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 4, 2021

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 4, 2021
William Clay Ford, Jr.
/s/ JAMES D. FARLEY, JR.						Director, President and Chief Executive Officer						February 4, 2021
James D. Farley, Jr.						(principal executive officer)
KIMBERLY A. CASIANO*						Director						February 4, 2021
Kimberly A. Casiano
ANTHONY F. EARLEY, JR.*						Director and Chair of the Compensation Committee						February 4, 2021
Anthony F. Earley, Jr.
EDSEL B. FORD II*						Director						February 4, 2021
Edsel B. Ford II
WILLIAM W. HELMAN IV*						Director and Chair of the Sustainability and Innovation Committee						February 4, 2021
William W. Helman IV
JON M. HUNTSMAN, JR.*						Director						February 4, 2021
Jon M. Huntsman, Jr.
WILLIAM E. KENNARD*						Director and Chair of the Nominating and Governance Committee						February 4, 2021
William E. Kennard
JOHN C. LECHLEITER*						Director						February 4, 2021
John C. Lechleiter
BETH E. MOONEY*						Director						February 4, 2021
Beth E. Mooney
JOHN L. THORNTON*						Director						February 4, 2021
John L. Thornton

Signature						Title						Date
JOHN B. VEIHMEYER*						Director and Chair of the Audit Committee						February 4, 2021
John B. Veihmeyer
LYNN M. VOJVODICH*						Director						February 4, 2021
Lynn M. Vojvodich
JOHN S. WEINBERG*						Director						February 4, 2021
John S. Weinberg
/s/ JOHN T. LAWLER						Chief Financial Officer						February 4, 2021
John T. Lawler						(principal financial officer)
/s/ CATHY O’CALLAGHAN						Controller						February 4, 2021
Cathy O’Callaghan						(principal accounting officer)
*By: /s/ JONATHAN E. OSGOOD												February 4, 2021
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 sheets of Ford Motor Company and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, 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, 2020, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 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, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for credit losses in 2020.

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.

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 Finance Receivables Allowance for Credit Losses

As described in Note 10 to the consolidated financial statements, the Company had consumer finance receivables of $78,075 million, for which a consumer allowance for credit losses of $1,245 million was recorded as of December 31, 2020. The consumer allowance for credit losses represents management’s estimate of the lifetime expected credit losses inherent in the consumer finance receivables as of the balance sheet date. For consumer receivables that share similar risk characteristics, the estimate of the lifetime expected credit losses is based on a collective assessment using measurement models and management judgment. The lifetime expected credit losses for the receivables is determined by applying probability of default and loss given default assumptions to monthly expected exposures, then discounting these cash flows to present value using the receivable’s original effective interest rate or the current effective interest rate for a variable rate receivable. If management does not believe the models reflect lifetime expected credit losses for the portfolio, an adjustment is made to reflect management judgment regarding qualitative factors including economic uncertainty, observable changes in portfolio performance, and other relevant factors.

The principal considerations for our determination that performing procedures relating to the consumer finance receivables allowance for credit losses is a critical audit matter are the significant judgment by management in determining the consumer finance receivables allowance for credit losses, which led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to the probability of default and loss given default assumptions and management’s judgment regarding qualitative factors. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

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 Company’s determination of the consumer finance receivables allowance for credit losses. These procedures also included, among others, testing management’s process for estimating the consumer finance receivables allowance for credit losses by, evaluating the appropriateness of the models used to estimate the allowance, evaluating the reasonableness of the probability of default and loss given default assumptions, testing the data used in the models, and evaluating the reasonableness of management’s judgment regarding qualitative factors related to economic uncertainty, observable changes in portfolio performance, and other relevant factors, which also involved the use of professionals with specialized skill and knowledge to perform these procedures to test management’s process.

Defined Benefit Pension Plan Obligations and Benefit Cost

As described in Note 17 to the consolidated financial statements, the Company has defined pension benefit obligations of $88,855 million (comprised of $49,020 million and $39,835 million for its U.S. plans and non-U.S. plans, respectively) as of December 31, 2020, and pre-tax net periodic benefit cost (“benefit cost”) of $273 million (comprised of $(563) million of benefit income and $836 million of benefit cost for its U.S. plans and non-U.S. plans, respectively) for the year ended December 31, 2020. 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 the 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 are related to 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.

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 related to 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.

Warranty and Field Service Actions Accrual (United States)

As described in Note 25 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 $8,172 million as of December 31, 2020, 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 the 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, related to the frequency and average cost of claims. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

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, related to 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 significant assumptions related to the frequency and average cost of claims.

/s/ PricewaterhouseCoopers LLP

Detroit, Michigan

February 4, 2021

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

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

			For the years ended December 31,
			2018						2019						2020
Cash flows from operating activities
Net income/(loss)			$	3,695					$	84					$	(1,276)
Depreciation and tooling amortization (Note 12 and Note 13)			9,385						9,689						8,751
Other amortization			(972)						(1,199)						(1,294)
Held-for-sale impairment charges (Note 22)			—						804						23
Brazil manufacturing exit non-cash charges (excluding accelerated depreciation of $145) (Note 21)			—						—						1,159
Provision for credit and insurance losses			504						413						929
Pension and other post-retirement employee benefits (“OPEB”) expense/(income) (Note 17)			400						2,625						1,027
Equity investment dividends received in excess of (earnings)/losses			206						203						130
Foreign currency adjustments			529						(54)						(420)
Net (gain)/loss on changes in investments in affiliates (Note 5)			(42)						(29)						(3,446)
Stock compensation (Note 6)			191						228						199
Provision for deferred income taxes			(197)						(1,370)						(269)
Decrease/(Increase) in finance receivables (wholesale and other)			(2,408)						1,554						12,104
Decrease/(Increase) in accounts receivable and other assets			(2,239)						(816)						(63)
Decrease/(Increase) in inventory			(828)						206						148
Increase/(Decrease) in accounts payable and accrued and other liabilities			6,781						5,260						6,809
Other			17						41						(242)
Net cash provided by/(used in) operating activities			15,022						17,639						24,269
Cash flows from investing activities
Capital spending			(7,785)						(7,632)						(5,742)
Acquisitions of finance receivables and operating leases			(62,924)						(55,576)						(55,901)
Collections of finance receivables and operating leases			50,880						50,182						48,746
Proceeds from sale of business (Note 22)			—						—						1,340
Purchases of marketable securities and other investments			(17,140)						(17,472)						(39,624)
Sales and maturities of marketable securities and other investments			20,527						16,929						32,395
Settlements of derivatives			358						(114)						(323)
Other			(177)						(38)						494
Net cash provided by/(used in) investing activities			(16,261)						(13,721)						(18,615)
Cash flows from financing activities
Cash payments for dividends and dividend equivalents			(2,905)						(2,389)						(596)
Purchases of common stock			(164)						(237)						—
Net changes in short-term debt			(2,819)						(1,384)						(2,291)
Proceeds from issuance of long-term debt			50,130						47,604						65,900
Principal payments on long-term debt			(44,172)						(46,497)						(60,514)
Other			(192)						(226)						(184)
Net cash provided by/(used in) financing activities			(122)						(3,129)						2,315
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			(370)						45						225
Net increase/(decrease) in cash, cash equivalents, and restricted cash			$	(1,731)					$	834					$	8,194
Cash, cash equivalents, and restricted cash at beginning of period (Note 9)			$	18,638					$	16,907					$	17,741
Net increase/(decrease) in cash, cash equivalents, and restricted cash			(1,731)						834						8,194
Cash, cash equivalents, and restricted cash at end of period (Note 9)			$	16,907					$	17,741					$	25,935

The accompanying notes are part of the consolidated financial statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(in millions, except per share amounts)

			For the years ended December 31,
			2018						2019						2020
Revenues
Automotive			$	148,294					$	143,599					$	115,885
Ford Credit			12,018						12,260						11,203
Mobility			26						41						56
Total revenues (Note 4)			160,338						155,900						127,144
Costs and expenses
Cost of sales			136,269						134,693						112,752
Selling, administrative, and other expenses			11,403						11,161						10,193
Ford Credit interest, operating, and other expenses			9,463						9,472						8,607
Total costs and expenses			157,135						155,326						131,552
Operating income/(loss)			3,203						574						(4,408)
Interest expense on Automotive debt			1,171						963						1,603
Interest expense on Other debt			57						57						46
Other income/(loss), net (Note 5 and Note 22)			2,247						(226)						4,899
Equity in net income/(loss) of affiliated companies			123						32						42
Income/(Loss) before income taxes			4,345						(640)						(1,116)
Provision for/(Benefit from) income taxes (Note 7)			650						(724)						160
Net income/(loss)			3,695						84						(1,276)
Less: Income/(Loss) attributable to noncontrolling interests			18						37						3
Net income/(loss) attributable to Ford Motor Company			$	3,677					$	47					$	(1,279)
EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 8)
Basic income/(loss)			$	0.93					$	0.01					$	(0.32)
Diluted income/(loss)			0.92						0.01						(0.32)
Weighted-average shares used in computation of earnings/(loss) per share
Basic shares			3,974						3,972						3,973
Diluted shares			3,998						4,004						3,973

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

			For the years ended December 31,
			2018						2019						2020
Net income/(loss)			$	3,695					$	84					$	(1,276)
Other comprehensive income/(loss), net of tax (Note 23)
Foreign currency translation			(523)						174						(901)
Marketable securities			(11)						130						85
Derivative instruments			183						(689)						222
Pension and other postretirement benefits			(56)						23						27
Total other comprehensive income/(loss), net of tax			(407)						(362)						(567)
Comprehensive income/(loss)			3,288						(278)						(1,843)
Less: Comprehensive income/(loss) attributable to noncontrolling interests			18						37						2
Comprehensive income/(loss) attributable to Ford Motor Company			$	3,270					$	(315)					$	(1,845)

The accompanying notes are part of the consolidated financial statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions)

			December 31, 2019						December 31, 2020
ASSETS
Cash and cash equivalents (Note 9)			$	17,504					$	25,243
Marketable securities (Note 9)			17,147						24,718
Ford Credit finance receivables, net of allowance for credit losses of $162 and $394 (Note 10)			53,651						42,401
Trade and other receivables, less allowances of $63 and $84			9,237						9,993
Inventories (Note 11)			10,786						10,808
Assets held for sale (Note 2, Note 10, and Note 22)			2,383						47
Other assets			3,339						3,534
Total current assets			114,047						116,744
Ford Credit finance receivables, net of allowance for credit losses of $351 and $911 (Note 10)			53,703						55,277
Net investment in operating leases (Note 12)			29,230						27,951
Net property (Note 13)			36,469						37,083
Equity in net assets of affiliated companies (Note 14)			2,519						4,901
Deferred income taxes (Note 7)			11,863						12,423
Other assets			10,706						12,882
Total assets			$	258,537					$	267,261
LIABILITIES
Payables			$	20,673					$	22,204
Other liabilities and deferred revenue (Note 16 and Note 25)			22,987						23,645
Automotive debt payable within one year (Note 19)			1,445						1,194
Ford Credit debt payable within one year (Note 19)			52,371						49,969
Other debt payable within one year (Note 19)			130						180
Liabilities held for sale (Note 22)			526						—
Total current liabilities			98,132						97,192
Other liabilities and deferred revenue (Note 16 and Note 25)			25,324						28,379
Automotive long-term debt (Note 19)			13,233						22,342
Ford Credit long-term debt (Note 19)			87,658						87,708
Other long-term debt (Note 19)			470						291
Deferred income taxes (Note 7)			490						538
Total liabilities			225,307						236,450
EQUITY
Common Stock, par value $0.01 per share (4,025 million shares issued of 6 billion authorized)			40						40
Class B Stock, par value $0.01 per share (71 million shares issued of 530 million authorized)			1						1
Capital in excess of par value of stock			22,165						22,290
Retained earnings			20,320						18,243
Accumulated other comprehensive income/(loss) (Note 23)			(7,728)						(8,294)
Treasury stock			(1,613)						(1,590)
Total equity attributable to Ford Motor Company			33,185						30,690
Equity attributable to noncontrolling interests			45						121
Total equity			33,230						30,811
Total liabilities and equity			$	258,537					$	267,261

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 sheets above. See Note 24 for additional information on our VIEs.

			December 31, 2019						December 31, 2020
ASSETS
Cash and cash equivalents			$	3,202					$	2,822
Ford Credit finance receivables, net			58,478						51,472
Net investment in operating leases			14,883						12,794
Other assets			12						—
LIABILITIES
Other liabilities and deferred revenue			$	19					$	56
Debt			50,865						46,770

The accompanying notes are part of the consolidated financial statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS 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 23)						Treasury Stock						Total						Equity Attributable to Non-controlling Interests						Total Equity
Balance at December 31, 2017			$	41					$	21,843					$	21,906					$	(6,959)					$	(1,253)					$	35,578					$	28					$	35,606
Adoption of accounting standards			—						—						—						—						—						—						—						—
Net income			—						—						3,677						—						—						3,677						18						3,695
Other comprehensive income/(loss), net of tax			—						—						—						(407)						—						(407)						—						(407)
Common stock issued (a)			—						163						—						—						—						163						—						163
Treasury stock/other			—						—						—						—						(164)						(164)						—						(164)
Dividend and dividend equivalents declared (b)			—						—						(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 (a)			—						159						—						—						—						159						—						159
Treasury stock/other			—						—						—						—						(196)						(196)						(26)						(222)
Dividend and dividend equivalents declared (b)			—						—						(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
Balance at December 31, 2019			$	41					$	22,165					$	20,320					$	(7,728)					$	(1,613)					$	33,185					$	45					$	33,230
Adoption of accounting standards			—						—						(202)						—						—						(202)						—						(202)
Net income/(loss)			—						—						(1,279)						—						—						(1,279)						3						(1,276)
Other comprehensive income/(loss), net of tax			—						—						—						(566)						—						(566)						(1)						(567)
Common stock issued (a)			—						125						—						—						—						125						—						125
Treasury stock/other			—						—						—						—						23						23						86						109
Dividend and dividend equivalents declared (b)			—						—						(596)						—						—						(596)						(12)						(608)
Balance at December 31, 2020			$	41					$	22,290					$	18,243					$	(8,294)					$	(1,590)					$	30,690					$	121					$	30,811

---

(a)Includes impacts of share-based compensation.

(b)We declared dividends per share of Common and Class B Stock of $0.73, $0.60, and $0.15 per share in 2018, 2019, and 2020, respectively.

The accompanying notes are part of the consolidated financial statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents

Footnote						Page
Note 1			Presentation			107
Note 2			Summary of Significant Accounting Policies			108
Note 3			New Accounting Standards			113
Note 4			Revenue			115
Note 5			Other Income/(Loss)			117
Note 6			Share-Based Compensation			118
Note 7			Income Taxes			119
Note 8			Capital Stock and Earnings/(Loss) Per Share			123
Note 9			Cash, Cash Equivalents, and Marketable Securities			124
Note 10			Ford Credit Finance Receivables and Allowance for Credit Losses			127
Note 11			Inventories			134
Note 12			Net Investment in Operating Leases			135
Note 13			Net Property			136
Note 14			Equity in Net Assets of Affiliated Companies			137
Note 15			Other Investments			138
Note 16			Other Liabilities and Deferred Revenue			138
Note 17			Retirement Benefits			139
Note 18			Lease Commitments			146
Note 19			Debt and Commitments			148
Note 20			Derivative Financial Instruments and Hedging Activities			154
Note 21			Employee Separation Actions and Exit and Disposal Activities			157
Note 22			Held-for-Sale Operations and Changes in Investments in Affiliates			159
Note 23			Accumulated Other Comprehensive Income/(Loss)			161
Note 24			Variable Interest Entities			162
Note 25			Commitments and Contingencies			163
Note 26			Segment Information			166
Note 27			Selected Quarterly Financial Data (unaudited)			168

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”). We reclassified certain prior year amounts in our consolidated financial statements to conform to the current year presentation.

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):

			2019																		2020
			Automotive						Mobility						Ford Credit						Automotive						Mobility						Ford Credit
Trade and other receivables (a)															$	4.9																	$	5.9
Unearned interest supplements and residual support (b)															(6.7)																		(6.5)
Finance receivables and other (c)															2.1																		1.5
Intersegment receivables/(payables)			$	(2.6)					$	0.1					2.5						$	(2.7)					$	—					2.7

---

(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.

Global Pandemic

On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment and mitigation measures. As a result, extraordinary actions were taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world. These actions included travel bans, quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

Consistent with the actions taken by governmental authorities, by late March 2020, we had idled all of our significant manufacturing operations in regions around the world. By May 2020, we restarted manufacturing operations in a phased manner at locations around the world.

Our results include adjustments to our assets and liabilities recorded during 2020 due to the impact of COVID-19, the most significant of which were valuation allowances on certain deferred tax assets (see Note 7) and a charge to the provision for credit losses on Ford Credit’s finance receivables (see Note 10). The majority of these adjustments were recorded in the first quarter of 2020.

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, allowance for credit losses, and other items requiring judgment. 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 $(121) million, $108 million, and $25 million, for the years ended 2018, 2019, and 2020, 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 purchase. 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 sheets.

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 sheets. Our Automotive segment restricted cash balances primarily include various escrow agreements related to legal, insurance, customs, and environmental matters. Mobility segment restricted cash balances primarily include cash held under the terms of certain contractual agreements. 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. Restricted cash does not include required minimum balances or cash securing debt issued through securitization transactions.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

On a quarterly basis, we review our available-for-sale securities for credit losses. We compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, we determine if a credit loss allowance is necessary. If a credit loss allowance is necessary, we will record an allowance, limited by the amount that fair value is less than the amortized cost basis, and recognize the corresponding charge in Other income/(loss), net. Factors we consider include the severity of the impairment, the reason for the decline in value, interest rate changes, and counterparty long-term ratings.

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 expected losses that result from all possible default events over the expected life of a receivable. Additions to the allowance for doubtful accounts are made by recording charges to bad debt expense reported in Selling, administrative, and other expenses.

At December 31, 2020, there were $11 million of certain trade receivables specifically identified as held for sale. These held-for-sale values are reported in Assets held for sale on our consolidated balance sheets.

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 carrying amount of intangible assets and goodwill is reported in Other assets in the non-current assets section of our consolidated balance sheets. The net carrying amount of our intangible assets was $188 million and $144 million at December 31, 2019 and 2020, respectively. The net carrying amount of goodwill was $278 million and $258 million at December 31, 2019 and 2020, respectively.

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

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 amounts of those assets are depreciated over their remaining useful life. For the periods presented, we have not recorded any impairments.

Held-for-Sale Asset Impairment

We perform an impairment test on a disposal group to be discontinued, held for sale (“HFS”), or otherwise disposed when we have committed to an action and the action is expected to be completed within one year. 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 22). We also assess fair value if circumstances arise that were considered unlikely and, as a result, we decide not to sell a disposal group previously classified as HFS upon reclassification as held and used. When there is a change to a plan of sale, and the assets are reclassified from HFS to held and used, the long-lived assets should be reported at the lower of (i) the carrying amount before HFS designation, adjusted for depreciation that would have been recognized if the assets had not been classified as HFS, or (ii) the fair value at the date the assets no longer satisfy the criteria for classification as HFS.

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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Valuation Method

Fixed Income Securities. Fixed income securities primarily include government securities, government agency securities, corporate bonds, and asset-backed securities. We generally measure 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. We also compare the price of certain securities sold close to the quarter end 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”).

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 when market data are not available, we use broker quotes and models (e.g., Black-Scholes) to determine fair value. This includes situations where there is a 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 17). 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 expected credit losses, pre-payment speed, and applicable spreads to approximate current rates. 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 these 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 19). 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.

Finance and Lease Incentives

We routinely sponsor special retail financing and lease incentives to dealers’ customers who choose to finance or lease our vehicles from Ford Credit. The cost for these incentives is included in our estimate of variable consideration 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 $2.4 billion, $2.5 billion, and $2.4 billion in 2018, 2019, and 2020, respectively, and lower depreciation of $2.4 billion, $2.6 billion, and $2.3 billion in 2018, 2019, and 2020, 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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):

			2018						2019						2020
Engineering, research, and development			$	8.2					$	7.4					$	7.1
Advertising			4.0						3.6						2.8

NOTE 3. NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards

Accounting Standards Update (“ASU”) 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments. On January 1, 2020, we adopted the new credit loss standard and all of the related amendments, which replaced the incurred loss impairment method with a method that reflects lifetime expected credit losses. We adopted the changes in accounting for credit losses by recognizing the cumulative effect of initially applying the new credit loss 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 accounting standard in effect for those periods.

The cumulative effect of the changes made to our consolidated balance sheet at January 1, 2020, for the adoption of

ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments, was as follows (in millions):

						Balance at December 31, 2019						Adjustments due to ASU 2016-13						Balance at January 1, 2020
Balance sheet
Assets
Ford Credit finance receivables, net, current						$	53,651					$	(69)					$	53,582
Trade and other receivables, net						9,237						(3)						9,234
Ford Credit finance receivables, net, non-current						53,703						(183)						53,520
Equity in net assets of affiliated companies						2,519						(7)						2,512
Deferred income taxes						11,863						2						11,865
Liabilities
Deferred income taxes						490						(58)						432
Equity
Retained earnings						20,320						(202)						20,118

ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. On April 1, 2020, we adopted the new standard and the related amendment, which provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform (e.g., discontinuation of LIBOR) if certain criteria are met. As of December 31, 2020, we have not yet elected any optional expedients provided in the standard. We will apply the accounting relief as relevant contract and hedge accounting relationship modifications are made during the reference rate reform transition period. We do not expect the standard to have a material impact on our consolidated financial statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. NEW ACCOUNTING STANDARDS (Continued)

We also adopted the following ASUs during 2020, none of which had a material impact to our consolidated financial statements or financial statement disclosures:

ASU									Effective Date
2020-01			Clarifying the Interaction between Equity Securities, Equity Method and Joint Ventures, and Derivatives and Hedging						January 1, 2020
2018-18			Clarifying the Interaction between Collaborative Arrangements and Revenue from Contracts with Customers						January 1, 2020
2018-15			Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract						January 1, 2020

Accounting Standards Issued But Not Yet Adopted

The Company considers the applicability and impact of all ASUs. ASUs were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements.

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):

			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

			2020
			Automotive						Mobility						Ford Credit						Consolidated
Vehicles, parts, and accessories			$	110,180					$	—					$	—					$	110,180
Used vehicles			2,935						—						—						2,935
Extended service contracts			1,431						—						—						1,431
Other revenue			1,027						56						161						1,244
Revenues from sales and services			115,573						56						161						115,790
Leasing income			312						—						5,653						5,965
Financing income			—						—						5,261						5,261
Insurance income			—						—						128						128
Total revenues			$	115,885					$	56					$	11,203					$	127,144

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-added, 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 25). 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.

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 2018, 2019, and 2020, we recorded a decrease of $903 million, $844 million, and $973 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 may 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 25).

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 $4 billion and $4.2 billion of unearned revenue associated with outstanding contracts reported in Other liabilities and deferred revenue at December 31, 2018 and 2019, respectively. We recognized $1.1 billion and $1.2 billion of the unearned amounts as revenue during the years ended December 31, 2019 and 2020, respectively. At December 31, 2020, the unearned amount was $4.2 billion. We expect to recognize approximately $1.3 billion of the unearned amount in 2021, $1 billion in 2022, 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 $270 million and $283 million in deferred costs as of December 31, 2019 and 2020, respectively. We recognized $73 million, $74 million, and $79 million of amortization during the years ended December 31, 2018, 2019, and 2020, 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.

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 sheets 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 that 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, which 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):

			2018						2019						2020
Net periodic pension and OPEB income/(cost), excluding service cost			$	786					$	(1,602)					$	69
Investment-related interest income			667						809						452
Interest income/(expense) on income taxes			33						(29)						(2)
Realized and unrealized gains/(losses) on cash equivalents, marketable securities, and other investments			115						144						325
Gains/(Losses) on changes in investments in affiliates (a)			42						20						3,446
Gains/(Losses) on extinguishment of debt			—						(55)						(1)
Royalty income			491						381						493
Other			113						106						117
Total			$	2,247					$	(226)					$	4,899

---

(a)See Note 22 for additional information relating to our Argo AI, LLC (“Argo AI”) and Volkswagen AG (“VW”) transaction.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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 vest, RSU awards are net settled (i.e., shares are withheld to cover the employee tax obligation). Stock options ratably vest over a three-year service period and expire ten years from the grant date.

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, 2018, 2019, and 2020 was $9.89, $8.99, and $7.11, respectively.

The fair value of time-based RSUs, RSSs, and stock options 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 when it is probable and estimable as measured against the performance metrics over the shorter of the performance or required service periods. We measure the fair value of our stock options on the date of grant using either the Black-Scholes option-pricing model (for options without a market condition) or a Monte Carlo simulation (for options with a market condition). We have elected to recognize forfeitures as an adjustment to compensation expense for all RSUs, RSSs, and stock options in the same period as the forfeitures occur. Expense is recorded in Selling, administrative, and other expenses.

Restricted Stock Units and Restricted Stock Shares

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

			2018						2019						2020
Fair value of vested shares			$	187					$	231					$	264
Compensation cost (a)			162						190						156

---

(a) Net of tax benefit of $29 million, $38 million, and $31 million in 2018, 2019, and 2020, respectively.

As of December 31, 2020, there was approximately $73 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 2018, 2019, and 2020 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:

			2018						2019						2020
Fair value per stock award			$	9.03					$	9.66					$	7.21
Grant date stock price			10.40						8.81						7.08
Assumptions:
Ford’s stock price expected volatility (a)			22.9		%				24.1		%				25.4		%
Expected average volatility of peer companies (a)			25.4						25.8						26.4
Risk-free interest rate			2.46						2.57						0.68

---

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

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. SHARE-BASED COMPENSATION (Continued)

During 2020, 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			69.3						$	9.90
Granted (a)			34.2						7.11
Vested (a)			(25.5)						10.34
Forfeited			(5.8)						9.51
Outstanding, end of year (b)			72.2						8.35

---

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

(b)Excludes 1,229,124 non-employee director shares that were vested, but unissued at December 31, 2020.

Stock Options

During 2020, 6.6 million stock options were issued to our employees with a weighted-average grant date fair value of $2.17. The options granted in 2020 contain a performance condition tied to Company stock price and were valued using a Monte Carlo simulation assuming a 0% dividend yield, a volatility rate of 30.4%, a risk-free interest rate of 0.69%, and an expected term of ten years.

For the years ended December 31, 2019 and 2020, stock options outstanding were 25.9 million and 26.9 million, respectively, and stock options exercisable were 25.9 million and 20.3 million, respectively. For the year ended December 31, 2020, the intrinsic value for vested and unvested stock options was $0 million and $15.7 million, respectively. The average remaining terms for fully vested stock options and unvested stock options were 1.8 years and 9.5 years, respectively. Compensation cost for stock options for the year ended December 31, 2020 was $8.7 million, net of a tax benefit of $2.7 million. As of December 31, 2020, there was approximately $2.9 million in unrecognized compensation cost related to non-vested stock options.

NOTE 7. INCOME TAXES

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

We account for U.S. tax on global intangible low-taxed 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. INCOME TAXES (Continued)

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:

			2018						2019						2020
Income/(Loss) before income taxes (in millions)
U.S.			$	2,051					$	2,656					$	(231)
Non-U.S.			2,294						(3,296)						(885)
Total			$	4,345					$	(640)					$	(1,116)
Provision for/(Benefit from) income taxes (in millions)
Current
Federal			$	75					$	(101)					$	(23)
Non-U.S.			690						738						554
State and local			(6)						33						(45)
Total current			759						670						486
Deferred
Federal			(360)						(1,190)						(523)
Non-U.S.			239						(70)						168
State and local			12						(134)						29
Total deferred			(109)						(1,394)						(326)
Total			$	650					$	(724)					$	160
Reconciliation of effective tax rate
U.S. statutory rate			21.0		%				21.0		%				21.0		%
Non-U.S. tax rates under U.S. rates			(1.2)						46.9						(2.6)
State and local income taxes			2.0						12.4						8.9
General business credits			(9.2)						67.0						35.1
Dispositions and restructurings			4.6						45.5						(0.4)
U.S. tax on non-U.S. earnings			8.1						(49.2)						27.0
Prior year settlements and claims			1.1						(5.0)						8.3
Tax incentives			—						20.7						(6.0)
Enacted change in tax laws			(3.0)						(12.5)						1.5
Valuation allowances			(9.6)						(18.7)						(108.8)
Other			1.2						(15.0)						1.7
Effective rate			15.0		%				113.1		%				(14.3)		%

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. For the year ended December 31, 2019, our tax provision includes additional expense of $95 million related to the impact of the act and subsequently issued Treasury regulations on our global operations.

During 2020, based on all available evidence, we established U.S. valuation allowances of $1.3 billion, primarily against tax credits, as it is more likely than not that these deferred tax assets will not be realized. In assessing the realizability of deferred tax assets, we consider the trade-offs between cash preservation and cash outlays to preserve tax credits.

At December 31, 2020, $12 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. INCOME TAXES (Continued)

Components of Deferred Tax Assets and Liabilities

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

			2019						2020
Deferred tax assets
Employee benefit plans			$	4,125					$	4,760
Net operating loss carryforwards			1,726						1,584
Tax credit carryforwards			9,335						11,037
Research expenditures			619						1,321
Dealer and dealers’ customer allowances and claims			1,724						2,145
Other foreign deferred tax assets			799						729
All other			1,781						2,335
Total gross deferred tax assets			20,109						23,911
Less: Valuation allowances			(843)						(1,981)
Total net deferred tax assets			19,266						21,930
Deferred tax liabilities
Leasing transactions			2,694						3,299
Depreciation and amortization (excluding leasing transactions)			3,094						3,218
Finance receivables			584						574
Other foreign deferred tax liabilities			608						905
All other			913						2,049
Total deferred tax liabilities			7,893						10,045
Net deferred tax assets/(liabilities)			$	11,373					$	11,885

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 $10.8 billion of deferred tax assets, subject to valuation allowance testing.

Operating loss carryforwards for tax purposes were $3.6 billion at December 31, 2020, resulting in a deferred tax asset of $1.6 billion. There is no expiration date for $2.1 billion of these losses. A substantial portion of the remaining losses will expire beyond 2023. Tax credits available to offset future tax liabilities are $11 billion. Approximately half of these credits have a remaining carryforward period of six 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.

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):

			2019						2020
Beginning balance			$	2,047					$	1,943
Increase – tax positions in prior periods			169						137
Increase – tax positions in current period			24						25
Decrease – tax positions in prior periods			(239)						(131)
Settlements			(57)						(61)
Lapse of statute of limitations			—						—
Foreign currency translation adjustment			(1)						—
Ending balance			$	1,943					$	1,913

The amount of unrecognized tax benefits that would affect the effective tax rate if recognized was $1.9 billion at December 31, 2019 and 2020.

Examinations by tax authorities have been completed through 2008 in Germany, 2011 in Canada, 2014 in the United States and the United Kingdom, and 2015 in China. 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 $33 million of income, $29 million of expense, and $2 million of expense for the years ended December 31, 2018, 2019, and 2020, respectively. These were reported in Other income/(loss), net in our consolidated income statements. Net payables for tax related interest were $58 million and $36 million as of December 31, 2019 and 2020, respectively.

Cash paid for income taxes was $821 million, $599 million, and $421 million in 2018, 2019, and 2020, respectively.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. CAPITAL STOCK AND EARNINGS/(LOSS) 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/(loss) per share (“EPS”) amounts in our financial reporting. Basic EPS excludes dilution and is computed by dividing Net income/(loss) 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 RSUs, and unvested RSSs. Potentially dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period.

Earnings/(Loss) Per Share Attributable to Ford Motor Company Common and Class B Stock

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

			2018						2019						2020
Basic and Diluted Income/(Loss) Attributable to Ford Motor Company
Basic income/(loss)			$	3,677					$	47					$	(1,279)
Diluted income/(loss)			3,677						47						(1,279)
Basic and Diluted Shares
Basic shares (average shares outstanding)			3,974						3,972						3,973
Net dilutive options, unvested restricted stock units, and unvested restricted stock shares (a)			24						32						—
Diluted shares			3,998						4,004						3,973

---

(a) In 2020, there were 29 million shares excluded from the calculation of diluted earnings/(loss) per share, due to their anti-dilutive effect.

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, 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
									December 31, 2020
			Fair Value Level						Automotive						Mobility						Ford Credit						Consolidated
Cash and cash equivalents
U.S. government			1						$	2,940					$	—					$	3,255					$	6,195
U.S. government agencies			2						850						—						640						1,490
Non-U.S. government and agencies			2						600						—						717						1,317
Corporate debt			2						605						—						970						1,575
Total marketable securities classified as cash equivalents									4,995						—						5,582						10,577
Cash, time deposits, and money market funds									5,830						69						8,767						14,666
Total cash and cash equivalents									$	10,825					$	69					$	14,349					$	25,243
Marketable securities
U.S. government			1						$	4,709					$	—					$	1,082					$	5,791
U.S. government agencies			2						3,259						—						485						3,744
Non-U.S. government and agencies			2						4,448						—						2,693						7,141
Corporate debt			2						7,095						—						308						7,403
Equities (a)			1						113						—						—						113
Other marketable securities			2						234						—						292						526
Total marketable securities									$	19,858					$	—					$	4,860					$	24,718
Restricted cash									$	38					$	7					$	647					$	692
Cash, cash equivalents, and restricted cash in held-for-sale assets									$	—					$	—					$	—					$	—

---

(a) Net unrealized gains/losses incurred during the reporting periods on equity securities still held at December 31, 2019 and 2020 were a $44 million loss and a $24 million gain, respectively.

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, 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
			December 31, 2020
																											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			$	2,894					$	44					$	—					$	2,938					$	1,649					$	1,286					$	3
U.S. government agencies			2,588						15						—						2,603						772						1,629						202
Non-U.S. government and agencies			2,926						31						—						2,957						1,330						1,617						10
Corporate debt			7,482						102						(1)						7,583						3,566						3,987						30
Other marketable securities			212						3						—						215						1						147						67
Total			$	16,102					$	195					$	(1)					$	16,296					$	7,318					$	8,666					$	312

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

			2018						2019						2020
Automotive
Sales proceeds			$	5,512					$	5,753					$	8,574
Gross realized gains			1						13						56
Gross realized losses			21						10						11

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, 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)
			December 31, 2020
			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			$	181					$	—					$	—					$	—					$	181					$	—
U.S. government agencies			83						—						—						—						83						—
Non-U.S. government and agencies			164						—						10						—						174						—
Corporate debt			1,538						(1)						9						—						1,547						(1)
Other marketable securities			23						—						13						—						36						—
Total			$	1,989					$	(1)					$	32					$	—					$	2,021					$	(1)

We determine credit losses on AFS debt securities using the specific identification method. During the years ended December 31, 2018, 2019, and 2020, we did not recognize any credit loss. The unrealized losses on securities are due to changes in interest rates and market liquidity.

Cash, Cash Equivalents, and Restricted Cash

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

			December 31, 2019						December 31, 2020
Cash and cash equivalents			$	17,504					$	25,243
Restricted cash (a)			175						692
Cash, cash equivalents, and restricted cash in held-for-sale assets			62						—
Total cash, cash equivalents, and restricted cash			$	17,741					$	25,935

---

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

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

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.

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 92% of dealer financing.

Finance receivables 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.

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.

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 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 as HFI or HFS 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 since GAAP requires the statement of cash flows presentation to be based on the original classification of the receivables. 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.

The value of the finance receivables considered HFS at December 31, 2019 was $1.5 billion, primarily Forso Nordic AB (“Forso”) related finance receivables of $1.2 billion. At December 31, 2020, there were $36 million of certain wholesale finance receivables specifically identified as HFS. These HFS values are reported in Assets held for sale on our consolidated balance sheets. See Note 22 for additional information.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Ford Credit finance receivables, net at December 31 were as follows (in millions):

			2019						2020
Consumer
Retail installment contracts, gross			$	68,905					$	73,631
Finance leases, gross			8,566						8,431
Retail financing, gross			77,471						82,062
Unearned interest supplements			(3,589)						(3,987)
Consumer finance receivables			73,882						78,075
Non-Consumer
Dealer financing			33,985						20,908
Non-Consumer finance receivables			33,985						20,908
Total recorded investment			$	107,867					$	98,983
Recorded investment in finance receivables			$	107,867					$	98,983
Allowance for credit losses			(513)						(1,305)
Total finance receivables, net			$	107,354					$	97,678
Current portion			$	53,651					$	42,401
Non-current portion			53,703						55,277
Total finance receivables, net			$	107,354					$	97,678
Net finance receivables subject to fair value (a)			$	99,168					$	89,651
Fair value (b)			99,297						91,238

---

(a)Net finance receivables subject to fair value exclude finance leases.

(b)The fair value of finance receivables is categorized within Level 3 of the fair value 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 for the years ended December 31, 2018, 2019, and 2020, was $375 million, $380 million, and $357 million, respectively, and is included in Ford Credit revenues on our consolidated income statements.

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

						2020
2021						$	1,978
2022						1,751
2023						1,348
2024						555
2025						55
Thereafter						—
Total future cash payments						5,687
Less: Present value discount						(251)
Finance lease receivables						$	5,436

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

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

			2019						2020
Finance lease receivables			$	5,651					$	5,436
Unguaranteed residual assets			2,795						2,893
Initial direct costs			120						102
Finance leases, gross			8,566						8,431
Unearned interest supplements from Ford and affiliated companies			(363)						(337)
Allowance for credit losses			(17)						(67)
Finance leases, net			$	8,186					$	8,027

At December 31, 2019 and 2020, accrued interest was $251 million and $181 million, respectively, which we report in Other assets in the current assets section of our consolidated balance sheets.

Included in the recorded investment in finance receivables at December 31, 2019 and 2020 were consumer receivables of $38.3 billion and $43.7 billion, respectively, and non-consumer receivables of $26.8 billion and $16.4 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 24).

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 Ford Credit’s 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

The credit quality analysis of consumer receivables at December 31, 2019 was as follows (in millions):

			Total
Consumer
31 - 60 days past due			$	839
61 - 120 days past due			166
Greater than 120 days past due			35
Total past due			1,040
Current			72,842
Total			$	73,882

The credit quality analysis of consumer receivables at December 31, 2020 was as follows (in millions):

						Amortized Cost Basis by Origination Year
						Prior to 2016						2016						2017						2018						2019						2020						Total
Consumer
31 - 60 days past due						$	45					$	62					$	103					$	162					$	166					$	143					$	681
61 - 120 days past due						7						12						24						44						45						31						163
Greater than 120 days past due						11						6						7						8						7						2						41
Total past due						63						80						134						214						218						176						885
Current						782						2,518						6,648						13,704						20,822						32,716						77,190
Total						$	845					$	2,598					$	6,782					$	13,918					$	21,040					$	32,892					$	78,075

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 Ford Credit 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 extends 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, Ford Credit regularly audits 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 analyses 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

The credit quality analysis of dealer financing receivables at December 31, 2019 was as follows (in millions):

			2019
Dealer financing
Group I			$	26,281
Group II			5,407
Group III			2,108
Group IV			189
Total (a)			$	33,985

---

(a)Total past due dealer financing receivables at December 31, 2019 were $62 million.

The credit quality analysis of dealer financing receivables at December 31, 2020 was as follows (in millions):

						Amortized Cost Basis by Origination Year																																										Wholesale Loans
						Dealer Loans
						Prior to 2016						2016						2017						2018						2019						2020						Total									Total
Group I						$	503					$	129					$	110					$	188					$	70					$	248					$	1,248					$	13,160					$	14,408
Group II						38						20						11						35						3						87						194						4,680						4,874
Group III						9						—						3						19						3						35						69						1,464						1,533
Group IV						2						—						—						—						2						6						10						83						93
Total (a)						$	552					$	149					$	124					$	242					$	78					$	376					$	1,521					$	19,387					$	20,908

---

(a)Total past due dealer financing receivables at December 31, 2020 were $99 million.

Non-Accrual of Revenue. The accrual of financing 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.

Troubled Debt Restructuring (“TDR”). 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 the 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.

Ford Credit offered various programs to provide relief to customers impacted by COVID-19. These programs, which were broadly available to all customers during the first half of 2020, included payment extensions. Ford Credit concluded that these programs did not meet TDR criteria. As of December 31, 2020, in the United States, Ford Credit has received payments on nearly all of the pandemic extensions offered to its customers. The volume of payment extensions has returned to pre-COVID-19 levels and Ford Credit continues to grant payment extensions to customers and dealers under its normal business practices.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Allowance for Credit Losses

The allowance for credit losses represents an estimate of the lifetime expected credit losses inherent in finance receivables as of the balance sheet date. The adequacy of the allowance for credit losses is assessed quarterly.

Additions to the allowance for credit losses are made by recording charges to Ford Credit interest, operating, and other expenses on our consolidated income statements. The uncollectible portion of a finance receivable is 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.

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. 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 sheets.

Consumer Portfolio

For consumer receivables that share similar risk characteristics such as product type, initial credit risk, term, vintage, geography, and other relevant factors, Ford Credit estimates the lifetime expected credit loss allowance based on a collective assessment using measurement models and management judgment. The lifetime expected credit losses for the receivables is determined by applying probability of default and loss given default assumption models to monthly expected exposures, then discounting these cash flows to present value using the receivable’s original effective interest rate or the current effective interest rate for a variable rate receivable. Probability of default models are developed from internal risk scoring models taking into account the expected probability of payment and time to default, adjusted for macroeconomic outlook and recent performance. The models consider factors such as risk evaluation at the time of origination, historical trends in credit losses (which include the impact of TDRs), and the composition and recent performance of the present portfolio (including vehicle brand, term, risk evaluation, and new/used vehicles). The loss given default is the percentage of the expected balance due at default that is not recoverable, taking into account the expected collateral value and trends in recoveries (including key metrics such as delinquencies, repossessions, and bankruptcies). Monthly exposures are equal to the receivables’ expected outstanding principal and interest balance.

The allowance for credit losses incorporates forward-looking macroeconomic conditions for baseline, upturn, and downturn scenarios. Three separate credit loss allowances are calculated from these scenarios. They are then probability-weighted to determine the quantitative estimate of the credit loss allowance recognized in the financial statements. Ford Credit uses forecasts from a third party that revert to a long-term historical average after a reasonable and supportable forecasting period, which is specific to the particular macroeconomic variable and which varies by market. Ford Credit updates the forward-looking macroeconomic forecasts quarterly.

If management does not believe the models reflect lifetime expected credit losses for the portfolio, an adjustment is made to reflect management judgment regarding qualitative factors, including economic uncertainty, observable changes in portfolio performance, and other relevant factors.

On an ongoing basis, Ford Credit reviews its models, including macroeconomic factors, the selection of macroeconomic scenarios, and their weighting, to ensure they reflect the risk of the portfolio.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Non-Consumer Portfolio

Dealer financing is evaluated on an individual dealer basis by segmenting dealers by risk characteristics (such as the amount of the loans, the nature of the collateral, the financial status of the dealer, and any TDR modifications) to determine if an individual dealer requires a specific allowance for credit loss. If required, the allowance is based on the present value of the expected future cash flows of the dealer’s receivables discounted at the loans’ original effective interest rate or the fair value of the collateral adjusted for estimated costs to sell.

For the remaining dealer financing, Ford Credit estimates an allowance for credit losses on a collective basis.

Wholesale Loans. Ford Credit estimates the allowance for credit losses for wholesale loans based on historical loss-to-receivable (“LTR”) ratios, expected future cash flows, and the fair value of collateral. For wholesale loans with similar risk characteristics, the allowance for credit losses is estimated on a collective basis using the LTR model and management judgment. The LTR model is based on the most recent years of history. An LTR ratio 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 ratio is multiplied by the end-of-period balances, representing the lifetime expected credit loss reserve.

Dealer Loans. Ford Credit uses a weighted-average remaining maturity method to estimate the lifetime expected credit loss reserve for dealer loans. The loss model is based on the industry-wide commercial real estate credit losses, adjusted to factor in the historical credit losses for the dealer loans portfolio. The expected credit loss is calculated under different macroeconomic scenarios that are weighted to provide the total lifetime expected credit loss.

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 forward-looking economic factors, an adjustment is made based on management judgment.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. FORD CREDIT FINANCE RECEIVABLES AND 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):

			2019 (a)
			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 (b)			(2)						1						(1)
Ending balance			$	496					$	17					$	513

			2020
			Consumer						Non-Consumer						Total
Allowance for credit losses
Beginning balance			$	496					$	17					$	513
Adoption of ASU 2016-13 (c)			247						5						252
Charge-offs			(441)						(29)						(470)
Recoveries			161						8						169
Provision for credit losses			771						57						828
Other (b)			11						2						13
Ending balance			$	1,245					$	60					$	1,305

---

(a)The comparative information has not been restated and continues to be reported under the accounting standard in effect during 2019.

(b)Primarily represents amounts related to translation adjustments.

(c)Cumulative pre-tax adjustments recorded to retained earnings as of January 1, 2020. See Note 3 for additional information.

For the year ended December 31, 2020, the allowance for credit losses increased $792 million. The change reflects an increase to the reserve of $252 million related to the adoption of ASU 2016-13, with the remainder primarily related to economic conditions attributable to the COVID-19 pandemic. The change to the reserve due to the impact of COVID-19 reflects economic uncertainty which, along with the expectation of continued higher unemployment, has increased the probability of default and loss given default rates used in Ford Credit’s estimate of the lifetime expected credit losses for its consumer portfolio, especially in the United States. These economic trends and conditions are also expected to negatively impact dealers. Although net charge-offs for the year ended December 31, 2020 remained low, reflecting government relief programs and customer payment deferral programs, the future impact of COVID-19 on credit losses is expected to be adverse. Ford Credit will continue to monitor economic trends and conditions and will adjust the reserve accordingly.

NOTE 11. 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):

			2019						2020
Raw materials, work-in-process, and supplies			$	4,402					$	4,676
Finished products			6,384						6,132
Total inventories			$	10,786					$	10,808

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 12. 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):

			2019						2020
Automotive Segment
Vehicles, net of depreciation			$	1,612					$	1,304
Ford Credit Segment
Vehicles and other equipment, at cost (a)			33,386						32,486
Accumulated depreciation			(5,768)						(5,839)
Total Ford Credit Segment			27,618						26,647
Total			$	29,230					$	27,951

---

(a)Includes Ford Credit’s operating lease assets of $14.9 billion and $12.8 billion at December 31, 2019 and 2020, 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):

			2018						2019						2020
Operating lease depreciation expense			$	3,972					$	3,635					$	3,235

The amounts contractually due on operating leases at December 31, 2020 were as follows (in millions):

			2021						2022						2023						2024						Thereafter						Total
Operating lease payments			$	4,369					$	2,530					$	878					$	98					$	4					$	7,879

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 13. 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 40 years. The estimated useful lives generally are 14.5 years for machinery and equipment, 8 years for software, 30 years for land improvements, and 40 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):

			2019						2020
Land			$	421					$	451
Buildings and land improvements			11,900						12,557
Machinery, equipment, and other			38,939						40,463
Software			3,691						3,900
Construction in progress			1,710						1,718
Total land, plant and equipment, and other			56,661						59,089
Accumulated depreciation			(31,020)						(32,848)
Net land, plant and equipment, and other			25,641						26,241
Tooling, net of amortization			10,828						10,842
Total			$	36,469					$	37,083

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

			2018						2019						2020
Depreciation and other amortization			$	2,504					$	3,449					$	2,792
Tooling amortization			2,909						3,409						2,747
Total (a)			$	5,413					$	6,858					$	5,539
Maintenance and rearrangement			$	1,994					$	1,963					$	1,670

---

(a) Includes impairment of held-for-sale long-lived assets in 2019 and 2020. See Note 22 for additional information.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 14. 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
			2019						2020						2020
Argo AI, LLC (see Note 22)			$	—					$	2,368					42		%
Changan Ford Automobile Corporation, Limited (a) (b)			672						691						50
Jiangling Motors Corporation, Limited (b)			544						592						32
AutoAlliance (Thailand) Co., Ltd.			435						428						50
Ford Otomotiv Sanayi Anonim Sirketi			274						328						41
Getrag Ford Transmissions GmbH (b)			209						131						50
FFS Finance South Africa (Pty) Limited			88						76						50
Ford Sollers Netherlands B.V. (see Note 21)			93						75						49
Ionity Holding GmbH & Co. KG			58						52						20
Other			146						160						Various
Total			$	2,519					$	4,901

---

(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/(loss) of affiliated companies.

(b)In 2020, Changan Ford Automobile Corporation, Limited, Jiangling Motors Corporation, Limited, and Getrag Ford Transmissions GmbH recorded restructuring charges, our share of which was $15 million, $40 million, and $91 million, respectively. These charges are included in Equity in net income/(loss) of affiliated companies.

We recorded $330 million, $244 million, and $180 million of dividends from these affiliated companies for the years ended December 31, 2018, 2019, and 2020, respectively.

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			2018						2019						2020
Sales			$	4,426					$	3,541					$	4,126
Purchases			10,477						10,106						8,439
Royalty income			374						250						381

Balance Sheet			2019						2020
Receivables			$	785					$	795
Payables			694						928

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 15. OTHER INVESTMENTS

We have investments in entities not accounted for under the equity method for which fair values are not readily available. We 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 sheets. These investments were $1.2 billion and $1.7 billion at December 31, 2019 and 2020, respectively. The increase from December 31, 2019 primarily reflects our preferred security investments in Argo AI (see Note 22). In the year ended December 31, 2020, there were no material adjustments to the fair values of these investments held at December 31, 2020.

In January 2021, there was an observable event for our investment in Rivian. Using an option pricing model, the observable event will result in an increase to our carrying value of approximately $900 million and will be recognized in our first quarter 2021 results.

NOTE 16. OTHER LIABILITIES AND DEFERRED REVENUE

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

			2019						2020
Current
Dealer and dealers’ customer allowances and claims			$	13,113					$	12,702
Deferred revenue			2,091						2,161
Employee benefit plans			1,857						1,752
Accrued interest			1,128						1,215
OPEB			332						339
Pension			185						193
Operating lease liabilities			367						323
Other			3,914						4,960
Total current other liabilities and deferred revenue			$	22,987					$	23,645
Non-current
Pension			$	9,878					$	10,738
OPEB			5,740						6,236
Dealer and dealers’ customer allowances and claims			1,921						3,072
Deferred revenue			4,191						4,559
Operating lease liabilities			1,047						991
Employee benefit plans			1,104						1,074
Other			1,443						1,709
Total non-current other liabilities and deferred revenue			$	25,324					$	28,379

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 17. 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 statements.

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 $393 million, $444 million, and $398 million for the years ended December 31, 2018, 2019, and 2020, respectively. This includes the expense for Company-matching contributions to our primary employee savings plan in the United States of $143 million, $143 million, and $146 million for the years ended December 31, 2018, 2019, and 2020, 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 17. 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
			2019						2020						2019						2020						2019						2020
Weighted Average Assumptions at December 31
Discount rate			3.32		%				2.56		%				1.74		%				1.23		%				3.30		%				2.62		%
Average rate of increase in compensation			3.50						3.50						3.37						3.34						3.44						3.44
Weighted Average Assumptions Used to Determine Net Benefit Cost for the Year Ended December 31
Discount rate - Service cost			4.17		%				3.55		%				2.52		%				1.75		%				4.34		%				3.57		%
Effective interest rate on benefit obligation			3.75						2.88						2.21						1.46						3.87						2.85
Expected long-term rate of return on assets			6.75						6.50						4.18						3.67						—						—
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
			2018						2019						2020						2018						2019						2020						2018						2019						2020
Service cost			$	544					$	474					$	520					$	588					$	506					$	529					$	54					$	43					$	47
Interest cost			1,466						1,570						1,291						684						691						514						195						211						169
Expected return on assets			(2,887)						(2,657)						(2,795)						(1,295)						(1,124)						(1,067)						—						—						—
Amortization of prior service costs/(credits)			143						87						4						25						33						32						(109)						(70)						(16)
Net remeasurement (gain)/loss			1,294						(135)						377						(76)						2,084						499						(366)						551						556
Separation programs/other			53						22						35						103						398						226						1						—						—
Settlements and curtailments			(15)						(67)						5						(2)						8						103						—						—						(2)
Net periodic benefit cost/(income)			$	598					$	(706)					$	(563)					$	27					$	2,596					$	836					$	(225)					$	735					$	754

In 2019, we recognized additional expense of $361 million related to separation programs, settlements, and curtailments, which included a $57 million settlement loss, offset partially by a $12 million curtailment gain, related to the transfer of our Netherlands pension obligation and related plan assets to an insurance company, and $415 million of separation expenses, partially offset by $104 million of settlement and curtailment gains, related to ongoing redesign programs.

In 2020, we recognized additional expense of $367 million related to separation programs, settlements, and curtailments, which included $61 million of settlement losses related to a non-U.S. pension plan and $268 million related to ongoing redesign programs. Until our Global Redesign programs are completed, we anticipate further adjustments to our plans in subsequent periods.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 17. 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
						2019						2020						2019						2020						2019						2020
Change in Benefit Obligation
Benefit obligation at January 1						$	42,269					$	45,672					$	31,079					$	35,373					$	5,559					$	6,072
Service cost						474						520						506						529						43						47
Interest cost						1,570						1,291						691						514						211						169
Amendments						—						—						10						—						—						21
Separation programs/other						(24)						(10)						391						219						3						—
Curtailments						—						—						(43)						—						—						—
Settlements						(966)						(25)						(272)						(189)						—						—
Plan participant contributions						23						23						17						14						3						21
Benefits paid						(2,615)						(3,055)						(1,395)						(1,394)						(367)						(339)
Foreign exchange translation						—						—						501						1,131						69						28
Actuarial (gain)/loss						4,941						4,604						3,888						3,638						551						556
Benefit obligation at December 31						45,672						49,020						35,373						39,835						6,072						6,575
Change in Plan Assets
Fair value of plan assets at January 1						39,774						44,253						27,273						29,958						—						—
Actual return on plan assets						7,800						7,018						2,935						4,149						—						—
Company contributions						284						186						789						744						—						—
Plan participant contributions						23						23						17						14						—						—
Benefits paid						(2,615)						(3,055)						(1,395)						(1,394)						—						—
Settlements						(966)						(25)						(330)						(189)						—						—
Foreign exchange translation						—						—						678						547						—						—
Other						(47)						(45)						(9)						(9)						—						—
Fair value of plan assets at December 31						44,253						48,355						29,958						33,820						—						—
Funded status at December 31						$	(1,419)					$	(665)					$	(5,415)					$	(6,015)					$	(6,072)					$	(6,575)
Amounts Recognized on the Balance Sheets
Prepaid assets						$	911					$	1,578					$	2,318					$	2,673					$	—					$	—
Other liabilities						(2,330)						(2,243)						(7,733)						(8,688)						(6,072)						(6,575)
Total						$	(1,419)					$	(665)					$	(5,415)					$	(6,015)					$	(6,072)					$	(6,575)
Amounts Recognized in Accumulated Other Comprehensive Loss (pre-tax)
Unamortized prior service costs/(credits)						$	8					$	4					$	274					$	206					$	29					$	(11)
Pension Plans in which Accumulated Benefit Obligation Exceeds Plan Assets at December 31
Accumulated benefit obligation						$	2,141					$	2,295					$	12,421					$	14,595
Fair value of plan assets						156						145						5,948						7,203
Accumulated Benefit Obligation at December 31						$	44,578					$	47,848					$	32,106					$	36,272
Pension Plans in which Projected Benefit Obligation Exceeds Plan Assets at December 31
Projected benefit obligation						$	22,085					$	2,389					$	13,864					$	15,951
Fair value of plan assets						19,755						145						6,131						7,264
Projected Benefit Obligation at December 31						$	45,672					$	49,020					$	35,373					$	39,835

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 17. RETIREMENT BENEFITS (Continued)

The actuarial (gain)/loss for our pension benefit obligations in 2019 and 2020 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 2020, we contributed $570 million to our global funded pension plans and made $360 million of benefit payments to participants in unfunded plans. During 2021, we expect to contribute between $600 million and $800 million of cash to our global funded pension plans. We also expect to make about $390 million of benefit payments to participants in unfunded plans. Based on current assumptions and regulations, we do not expect to have a legal requirement to fund our major U.S. pension plans in 2021.

Expected Future Benefit Payments

The expected future benefit payments at December 31, 2020 were as follows (in millions):

						Benefit Payments
						Pension
						U.S. Plans						Non-U.S. Plans						Worldwide OPEB
2021						$	3,430					$	1,480					$	340
2022						2,750						1,360						340
2023						2,760						1,370						330
2024						2,790						1,380						330
2025						2,780						1,400						330
2026-2030						13,730						7,210						1,640

Pension Plan Asset Information

Investment Objectives 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 17. 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 2020, 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 2020 is 6.00% for the U.S. plans, 3.25% for the U.K. plans, and 4.25% for the Canadian plans, and averages 3.42% 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 17. 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).

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 17. RETIREMENT BENEFITS (Continued)

The fair value of our defined benefit pension plan assets (including dividends and interest receivables of $317 million and $102 million for U.S. and non-U.S. plans, respectively) by asset category at December 31 was as follows (in millions):

			2020
			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			$	2,161					$	20					$	—					$	—					$	2,181					$	1,989					$	48					$	—					$	—					$	2,037
International companies			1,346						18						2						—						1,366						1,428						181						4						—						1,613
Total equity			3,507						38						2						—						3,547						3,417						229						4						—						3,650
Fixed Income
U.S. government and agencies			9,243						2,177						—						—						11,420						—						75						—						—						75
Non-U.S. government			—						1,203						14						—						1,217						—						20,398						—						—						20,398
Corporate bonds			—						26,983						—						—						26,983						—						3,391						53						—						3,444
Mortgage/other asset-backed			—						512						—						—						512						—						515						16						—						531
Commingled funds			—						189						—						—						189						—						111						—						—						111
Derivative financial instruments, net			1						(95)						—						—						(94)						2						80						(118)						—						(36)
Total fixed income			9,244						30,969						14						—						40,227						2						24,570						(49)						—						24,523
Alternatives
Hedge funds			—						—						—						3,258						3,258						—						—						—						1,259						1,259
Private equity			—						—						—						1,859						1,859						—						—						—						729						729
Real estate			—						—						—						1,220						1,220						—						—						—						323						323
Total alternatives			—						—						—						6,337						6,337						—						—						—						2,311						2,311
Cash, cash equivalents, and repurchase agreements (b)			(605)						—						—						—						(605)						(2,257)						—						—						—						(2,257)
Other (c)			(1,151)						—						—						—						(1,151)						(458)						—						6,051						—						5,593
Total assets at fair value			$	10,995					$	31,007					$	16					$	6,337					$	48,355					$	704					$	24,799					$	6,006					$	2,311					$	33,820

---

(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 $(2.4) billion in U.S. plans and $(2.9) 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 $5 billion at year-end 2020) and amounts related to net pending security (purchases)/sales and net pending foreign currency purchases/(sales).

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 17. 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):

			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
			2020
									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			$	17					$	(2)					$	1					$	—					$	—					$	16
Non-U.S. Plans (a)			5,572						473						1						1						(41)						6,006

---

(a)Primarily Ford-Werke plan assets (insurance contract valued at $4.5 billion and $5 billion at year-end 2019 and 2020, respectively).

NOTE 18. 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 sheets. Otherwise, the leases are classified as operating leases and reported in Other assets in the non-current assets section of our consolidated balance sheets.

For the majority of our leases, 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. LEASE COMMITMENTS (Continued)

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

						2019						2020
Operating leases
Other assets, non-current						$	1,415					$	1,287
Other liabilities and deferred revenue, current						$	367					$	323
Other liabilities and deferred revenue, non-current						1,047						991
Total operating lease liabilities						$	1,414					$	1,314
Finance leases
Property and equipment, gross						$	252					$	540
Accumulated depreciation						(43)						(50)
Property and equipment, net						$	209					$	490
Automotive debt payable within one year						$	92					$	46
Automotive long-term debt						85						368
Total finance lease liabilities						$	177					$	414

The amounts contractually due on our lease liabilities as of December 31, 2020 were as follows (in millions):

						Operating Leases (a)						Finance Leases
2021						$	366					$	60
2022						279						54
2023						210						42
2024						156						35
2025						117						30
Thereafter						352						303
Total						1,480						524
Less: Present value discount						166						110
Total lease liabilities						$	1,314					$	414

---

(a) Excludes approximately $101 million in future lease payments for various operating leases commencing in a future period.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. LEASE COMMITMENTS (Continued)

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

						2019						2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases						$	460					$	434
Operating cash flows from finance leases						6						15
Financing cash flows from finance leases						35						105
Right-of-use assets obtained in exchange for lease liabilities
Operating leases						$	527					$	304
Finance leases (a)						43						306

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

						2019						2020
Operating lease expense						$	467					$	463
Variable lease expense						53						57
Sublease income						(16)						(14)
Finance lease expense
Amortization of right-of-use assets						15						27
Interest on lease liabilities						6						15
Total lease expense						$	525					$	548

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

						2019						2020
Weighted-average remaining lease term (in years)
Operating leases						6.3						6.3
Finance leases (a)						3.0						14.8
Weighted-average discount rate
Operating leases						3.4		%				3.8		%
Finance leases						3.3		%				3.5		%

---

(a) Includes the addition of a 20-year finance lease for about $300 million that commenced in January 2020.

NOTE 19. 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 sheets at par value adjusted for unamortized discount or premium, unamortized issuance costs, and adjustments related to designated fair value hedging (see Note 20). 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. 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			2019						2020						2019						2020						2019						2020
Debt payable within one year
Short-term			$	315					$	613					1.5		%				4.0		%				1.5		%				4.0		%
Long-term payable within one year
U.S. Department of Energy Advanced Technology Vehicles Manufacturing (“DOE ATVM”) Incentive Program			591						148
Other debt			540						434
Unamortized (discount)/premium			(1)						(1)
Total debt payable within one year			1,445						1,194
Long-term debt payable after one year
Public unsecured debt securities			10,583						18,583
Delayed draw term loan			1,500						1,500
DOE ATVM Incentive Program			880						1,064
Other debt			547						1,622
Unamortized (discount)/premium			(161)						(239)
Unamortized issuance costs			(116)						(188)
Total long-term debt payable after one year			13,233						22,342						5.2		%	(b)			6.3		%	(b)			5.3		%	(b)			6.5		%	(b)
Total Automotive			$	14,678					$	23,536
Fair value of Automotive debt (c)			$	15,606					$	27,209
Ford Credit
Debt payable within one year
Short-term			$	13,717					$	11,429					2.8		%				1.5		%				2.8		%				1.6		%
Long-term payable within one year
Unsecured debt			15,062						17,185
Asset-backed debt			23,609						21,345
Unamortized (discount)/premium			1						2
Unamortized issuance costs			(17)						(17)
Fair value adjustments (d)			(1)						25
Total debt payable within one year			52,371						49,969
Long-term debt payable after one year
Unsecured debt			55,148						54,197
Asset-backed debt			32,162						32,276
Unamortized (discount)/premium			6						28
Unamortized issuance costs			(197)						(235)
Fair value adjustments (d)			539						1,442
Total long-term debt payable after one year			87,658						87,708						3.0		%	(b)			2.7		%	(b)			3.0		%	(b)			2.7		%	(b)
Total Ford Credit			$	140,029					$	137,677
Fair value of Ford Credit debt (c)			$	141,678					$	139,796
Other
Long-term debt payable within one year			$	130					$	180
Long-term debt payable after one year
Unsecured debt			474						294
Unamortized (discount)/premium and issuance costs			(4)						(3)
Total long-term debt payable after one year			470						291						9.3		%	(b)			9.3		%	(b)			9.2		%	(b)			9.2		%	(b)
Total Other			$	600					$	471
Fair value of Other debt			$	720					$	585

---

(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, 2019 and 2020, the fair value of debt includes $315 million and $529 million of Automotive short-term debt and $12.8 billion and $10.4 billion of Ford Credit short-term debt, respectively, carried at cost which approximates fair value. All other debt is categorized within Level 2 of the fair value hierarchy.

(d)These adjustments are related to hedging activity and include discontinued hedging relationship adjustments of $7 million and $299 million at December 31, 2019 and 2020, respectively. The carrying value of hedged debt was $39.4 billion and $45.5 billion at December 31, 2019 and 2020, respectively.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. DEBT AND COMMITMENTS (Continued)

Cash paid for interest was $1.2 billion, $1 billion, and $1.4 billion in 2018, 2019, and 2020, respectively, on Automotive and Other debt. Cash paid for interest was $3.5 billion, $4.1 billion, and $3.4 billion in 2018, 2019, and 2020, respectively, on Ford Credit debt.

Maturities

Debt maturities at December 31, 2020 were as follows (in millions):

			2021						2022						2023						2024						2025						Thereafter						Adjustments						Total Debt Maturities
Automotive
Public unsecured debt securities			$	—					$	86					$	3,500					$	—					$	3,709					$	11,288					$	(290)					$	18,293
DOE ATVM Incentive Program			148						1,064						—						—						—						—						3						1,215
Delayed draw term loan			—						1,500						—						—						—						—						—						1,500
Short-term and other debt			1,047						145						175						48						881						373						(141)						2,528
Total			$	1,195					$	2,795					$	3,675					$	48					$	4,590					$	11,661					$	(428)					$	23,536
Ford Credit
Unsecured debt			$	27,583					$	13,983					$	10,835					$	10,323					$	9,117					$	9,939					$	1,313					$	83,093
Asset-backed debt			22,376						14,419						7,850						3,148						6,159						700						(68)						54,584
Total			$	49,959					$	28,402					$	18,685					$	13,471					$	15,276					$	10,639					$	1,245					$	137,677
Other
Unsecured debt			$	180					$	—					$	—					$	—					$	—					$	294					$	(3)					$	471

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. DEBT AND COMMITMENTS (Continued)

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			2019						2020
8 7/8% Debentures due January 15, 2022			$	86					$	86
8.500% Notes due April 21, 2023			—						3,500
9.000% Notes due April 22, 2025			—						3,500
7 1/8% Debentures due November 15, 2025			209						209
7 1/2% Debentures due August 1, 2026			193						193
4.346% Notes due December 8, 2026			1,500						1,500
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
9.625% Notes due April 22, 2030			—						1,000
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
4.75% Notes due January 15, 2043			2,000						2,000
7.75% Debentures due June 15, 2043			73						73
7.40% Debentures due November 1, 2046			398						398
5.291% Notes due December 8, 2046			1,300						1,300
9.980% Debentures due February 15, 2047			181						181
6.20% Notes due June 1, 2059			750						750
6.00% Notes due December 1, 2059			800						800
7.70% Debentures due May 15, 2097			142						142
Total public unsecured debt securities (b)			$	10,583					$	18,583

---

(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, 2020 of $180 million. The proceeds from these securities were on-lent by Ford to Ford Holdings and are reported as Other long-term debt.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. 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, 2020, an aggregate $1.2 billion was outstanding. In June 2020, the ATVM loan was modified, reducing quarterly principal payments from $148 million to $37 million. The deferred portion of the principal payments will be due upon original maturity in June 2022. 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) on the principal amount, and an additional 1.45% per annum on the deferred portion of the principal amount.

U.K. Export Finance Program

In the second quarter of 2020, Ford Motor Company Limited (“Ford of Britain”), our operating subsidiary in the United Kingdom, entered into, and drew in full, a £625 million term loan credit facility with a syndicate of banks to support Ford of Britain’s general export activities. Accordingly, U.K. Export Finance (“UKEF”) provided a £500 million guarantee of the credit facility under its Export Development Guarantee scheme, which supports high value commercial lending to U.K. exporters. We have also guaranteed Ford of Britain’s obligations under the credit facility to the lenders. As of December 31, 2020, the full £625 million remained outstanding. This five-year, non-amortizing loan matures on June 30, 2025.

Automotive Credit Facilities

Total Company committed credit lines, excluding Ford Credit, at December 31, 2020 were $18.6 billion, consisting of $13.5 billion of our corporate credit facility, $2 billion of our supplemental revolving credit facility, $1.5 billion of our delayed draw term loan facility, and $1.6 billion of local credit facilities. In the first quarter of 2020, we submitted borrowing notices to our lenders for the full amounts of both our corporate credit facility and our supplemental revolving credit facility, and by the third quarter of 2020, we repaid the full amounts outstanding under each facility. At December 31, 2020, the utilized portion of the corporate credit facility was $27 million, representing amounts utilized for letters of credit, and no portion of the supplemental revolving credit facility was utilized. The $1.5 billion delayed draw term loan facility was drawn in full in 2019 and remains outstanding. In addition, about $700 million of committed Company credit lines, excluding Ford Credit, was available under local credit facilities for our affiliates as of December 31, 2020.

Lenders under our corporate credit facility have $400 million of commitments maturing on April 30, 2022, $3 billion of commitments maturing on July 27, 2023, and $10.1 billion of commitments maturing on April 30, 2024. Lenders under our supplemental revolving credit facility have about $200 million of commitments maturing on April 30, 2022, and $1.8 billion of commitments maturing on July 27, 2023.

The corporate credit facility is unsecured and free of material adverse change conditions to borrowing, restrictive financial covenants (for example, interest or fixed-charge coverage ratio, debt-to-equity ratio, and minimum net worth requirements), and credit rating triggers that could limit our ability to obtain funding or trigger early repayment. The corporate credit facility contains a liquidity covenant that requires us to maintain a minimum of $4 billion in aggregate of domestic cash, cash equivalents, and loaned and marketable securities and/or availability under the facility. Further, the terms of the corporate and supplemental revolving credit facilities prohibit share repurchases (with limited exceptions) while any portion of either facility is outstanding and the payment of dividends on our common or Class B stock while more than 50% of the aggregate amount of commitments under the two facilities is utilized. The terms and conditions of the delayed draw term loan (other than the restrictions on share repurchases and dividends) and the supplemental revolving credit facility are consistent with our corporate credit facility.

Each of the corporate credit facility, supplemental revolving credit facility, delayed draw term loan, and our Loan Arrangement and Reimbursement Agreement with the DOE include a covenant that requires us to provide guarantees from certain of our subsidiaries in the event that our senior, unsecured, long-term debt does not maintain at least two investment grade ratings from Fitch, Moody’s, and S&P. The following subsidiaries have provided unsecured guarantees to the lenders under the credit facilities and to the DOE: Ford Component Sales, LLC; Ford European Holdings LLC; Ford Global Technologies, LLC; Ford Holdings LLC (the parent company of Ford Credit); Ford International Capital LLC; Ford Mexico Holdings LLC; Ford Motor Service Company; Ford Smart Mobility LLC; and Ford Trading Company, LLC.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. DEBT AND COMMITMENTS (Continued)

Ford Credit Segment

Asset-Backed Debt

At December 31, 2020, the carrying value of our asset-backed debt was $54.6 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 24 for additional information.

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 contributions in 2019 and the balance of cash related to these contributions was $0 throughout 2019. The balances of cash related to these contributions were $25 million at December 31, 2020, and ranged from $0 to $524 million throughout 2020.

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 $(17) million, $(75) million, and $(234) million for the years ended December 31, 2018, 2019, and 2020, respectively. See Note 20 for additional information regarding the accounting for derivatives.

Interest expense on securitization debt was $1.4 billion, $1.6 billion, and $1.2 billion in 2018, 2019, and 2020, 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):

			2019						2020
Assets
Cash and cash equivalents			$	3.5					$	3.2
Finance receivables, net			64.9						59.6
Net investment in operating leases			14.9						12.8
Liabilities
Debt (a)			$	56.6					$	54.6

---

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

Committed Credit Facilities

At December 31, 2020, Ford Credit’s committed capacity totaled $40.6 billion, compared with $42.6 billion at December 31, 2019. Ford Credit’s committed capacity is primarily comprised of committed asset-backed security facilities from bank-sponsored commercial paper conduits and other financial institutions and unsecured credit facilities with financial institutions.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. 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. Derivative assets are reported in Other assets and derivative liabilities are reported in Payables and Other liabilities and deferred revenue.

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 our consolidated balance sheets 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 and cross-currency 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 and foreign exchange. We report the change in fair value of the hedged debt related to the change in benchmark interest rate in Ford Credit debt and Ford Credit interest, operating, and other expenses. We report the change in fair value of the hedged debt and hedging instrument related to foreign currency in Other income/(loss), net. Net interest settlements and accruals, and fair value changes on hedging instruments due to the benchmark interest rate change 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 statements 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. Our Automotive segment 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 statements 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 statements of cash flows.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

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.

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):

			2018						2019						2020
Cash flow hedges
Reclassified from AOCI to Cost of sales
Foreign currency exchange contracts (a)			$	50					$	29					$	(11)
Commodity contracts (b)			—						(32)						(55)
Fair value hedges
Interest rate contracts
Net interest settlements and accruals on hedging instruments			10						(16)						290
Fair value changes on hedging instruments			(155)						706						986
Fair value changes on hedged debt			153						(694)						(985)
Cross-currency interest rate swap contracts
Net interest settlements and accruals on hedging instruments			—						—						(2)
Fair value changes on hedging instruments			—						—						38
Fair value changes on hedged debt			—						—						(37)
Derivatives not designated as hedging instruments
Foreign currency exchange contracts (c)			398						84						(310)
Cross-currency interest rate swap contracts			(244)						(229)						486
Interest rate contracts			(84)						(13)						(100)
Commodity contracts			(96)						—						47
Total			$	32					$	(165)					$	347

---

(a)For 2018, 2019, and 2020, a $288 million gain, an $839 million loss, and a $198 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax.

(b)For 2019 and 2020, a $36 million loss and a $9 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax.

(c)For 2018, 2019, and 2020, a $235 million gain, a $32 million gain, and a $228 million loss, respectively, were reported in Cost of sales and a $163 million gain, a $52 million gain, and an $82 million loss were reported in Other income/(loss), net, respectively.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

Derivative assets and liabilities are reported on our consolidated balance sheets 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. Collateral represents cash received or paid under reciprocal arrangements that we have entered into with our derivative counterparties, which we do not use to offset our derivative assets and liabilities.

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

			2019																		2020
			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			$	15,349					$	47					$	493					$	15,860					$	47					$	383
Commodity contracts			673						5						29						703						40						5
Fair value hedges
Interest rate contracts			26,577						702						19						26,924						1,331						4
Cross-currency interest rate swap contracts			—						—						—						885						46						—
Derivatives not designated as hedging instruments
Foreign currency exchange contracts			19,350						58						270						25,956						172						399
Cross-currency interest rate swap contracts			5,849						134						67						6,849						557						1
Interest rate contracts			68,914						275						191						70,318						663						439
Commodity contracts			467						9						9						599						74						4
Total derivative financial instruments, gross (a) (b)			$	137,179					$	1,230					$	1,078					$	148,094					$	2,930					$	1,235
Current portion									$	390					$	772											$	974					$	859
Non-current portion									840						306												1,956						376
Total derivative financial instruments, gross									$	1,230					$	1,078											$	2,930					$	1,235

---

(a)At December 31, 2019 and 2020, we held collateral of $18 million and $9 million, respectively, and we posted collateral of $78 million and $96 million, respectively.

(b)At December 31, 2019 and 2020, the fair value of assets and liabilities available for counterparty netting was $269 million and $505 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 21. 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

Global Redesign

As previously announced, we are executing a global redesign of our business. Redesign-related activities, including employee separation costs, facility and other asset-related charges (e.g., impairment, accelerated depreciation), dealer and supplier payments, other statutory and contractual obligations, and other expenses, 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. Ford Brazil completed a sale of the plant machinery and equipment in the third quarter of 2020 and the land and buildings in the fourth quarter of 2020.

In December 2020, Ford Brazil committed to a plan to exit manufacturing operations in Brazil, which will result in the closure of facilities in Camaçari, Taubaté, and Troller in 2021. Production in Camaçari and Taubaté to support new vehicle sales ceased in January 2021, with a limited amount of parts production continuing for a few months to support inventories for aftermarket sales. The Troller plant will cease operations in the fourth quarter of 2021. These actions will not result in Ford Brazil being substantially liquidated, as it will continue imported vehicle sales and customer support operations, and maintain the product development center in Bahia, the proving grounds in Tatuí, São Paulo, and the regional headquarters in São Paulo.

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.

In the fourth quarter of 2020, we also completed a sale of certain manufacturing assets.

United Kingdom. In June 2019, Ford of Britain announced its plan to exit the Ford Bridgend plant in South Wales in 2020. Ford of Britain ceased production at the Bridgend plant and the facility was closed in September 2020.

India. In the third quarter of 2019, Ford committed to a plan to sell specific net assets in our India Automotive operations. On December 31, 2020, Ford and Mahindra & Mahindra Limited (“Mahindra”) mutually determined that we will not complete the joint venture. See Note 22 for additional information.

Other Global Redesign Actions. In 2018, we announced our plan to end production at the Ford Aquitaine Industries plant in Bordeaux, France. We ceased production and the facility was closed in July 2019. 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. We ceased production of the C-Max in June 2019. In addition, we are continuing to reduce our global workforce and take other restructuring actions.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 21. EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES (Continued)

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

						2019						2020
Beginning balance						$	291					$	734
Changes in accruals (a)						1,382						1,598
Payments						(911)						(631)
Foreign currency translation						(28)						31
Ending balance						$	734					$	1,732

---

(a) Excludes pension costs of $311 million and $268 million in 2019 and 2020, respectively.

We also recorded $1.4 billion of non-cash charges in 2019 for the impairment of our India Automotive operations, accelerated depreciation, and other items. In 2020, we also recorded $1.4 billion of non-cash charges related to the write-off of certain tax and other assets in South America, accelerated depreciation, and other items. In addition, we recognized a pre-tax net gain on sale of assets in Brazil and Russia of $39 million, with cash proceeds of $128 million, in 2020.

We estimate that we will incur total charges in 2021 that range between $2.2 billion and $2.7 billion related to the actions above, primarily attributable to employee separations, accelerated depreciation, and dealer and supplier settlements.

Other Actions

United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) Voluntary Separation Packages. As agreed in the collective bargaining agreement ratified in November 2019, during the first quarter of 2020, we offered voluntary separation packages to our UAW hourly workforce who were eligible for normal or early retirement, and recorded associated costs of $201 million in Cost of sales. All separations occurred during 2020.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 22. HELD-FOR-SALE OPERATIONS AND CHANGES IN INVESTMENTS IN AFFILIATES

Automotive Segment

India. 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 to sell certain India Automotive operations to the joint venture. Accordingly, we reported the assets and liabilities of these operations as held for sale for the year ended December 31, 2019, 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 sheets. We have presented those balances in the table for informational purposes.

We recognized, in Cost of sales, pre-tax impairment charges of $804 million and $23 million during the years ended December 31, 2019 and 2020, respectively, 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 the negotiated value of the assets.

As a result of fundamental changes in global economic and business conditions during 2020, caused in part by the global pandemic, on December 31, 2020, we and Mahindra mutually determined that we will not complete the joint venture. Accordingly, at December 31, 2020, the assets and liabilities of our India Automotive operations have been reclassified and reported as held and used. Because the carrying value of the net assets approximated fair value at December 31, 2020, the pre-tax impairment charges recorded in 2019 and 2020 were not adjusted as a result of the reclassification to held and used.

Mobility Segment

On June 1, 2020, we completed a transaction with VW that reduced our ownership interest in the autonomous vehicle technology company Argo AI and resulted in Ford and VW holding equal interests in Argo AI, with the remaining interests consisting of incentive units and founders’ equity. The transaction involved us selling a portion of our Argo AI equity to VW for $500 million and VW making additional investments in Argo AI, including contributing its Autonomous Intelligent Driving company. As a result of the transaction, we deconsolidated Argo AI, remeasured our retained investment in Argo AI at fair value, and recognized a $3.5 billion gain in Other income/(loss), of which $2.9 billion related to our retained investment in Argo AI. We measured the fair value of Argo AI using the income approach. The significant assumptions used in the valuation included Argo AI’s projected long-term cash flows and related terminal value, discounted at a rate typically used for a company at Argo AI’s stage of development.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 22. HELD-FOR-SALE OPERATIONS AND CHANGES IN INVESTMENTS IN AFFILIATES (Continued)

Our retained investment in Argo AI immediately after the transaction consisted of an equity method investment of $2.4 billion and a preferred equity security investment of $400 million, reflected on our consolidated balance sheets in Equity in net assets of affiliated companies and Other assets, respectively. The difference between the fair value of our equity method investment and our share of the carrying value of Argo AI’s net assets primarily related to indefinite-lived assets. We also agreed to future funding of Argo AI of $600 million, subject to capital calls, which will increase our preferred equity investment. As of December 31, 2020, $507 million of the agreed future funding remains.

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, that provided retail and dealer financing in Denmark, Finland, Norway, and Sweden. As a result, we classified the assets and liabilities of these operations as held for sale and recognized a pre-tax fair value impairment charge of $20 million, reported in Other income/(loss), net, in the fourth quarter of 2019.

The assets and liabilities of the Forso operations classified as held for sale for the year ended December 31, 2019 were as follows (in millions):

						December 31, 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 sheets. Upon closing, the buyer assumed the intercompany assets and liabilities. Accordingly, we have presented those balances in the table for informational purposes.

In the first quarter of 2020, Ford Credit completed the sale of Forso recognizing a pre-tax loss of $4 million, reported in Other income/(loss), net, and cash proceeds of $1.3 billion.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 23. 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):

			2018						2019						2020
Foreign currency translation
Beginning balance			$	(4,277)					$	(4,800)					$	(4,626)
Gains/(Losses) on foreign currency translation			(435)						181						(1,107)
Less: Tax/(Tax benefit) (a)			91						6						(206)
Net gains/(losses) on foreign currency translation			(526)						175						(901)
(Gains)/Losses reclassified from AOCI to net income (b)			3						(1)						1
Other comprehensive income/(loss), net of tax (c)			(523)						174						(900)
Ending balance			$	(4,800)					$	(4,626)					$	(5,526)
Marketable securities
Beginning balance			$	(48)					$	(59)					$	71
Gains/(Losses) on available for sale securities			(37)						173						155
Less: Tax/(Tax benefit)			(8)						40						37
Net gains/(losses) on available for sale securities			(29)						133						118
(Gains)/Losses reclassified from AOCI to net income			20						(3)						(45)
Less: Tax/(Tax benefit)			2						—						(12)
Net (gains)/losses reclassified from AOCI to net income			18						(3)						(33)
Other comprehensive income/(loss), net of tax			(11)						130						85
Ending balance			$	(59)					$	71					$	156
Derivative instruments
Beginning balance			$	18					$	201					$	(488)
Gains/(Losses) on derivative instruments			288						(875)						207
Less: Tax/(Tax benefit)			65						(180)						39
Net gains/(losses) on derivative instruments			223						(695)						168
(Gains)/Losses reclassified from AOCI to net income			(50)						3						66
Less: Tax/(Tax benefit)			(10)						(3)						12
Net (gains)/losses reclassified from AOCI to net income (d)			(40)						6						54
Other comprehensive income/(loss), net of tax			183						(689)						222
Ending balance			$	201					$	(488)					$	(266)
Pension and other postretirement benefits
Beginning balance			$	(2,652)					$	(2,708)					$	(2,685)
Prior service (costs)/credits arising during the period			(135)						(15)						(21)
Less: Tax/(Tax benefit)			(23)						(2)						(6)
Net prior service (costs)/credits arising during the period			(112)						(13)						(15)
Amortization and recognition of prior service costs/(credits) (e)			59						50						63
Less: Tax/(Tax benefit)			13						10						10
Net prior service costs/(credits) reclassified from AOCI to net income			46						40						53
Translation impact on non-U.S. plans			10						(4)						(11)
Other comprehensive income/(loss), net of tax			(56)						23						27
Ending balance			$	(2,708)					$	(2,685)					$	(2,658)
Total AOCI ending balance at December 31			$	(7,366)					$	(7,728)					$	(8,294)

---

(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, in 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)In 2020, excludes a loss of $1 million related to noncontrolling interests.

(d)Reclassified to Cost of sales. During the next twelve months we expect to reclassify existing net losses on cash flow hedges of $114 million. See Note 20 for additional information.

(e)Amortization and recognition of prior service costs/(credits) is included in the computation of net periodic pension cost/(income). See Note 17 for additional information.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 24. VARIABLE INTEREST ENTITIES

A VIE is an entity that either (i) has insufficient equity 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 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, 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 investments in affiliates are VIEs, in which the power to direct economically significant activities is shared with other investors. Our investments in these affiliates are accounted for as equity method investments and, in the case of Argo AI, also as a preferred equity security investment. Our maximum exposure to any potential losses associated with these affiliates is limited to our investments, including loans, and was $209 million and $3 billion at December 31, 2019 and 2020, respectively. The increase from December 31, 2019 primarily reflects our investments in Argo AI in the second quarter of 2020. See Note 22 for additional information.

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 are the primary beneficiary and, therefore, are 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 statements. See Note 19 for additional information on the accounting for asset-backed debt and the assets securing this debt.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 25. COMMITMENTS AND CONTINGENCIES

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

Guarantees and Indemnifications

Financial Guarantees. Financial guarantees and indemnifications are recorded at fair value at their inception. Subsequent to initial recognition, the guarantee liability is adjusted at each reporting period to reflect the current estimate of expected payments resulting from possible default events over the remaining life of the guarantee. The maximum potential payments for financial guarantees were $162 million and $346 million at December 31, 2019 and 2020, respectively. The carrying value of recorded liabilities related to financial guarantees was $33 million and $46 million at December 31, 2019 and 2020, respectively.

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

Non-Financial Guarantees. Non-financial 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. The maximum potential payments for non-financial guarantees were $587 million and $245 million at December 31, 2019 and 2020, respectively. The carrying value of recorded liabilities related to non-financial guarantees was $200 million and $48 million at December 31, 2019 and 2020, respectively.

We guarantee the resale value of vehicles sold in certain arrangements to daily rental companies. The maximum potential payment of $240 million as of December 31, 2020 represents the total proceeds we guarantee the rental company will receive on resale. Reflecting our present estimate of proceeds the rental companies will receive on resale from third parties, we have recorded $47 million as our best estimate of the amount we will have to pay under the guarantee.

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 contract claim brought by a counterparty, including a joint venture or alliance partner, or 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 25. COMMITMENTS AND CONTINGENCIES (Continued)

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.

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 $400 million, a decrease of about $500 million from September 30, 2020, primarily reflecting an accrual in the fourth quarter of 2020 for indirect tax matters.

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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 25. COMMITMENTS AND CONTINGENCIES (Continued)

Warranty 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 recovery is virtually certain. Recoveries are reported in Trade and other receivables, net and Other assets.

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

			2019						2020
Beginning balance			$	5,137					$	5,702
Payments made during the period			(4,561)						(3,923)
Changes in accrual related to warranties issued during the period			3,182						3,934
Changes in accrual related to pre-existing warranties			1,941						2,403
Foreign currency translation and other			3						56
Ending balance			$	5,702					$	8,172

Changes in accrual related to pre-existing warranties in the table above includes changes to our estimated costs as well as a $610 million charge in our fourth quarter 2020 results for a field service action related to three million Takata airbag inflators. Separately, NHTSA and the automotive industry are currently engaged in a study of the safety of approximately 56 million Takata desiccated airbag inflators in the United States. Of these, approximately three and a half million of the inflators are in our vehicles. Should NHTSA determine that the inflators contain a safety defect, Ford and other manufacturers could potentially face significant incremental recall costs.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 26. SEGMENT INFORMATION

We report segment information consistent with the way our chief operating decision maker (“CODM”) 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. Effective January 1, 2021, consistent with how our CODM assesses performance of the segments and makes decisions about resource allocations, we are changing the measurement of our segments as follows: (i) costs and benefits related to enterprise connectivity activities included in the Mobility segment will be reported in the Automotive segment; (ii) certain corporate governance expenses that benefit the global enterprise reported in the Automotive segment will be reported as part of Corporate Other; and (iii) cash and other centrally managed corporate assets reported in the Automotive segment will be realigned to Corporate Other.

Below is a description of our reportable segments and other activities as of December 31, 2020.

Automotive Segment

The 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), and the International Markets Group.

Mobility Segment

The Mobility segment primarily includes development costs for Ford’s autonomous vehicles and related businesses, Ford’s equity ownership in Argo AI (a developer of autonomous driving systems), and other mobility businesses and investments (including Spin, a micro-mobility service provider).

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 our 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 ordinarily 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 26. SEGMENT INFORMATION

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
2018
Revenues			$	148,294					$	26					$	12,018					$	—					$	—					$	—					$	—					$	160,338
Income/(Loss) before income taxes			5,422						(674)						2,627						(373)						(1,228)						(1,429)			(a)			—						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)			(b)			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)			(c)			—						(640)
Depreciation and tooling amortization			5,520						29						3,666						—						—						1,278			(d)			—						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			88						12						31						—						—						(99)			(d)			—						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)			(b)			258,537
2020
Revenues			$	115,885					$	56					$	11,203					$	—					$	—					$	—					$	—					$	127,144
Income/(Loss) before income taxes			1,633						(1,274)						2,608						(188)						(1,649)						(2,246)			(e)			—						(1,116)
Depreciation and tooling amortization			5,232						37						3,269						—						—						236						—						8,774
Interest expense			—						—						3,402						—						1,649						—						—						5,051
Investment-related interest income			158						—						94						200						—						—						—						452
Equity in net income/(loss) of affiliated companies			300						(132)						20						—						—						(146)						—						42
Cash outflow for capital spending			5,560						142						40						—						—						—						—						5,742
Cash, cash equivalents, marketable securities, and restricted cash			30,721						76						19,856						—						—						—						—						50,653
Total assets			109,963						4,023						158,524						—						—						—						(5,249)			(b)			267,261

---

(a)Primarily reflects mark-to-market adjustments for our global pension and OPEB plans and Global Redesign actions.

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

(c)Primarily reflects Global Redesign actions in Europe and mark-to-market adjustments for our global pension and OPEB plans.

(d)Prior period amounts have been reclassified in accordance with special item reporting.

(e)Primarily reflects Global Redesign actions in South America and Europe, mark-to-market adjustments for our global pension and OPEB plans, and the field service action for Takata airbag inflators, partially offset by the gain on our investment in Argo AI as a result of the transaction with Argo AI and VW in the second quarter of 2020.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 26. 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):

			2018												2019												2020
			Revenues						Long-Lived Assets (a)						Revenues						Long-Lived Assets (a)						Revenues						Long-Lived Assets (a)
United States			$	97,546					$	44,940					$	98,729					$	46,434					$	82,535					$	45,360
Canada			10,541						4,604						10,855						4,842						8,711						5,111
Germany			7,894						3,593						7,930						3,225						6,526						3,197
United Kingdom			9,703						1,650						8,899						1,541						6,110						1,401
Mexico			1,853						2,285						1,451						2,909						1,030						3,669
All Other			32,801						8,225						28,036						6,748						22,232						6,296
Total Company			$	160,338					$	65,297					$	155,900					$	65,699					$	127,144					$	65,034

---

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

NOTE 27. SELECTED QUARTERLY FINANCIAL DATA (unaudited)

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

			2019																								2020
			First Quarter						Second Quarter						Third Quarter						Fourth Quarter						First Quarter						Second Quarter						Third Quarter						Fourth Quarter
Total revenues			$	40,342					$	38,853					$	36,990					$	39,715					$	34,320					$	19,371					$	37,501					$	35,952
Income/(Loss) before income taxes			1,610						205						(19)						(2,436)						(1,146)						1,084						2,756						(3,810)
Amounts Attributable to Ford Motor Company Common and Class B Shareholders
Net income/(loss)			$	1,146					$	148					$	425					$	(1,672)					$	(1,993)					$	1,117					$	2,385					$	(2,788)
Common and Class B per share from income/(loss) from continuing operations
Basic			$	0.29					$	0.04					$	0.11					$	(0.42)					$	(0.50)					$	0.28					$	0.60					$	(0.70)
Diluted			0.29						0.04						0.11						(0.42)						(0.50)						0.28						0.60						(0.70)

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 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.

The third quarter 2019 results include 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.

The first quarter 2020 results include various adjustments to our assets and liabilities made due to the impact of COVID-19, the most significant of which were valuation allowances of $855 million on certain deferred tax assets and a charge of $486 million to the provision for credit losses on Ford Credit’s finance receivables.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 27. SELECTED QUARTERLY FINANCIAL DATA (unaudited) (Continued)

The second quarter 2020 results include the deconsolidation of Argo AI and remeasurement of our retained investment in Argo AI at fair value, which resulted in the recognition of a $3.5 billion gain (see Note 22).

The fourth quarter 2020 results include a pension and OPEB net remeasurement loss of $1.5 billion and a $610 million charge for a field service action to replace Takata airbag inflators.

The first, second, third, and fourth quarter 2020 results each include Global Redesign related activities, including employee separation costs, payments to dealers and suppliers, and impairment and other charges, of $106 million, $119 million, $268 million, and $2.9 billion (of which $2.4 billion related to our South America operations), respectively.

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, 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
For the Year Ended December 31, 2020
Allowances deducted from assets
Credit losses						$	530					$	840								$	38		(a)						$	1,332
Doubtful receivables						49						28									20			(b)						57
Inventories (primarily service part obsolescence)						462						226			(c)						—									688
Deferred tax assets						843						1,301			(d)						163									1,981
Total allowances deducted from assets						$	1,884					$	2,395								$	221								$	4,058

---

(a)Finance receivables deemed to be uncollectible and other changes, principally amounts related to finance receivables sold and translation adjustments. Includes $(252) million related to the adoption of ASU 2016-13 for cumulative pre-tax adjustments recorded to retained earnings as of January 1, 2020.

(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 $(101) million, $(78) million, and $(77) million in 2018, 2019, and 2020, respectively, of valuation allowances for deferred tax assets through Accumulated other comprehensive income/(loss), including translation adjustments and $(418) million, $(52) million, and $1.2 billion in 2018, 2019, and 2020, respectively, of valuation allowances for deferred tax assets through the income statement.