nature, many of them do not limit potential payment. Therefore, we are unable to estimate a maximum amount of future payments that could result from claims made under these unlimited indemnities.

Litigation and Claims

Various legal actions, proceedings, and claims (generally, “matters”) are pending or may be instituted or asserted against us. These include but are not limited to matters arising out of alleged defects in our products; product warranties; governmental regulations relating to safety, emissions, and fuel economy or other matters; government incentives; tax matters; alleged illegal acts resulting in fines or penalties; financial services; employment-related matters; dealer, supplier, and other contractual relationships; intellectual property rights; environmental matters; shareholder or investor matters; and financial reporting matters. Certain of the pending legal actions are, or purport to be, class actions. Some of the matters involve or may involve claims for compensatory, punitive, or antitrust or other treble damages in very large amounts, or demands for field service actions, environmental remediation programs, sanctions, loss of government incentives, assessments, or other relief, which, if granted, would require very large expenditures.

The extent of our financial exposure to these matters is difficult to estimate. Many matters do not specify a dollar amount for damages, and many others specify only a jurisdictional minimum. To the extent an amount is asserted, our historical experience suggests that in most instances the amount asserted is not a reliable indicator of the ultimate outcome.

FS-63

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 27. COMMITMENTS AND CONTINGENCIES (Continued)

We accrue for matters when losses are deemed probable and reasonably estimable. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar

nature, the specific facts and circumstances asserted, the likelihood that we will prevail, and the severity of any potential loss. We reevaluate and update our accruals as matters progress over time.

For the majority of matters, which generally arise out of alleged defects in our products, we establish an accrual based on our extensive historical experience with similar matters. We do not believe there is a reasonably possible outcome materially in excess of our accrual for these matters.

For the remaining matters, where our historical experience with similar matters is of more limited value (i.e., “non-pattern matters”), we evaluate the matters primarily based on the individual facts and circumstances. For non-pattern matters, we evaluate whether there is a reasonable possibility of a material loss in excess of any accrual that can be estimated. Our estimate of reasonably possible loss in excess of our accruals for all material matters currently reflects indirect tax and customs matters, for which we estimate the aggregate risk to be a range of up to about $500 million. In addition, we have a reasonably possible risk of loss for an emission matter. At this stage, we cannot estimate the risk of loss or predict the outcome, and cannot provide reasonable assurance that it will not have a material adverse effect on us.

As noted, the litigation process is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. Our assessments are based on our knowledge and experience, but the ultimate outcome of any matter could require payment substantially in excess of the amount that we have accrued and/or disclosed.

Warranties and Field Service Actions

We accrue the estimated cost of both base warranty coverages and field service actions at the time of sale. We establish our estimate of base warranty obligations using a patterned estimation model, using historical information regarding the nature, frequency, and average cost of claims for each vehicle line by model year. We establish our estimates of field service action obligations using a patterned estimation model, using historical information regarding the nature, frequency, severity, and average cost of claims for each model year. 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. Warranty and field service action obligations are reported in Other liabilities and deferred revenue. We reevaluate the adequacy of our accruals on a regular basis.

We recognize the benefit from a recovery of the costs associated with our warranty and field service actions when specifics of the recovery have been agreed with our supplier and the amount of the recovery is virtually certain. Recoveries are reported in Trade and other receivables and Other assets.

The estimate of our future warranty and field service action costs, net of estimated supplier recoveries, for the years ended December 31 was as follows (in millions):

	2018				2019
Beginning balance	$	5,296			$	5,137
Payments made during the period	(4,360		)		(4,561		)
Changes in accrual related to warranties issued during the period	2,584				3,182
Changes in accrual related to pre-existing warranties	1,758				1,941
Foreign currency translation and other	(141		)		3
Ending balance	$	5,137			$	5,702

Changes to our estimated costs are reported as changes in accrual related to pre-existing warranties in the table above.

FS-64

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 28. SEGMENT INFORMATION

We report segment information consistent with the way our chief operating decision maker evaluates the operating results and performance of the Company. Accordingly, we analyze the results of our business through the following segments: Automotive, Mobility, and Ford Credit. Below is a description of our reportable segments and other activities.

Automotive Segment

Our Automotive segment primarily includes the sale of Ford and Lincoln vehicles, service parts, and accessories worldwide, together with the associated costs to develop, manufacture, distribute, and service the vehicles, parts, and accessories. This segment includes revenues and costs related to our electrification vehicle programs. The segment includes the following regional business units: North America, South America, Europe, China (including Taiwan), Asia Pacific Operations, and Middle East & Africa.

Mobility Segment

Our Mobility segment primarily includes development costs related to our autonomous vehicles and our investment in mobility through Ford Smart Mobility LLC (“FSM”). Autonomous vehicles includes self-driving systems development and vehicle integration, autonomous vehicle research and advanced engineering, autonomous vehicle transportation-as-a-service network development, user experience, and business strategy and business development teams. FSM designs and builds mobility products and subscription and other services on its own, and collaborates with service providers and technology companies. In 2019, we began recording in the Mobility segment subscription related income previously reported in the Automotive segment. This income is generated from services managed in our Mobility segment.

Ford Credit Segment

The Ford Credit segment is comprised of the Ford Credit business on a consolidated basis, which is primarily vehicle-related financing and leasing activities.

Corporate Other

Corporate Other primarily includes corporate governance expenses, interest income (excluding interest earned on our extended service contract portfolio that is included in our Automotive segment) and gains and losses from our cash, cash equivalents, marketable securities, and other investments, 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, and are not allocated to specific Automotive business units or operating segments. These include expenses related to setting and directing global policy, providing oversight and stewardship, and promoting the Company’s interests. The underlying assets and liabilities associated with these activities remain with the respective Automotive and Mobility segments.

Interest on Debt

Interest on Debt is presented as a separate reconciling item and consists of interest expense on Automotive and Other debt. The underlying liability is reported in the Automotive segment and in Corporate Other.

Special Items

Special Items are presented as a separate reconciling item. They consist of (i) pension and OPEB remeasurement gains and losses, (ii) significant personnel expenses, dealer-related costs, and facility-related charges stemming from efforts to match production capacity and cost structure to market demand and changing model mix, and (iii) other items that we do not necessarily consider to be indicative of earnings from ongoing operating activities. Our management excludes these items from its review of the results of the operating segments for purposes of measuring segment profitability and allocating resources. We also report these special items separately to help investors track amounts related to these activities and 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.

FS-65

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 28. SEGMENT INFORMATION (Continued)

Key financial information for the years ended or at December 31 was as follows (in millions):

	Automotive				Mobility				Ford Credit				Corporate Other				Interest on Debt				Special Items				Adjustments				Total
2017
Revenues	$	145,653			$	10			$	11,113			$	—			$	—			$	—			$	—			$	156,776
Income/(loss) before income taxes	8,084				(299		)		2,310				(457		)		(1,190		)		(289		)		—				8,159
Depreciation and tooling amortization	4,963				—				4,278				—				—				—				—				9,241
Interest expense	—				—				3,174				—				1,190				—				—				4,364
Investment-related interest income	93				—				118				248				—				—				—				459
Equity in net income/(loss) of affiliated companies	1,169				—				32				—				—				—				—				1,201
Cash outflow for capital spending	7,001				3				45				—				—				—				—				7,049
Cash, cash equivalents, marketable securities, and restricted cash	26,499				11				12,563				—				—				—				—				39,073
Total assets	103,573				96				160,594				—				—				—				(5,767		)	(a)	258,496
2018
Revenues	$	148,294			$	26			$	12,018			$	—			$	—			$	—			$	—			$	160,338
Income/(loss) before income taxes	5,422				(674		)		2,627				(373		)		(1,228		)		(1,429		)		—				4,345
Depreciation and tooling amortization	5,368				16				4,001				—				—				—				—				9,385
Interest expense	—				—				3,929				—				1,228				—				—				5,157
Investment-related interest income	109				—				201				357				—				—				—				667
Equity in net income/(loss) of affiliated companies	95				—				28				—				—				—				—				123
Cash outflow for capital spending	7,677				60				48				—				—				—				—				7,785
Cash, cash equivalents, marketable securities, and restricted cash	22,999				86				11,055				—				—				—				—				34,140
Total assets	100,105				558				161,678				—				—				—				(5,801		)	(a)	256,540
2019
Revenues	$	143,599			$	41			$	12,260			$	—			$	—			$	—			$	—			$	155,900
Income/(loss) before income taxes	4,926				(1,186		)		2,998				(359		)		(1,020		)		(5,999		)		—				(640		)
Depreciation and tooling amortization	6,798				29				3,666				—				—				—				—				10,493
Interest expense	—				—				4,389				—				1,020				—				—				5,409
Investment-related interest income	167				—				306				336				—				—				—				809
Equity in net income/(loss) of affiliated companies	(11		)		12				31				—				—				—				—				32
Cash outflow for capital spending	7,481				99				52				—				—				—				—				7,632
Cash, cash equivalents, marketable securities, and restricted cash	22,186				138				12,564				—				—				—				—				34,888
Total assets	101,348				1,034				160,697				—				—				—				(4,542		)	(a)	258,537

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(a)	Includes deferred tax netting and eliminations of intersegment transactions occurring in the ordinary course of business.

FS-66

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 28. SEGMENT INFORMATION (Continued)

Geographic Information

We report revenue on a “where-sold” basis, which reflects the revenue within the country in which the ultimate sale or financing is made to our external customer.

Total Company revenues and long-lived assets, split geographically by our country of domicile (the United States) and other countries where our major subsidiaries are domiciled, for the years ended December 31 were as follows (in millions):

	2017								2018								2019
	Revenues				Long-Lived Assets (a)				Revenues				Long-Lived Assets (a)				Revenues				Long-Lived Assets (a)
United States	$	93,844			$	42,504			$	97,546			$	44,940			$	98,729			$	46,434
Canada	10,580				4,771				10,541				4,604				10,855				4,842
United Kingdom	9,619				1,691				9,703				1,650				8,899				1,541
Germany	7,265				3,182				7,894				3,593				7,930				3,225
All Other	35,468				11,414				34,654				10,510				29,487				9,657
Total Company	$	156,776			$	63,562			$	160,338			$	65,297			$	155,900			$	65,699

---

(a)	Includes Net property and Net investment in operating leases from our consolidated balance sheet.

NOTE 29. SELECTED QUARTERLY FINANCIAL DATA (unaudited)

Selected financial data by calendar quarter were as follows (in millions, except per share amounts):

	2018																2019
	First Quarter				Second Quarter				Third Quarter				Fourth Quarter				First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Total revenues	$	41,959			$	38,920			$	37,666			$	41,793			$	40,342			$	38,853			$	36,990			$	39,715
Income/(Loss) before income taxes	1,919				1,349				1,094				(17		)		1,610				205				(19		)		(2,436		)
Amounts Attributable to Ford Motor Company Common and Class B Shareholders
Net income/(loss)	$	1,736			$	1,066			$	991			$	(116	)		$	1,146			$	148			$	425			$	(1,672	)
Common and Class B per share from income from continuing operations
Basic	$	0.44			$	0.27			$	0.25			$	(0.03	)		$	0.29			$	0.04			$	0.11			$	(0.42	)
Diluted	0.43				0.27				0.25				(0.03		)		0.29				0.04				0.11				(0.42		)

Certain of the quarterly results identified in the table above include material unusual or infrequently occurring items as follows on a pre-tax basis, except for tax items:

The fourth quarter 2018 results include a pension and OPEB net remeasurement loss of $877 million.

The first, second, third, and fourth quarter 2019 results each include global redesign related activities, including employee separation costs, payments to dealers and suppliers, and impairment and other charges, of $514 million, $1.2 billion, $1 billion, and $413 million, respectively (see Note 22).

The third quarter 2019 net income includes a one-time tax benefit of $278 million arising from restructuring in our European operations.

The third and fourth quarter 2019 results include pension and OPEB net remeasurement losses of $306 million and $2.2 billion, respectively.

FS-67

FORD MOTOR COMPANY AND SUBSIDIARIES

Schedule II — Valuation and Qualifying Accounts

(in millions)

Description		Balance at Beginning of Period				Charged to Costs and Expenses					Deductions					Balance at End of Period
For the Year Ended December 31, 2017
Allowances deducted from assets
Credit losses		$	503			$	476				$	371		(a)		$	608
Doubtful receivables		377				24					(3		)	(b)		404
Inventories (primarily service part obsolescence)		201				42			(c)		—					243
Deferred tax assets		909				583			(d)		—					1,492
Total allowances deducted from assets		$	1,990			$	1,125				$	368				$	2,747
For the Year Ended December 31, 2018
Allowances deducted from assets
Credit losses		$	608			$	419				$	435		(a)		$	592
Doubtful receivables		404				5					315			(b)		94
Inventories (primarily service part obsolescence)		243				130			(c)		—					373
Deferred tax assets		1,492				(519		)	(d)		—					973
Total allowances deducted from assets		$	2,747			$	35				$	750				$	2,032
For the Year Ended December 31, 2019
Allowances deducted from assets
Credit losses		$	592			$	310				$	372		(a)		$	530
Doubtful receivables		94				18					63			(b)		49
Inventories (primarily service part obsolescence)		373				89			(c)		—					462
Deferred tax assets		973				41			(d)		171					843
Total allowances deducted from assets		$	2,032			$	458				$	606				$	1,884

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(a)	Finance receivables deemed to be uncollectible and other changes, principally amounts related to finance receivables sold and translation adjustments.

(b)	Accounts and notes receivable deemed to be uncollectible as well as translation adjustments.

(c)	Net change in inventory allowances, including translation adjustments.

(d)	Includes $127 million, $(101) million, and $(78) million in 2017, 2018, and 2019, respectively, of valuation allowance for deferred tax assets through Accumulated other comprehensive income/(loss), including translation adjustments and $456 million, $(418) million, and $(52) million in 2017, 2018, and 2019, respectively, of valuation allowance for deferred tax assets through the income statement.

FSS-1