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 3, 2022

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, Chair of the Board, Executive Chair, Chair of the Office of the Chair and Chief Executive, and Chair of the Finance Committee						February 3, 2022
William Clay Ford, Jr.
/s/ JAMES D. FARLEY, JR.						Director, President and Chief Executive Officer						February 3, 2022
James D. Farley, Jr.						(principal executive officer)
KIMBERLY A. CASIANO*						Director						February 3, 2022
Kimberly A. Casiano
ANTHONY F. EARLEY, JR.*						Director and Chair of the Compensation, Talent and Culture Committee						February 3, 2022
Anthony F. Earley, Jr.
ALEXANDRA FORD ENGLISH*						Director						February 3, 2022
Alexandra Ford English
HENRY FORD III*						Director						February 3, 2022
Henry Ford III
WILLIAM W. HELMAN IV*						Director and Chair of the Sustainability, Innovation and Policy Committee						February 3, 2022
William W. Helman IV
/s/ JON M. HUNTSMAN, JR.						Director, Vice Chair, Policy						February 3, 2022
Jon M. Huntsman, Jr.
WILLIAM E. KENNARD*						Director and Chair of the Nominating and Governance Committee						February 3, 2022
William E. Kennard
JOHN C. MAY II*						Director						February 3, 2022
John C. May II
BETH E. MOONEY*						Director						February 3, 2022
Beth E. Mooney
LYNN VOJVODICH RADAKOVICH*						Director						February 3, 2022
Lynn Vojvodich Radakovich

Signature						Title						Date
JOHN L. THORNTON*						Director						February 3, 2022
John L. Thornton
JOHN B. VEIHMEYER*						Director and Chair of the Audit Committee						February 3, 2022
John B. Veihmeyer
JOHN S. WEINBERG*						Director						February 3, 2022
John S. Weinberg
/s/ JOHN T. LAWLER						Chief Financial Officer						February 3, 2022
John T. Lawler						(principal financial officer)
/s/ CATHY O’CALLAGHAN						Controller						February 3, 2022
Cathy O’Callaghan						(principal accounting officer)
*By: /s/ JONATHAN E. OSGOOD												February 3, 2022
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, 2021 and 2020, 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, 2021, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 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, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 10 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.

Ford Credit Consumer Finance Receivables Allowance for Credit Losses

As described in Note 10 to the consolidated financial statements, the Company had consumer finance receivables of $73,446 million, for which a consumer allowance for credit losses of $903 million was recorded as of December 31, 2021. 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, management estimates the lifetime expected credit losses 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 Ford Credit consumer finance receivables allowance for credit losses is a critical audit matter are (i) the significant judgment by management in determining the consumer finance receivables allowance for credit losses; (ii) 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; and (iii) 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 (i) testing management’s process for determining the consumer finance receivables allowance for credit losses; (ii) evaluating the appropriateness of the models used to determine the allowance; (iii) evaluating the reasonableness of the probability of default and loss given default assumptions; (iv) testing the data used in the models; and (v) evaluating the reasonableness of management’s judgment regarding qualitative factors related to economic uncertainty, observable changes in portfolio performance, and other relevant factors. Professionals with specialized skill and knowledge were used to assist in performing the procedures described in (i) through (v).

Warranty and Field Service Actions Accrual (United States)

As described in Note 25 to the consolidated financial statements, the Company had an accrual for estimated future warranty and field service action costs, net of estimated supplier recoveries (“warranty accrual”), of $8,451 million as of December 31, 2021, 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. Management reevaluates the adequacy of their accruals on a regular basis.

The principal considerations for our determination that performing procedures relating to the warranty accrual for the United States is a critical audit matter are (i) the significant judgment by management in the estimation of the accrual and development of the patterned estimation model; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the estimation model and significant assumptions related to the frequency and average cost of claims; and (iii) 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. Professionals with specialized skill and knowledge were used to assist in evaluating 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 3, 2022

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,
			2019						2020						2021
Cash flows from operating activities
Net income/(loss)			$	84					$	(1,276)					$	17,910
Depreciation and tooling amortization (Note 12 and Note 13)			9,689						8,751						7,318
Other amortization			(1,199)						(1,294)						(1,358)
Held-for-sale impairment charges (Note 21)			804						23						—
Brazil manufacturing exit non-cash charges (excluding accelerated depreciation of $145 and $322) (Note 21)			—						1,159						48
(Gains)/Losses on extinguishment of debt (Note 5 and Note 19)			55						1						1,702
Provision for/(Benefit from) credit and insurance losses			413						929						(298)
Pension and other post-retirement employee benefits (“OPEB”) expense/(income) (Note 17)			2,625						1,027						(4,865)
Equity investment dividends received in excess of (earnings)/losses			203						130						116
Foreign currency adjustments			(54)						(420)						532
Net realized and unrealized (gains)/losses on cash equivalents, marketable securities, and other investments			(139)						(315)						(9,159)
Net (gain)/loss on changes in investments in affiliates (Note 5)			(29)						(3,446)						(368)
Stock compensation (Note 6)			228						199						305
Provision for deferred income taxes			(1,370)						(269)						(563)
Decrease/(Increase) in finance receivables (wholesale and other)			1,554						12,104						7,656
Decrease/(Increase) in accounts receivable and other assets			(816)						(63)						(1,141)
Decrease/(Increase) in inventory			206						148						(1,778)
Increase/(Decrease) in accounts payable and accrued and other liabilities			5,260						6,809						(36)
Other			125						72						(234)
Net cash provided by/(used in) operating activities			17,639						24,269						15,787
Cash flows from investing activities
Capital spending			(7,632)						(5,742)						(6,227)
Acquisitions of finance receivables and operating leases			(55,576)						(55,901)						(48,379)
Collections of finance receivables and operating leases			50,182						48,746						52,094
Proceeds from sale of business (Note 22)			—						1,340						145
Purchases of marketable securities and other investments			(17,472)						(39,624)						(27,491)
Sales and maturities of marketable securities and other investments			16,929						32,395						33,229
Settlements of derivatives			(114)						(323)						(272)
Other			(38)						494						(354)
Net cash provided by/(used in) investing activities			(13,721)						(18,615)						2,745
Cash flows from financing activities
Cash payments for dividends and dividend equivalents			(2,389)						(596)						(403)
Purchases of common stock			(237)						—						—
Net changes in short-term debt			(1,384)						(2,291)						3,273
Proceeds from issuance of long-term debt			47,604						65,900						27,901
Payments of long-term debt			(46,497)						(60,514)						(54,164)
Other			(226)						(184)						(105)
Net cash provided by/(used in) financing activities			(3,129)						2,315						(23,498)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			45						225						(232)
Net increase/(decrease) in cash, cash equivalents, and restricted cash			$	834					$	8,194					$	(5,198)
Cash, cash equivalents, and restricted cash at beginning of period (Note 9)			$	16,907					$	17,741					$	25,935
Net increase/(decrease) in cash, cash equivalents, and restricted cash			834						8,194						(5,198)
Cash, cash equivalents, and restricted cash at end of period (Note 9)			$	17,741					$	25,935					$	20,737

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,
			2019						2020						2021
Revenues
Automotive			$	143,604					$	115,894					$	126,150
Ford Credit			12,260						11,203						10,073
Mobility			36						47						118
Total revenues (Note 4)			155,900						127,144						136,341
Costs and expenses
Cost of sales			134,693						112,752						114,651
Selling, administrative, and other expenses			11,161						10,193						11,915
Ford Credit interest, operating, and other expenses			9,472						8,607						5,252
Total costs and expenses			155,326						131,552						131,818
Operating income/(loss)			574						(4,408)						4,523
Interest expense on Company debt excluding Ford Credit			1,020						1,649						1,803
Other income/(loss), net (Note 5 and Note 22)			(226)						4,899						14,733
Equity in net income/(loss) of affiliated companies			32						42						327
Income/(Loss) before income taxes			(640)						(1,116)						17,780
Provision for/(Benefit from) income taxes (Note 7)			(724)						160						(130)
Net income/(loss)			84						(1,276)						17,910
Less: Income/(Loss) attributable to noncontrolling interests			37						3						(27)
Net income/(loss) attributable to Ford Motor Company			$	47					$	(1,279)					$	17,937
EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 8)
Basic income/(loss)			$	0.01					$	(0.32)					$	4.49
Diluted income/(loss)			0.01						(0.32)						4.45
Weighted-average shares used in computation of earnings/(loss) per share
Basic shares			3,972						3,973						3,991
Diluted shares			4,004						3,973						4,034

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

			For the years ended December 31,
			2019						2020						2021
Net income/(loss)			$	84					$	(1,276)					$	17,910
Other comprehensive income/(loss), net of tax (Note 23)
Foreign currency translation			174						(901)						43
Marketable securities			130						85						(175)
Derivative instruments			(689)						222						73
Pension and other postretirement benefits			23						27						18
Total other comprehensive income/(loss), net of tax			(362)						(567)						(41)
Comprehensive income/(loss)			(278)						(1,843)						17,869
Less: Comprehensive income/(loss) attributable to noncontrolling interests			37						2						(23)
Comprehensive income/(loss) attributable to Ford Motor Company			$	(315)					$	(1,845)					$	17,892

The accompanying notes are part of the consolidated financial statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions)

			December 31, 2020						December 31, 2021
ASSETS
Cash and cash equivalents (Note 9)			$	25,243					$	20,540
Marketable securities (Note 9)			24,718						29,053
Ford Credit finance receivables, net of allowance for credit losses of $394 and $282 (Note 10)			42,401						32,543
Trade and other receivables, less allowances of $84 and $48			9,993						11,370
Inventories (Note 11)			10,808						12,065
Other assets			3,581						3,425
Total current assets			116,744						108,996
Ford Credit finance receivables, net of allowance for credit losses of $911 and $643 (Note 10)			55,277						51,256
Net investment in operating leases (Note 12)			27,951						26,361
Net property (Note 13)			37,083						37,139
Equity in net assets of affiliated companies (Note 14)			4,901						4,545
Deferred income taxes (Note 7)			12,423						13,796
Other assets			12,882						14,942
Total assets			$	267,261					$	257,035
LIABILITIES
Payables			$	22,204					$	22,349
Other liabilities and deferred revenue (Note 16 and Note 25)			23,645						18,686
Debt payable within one year (Note 19)
Company excluding Ford Credit			1,374						3,175
Ford Credit			49,969						46,517
Total current liabilities			97,192						90,727
Other liabilities and deferred revenue (Note 16 and Note 25)			28,379						27,705
Long-term debt (Note 19)
Company excluding Ford Credit			22,633						17,200
Ford Credit			87,708						71,200
Deferred income taxes (Note 7)			538						1,581
Total liabilities			236,450						208,413
EQUITY
Common Stock, par value $0.01 per share (4,050 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			22,290						22,611
Retained earnings			18,243						35,769
Accumulated other comprehensive income/(loss) (Note 23)			(8,294)						(8,339)
Treasury stock			(1,590)						(1,563)
Total equity attributable to Ford Motor Company			30,690						48,519
Equity attributable to noncontrolling interests			121						103
Total equity			30,811						48,622
Total liabilities and equity			$	267,261					$	257,035

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, 2020						December 31, 2021
ASSETS
Cash and cash equivalents			$	2,822					$	3,407
Ford Credit finance receivables, net			51,472						43,001
Net investment in operating leases			12,794						7,540
Other assets			—						39
LIABILITIES
Other liabilities and deferred revenue			$	56					$	6
Debt			46,770						38,274

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, 2018			$	41					$	22,006					$	22,668					$	(7,366)					$	(1,417)					$	35,932					$	34					$	35,966
Adoption of accounting standards			—						—						13						—						—						13						—						13
Net income/(loss)			—						—						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
Balance at December 31, 2020			$	41					$	22,290					$	18,243					$	(8,294)					$	(1,590)					$	30,690					$	121					$	30,811
Net income/(loss)			—						—						17,937						—						—						17,937						(27)						17,910
Other comprehensive income/(loss), net of tax			—						—						—						(45)						—						(45)						4						(41)
Common stock issued (a)			—						321						—						—						—						321						—						321
Treasury stock/other			—						—						—						—						27						27						5						32
Dividend and dividend equivalents declared (b)			—						—						(411)						—						—						(411)						—						(411)
Balance at December 31, 2021			$	41					$	22,611					$	35,769					$	(8,339)					$	(1,563)					$	48,519					$	103					$	48,622

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(a)Includes impacts of share-based compensation.

(b)We declared dividends per share of Common and Class B Stock of $0.60, $0.15, and $0.10 per share in 2019, 2020, and 2021, 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			114
Note 2			Summary of Significant Accounting Policies			115
Note 3			New Accounting Standards			120
Note 4			Revenue			121
Note 5			Other Income/(Loss)			123
Note 6			Share-Based Compensation			124
Note 7			Income Taxes			125
Note 8			Capital Stock and Earnings/(Loss) Per Share			129
Note 9			Cash, Cash Equivalents, and Marketable Securities			130
Note 10			Ford Credit Finance Receivables and Allowance for Credit Losses			133
Note 11			Inventories			140
Note 12			Net Investment in Operating Leases			141
Note 13			Net Property			142
Note 14			Equity in Net Assets of Affiliated Companies			143
Note 15			Other Investments			144
Note 16			Other Liabilities and Deferred Revenue			144
Note 17			Retirement Benefits			145
Note 18			Lease Commitments			152
Note 19			Debt and Commitments			154
Note 20			Derivative Financial Instruments and Hedging Activities			161
Note 21			Employee Separation Actions and Exit and Disposal Activities			165
Note 22			Acquisitions and Divestitures			167
Note 23			Accumulated Other Comprehensive Income/(Loss)			168
Note 24			Variable Interest Entities			169
Note 25			Commitments and Contingencies			170
Note 26			Segment Information			173

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):

			2020																		2021
			Automotive						Mobility						Ford Credit						Automotive						Mobility						Ford Credit
Trade and other receivables (a)															$	5.9																	$	7.4
Unearned interest supplements and residual support (b)															(6.5)																		(4.6)
Finance receivables and other (c)															1.5																		1.2
Intersegment receivables/(payables)			$	(2.7)					$	—					2.7						$	(1.4)					$	—					1.4

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(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, including a sale-leaseback agreement between Automotive and Ford Credit relating primarily to vehicles that we lease to our employees.

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

When an entity has monetary assets and liabilities denominated in a currency that is different from its functional currency, we remeasure those assets and liabilities from the transactional currency to the entity’s functional currency. The effect of this remeasurement process and the results of our related foreign currency hedging activities are reported in Cost of sales and Other income/(loss), net and were $58 million, $(46) million, and $(74) million, for the years ended 2019, 2020, and 2021, 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 Company excluding Ford Credit restricted cash balances primarily include various escrow agreements related to legal, insurance, customs, and environmental matters and 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 debt securities with a maturity date greater than three months at the date of purchase and other debt 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 and accounted for as either trading or available-for-sale marketable securities. Equity securities with a readily determinable fair value are classified and accounted for as trading marketable securities.

Realized gains and losses, interest income, and dividend 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 debt 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 consist primarily of Company excluding Ford Credit receivables from contracts with customers for the sale of vehicles, parts, accessories, and services. Trade receivables initially are recorded at the transaction amount and are typically outstanding for 30 days or less. 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 possible default events over the expected life of a receivable. Changes to the allowance for doubtful accounts are made by recording charges to bad debt expense reported in Selling, administrative, and other expenses.

Net Intangible Assets and Goodwill

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

The carrying amount of intangible assets and goodwill is reported in Other assets in the non-current assets section of our consolidated balance sheets. Intangible assets are comprised primarily of advertising agreements, land rights, and technology licenses. The net carrying amount of our intangible assets was $144 million and $111 million at December 31, 2020 and 2021, respectively. For the periods presented, we have not recorded any material impairments for indefinite-lived intangibles. The net carrying amount of goodwill was $258 million and $619 million at December 31, 2020 and 2021, respectively. The goodwill increase from December 31, 2020 primarily reflects the acquisitions of Getrag Ford Transmissions GmbH in March 2021 and Electriphi, Inc. in June 2021 (see Note 22), offset partially by the full impairment of goodwill for two investments in our Mobility segment.

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 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 or 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 would 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. When broker quotes or models are used to determine fair value, the derivative is categorized within Level 3 of the hierarchy. All other derivatives are categorized within Level 2.

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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

We may hold annuity contracts within some of our non-U.S. pension plans (see Note 17). Generally, the contract valuation method is applied for markets where we have purchased non-participating annuity contracts from an insurer as a plan asset. The Ford-Werke GmbH (“Ford-Werke”) defined benefit plan is primarily funded through a participating group insurance contract. For the Ford-Werke plan, 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 as well as 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. We include all annuity contracts within Level 3 of the hierarchy.

Finance Receivables. We measure finance receivables at fair value using internal valuation models (see Note 10). These models project future cash flows of financing contracts based on scheduled contract payments (including principal and interest). The projected cash flows are discounted to present value based on assumptions regarding 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 $2.5 billion, $2.4 billion, and $2.4 billion in 2019, 2020, and 2021, respectively, and lower depreciation of $2.6 billion, $2.3 billion, and $1.9 billion in 2019, 2020, and 2021, 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.

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):

			2019						2020						2021
Engineering, research, and development			$	7.4					$	7.1					$	7.6
Advertising			3.6						2.8						3.1

NOTE 3. NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards

Accounting Standards Update (“ASU”) 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes. Effective January 1, 2021, we adopted the amendments in this ASU to simplify the accounting for income taxes. The amendments clarified that an entity may elect, but is not required, to reflect an allocation of consolidated current and deferred tax expense for non-taxable legal entities that are treated as disregarded by taxing authorities in their separately issued financial statements.

With the adoption of the amendments in ASU 2019-12, Ford Credit’s separately issued financial statements no longer reflect an allocation of our consolidated U.S. current and deferred tax expense to it and certain of its U.S. subsidiaries that are treated as disregarded entities for U.S. tax purposes. Adoption of these amendments reduces complexity in accounting for income taxes and better reflects Ford Credit’s external obligations to tax authorities. Following the adoption, in April 2021, we entered into a Second Amended and Restated Tax Sharing Agreement with Ford Credit. The adoption of ASU 2019-12 and the Second Amended and Restated Tax Sharing Agreement had no impact on our consolidated financial position or results of operations. The amendments were adopted on a retrospective basis and are reflected in Ford Credit’s standalone financial statements and disclosures.

ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Effective January 1, 2021, we adopted the new standard, which simplified guidance on the issuer’s accounting for convertible debt instruments and amended certain guidance related to the computation of earnings per share for convertible instruments and contracts in an entity’s own equity. There was no impact on the date of adoption. During the first quarter of 2021, we issued convertible notes (see Note 19).

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):

			2019
			Company Excluding Ford Credit						Ford Credit						Consolidated
Vehicles, parts, and accessories			$	137,659					$	—					$	137,659
Used vehicles			3,307						—						3,307
Services and other revenue (a)			2,228						204						2,432
Revenues from sales and services			143,194						204						143,398
Leasing income			446						5,899						6,345
Financing income			—						5,996						5,996
Insurance income			—						161						161
Total revenues			$	143,640					$	12,260					$	155,900

			2020
			Company Excluding Ford Credit						Ford Credit						Consolidated
Vehicles, parts, and accessories			$	110,180					$	—					$	110,180
Used vehicles			2,935						—						2,935
Services and other revenue (a)			2,514						161						2,675
Revenues from sales and services			115,629						161						115,790
Leasing income			312						5,653						5,965
Financing income			—						5,261						5,261
Insurance income			—						128						128
Total revenues			$	115,941					$	11,203					$	127,144

			2021
			Company Excluding Ford Credit						Ford Credit						Consolidated
Vehicles, parts, and accessories			$	120,973					$	—					$	120,973
Used vehicles			2,358						—						2,358
Services and other revenue (a)			2,651						161						2,812
Revenues from sales and services			125,982						161						126,143
Leasing income			286						5,291						5,577
Financing income			—						4,560						4,560
Insurance income			—						61						61
Total revenues			$	126,268					$	10,073					$	136,341

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(a)Includes extended service contract revenue.

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs when we transfer control of our vehicles, parts, or accessories, or provide services. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. For the majority of sales, this occurs when products are shipped from our manufacturing facilities. However, we defer a portion of the consideration received when there is a separate future or stand-ready performance obligation, such as extended service contracts or ongoing vehicle connectivity. 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 are recognized as expense when the products are sold (see Note 25). 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)

Company Excluding Ford Credit

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 is obligated to pay 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, we recorded a decrease in revenue of $844 million and $973 million during 2019 and 2020, respectively, and an increase in revenue of $252 million during 2021 related to revenue recognized in prior annual periods.

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 Company excluding Ford Credit revenues upon transfer of control of the vehicle to the customer, and the related vehicle carrying value is recognized in Cost of sales.

Services and other revenue. We use an observable price to determine the stand-alone selling price for separate or stand-ready performance obligations that are included as part of the vehicle consideration received (e.g., free extended service contracts, vehicle connectivity, over-the-air updates), or a cost-plus margin approach when one is not available. We also sell separately priced service contracts that extend mechanical and maintenance coverages beyond our base warranty agreements to vehicle owners. We receive payment at contract inception and the contracts range from 12 to 120 months. We recognize revenue for vehicle service contracts that extend mechanical and maintenance coverages beyond our base warranties over the term of the agreement in proportion to the costs we expect to incur in satisfying the contract obligations. Revenue related to other future or stand-ready performance obligations is generally recognized on a straight-line basis over the period in which services are expected to be performed.

At December 31, 2019 and 2020, a balance of $4.2 billion of unearned revenue associated primarily with outstanding extended service contracts was reported in Other liabilities and deferred revenue. We recognized $1.2 billion and $1.3 billion of the unearned amounts as revenue during the years ended December 31, 2020 and 2021, respectively. At December 31, 2021, the unearned amount was $4.3 billion. We expect to recognize approximately $1.3 billion of the unearned amount in 2022, $1.1 billion in 2023, and $1.9 billion thereafter.

We record a premium deficiency reserve to the extent we estimate the future costs associated with extended service 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 $283 million and $309 million in deferred costs as of December 31, 2020 and 2021, respectively. We recognized $74 million, $79 million, and $81 million of amortization during the years ended December 31, 2019, 2020, and 2021, respectively.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. REVENUE (Continued)

We also receive net commissions 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.

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 Company excluding Ford Credit 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):

			2019						2020						2021
Net periodic pension and OPEB income/(cost), excluding service cost (a)			$	(1,602)					$	69					$	5,997
Investment-related interest income			809						452						254
Interest income/(expense) on income taxes			(29)						(2)						7
Realized and unrealized gains/(losses) on cash equivalents, marketable securities, and other investments (b)			144						325						9,159
Gains/(Losses) on changes in investments in affiliates (c)			20						3,446						368
Gains/(Losses) on extinguishment of debt (d)			(55)						(1)						(1,702)
Royalty income			381						493						619
Other			106						117						31
Total			$	(226)					$	4,899					$	14,733

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(a) See Note 17 for additional information relating to our pension and OPEB remeasurements.

(b) See Note 15 for additional information relating to our investment in Rivian.

(c) See Note 22 for additional information relating to our Argo AI, LLC (“Argo AI”) and Volkswagen AG (“VW”) transaction in 2020.

(d) See Note 19 for additional information relating to our debt repurchase.

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. For awards that include a market condition, we measure the fair value using a Monte Carlo simulation. The weighted average per unit grant date fair value for the years ended December 31, 2019, 2020, and 2021 was $8.99, $7.11, and $13.02, respectively.

Time-based RSUs generally have a graded vesting feature whereby one-third of each grant vests after the first anniversary of the grant date, one-third after the second anniversary, and one-third after the third anniversary. The graded vesting method recognizes expense over the service period for each separately-vesting tranche, which results in accelerated recognition of expense. The fair value of time-based RSUs, RSSs, and stock options is expensed over the shorter of each separate 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):

			2019						2020						2021
Fair value of vested shares			$	231					$	264					$	217
Compensation cost (a)			190						156						229

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(a) Net of tax benefit of $38 million, $31 million, and $74 million in 2019, 2020, and 2021, respectively.

As of December 31, 2021, there was approximately $121 million in unrecognized compensation cost related to non-vested RSUs. This expense will be recognized over a weighted average period of 1.9 years.

The performance-based RSUs granted in March 2019, 2020, and 2021 include a relative Total Shareholder Return (“TSR”) metric. Inputs and assumptions used to calculate the fair value at grant date through a Monte Carlo simulation were as follows:

			2019						2020						2021
Fair value per stock award			$	9.66					$	7.21					$	13.45
Grant date stock price			8.81						7.08						11.93
Assumptions:
Ford’s stock price expected volatility (a)			24.1		%				25.4		%				39.9		%
Expected average volatility of peer companies (a)			25.8						26.4						39.6
Risk-free interest rate			2.57						0.68						0.32

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(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 2021, 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			72.2						$	8.35
Granted (a)			23.4						13.02
Vested (a)			(24.1)						9.01
Forfeited			(9.0)						10.73
Outstanding, end of year (b)			62.5						10.31

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

(b)Excludes 821,082 non-employee director shares that were vested but unissued at December 31, 2021.

Stock Options

For the years ended December 31, 2020 and 2021, stock options outstanding were 26.9 million and 11.9 million, respectively, and stock options exercisable were 20.3 million and 7.5 million, respectively. During 2021, there were 11 million stock options exercised, with a weighted-average exercise price of $12.07. The exercised options prices ranged from $6.19 to $15.37 during 2021. We received approximately $133 million in proceeds with an equivalent of about $197 million in new issues used to settle the exercised options. For options exercised during the year ended December 31, 2021, the difference between the fair value of the Common Stock issued and the respective exercise price was $64 million. As of December 31, 2021, the intrinsic value for vested and unvested stock options was $51.6 million and $63.2 million, respectively. The average remaining terms for fully vested stock options and unvested stock options were 2.3 years and 8.5 years, respectively. Compensation cost for stock options for the year ended December 31, 2021 was $2 million. As of December 31, 2021, there was no unrecognized compensation cost related to non-vested stock options. During 2021, no new stock options were granted.

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:

			2019						2020						2021
Income/(Loss) before income taxes (in millions)
U.S.			$	2,656					$	(231)					$	10,043
Non-U.S.			(3,296)						(885)						7,737
Total			$	(640)					$	(1,116)					$	17,780
Provision for/(Benefit from) income taxes (in millions)
Current
Federal			$	(101)					$	(23)					$	102
Non-U.S.			738						554						598
State and local			33						(45)						26
Total current			670						486						726
Deferred
Federal			(1,190)						(523)						2,290
Non-U.S.			(70)						168						(3,254)
State and local			(134)						29						108
Total deferred			(1,394)						(326)						(856)
Total			$	(724)					$	160					$	(130)
Reconciliation of effective tax rate
U.S. statutory rate			21.0		%				21.0		%				21.0		%
Non-U.S. tax rates under U.S. rates			46.9						(2.6)						1.3
State and local income taxes			12.4						8.9						0.5
General business credits			67.0						35.1						(2.3)
Dispositions and restructurings (a)			45.5						(0.4)						(18.8)
U.S. tax on non-U.S. earnings			(49.2)						27.0						2.4
Prior year settlements and claims			(5.0)						8.3						(0.3)
Tax incentives			20.7						(6.0)						(0.6)
Enacted change in tax laws			(12.5)						1.5						1.1
Valuation allowances			(18.7)						(108.8)						(4.7)
Other			(15.0)						1.7						(0.3)
Effective rate			113.1		%				(14.3)		%				(0.7)		%

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(a)Includes a benefit of $2.9 billion to recognize deferred tax assets resulting from changes in our global tax structure in 2021.

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 was deemed more likely than not that these deferred tax assets would 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. In 2021, we reversed $918 million of the previously established U.S. valuation allowances. The reversal primarily reflects a change in our intent to pursue planning actions involving cash outlays to preserve tax credits.

At December 31, 2021, $16.7 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):

			2020						2021
Deferred tax assets
Employee benefit plans			$	4,760					$	2,320
Net operating loss carryforwards			1,584						4,163
Tax credit carryforwards			11,037						10,437
Research expenditures			1,321						1,117
Dealer and dealers’ customer allowances and claims			2,145						1,944
Other foreign deferred tax assets			729						2,005
All other			2,335						2,353
Total gross deferred tax assets			23,911						24,339
Less: Valuation allowances			(1,981)						(1,067)
Total net deferred tax assets			21,930						23,272
Deferred tax liabilities
Leasing transactions			3,299						2,103
Depreciation and amortization (excluding leasing transactions)			3,218						2,881
Finance receivables			574						756
Carrying value of investments			144						2,149
Other foreign deferred tax liabilities			839						893
All other			1,971						2,275
Total deferred tax liabilities			10,045						11,057
Net deferred tax assets/(liabilities)			$	11,885					$	12,215

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. During 2021, we restructured a significant portion of these operations resulting in recognition of $2.9 billion of net deferred tax assets. Reversal of the remaining elections would result in the recognition of $4.3 billion of deferred tax assets, subject to valuation allowance testing.

Operating loss carryforwards for tax purposes were $11.4 billion at December 31, 2021, resulting in a deferred tax asset of $4.2 billion. There is no expiration date for $3.2 billion of these losses. A substantial portion of the remaining losses will expire beyond 2024. Tax credits available to offset future tax liabilities are $10.4 billion. The majority of these credits have a remaining carryforward period of five 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):

			2020						2021
Beginning balance			$	1,943					$	1,913
Increase – tax positions in prior periods			137						1,054
Increase – tax positions in current period			25						25
Decrease – tax positions in prior periods			(131)						(54)
Settlements			(61)						1
Lapse of statute of limitations			—						(7)
Foreign currency translation adjustment			—						(22)
Ending balance			$	1,913					$	2,910

The amount of unrecognized tax benefits that would affect the effective tax rate if recognized was $1.9 billion and $2.9 billion as of December 31, 2020 and 2021, respectively.

Examinations by tax authorities have been completed through the following years: 2004 in India, 2006 in Mexico, 2008 in Germany, 2010 in Spain, 2011 in Canada, 2014 in the United States and the United Kingdom, and 2016 in China.

Net interest on income taxes was $29 million of expense, $2 million of expense, and $7 million of income for the years ended December 31, 2019, 2020, and 2021, respectively. These were reported in Other income/(loss), net in our consolidated income statements. Net payables for tax related interest were $36 million and $32 million as of December 31, 2020 and 2021, respectively.

Cash paid for income taxes was $599 million, $421 million, and $568 million in 2019, 2020, and 2021, 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 (“in-the-money” stock options, unvested RSUs, and unvested RSSs) and convertible debt. 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):

			2019						2020						2021
Net income/(loss) attributable to Ford Motor Company			$	47					$	(1,279)					$	17,937
Basic and Diluted Shares
Basic shares (average shares outstanding)			3,972						3,973						3,991
Net dilutive options, unvested restricted stock units, unvested restricted stock shares, and convertible debt (a)			32						—						43
Diluted shares			4,004						3,973						4,034

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(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, 2020
			Fair Value Level						Company excluding Ford Credit						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									5,899						8,767						14,666
Total cash and cash equivalents									$	10,894					$	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									$	45					$	647					$	692
									December 31, 2021
			Fair Value Level						Company excluding Ford Credit						Ford Credit						Consolidated
Cash and cash equivalents
U.S. government			1						$	2,877					$	711					$	3,588
U.S. government agencies			2						355						240						595
Non-U.S. government and agencies			2						55						152						207
Corporate debt			2						105						940						1,045
Total marketable securities classified as cash equivalents									3,392						2,043						5,435
Cash, time deposits, and money market funds									6,185						8,920						15,105
Total cash and cash equivalents									$	9,577					$	10,963					$	20,540
Marketable securities
U.S. government			1						$	4,018					$	864					$	4,882
U.S. government agencies			2						2,270						75						2,345
Non-U.S. government and agencies			2						3,373						697						4,070
Corporate debt			2						6,299						304						6,603
Equities (a)			1						10,673						—						10,673
Other marketable securities			2						247						233						480
Total marketable securities									$	26,880					$	2,173					$	29,053
Restricted cash									$	69					$	128					$	197

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(a) Includes $10.6 billion of Rivian common shares valued at $103.69 per share as of December 31, 2021. Net unrealized gains/losses incurred during the reporting periods on equity securities still held at December 31, 2020 and 2021 were a $24 million gain and a $8.3 billion gain, respectively. At February 2, 2022, Rivian common shares were valued at $64.32 per share. Ford’s Rivian shares are subject to a contractual 180-day lockup period that commenced with Rivian’s initial public offering (“IPO”) on November 10, 2021.

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, 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
Company excluding Ford Credit
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
			December 31, 2021
																											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
Company excluding Ford Credit
U.S. government			$	3,821					$	12					$	(14)					$	3,819					$	1,360					$	2,435					$	24
U.S. government agencies			2,249						2						(21)						2,230						316						1,802						112
Non-U.S. government and agencies			2,599						6						(21)						2,584						854						1,708						22
Corporate debt			6,373						21						(23)						6,371						2,645						3,726						—
Other marketable securities			228						1						(1)						228						—						150						78
Total			$	15,270					$	42					$	(80)					$	15,232					$	5,175					$	9,821					$	236

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

			2019						2020						2021
Company excluding Ford Credit
Sales proceeds			$	5,753					$	8,574					$	5,943
Gross realized gains			13						56						26
Gross realized losses			10						11						3

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, 2020
			Less than 1 Year												1 Year or Greater												Total
			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
Company excluding Ford Credit
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)
			December 31, 2021
			Less than 1 Year												1 Year or Greater												Total
			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
Company excluding Ford Credit
U.S. government			$	2,598					$	(14)					$	—					$	—					$	2,598					$	(14)
U.S. government agencies			1,809						(19)						73						(2)						1,882						(21)
Non-U.S. government and agencies			1,614						(20)						38						(1)						1,652						(21)
Corporate debt			3,637						(21)						71						(2)						3,708						(23)
Other marketable securities			178						(1)						15						—						193						(1)
Total			$	9,836					$	(75)					$	197					$	(5)					$	10,033					$	(80)

We determine credit losses on AFS debt securities using the specific identification method. During the years ended December 31, 2019, 2020, and 2021, 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, 2020						December 31, 2021
Cash and cash equivalents			$	25,243					$	20,540
Restricted cash (a)			692						197
Total cash, cash equivalents, and restricted cash			$	25,935					$	20,737

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(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 89% 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.

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):

			2020						2021
Consumer
Retail installment contracts, gross			$	73,631					$	69,148
Finance leases, gross			8,431						7,318
Retail financing, gross			82,062						76,466
Unearned interest supplements			(3,987)						(3,020)
Consumer finance receivables			78,075						73,446
Non-Consumer
Dealer financing			20,908						11,278
Non-Consumer finance receivables			20,908						11,278
Total recorded investment			$	98,983					$	84,724
Recorded investment in finance receivables			$	98,983					$	84,724
Allowance for credit losses			(1,305)						(925)
Total finance receivables, net			$	97,678					$	83,799
Current portion			$	42,401					$	32,543
Non-current portion			55,277						51,256
Total finance receivables, net			$	97,678					$	83,799
Net finance receivables subject to fair value (a)			$	89,651					$	76,796
Fair value (b)			91,238						77,648

---

(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, 2019, 2020, and 2021, was $380 million, $357 million, and $345 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):

						2021
2022						$	2,190
2023						1,376
2024						897
2025						322
2026						52
Thereafter						—
Total future cash payments						4,837
Less: Present value discount						(206)
Finance lease receivables						$	4,631

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):

			2020						2021
Finance lease receivables			$	5,436					$	4,631
Unguaranteed residual assets			2,893						2,605
Initial direct costs			102						82
Finance leases, gross			8,431						7,318
Unearned interest supplements from Ford and affiliated companies			(337)						(274)
Allowance for credit losses			(67)						(41)
Finance leases, net			$	8,027					$	7,003

At December 31, 2020 and 2021, accrued interest was $181 million and $125 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, 2020 and 2021 were consumer receivables of $43.7 billion and $39 billion, respectively, and non-consumer receivables of $16.4 billion and $12 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, 2020 was as follows (in millions):

			Amortized Cost Basis by Origination Year
			Prior to 2016						2016						2017						2018						2019						2020						Total						Percent
Consumer
31 - 60 days past due			$	45					$	62					$	103					$	162					$	166					143						$	681					0.9		%
61 - 120 days past due			7						12						24						44						45						31						163						0.2
Greater than 120 days past due			11						6						7						8						7						2						41						—
Total past due			63						80						134						214						218						176						885						1.1
Current			782						2,518						6,648						13,704						20,822						32,716						77,190						98.9
Total			$	845					$	2,598					$	6,782					$	13,918					$	21,040					$	32,892					$	78,075					100.0		%

The credit quality analysis of consumer receivables at December 31, 2021 was as follows (in millions):

			Amortized Cost Basis by Origination Year
			Prior to 2017						2017						2018						2019						2020						2021						Total						Percent
Consumer
31 - 60 days past due			$	39					$	52					$	98					$	120					$	186					$	91					$	586					0.8		%
61 - 120 days past due			7						10						20						29						40						21						127						0.2
Greater than 120 days past due			10						6						6						9						11						1						43						—
Total past due			56						68						124						158						237						113						756						1.0
Current			812						2,607						6,559						12,689						22,701						27,322						72,690						99.0
Total			$	868					$	2,675					$	6,683					$	12,847					$	22,938					$	27,435					$	73,446					100.0		%

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, 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						Percent
Group I						$	503					$	129					$	110					$	188					$	70					$	248					$	1,248					$	13,160					$	14,408					68.9		%
Group II						38						20						11						35						3						87						194						4,680						4,874						23.3
Group III						9						—						3						19						3						35						69						1,464						1,533						7.3
Group IV						2						—						—						—						2						6						10						83						93						0.5
Total (a)						$	552					$	149					$	124					$	242					$	78					$	376					$	1,521					$	19,387					$	20,908					100.0		%

---

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

The credit quality analysis of dealer financing receivables at December 31, 2021 was as follows (in millions):

			Amortized Cost Basis by Origination Year																																										Wholesale Loans
			Dealer Loans
			Prior to 2017						2017						2018						2019						2020						2021						Total									Total						Percent
Group I			$	391					$	68					$	151					$	45					$	109					$	345					$	1,109					$	6,751					$	7,860					69.7		%
Group II			11						7						26						2						4						54						104						2,689						2,793						24.8
Group III			8						—						1						—						1						20						30						529						559						4.9
Group IV			—						—						4						—						—						6						10						56						66						0.6
Total (a)			$	410					$	75					$	182					$	47					$	114					$	425					$	1,253					$	10,025					$	11,278					100.0		%

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(a)Total past due dealer financing receivables at December 31, 2021 were $62 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 fees 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 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.

Adjustments 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):

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

			2021
			Consumer						Non-Consumer						Total
Allowance for credit losses
Beginning balance			$	1,245					$	60					$	1,305
Charge-offs			(272)						(3)						(275)
Recoveries			202						8						210
Provision for/(Benefit from) credit losses			(270)						(40)						(310)
Other (b)			(2)						(3)						(5)
Ending balance			$	903					$	22					$	925

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(a)On January 1, 2020, we adopted ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss impairment method with a method that reflects lifetime expected credit losses. We recognized the cumulative effect as a pre-tax adjustment to retained earnings as of January 1, 2020.

(b)Primarily represents amounts related to translation adjustments.

The allowance for credit losses at December 31, 2021 considers the remaining economic uncertainty attributable to the COVID-19 pandemic, including the negative impact to consumer liquidity once economic support programs end, and the pandemic’s effect on the labor market and unemployment.

For the year ended December 31, 2021, the allowance for credit losses decreased $380 million, primarily reflecting improvement in the economic outlook that caused Ford Credit to lower its expectation of lifetime losses attributable to macroeconomic assumptions driven by COVID-19. Although net charge-offs for the year ended December 31, 2021 remained low, due in part to government support programs, changes in consumer spending behavior, and high vehicle auction values, the impact of COVID-19 on future credit losses remains uncertain. Ford Credit will continue to monitor economic trends and conditions and portfolio performance 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):

			2020						2021
Raw materials, work-in-process, and supplies			$	4,676					$	5,785
Finished products			6,132						6,280
Total inventories			$	10,808					$	12,065

Finished products at December 31, 2021 in the table above include vehicles completed but awaiting installation of components affected by the semiconductor supply shortage, after which, they will proceed through an additional quality review process prior to being shipped to our dealers.

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):

			2020						2021
Company excluding Ford Credit
Vehicles, net of depreciation			$	1,304					$	1,194
Ford Credit Segment
Vehicles and other equipment, at cost (a)			32,486						29,982
Accumulated depreciation			(5,839)						(4,815)
Total Ford Credit Segment			26,647						25,167
Total			$	27,951					$	26,361

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(a)Includes Ford Credit’s operating lease assets of $12.8 billion and $7.5 billion at December 31, 2020 and 2021, 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 along with fees assessed to a customer at lease termination such as excess wear and use and excess mileage that are considered variable lease payments. Operating lease depreciation expense for the years ended December 31 was as follows (in millions):

			2019						2020						2021
Operating lease depreciation expense			$	3,635					$	3,235					$	1,626

The amounts contractually due on operating leases at December 31, 2021 were as follows (in millions):

			2022						2023						2024						2025						Thereafter						Total
Operating lease payments			$	3,848					$	2,278					$	855					$	138					$	7					$	7,126

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):

			2020						2021
Land			$	451					$	450
Buildings and land improvements			12,557						12,438
Machinery, equipment, and other			40,463						39,636
Software			3,900						4,598
Construction in progress			1,718						2,152
Total land, plant and equipment, and other			59,089						59,274
Accumulated depreciation			(32,848)						(32,342)
Net land, plant and equipment, and other			26,241						26,932
Tooling, net of amortization			10,842						10,207
Total			$	37,083					$	37,139

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

			2019						2020						2021
Depreciation and other amortization			$	3,449					$	2,792					$	2,986
Tooling amortization			3,409						2,747						2,706
Total (a)			$	6,858					$	5,539					$	5,692
Maintenance and rearrangement			$	1,963					$	1,670					$	1,940

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(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
			2020						2021						2021
Argo AI, LLC (see Note 22)			$	2,368					$	2,042					41		%
Changan Ford Automobile Corporation, Limited (a)			691						860						50
Jiangling Motors Corporation, Limited (a) (b)			592						468						32
AutoAlliance (Thailand) Co., Ltd.			428						391						50
Ford Otomotiv Sanayi Anonim Sirketi			328						278						41
Ford Sollers Netherlands B.V. (see Note 21)			75						108						49
FFS Finance South Africa (Pty) Limited			76						70						50
Ionity Holding GmbH & Co. KG			52						41						20
Getrag Ford Transmissions GmbH (a) (b) (See Note 22)			131						—						50
Other			160						287						Various
Total			$	4,901					$	4,545

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(a)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.

(b)In 2021, Jiangling Motors Corporation, Limited, and Getrag Ford Transmission GmbH recorded restructuring charges, our share of which was $10 million and $40 million, respectively. These charges are included in Equity in net income/(loss) of affiliated companies.

We recorded $244 million, $180 million, and $452 million of dividends from these affiliated companies for the years ended December 31, 2019, 2020, and 2021, 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			2019						2020						2021
Sales			$	3,541					$	4,126					$	4,777
Purchases			10,106						8,439						9,245
Royalty income			250						381						458

Balance Sheet			2020						2021
Receivables			$	795					$	724
Payables			928						1,035

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 $1.7 billion and $0.9 billion at December 31, 2020 and 2021, respectively.

The decrease from December 31, 2020 primarily reflects the reclassification of our investment in Rivian from Other assets to Marketable securities following the Rivian IPO in November 2021. At the time of the IPO, Ford’s investment in Rivian’s preferred shares (including the observable event earlier in 2021 of $902 million) and investment in Rivian’s unsecured senior convertible notes converted to common shares, and we recorded an $8.2 billion unrealized gain during fourth quarter 2021, reported in Other income/(loss), net on our consolidated income statements.

The cumulative net unrealized gain from adjustments related to Other Investments held on December 31, 2021 is $101 million.

NOTE 16. OTHER LIABILITIES AND DEFERRED REVENUE

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

			2020						2021
Current
Dealer and dealers’ customer allowances and claims			$	12,702					$	8,300
Deferred revenue			2,161						2,349
Employee benefit plans			1,752						1,687
Accrued interest			1,215						888
Operating lease liabilities			323						345
OPEB			339						332
Pension			193						202
Other			4,960						4,583
Total current other liabilities and deferred revenue			$	23,645					$	18,686
Non-current
Pension			$	10,738					$	8,658
OPEB			6,236						5,708
Dealer and dealers’ customer allowances and claims			3,072						4,909
Deferred revenue			4,559						4,683
Operating lease liabilities			991						1,048
Employee benefit plans			1,074						1,007
Other			1,709						1,692
Total non-current other liabilities and deferred revenue			$	28,379					$	27,705

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 $444 million, $398 million, and $432 million for the years ended December 31, 2019, 2020, and 2021, respectively. This includes the expense for Company-matching contributions to our primary employee savings plan in the United States of $143 million, $146 million, and $152 million for the years ended December 31, 2019, 2020, and 2021, 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
			2020						2021						2020						2021						2020						2021
Weighted Average Assumptions at December 31
Discount rate			2.56		%				2.91		%				1.23		%				1.75		%				2.62		%				2.97		%
Average rate of increase in compensation			3.50						3.50						3.34						3.19						3.44						3.46
Weighted Average Assumptions Used to Determine Net Benefit Cost for the Year Ended December 31
Discount rate - Service cost			3.55		%				3.02		%				1.75		%				1.44		%				3.57		%				3.14		%
Effective interest rate on benefit obligation			2.88						2.00						1.46						1.06						2.85						1.96
Expected long-term rate of return on assets			6.50						6.00						3.67						3.42						—						—
Average rate of increase in compensation			3.50						3.50						3.37						3.34						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
			2019						2020						2021						2019						2020						2021						2019						2020						2021
Service cost			$	474					$	520					$	526					$	506					$	529					$	557					$	43					$	47					$	49
Interest cost			1,570						1,291						928						691						514						420						211						169						127
Expected return on assets			(2,657)						(2,795)						(2,728)						(1,124)						(1,067)						(1,130)						—						—						—
Amortization of prior service costs/(credits)			87						4						2						33						32						24						(70)						(16)						(12)
Net remeasurement (gain)/loss			(135)						377						(254)						2,084						499						(3,241)						551						556						(376)
Separation programs/other			22						35						19						398						226						156						—						—						—
Settlements and curtailments			(67)						5						70						8						103						(2)						—						(2)						—
Net periodic benefit cost/(income)			$	(706)					$	(563)					$	(1,437)					$	2,596					$	836					$	(3,216)					$	735					$	754					$	(212)

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.

In 2021, we recognized expense of $244 million related to separation programs, settlements, and curtailments, which included $70 million of settlement losses related to a U.S. pension plan and additional separation expense of $156 million in non-U.S. pension plans 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
						2020						2021						2020						2021						2020						2021
Change in Benefit Obligation
Benefit obligation at January 1						$	45,672					$	49,020					$	35,373					$	39,835					$	6,072					$	6,575
Service cost						520						526						529						557						47						49
Interest cost						1,291						928						514						420						169						127
Amendments						—						—						—						4						21						—
Separation programs/other						(10)						(25)						219						185						—						—
Curtailments						—						—						—						(4)						—						—
Settlements						(25)						(1,297)						(189)						—						—						—
Plan participant contributions						23						20						14						13						21						21
Benefits paid						(3,055)						(2,522)						(1,394)						(1,565)						(339)						(356)
Foreign exchange translation						—						—						1,131						(1,432)						28						—
Actuarial (gain)/loss						4,604						(1,762)						3,638						(3,581)						556						(376)
Benefit obligation at December 31						49,020						44,888						39,835						34,432						6,575						6,040
Change in Plan Assets
Fair value of plan assets at January 1						44,253						48,355						29,958						33,820						—						—
Actual return on plan assets						7,018						1,150						4,149						788						—						—
Company contributions						186						247						744						912						—						—
Plan participant contributions						23						20						14						13						—						—
Benefits paid						(3,055)						(2,522)						(1,394)						(1,565)						—						—
Settlements						(25)						(1,297)						(189)						—						—						—
Foreign exchange translation						—						—						547						(855)						—						—
Other						(45)						(44)						(9)						(28)						—						—
Fair value of plan assets at December 31						48,355						45,909						33,820						33,085						—						—
Funded status at December 31						$	(665)					$	1,021					$	(6,015)					$	(1,347)					$	(6,575)					$	(6,040)
Amounts Recognized on the Balance Sheets
Prepaid assets						$	1,578					$	3,130					$	2,673					$	5,404					$	—					$	—
Other liabilities						(2,243)						(2,109)						(8,688)						(6,751)						(6,575)						(6,040)
Total						$	(665)					$	1,021					$	(6,015)					$	(1,347)					$	(6,575)					$	(6,040)
Amounts Recognized in Accumulated Other Comprehensive Loss (pre-tax)
Unamortized prior service costs/(credits)						$	4					$	2					$	206					$	170					$	(11)					$	22
Pension Plans in which Accumulated Benefit Obligation Exceeds Plan Assets at December 31
Accumulated benefit obligation						$	2,295					$	2,192					$	14,595					$	12,586
Fair value of plan assets						145						140						7,203						6,835
Accumulated Benefit Obligation at December 31						$	47,848					$	43,879					$	36,272					$	31,850
Pension Plans in which Projected Benefit Obligation Exceeds Plan Assets at December 31
Projected benefit obligation						$	2,389					$	2,249					$	15,951					$	13,651
Fair value of plan assets						145						140						7,264						6,900
Projected Benefit Obligation at December 31						$	49,020					$	44,888					$	39,835					$	34,432

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 2020 and 2021 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 2021, we contributed $773 million to our global funded pension plans and made $387 million of benefit payments to participants in unfunded plans. During 2022, 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 2022.

Expected Future Benefit Payments

The expected future benefit payments at December 31, 2021 were as follows (in millions):

						Benefit Payments
						Pension
						U.S. Plans						Non-U.S. Plans						Worldwide OPEB
2022						$	2,700					$	1,490					$	335
2023						2,670						1,350						330
2024						2,680						1,360						330
2025						2,680						1,380						330
2026						2,650						1,380						330
2027-2031						12,805						7,035						1,620

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 largest non-U.S. plans (e.g., 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 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 are also 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 (primarily hedge funds, real estate, private equity, and public equity) 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 2021, 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 2021 is 5.75% for the U.S. plans, 3.00% for the U.K. plans, and 4.11% for the Canadian plans, and averages 3.29% 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 $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 contracts 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 fair value of our defined benefit pension plan assets (including dividends and interest receivables of $310 million and $96 million for U.S. and non-U.S. plans, respectively) by asset category at December 31 was as follows (in millions):

			2021
			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			$	1,396					$	20					$	—					$	—					$	1,416					$	1,862					$	48					$	—					$	—					$	1,910
International companies			740						8						8						—						756						1,254						59						—						—						1,313
Total equity			2,136						28						8						—						2,172						3,116						107						—						—						3,223
Fixed Income
U.S. government and agencies			9,660						1,687						—						—						11,347						47						13						—						—						60
Non-U.S. government			—						1,230						12						—						1,242						—						20,338						123						—						20,461
Corporate bonds			—						25,842						—						—						25,842						—						2,901						70						—						2,971
Mortgage/other asset-backed			—						464						—						—						464						—						338						15						—						353
Commingled funds			—						164						—						—						164						—						185						—						—						185
Derivative financial instruments, net			1						(19)						—						—						(18)						(1)						23						28						—						50
Total fixed income			9,661						29,368						12						—						39,041						46						23,798						236						—						24,080
Alternatives
Hedge funds			—						—						—						3,390						3,390						—						—						—						1,221						1,221
Private equity			1						—						—						1,976						1,977						—						—						—						756						756
Real estate			—						—						—						1,323						1,323						—						—						—						386						386
Total alternatives			1						—						—						6,689						6,690						—						—						—						2,363						2,363
Cash, cash equivalents, and repurchase agreements (b)			(1,220)						—						—						—						(1,220)						(1,899)						—						—						—						(1,899)
Other (c)			(774)						—						—						—						(774)						(466)						—						5,784						—						5,318
Total assets at fair value			$	9,804					$	29,396					$	20					$	6,689					$	45,909					$	797					$	23,905					$	6,020					$	2,363					$	33,085

---

(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 $2.9 billion in U.S. plans and $2.6 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, $4.7 billion of insurance contracts, primarily Ford-Werke, 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):

			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
			2021
									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			$	16					$	(2)					$	—					$	5					$	1					$	20
Non-U.S. Plans (a)			6,006						(943)						153						687						117						6,020

---

(a)Non-U.S. plans, insurance contracts, primarily Ford-Werke plan, valued at $5 billion and $4.7 billion at year-end 2020 and 2021, 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):

						2020						2021
Operating leases
Other assets, non-current						$	1,287					$	1,337
Other liabilities and deferred revenue, current						$	323					$	345
Other liabilities and deferred revenue, non-current						991						1,048
Total operating lease liabilities						$	1,314					$	1,393
Finance leases
Property and equipment, gross						$	540					$	715
Accumulated depreciation						(50)						(68)
Property and equipment, net						$	490					$	647
Company excluding Ford Credit debt payable within one year						$	46					$	76
Company excluding Ford Credit long-term debt						368						489
Total finance lease liabilities						$	414					$	565

The amounts contractually due on our lease liabilities as of December 31, 2021 were as follows (in millions):

						Operating Leases (a)						Finance Leases
2022						$	385					$	94
2023						307						88
2024						223						70
2025						161						62
2026						128						57
Thereafter						335						288
Total						1,539						659
Less: Present value discount						146						94
Total lease liabilities						$	1,393					$	565

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(a) Excludes approximately $252 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						2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases						$	460					$	434					$	424
Operating cash flows from finance leases						6						15						14
Financing cash flows from finance leases						35						105						52
Right-of-use assets obtained in exchange for lease liabilities
Operating leases						$	527					$	304					$	441
Finance leases						43						306						192

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

						2019						2020						2021
Operating lease expense						$	467					$	463					$	444
Variable lease expense						53						57						49
Sublease income						(16)						(14)						(16)
Finance lease expense
Amortization of right-of-use assets						15						27						34
Interest on lease liabilities						6						15						14
Total lease expense						$	525					$	548					$	525

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

						2019						2020						2021
Weighted-average remaining lease term (in years)
Operating leases						6.3						6.3						6.0
Finance leases						3.0						14.8						12.1
Weighted-average discount rate
Operating leases						3.4		%				3.8		%				3.3		%
Finance leases						3.3		%				3.5		%				3.3		%

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 Company debt excluding Ford Credit and Ford Credit debt at December 31 was as follows (in millions):

															Interest Rates
															Average Contractual												Average Effective (a)
Company excluding Ford Credit			2020						2021						2020						2021						2020						2021
Debt payable within one year
Short-term			$	613					$	286					4.0		%				0.4		%				4.0		%				0.4		%
Long-term payable within one year
Public unsecured debt securities			180						86
U.S. Department of Energy Advanced Technology Vehicles Manufacturing (“DOE ATVM”) Incentive Program			148						953
Delayed draw term loan			—						1,500
Other debt			434						348
Unamortized (discount)/premium			(1)						2
Total debt payable within one year			1,374						3,175
Long-term debt payable after one year
Public unsecured debt securities			18,877						13,643
Convertible notes			—						2,300
Delayed draw term loan			1,500						—
DOE ATVM Incentive Program			1,064						—
U.K. Export Finance Program			854						843
Other debt			768						768
Unamortized (discount)/premium			(242)						(188)
Unamortized issuance costs			(188)						(166)
Total long-term debt payable after one year			22,633						17,200						6.3		%	(b)			4.4		%	(b)			6.5		%	(b)			4.6		%	(b)
Total Company excluding Ford Credit			$	24,007					$	20,375
Fair value of Company debt excluding Ford Credit (c)			$	27,794					$	24,044
Ford Credit
Debt payable within one year
Short-term			$	11,429					$	14,810					1.5		%				1.2		%				1.6		%				1.3		%
Long-term payable within one year
Unsecured debt			17,185						13,660
Asset-backed debt			21,345						18,049
Unamortized (discount)/premium			2						1
Unamortized issuance costs			(17)						(13)
Fair value adjustments (d)			25						10
Total debt payable within one year			49,969						46,517
Long-term debt payable after one year
Unsecured debt			54,197						44,337
Asset-backed debt			32,276						26,654
Unamortized (discount)/premium			28						28
Unamortized issuance costs			(235)						(199)
Fair value adjustments (d)			1,442						380
Total long-term debt payable after one year			87,708						71,200						2.7		%	(b)			2.6		%	(b)			2.7		%	(b)			2.6		%	(b)
Total Ford Credit			$	137,677					$	117,717
Fair value of Ford Credit debt (c)			$	139,796					$	120,204

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(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, 2020 and 2021, the fair value of debt includes $529 million and $209 million of Company excluding Ford Credit short-term debt and $10.4 billion and $14.1 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 $299 million and $257 million at December 31, 2020 and 2021, respectively. The carrying value of hedged debt was $45.5 billion and $37.5 billion at December 31, 2020 and 2021, respectively.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. DEBT AND COMMITMENTS (Continued)

Cash paid for interest was $1 billion, $1.4 billion, and $1.9 billion in 2019, 2020, and 2021, respectively, on Company excluding Ford Credit debt. Cash paid for interest was $4.1 billion, $3.4 billion, and $2.8 billion in 2019, 2020, and 2021, respectively, on Ford Credit debt.

Maturities

Debt maturities at December 31, 2021 were as follows (in millions):

			2022						2023						2024						2025						2026						Thereafter						Adjustments						Total Debt Maturities
Company excluding Ford Credit
Public unsecured debt securities			$	86					$	—					$	—					$	1,234					$	3,972					$	10,737					$	(242)					$	15,787
DOE ATVM Incentive Program			953						—						—						—						—						—						2						955
Delayed draw term loan			1,500						—						—						—						—						—						—						1,500
Short-term and other debt			634						195						70						914						52						380						(112)						2,133
Total			$	3,173					$	195					$	70					$	2,148					$	4,024					$	11,117					$	(352)					$	20,375
Ford Credit
Unsecured debt			$	27,761					$	11,319					$	10,730					$	8,870					$	5,150					$	8,268					$	260					$	72,358
Asset-backed debt			18,758						11,791						5,207						6,736						2,220						700						(53)						45,359
Total			$	46,519					$	23,110					$	15,937					$	15,606					$	7,370					$	8,968					$	207					$	117,717

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. DEBT AND COMMITMENTS (Continued)

Company excluding Ford Credit 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			2020						2021
9.215% Debentures due September 15, 2021			$	180					$	—
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						1,058
7 1/8% Debentures due November 15, 2025			209						176
0.00% Notes due March 15, 2026			—						2,300
7 1/2% Debentures due August 1, 2026			193						172
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						446
6 3/8% Debentures due February 1, 2029 (a)			260						202
9.30% Notes due March 1, 2030			294						294
9.625% Notes due April 22, 2030			1,000						432
7.45% GLOBLS due July 16, 2031 (a)			1,794						1,070
8.900% Debentures due January 15, 2032			151						108
3.25% Notes due February 12, 2032			—						2,500
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						114
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			$	19,057					$	16,029

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

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. DEBT AND COMMITMENTS (Continued)

2021 Debt Extinguishment

Pursuant to our November 2021 cash tender offer and December 2021 redemption, we repurchased or redeemed $7.6 billion principal amount of our public unsecured debt securities for an aggregate cost of $9.3 billion (including transaction costs and accrued and unpaid interest payments for such tendered securities). As a result of these transactions, we recorded a pre-tax loss of $1.7 billion (net of unamortized discounts, premiums, and fees) in Other income/(loss), net in the fourth quarter of 2021.

Environmental, Social, Governance (ESG) Bond

In November 2021, we issued $2.5 billion aggregate principal amount of green bonds with an interest rate of 3.250% under our new sustainable financing framework. We are allocating the net proceeds from this issuance to the design, development, and manufacturing of our battery electric vehicles.

Convertible Debt

In March 2021, we issued $2.3 billion aggregate principal amount of unsecured 0% Convertible Senior Notes due 2026, including $300 million aggregate principal amount of such notes pursuant to the exercise in full of the overallotment option granted to the initial purchasers. The notes will not bear regular interest and the principal amount of the notes will not accrete. The total net proceeds from the offering, after deducting debt issuance costs, were approximately $2.267 billion.

Each $1,000 principal amount of the notes will be convertible into 57.1886 shares of our Common Stock, which is equivalent to a conversion price of approximately $17.49 per share, subject to adjustment upon the occurrence of specified events. The notes are convertible, at the option of the noteholders, on or after December 15, 2025. Prior to December 15, 2025, the notes are convertible only under the following circumstances:

• During any fiscal quarter commencing after the fiscal quarter ending on September 30, 2021 (and only during such fiscal quarter), if the last reported sale price of our Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the notes on each applicable trading day;

• During the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the notes for each day of that five consecutive trading day period was less than 98% of the product of the last reported sale price of our Common Stock and the conversion rate of the notes on such trading day;

• If we call any or all of the notes for redemption; or

• Upon the occurrence of specific corporate events such as a change in control or certain beneficial distributions to common stockholders (as set forth in the indenture governing the notes).

Upon conversion, we will pay cash up to the aggregate principal amount of the notes to be converted and cash, shares of our Common Stock, or a combination of cash and shares of our Common Stock, at our election for the remainder of our obligation in excess, if any, of the aggregate principal amount of the notes being converted.

We may not redeem the notes prior to March 20, 2024. On or after March 20, 2024, we may redeem all or any portion of the notes for cash equal to 100% of the principal amount of the notes being redeemed if the last reported sale price of our Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period.

If we undergo a fundamental change (e.g., change of control), subject to certain conditions, holders of the notes may require us to repurchase for cash all or any portion of their notes at a repurchase price equal to 100% of the principal amount of the notes. In addition, if specific corporate events occur prior to the maturity date or if we issue a notice of redemption, we will increase the conversion rate by pre-defined amounts for holders who elect to convert their notes in connection with such a corporate event. The conditions allowing holders of the notes to convert were not met in 2021.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. DEBT AND COMMITMENTS (Continued)

The notes were issued at par and fees associated with the issuance of these notes are amortized to Interest expense on Company debt excluding Ford Credit over the contractual term of the notes. Amortization of issuance costs was $5 million in 2021. The effective interest rate of the notes is 0.3%.

The total estimated fair value of the notes as of December 31, 2021 was approximately $3.2 billion. The fair value was determined using commonly employed valuation methodologies applying observable market inputs and is classified within Level 2 of the fair value hierarchy.

The notes did not have an impact on our full year 2021 diluted EPS.

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, 2021, an aggregate $953 million 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. As a result of our dividend payment in December 2021, the remaining quarterly principal payments revert from $37 million back to $148 million in accordance with the terms of the Loan Arrangement and Reimbursement Agreement. 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 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, 2021, the full £625 million remained outstanding. This five-year, non-amortizing loan matures on June 30, 2025.

Company Excluding Ford Credit Facilities

Total Company committed credit lines, excluding Ford Credit, at December 31, 2021 were $18.3 billion, consisting of $13.5 billion of our corporate credit facility, $2.0 billion of our supplemental revolving credit facility, $1.5 billion of our delayed draw term loan facility, and $1.3 billion of local credit facilities. At December 31, 2021, the utilized portion of the corporate credit facility was $25 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, $847 million of committed Company credit lines, excluding Ford Credit, was utilized under local credit facilities for our affiliates as of December 31, 2021.

Lenders under our corporate credit facility have $3.4 billion of commitments maturing on September 29, 2024 and $10.1 billion of commitments maturing on September 29, 2026. Lenders under our supplemental revolving credit facility have $2.0 billion of commitments maturing on September 29, 2024.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. DEBT AND COMMITMENTS (Continued)

In September 2021, we amended the corporate and supplemental credit agreements to remove the restrictions on our ability to repurchase shares or pay dividends. In addition, the agreements include certain sustainability-linked targets, pursuant to which the applicable margin and facility fees may be adjusted if Ford achieves, or fails to achieve, the specified targets related to global manufacturing facility greenhouse gas emissions, renewable electricity consumption, and Ford Europe CO2 tailpipe emissions. Further, interest on any U.S. dollar borrowings under both the corporate and supplemental revolving credit facilities will be calculated using daily simple SOFR. Prior to the amendments, such interest was calculated using LIBOR.

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. The terms and conditions of the delayed draw term loan (other than sustainability-linked provisions and the transition from LIBOR to SOFR) 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 Next LLC (formerly known as Ford Autonomous Vehicles LLC); Ford Smart Mobility LLC; and Ford Trading Company, LLC.

Ford Credit Segment

Asset-Backed Debt

At December 31, 2021, the carrying value of our asset-backed debt was $45.4 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. The balance of cash related to these contributions was $25 million and $1,150 million at December 31, 2020 and December 31, 2021, respectively, and ranged from $0 to $524 million during 2020 and from $25 million to $3,700 million during 2021. Cash contributions were higher than a year ago primarily related to lower wholesale receivables as a result of lower dealer inventories due to the semiconductor shortage.

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 $(75) million, $(234) million, and $41 million for the years ended December 31, 2019, 2020, and 2021, respectively. See Note 20 for additional information regarding the accounting for derivatives.

Interest expense on securitization debt was $1.6 billion, $1.2 billion, and $0.9 billion in 2019, 2020, and 2021, respectively.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. DEBT AND COMMITMENTS (Continued)

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):

			2020						2021
Assets
Cash and cash equivalents			$	3.2					$	3.8
Finance receivables, net			59.6						50.6
Net investment in operating leases			12.8						7.5
Liabilities
Debt (a)			$	54.6					$	45.4

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

Committed Credit Facilities

At December 31, 2021, Ford Credit’s committed capacity totaled $39.8 billion, compared with $40.6 billion at December 31, 2020. 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.

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. We have 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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

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. For total Company excluding Ford Credit, we report 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.

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.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

Income Effect of Derivative Financial Instruments

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

			2019						2020						2021
Cash flow hedges
Reclassified from AOCI to Cost of sales
Foreign currency exchange contracts (a)			$	29					$	(11)					$	(412)
Commodity contracts (b)			(32)						(55)						132
Fair value hedges
Interest rate contracts
Net interest settlements and accruals on hedging instruments			(16)						290						393
Fair value changes on hedging instruments			706						986						(1,001)
Fair value changes on hedged debt			(694)						(985)						957
Cross-currency interest rate swap contracts
Net interest settlements and accruals on hedging instruments			—						(2)						(8)
Fair value changes on hedging instruments			—						38						(93)
Fair value changes on hedged debt			—						(37)						82
Derivatives not designated as hedging instruments
Foreign currency exchange contracts (c)			84						(310)						375
Cross-currency interest rate swap contracts			(229)						486						(507)
Interest rate contracts			(13)						(100)						(3)
Commodity contracts			—						47						170
Total			$	(165)					$	347					$	85

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(a)For 2019, 2020, and 2021, an $839 million loss, a $198 million gain, and a $453 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax.

(b)For 2019, 2020, and 2021, a $36 million loss, a $9 million gain, and a $284 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax.

(c)For 2019, 2020, and 2021, a $32 million gain, a $228 million loss, and a $230 million gain, respectively, were reported in Cost of sales and a $52 million gain, an $82 million loss, and a $145 million gain 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):

			2020																		2021
			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			$	15,860					$	47					$	383					$	11,534					$	74					$	346
Commodity contracts			703						40						5						931						182						5
Fair value hedges
Interest rate contracts			26,924						1,331						4						23,893						544						274
Cross-currency interest rate swap contracts			885						46						—						885						—						49
Derivatives not designated as hedging instruments
Foreign currency exchange contracts			25,956						172						399						28,463						281						198
Cross-currency interest rate swap contracts			6,849						557						1						6,533						117						61
Interest rate contracts			70,318						663						439						50,060						338						126
Commodity contracts			599						74						4						997						54						11
Total derivative financial instruments, gross (a) (b)			$	148,094					$	2,930					$	1,235					$	123,296					$	1,590					$	1,070
Current portion									$	974					$	859											$	924					$	535
Non-current portion									1,956						376												666						535
Total derivative financial instruments, gross									$	2,930					$	1,235											$	1,590					$	1,070

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(a)At December 31, 2020 and 2021, we held collateral of $9 million and $26 million, respectively, and we posted collateral of $96 million and $71 million, respectively.

(b)At December 31, 2020 and 2021, the fair value of assets and liabilities available for counterparty netting was $505 million and $719 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.

Company Excluding Ford Credit

Global Redesign and Other Actions

Employee separation actions and exit and disposal activities include 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, which are recorded in Cost of sales and Selling, administrative, and other expenses. Below are actions we have initiated, primarily related to the global redesign of our business.

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 resulted in the closure of facilities in Camaçari, Taubaté, and Troller in 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 as part of a plan to establish a joint venture with Mahindra & Mahindra Limited (“Mahindra”). In December 2020, Ford and Mahindra mutually determined that we would not complete the joint venture (see Note 22). Subsequently, in September 2021, Ford India Private Limited (“Ford India”), our subsidiary in India, announced its plans to exit the engine and vehicle manufacturing operations at its facilities in Chennai and its vehicle manufacturing operation at its facility in Sanand. Ford India ceased vehicle manufacturing in Sanand in fourth quarter 2021 and plans to cease engine and vehicle manufacturing in Chennai by second quarter 2022. These actions will not result in Ford India being substantially liquidated, as it will continue with its powertrain operations at its engine plant in Sanand to support certain products, including those manufactured by our affiliate in Thailand, and it will continue its imported vehicle sales and customer support operations.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

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 closed the facility 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 March 2021, we announced our plan to phase-out the production of the Mondeo at the Valencia Plant in Spain.

In addition, we are continuing to reduce our global workforce and take other restructuring actions.

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

						2020						2021
Beginning balance						$	734					$	1,732
Changes in accruals (a)						1,598						1,150
Payments						(631)						(1,883)
Foreign currency translation						31						(49)
Ending balance						$	1,732					$	950

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(a) Excludes pension costs of $268 million and $156 million in 2020 and 2021, respectively.

We 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 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 2021, we recorded $739 million for accelerated depreciation and other non-cash items.

We estimate that we will incur about $2 billion in total charges in 2022 related to the actions above, primarily attributable to employee separations and dealer and supplier settlements. We continue to review our global businesses and may take additional restructuring actions in markets where a path to sustained profitability is not feasible when considering the capital allocation required for those markets.

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 Credit

In June 2021, Ford Credit announced the plan of its subsidiaries in Brazil and Argentina to cease originating receivables by the end of 2021 and begin the process of selling or otherwise winding down their operations in those markets. We recorded approximately $11 million related to employee separation costs in Ford Credit interest, operating, and other expenses, the majority of which was paid in 2021.

Accumulated foreign currency translation losses included in Accumulated other comprehensive income/(loss) at December 31, 2021 of $379 million are associated with Ford Credit’s investments in Brazil and Argentina that it no longer plans to operate. We expect to reclassify these losses to income upon sale, transfer, or substantially complete liquidation of Ford Credit’s investments, which may occur over multiple reporting periods. In the fourth quarter of 2021, we recognized a $14 million gain on the liquidation of an entity in Brazil. The timing for the completion of the remaining actions is uncertain, as they may be subject to regulatory approval. We expect the majority of losses to be recognized in 2022.

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 22. ACQUISITIONS AND DIVESTITURES

Company Excluding Ford Credit

Electriphi, Inc. (“Electriphi”). On June 18, 2021, we acquired Electriphi, a California-based provider of charging management and fleet monitoring software for electric vehicles. Assets acquired primarily include goodwill, reported in Other assets (see Note 2), and software, reported in Net property. The acquisition did not have a material impact on our

financial statements.

Ford Lio Ho Motor Co., Ltd. (“FLH”). On April 1, 2021, we completed the sale of our controlling financial interest in FLH and its wholly owned subsidiary FLH Marketing & Service Limited, which resulted in deconsolidation of our Ford Taiwan subsidiary in the second quarter of 2021. FLH will continue to import, manufacture, and sell Ford-branded vehicles through at least 2025. We recognized a pre-tax gain of $161 million, which was reported in Other income/(loss), net in the second quarter of 2021.

Getrag Ford Transmissions GmbH (“GFT”). Prior to March 2021, Ford and Magna International Inc. (“Magna”) equally owned and operated the GFT joint venture for the purpose of developing, manufacturing, and selling transmissions. We accounted for our investment in GFT as an equity method investment. During the first quarter of 2021 and prior to our acquisition, GFT recorded restructuring charges, of which our share was $40 million. These charges are included in Equity in net income/(loss) of affiliated companies.

On March 1, 2021, we acquired Magna’s shares in the restructured GFT. The purchase price, which is subject to post-closing revisions, presently is estimated at $273 million. We expect that the purchase price revisions will be finalized by the first quarter of 2022. The restructured GFT includes the Halewood, UK and Cologne, Germany transmission plants, but excludes the Bordeaux, France transmission plant and China interests acquired by Magna. We concluded with Magna that these businesses would be better served under separate ownership. The Sanand, India transmission plant will continue under joint Ford/Magna ownership. As a result of the transaction, we consolidated the restructured GFT, remeasured our prior investment in GFT at its $273 million fair value, and recognized a pre-tax gain of $178 million in Other income/(loss), net during 2021. We estimated the fair value of GFT in negotiations with Magna based on the income approach. The significant assumptions used in the valuation included GFT’s cash flows that reflect the approved business plan, discounted at a rate typically used for a company like GFT. See Note 2 for information about goodwill recognized as part of this transaction.

Argo AI, LLC (“Argo AI”). On June 1, 2020, we completed a transaction with Volkswagen AG (“VW”) that reduced our ownership interest in the autonomous vehicle technology company Argo AI and resulted in Ford and VW holding equal interests that comprised a majority ownership of Argo AI. 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. Our retained investment in Argo AI consists of an equity method investment and a preferred equity security investment, reflected on our consolidated balance sheets in Equity in net assets of affiliated companies and Other assets, respectively.

India. In 2019 and 2020, we recognized, in Cost of sales, pre-tax impairment charges of $804 million and $23 million, respectively, to adjust the carrying value of certain India Automotive operations held-for-sale assets to fair value less cost to sell in preparation to form a joint venture with Mahindra. In 2020, it was determined the joint venture with Mahindra would not be completed, and the assets and liabilities were reclassified 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.

Ford Credit Segment

In the first quarter of 2020, Ford Credit completed the sale of its wholly-owned subsidiary Forso Nordic AB, 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):

			2019						2020						2021
Foreign currency translation
Beginning balance			$	(4,800)					$	(4,626)					$	(5,526)
Gains/(Losses) on foreign currency translation			181						(1,107)						200
Less: Tax/(Tax benefit) (a)			6						(206)						143
Net gains/(losses) on foreign currency translation			175						(901)						57
(Gains)/Losses reclassified from AOCI to net income (b)			(1)						1						(18)
Other comprehensive income/(loss), net of tax (c)			174						(900)						39
Ending balance			$	(4,626)					$	(5,526)					$	(5,487)
Marketable securities
Beginning balance			$	(59)					$	71					$	156
Gains/(Losses) on available for sale securities			173						155						(209)
Less: Tax/(Tax benefit)			40						37						(52)
Net gains/(losses) on available for sale securities			133						118						(157)
(Gains)/Losses reclassified from AOCI to net income			(3)						(45)						(23)
Less: Tax/(Tax benefit)			—						(12)						(5)
Net (gains)/losses reclassified from AOCI to net income			(3)						(33)						(18)
Other comprehensive income/(loss), net of tax			130						85						(175)
Ending balance			$	71					$	156					$	(19)
Derivative instruments
Beginning balance			$	201					$	(488)					$	(266)
Gains/(Losses) on derivative instruments			(875)						207						(169)
Less: Tax/(Tax benefit)			(180)						39						(20)
Net gains/(losses) on derivative instruments			(695)						168						(149)
(Gains)/Losses reclassified from AOCI to net income			3						66						280
Less: Tax/(Tax benefit)			(3)						12						58
Net (gains)/losses reclassified from AOCI to net income (d)			6						54						222
Other comprehensive income/(loss), net of tax			(689)						222						73
Ending balance			$	(488)					$	(266)					$	(193)
Pension and other postretirement benefits
Beginning balance			$	(2,708)					$	(2,685)					$	(2,658)
Prior service (costs)/credits arising during the period			(15)						(21)						—
Less: Tax/(Tax benefit)			(2)						(6)						—
Net prior service (costs)/credits arising during the period			(13)						(15)						—
Amortization and recognition of prior service costs/(credits) (e)			50						63						27
Less: Tax/(Tax benefit)			10						10						6
Net prior service costs/(credits) reclassified from AOCI to net income			40						53						21
Translation impact on non-U.S. plans			(4)						(11)						(3)
Other comprehensive income/(loss), net of tax			23						27						18
Ending balance			$	(2,685)					$	(2,658)					$	(2,640)
Total AOCI ending balance at December 31			$	(7,728)					$	(8,294)					$	(8,339)

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(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 2021, excludes a gain of $4 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 $116 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 affiliates are VIEs in which we are not the primary beneficiary. Our maximum exposure to any potential losses associated with these affiliates is limited to our affiliate investments and loans and was $3 billion and $2.8 billion at December 31, 2020 and 2021, respectively.

VIEs of Which We are the Primary Beneficiary

Securitization Entities. Through Ford Credit, we securitize, transfer, and service financial assets associated with consumer finance receivables, operating leases, and wholesale loans. Our securitization transactions typically involve the legal transfer of financial assets to bankruptcy remote SPEs. We generally retain a portion of the economic interests in the asset-backed securitization transactions, which could be retained in the form of a portion of the senior interests, the subordinated interests, cash reserve accounts, residual interests, and servicing rights. The transfers of assets in our securitization transactions do not qualify for accounting sale treatment. 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 $346 million and $357 million at December 31, 2020 and 2021, respectively. The carrying value of recorded liabilities related to financial guarantees was $46 million and $36 million at December 31, 2020 and 2021, 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 $245 million and $453 million at December 31, 2020 and 2021, respectively. The carrying value of recorded liabilities related to non-financial guarantees was $48 million and $38 million at December 31, 2020 and 2021, respectively.

We guarantee the resale value of vehicles sold in certain arrangements to daily rental companies. The maximum potential payment of $446 million as of December 31, 2021 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 $38 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, including trade and customs; 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 $1.7 billion, an increase of about $1.3 billion from December 31, 2020, primarily reflecting an assessment received in 2021 in a customs matter.

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):

			2020						2021
Beginning balance			$	5,702					$	8,172
Payments made during the period			(3,923)						(3,952)
Changes in accrual related to warranties issued during the period			3,934						4,102
Changes in accrual related to pre-existing warranties			2,403						221
Foreign currency translation and other			56						(92)
Ending balance			$	8,172					$	8,451

Changes to our estimated costs are reported as changes in accrual related to pre-existing warranties in the table above. Our estimate of reasonably possible costs in excess of our accruals for material field service actions and customer satisfaction actions is a range of up to about $1 billion in the aggregate.

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.

Beginning in 2021, consistent with how our CODM assesses performance of the segments and makes decisions about resource allocations, we changed the measurement of our segments as follows: (i) costs and benefits related to enterprise connectivity activities included in the Mobility segment are reported in the Automotive segment; (ii) certain corporate governance expenses that benefit the global enterprise reported in the Automotive segment are reported as part of Corporate Other; and (iii) cash and other centrally managed corporate assets reported in the Automotive segment are realigned to Corporate Other.

In addition, we realigned tax-related assets within our segments to reflect our adoption of ASU 2019-12 as of January 1, 2021 (see Note 3).

Effective with fourth quarter 2021 reporting, special items now include gains and losses on investments in equity securities.

Prior period amounts were adjusted retrospectively to reflect each of the above changes.

Below is a description of our reportable segments and other activities.

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 and enterprise connectivity. 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.

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, and marketable securities (excluding gains and losses on investments in equity securities), and foreign exchange derivatives gains and losses associated with intercompany lending. Corporate governance expenses are primarily administrative, delivering benefit on behalf of the global enterprise, that are not allocated to operating segments. These include expenses related to setting and directing global policy, providing oversight and stewardship, and promoting the Company’s interests. Corporate Other assets include: cash, cash equivalents, and marketable securities; tax related assets; other investments; and other assets managed centrally.

Interest on Debt

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

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 26. SEGMENT INFORMATION (Continued)

Special Items

Special Items are presented as a separate reconciling item. They consist of (i) pension and OPEB remeasurement gains and losses, (ii) gains and losses on investments in equity securities, (iii) 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 (iv) 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 (Continued)

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

			Automotive						Mobility						Ford Credit						Corporate Other						Interest on Debt						Special Items						Adjustments						Total
2019
Revenues			$	143,604					$	36					$	12,260					$	—					$	—					$	—					$	—					$	155,900
Income/(Loss) before income taxes			4,888						(941)						2,998						(688)						(1,020)						(5,877)			(a)			—						(640)
Depreciation and tooling amortization			5,494						8						3,666						47						—						1,278						—						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			83						—						31						2						—						(84)			(b)			—						32
Cash outflow for capital spending			7,362						23						52						195						—						—						—						7,632
Total assets			63,586						419						160,964						36,190						—						—						(2,622)			(c)			258,537
2020
Revenues			$	115,894					$	47					$	11,203					$	—					$	—					$	—					$	—					$	127,144
Income/(Loss) before income taxes			1,706						(1,052)						2,608						(726)						(1,649)						(2,003)			(d)			—						(1,116)
Depreciation and tooling amortization			5,209						8						3,269						52						—						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			296						(133)						20						1						—						(142)			(b)			—						42
Cash outflow for capital spending			5,483						44						40						175						—						—						—						5,742
Total assets			62,741						3,459						157,637						45,410						—						—						(1,986)			(c)			267,261
2021
Revenues			$	126,150					$	118					$	10,073					$	—					$	—					$	—					$	—					$	136,341
Income/(Loss) before income taxes			7,397						(1,030)						4,717						(1,084)						(1,803)						9,583			(e)			—						17,780
Depreciation and tooling amortization			5,024						8						1,666						53						—						567						—						7,318
Interest expense			—						—						2,790						—						1,803						—						—						4,593
Investment-related interest income			112						—						38						104						—						—						—						254
Equity in net income/(loss) of affiliated companies			567						(258)						31						2						—						(15)						—						327
Cash outflow for capital spending			5,979						46						44						158						—						—						—						6,227
Total assets			68,969						3,325						134,428						51,730						—						—						(1,417)			(c)			257,035

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(a)Primarily reflects Global Redesign actions in Europe and mark-to-market adjustments for our global pension and OPEB plans. Prior period amounts have been reclassified in accordance with special item reporting.

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

(c)Primarily includes eliminations of intersegment transactions occurring in the ordinary course of business. Prior period amounts have been revised to reflect adoption of ASU 2019-12.

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

(e)Primarily reflects gains/(losses) on investments in equity securities (including a $9.1 billion gain on our Rivian equity investment) and mark-to-market adjustments for our global pension and OPEB plans, partially offset by Global Redesign actions and the loss on extinguishment of debt.

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):

			2019												2020												2021
			Revenues						Long-Lived Assets (a)						Revenues						Long-Lived Assets (a)						Revenues						Long-Lived Assets (a)
United States			$	98,729					$	46,434					$	82,535					$	45,360					$	87,012					$	44,271
Canada			10,855						4,842						8,711						5,111						11,153						5,773
Germany			7,930						3,225						6,526						3,197						6,237						2,708
United Kingdom			8,899						1,541						6,110						1,401						7,607						1,383
Mexico			1,451						2,909						1,030						3,669						1,440						3,903
All Other			28,036						6,748						22,232						6,296						22,892						5,462
Total Company			$	155,900					$	65,699					$	127,144					$	65,034					$	136,341					$	63,500

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

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, 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
For the Year Ended December 31, 2021
Allowances deducted from assets
Credit losses						$	1,332					$	(306)								$	100		(a)						$	926
Doubtful receivables						57						3									13			(b)						47
Inventories (primarily service part obsolescence)						688						36			(c)						—									724
Deferred tax assets						1,981						(670)			(d)						244									1,067
Total allowances deducted from assets						$	4,058					$	(937)								$	357								$	2,764

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(a)Finance receivables deemed to be uncollectible and other changes, principally amounts related to finance receivables sold and translation adjustments. For the year ended 2020, 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 receivable deemed to be uncollectible as well as translation adjustments.

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

(d)Includes $(78) million, $(77) million, and $127 million in 2019, 2020, and 2021, respectively, of valuation allowances for deferred tax assets through Accumulated other comprehensive income/(loss), including translation adjustments and $(52) million, $1.2 billion, and $(797) million in 2019, 2020, and 2021, respectively, of valuation allowances for deferred tax assets through the income statement. The reversal in 2021 primarily reflects a change in our intent to pursue planning actions involving cash outlays to preserve tax credits.