Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

KEY TRENDS AND ECONOMIC FACTORS AFFECTING FORD AND THE AUTOMOTIVE INDUSTRY

COVID-19 and Supplier Disruptions. The impact of COVID-19, including changes in consumer behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy. Outbreaks in certain regions continue to cause intermittent COVID-19-related disruptions in our supply chain and local manufacturing operations. We also continue to face supplier disruptions due to labor shortages and other production issues, in addition to the continuing semiconductor shortage. Our inconsistent production schedule has been disruptive to our suppliers’ operations, which, in turn, has led to a limited availability of certain parts and delivery delays. Further, actions taken by Russia in Ukraine have impacted and could further impact our suppliers, particularly our lower tier suppliers, as well as our operations in Europe. For additional information on the impact of supplier disruptions, see the Outlook section on page 59.

Commodity and Energy Prices. Prices for commodities remain volatile but spot prices have recently diverged somewhat, as anticipated weakening in global industrial activity mitigates price increases for base metals such as steel and aluminum, while precious metals (e.g., palladium), and raw materials that are used in batteries for electric vehicles (e.g., lithium, cobalt, and nickel for batteries) remain at historically elevated price levels. The net impact on us and our suppliers has been higher material costs overall. To help ensure supply of raw materials for critical components (e.g., batteries), we, like others in the industry, have entered into multi-year sourcing agreements and may enter into additional agreements. Similar dynamics are impacting energy markets, with Europe particularly exposed to the risk of both higher prices and constraints on supply of natural gas due to the ongoing conflict in Ukraine. Such shortages may impact facilities operated by us or our suppliers, which could have an impact on us in Europe and other regions. For additional information on commodity costs, see the Outlook section on page 59.

Inflation and Interest Rates. We continue to see near-term impacts on our business due to inflation, including ongoing global price pressures in the wake of Russia’s invasion of Ukraine, driving up energy prices, freight premiums, and other operating costs. Inflation in the United States peaked at a year-over-year rate of 9.1% in June, before moderating to a still-elevated 8.2% in September as gasoline prices eased. In Europe, energy price pressures and inflation have remained on an upward path, with September U.K. inflation rebounding to 10.1% and Euro Area inflation at 9.9%, both on a year-over-year basis. Interest rates have increased quickly and substantially as central banks in developed countries raise interest rates in an effort to subdue inflation, while government deficits and debt remain at high levels in many global markets. The eventual implications of higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital for the business.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

RESULTS OF OPERATIONS

In the third quarter of 2022, the net loss attributable to Ford Motor Company was $827 million, and Company adjusted EBIT was $1,803 million.

Net income/(loss) includes certain items (“special items”) that are excluded from Company adjusted EBIT. These items are discussed in more detail in Note 22 of the Notes to the Financial Statements. We report special items separately to allow investors analyzing our results to identify certain items that they may wish to exclude when considering the trend of ongoing operating results. Our pre-tax and tax special items were as follows (in millions):


	Third Quarter				First Nine Months
	2021		2022		2021		2022
Global Redesign
Europe	$	(88)	$	(12)	$	(347)	$	(61)
India	(369)		(175)		(369)		(250)
South America	(211)		(9)		(666)		(26)
China (including Taiwan)	(5)		(17)		152		(37)
North America	(29)		(180)		(39)		(210)
Other	—		2		7		20
Subtotal Global Redesign	$	(702)	$	(391)	$	(1,262)	$	(564)
Other Items
Gain/(loss) on Rivian investment (a)	$	—	$	646	$	902	$	(7,250)
Debt extinguishment premium	—		(135)		—		(135)
Argo impairment (see Note 10)	—		(2,708)		—		(2,708)
Ford Credit – Brazil restructuring (see Note 17)	—		—		—		(155)
Russia suspension of operations/asset write-off	—		2		—		(130)
Patent matters related to prior calendar years	—		—		—		(121)
Other	—		(14)		21		(6)
Subtotal Other Items	$	—	$	(2,209)	$	923	$	(10,505)
Pension and OPEB Gain/(Loss)
Pension and OPEB remeasurement	$	40	$	(7)	$	364	$	(23)
Pension settlements and curtailments	(7)		—		(56)		—
Subtotal Pension and OPEB Gain/(Loss)	$	33	$	(7)	$	308	$	(23)
Total EBIT Special Items	$	(669)	$	(2,607)	$	(31)	$	(11,092)

Cash effect of Global Redesign (incl. separations)	$	(293)	$	(185)	$	(1,608)	$	(35)

Provision for/(Benefit from) tax special items (b)	$	(460)	$	(544)	$	(318)	$	(2,273)

(a)As of September 30, 2022, we held 24.8 million Rivian common shares valued at $32.91 per share.

(b)Includes related tax effect on special items and tax special items.

We recorded $2.6 billion of pre-tax special item charges in the third quarter of 2022, driven by an impairment on our Argo investment. For additional information on the impairment on our Argo investment, see Note 10 of the Notes to the Financial Statements.

In Note 22 of the Notes to the Financial Statements, special items are reflected as a separate reconciling item, as opposed to being allocated among the Automotive, Mobility, and Ford Credit segments. This reflects the fact that management excludes these items from its review of operating segment results for purposes of measuring segment profitability and allocating resources.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

COMPANY KEY METRICS

The table below shows our third quarter and first nine months 2022 key metrics for the Company, compared to a year ago.


	Third Quarter									First Nine Months
	2021			2022			H / (L)			2021			2022			H / (L)
GAAP Financial Measures
Cash Flows from Operating Activities ($B)	$	7.0		$	3.8		$	(3.2)		$	12.3		$	5.7		$	(6.6)
Revenue ($M)	35,683			39,392			10		%	98,663			114,058			16		%
Net Income/(Loss) ($M)	1,832			(827)			$	(2,659)		5,655			(3,270)			$	(8,925)
Net Income/(Loss) Margin (%)	5.1		%	(2.1)		%	(7.2) ppts			5.7		%	(2.9)		%	(8.6) ppts
EPS (Diluted)	$	0.45		$	(0.21)		$	(0.66)		$	1.40		$	(0.81)		$	(2.21)

Non-GAAP Financial Measures (a)
Company Adj. Free Cash Flow ($B)	$	7.8		$	3.6		$	(4.2)		$	2.3		$	6.6		$	4.4
Company Adj. EBIT ($M)	2,993			1,803			(1,190)			7,958			7,851			(107)
Company Adj. EBIT Margin (%)	8.4		%	4.6		%	(3.8) ppts			8.1		%	6.9		%	(1.2) ppts
Adjusted EPS (Diluted)	$	0.51		$	0.30		$	(0.21)		$	1.33		$	1.37		$	0.04
Adjusted ROIC (Trailing Four Quarters)	9.7		%	10.7		%	1.0 ppts

(a)See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.

In the third quarter of 2022, our diluted earnings per share of Common and Class B Stock was a loss of $0.21 and our diluted adjusted earnings per share was $0.30.

Net income/(loss) margin was negative 2.1% in the third quarter of 2022, down 7.2 percentage points from a year ago. Company adjusted EBIT margin was 4.6% in the third quarter of 2022, down 3.8 percentage points from a year ago.

The year-over-year decrease of $2.7 billion in net income/(loss) in the third quarter of 2022 was driven by an impairment on our Argo investment, which is included in special items, and lower Automotive EBIT and Ford Credit EBT. The year-over-year decrease of $1.2 billion in Company adjusted EBIT was driven by lower Automotive EBIT and lower Ford Credit EBT.

The table below shows our third quarter and first nine months 2022 net income/(loss) attributable to Ford and Company adjusted EBIT by segment.


	Third Quarter						First Nine Months
	2021		2022		H / (L)		2021		2022		H / (L)
Automotive	$	2,456	$	1,698	$	(758)	$	5,756	$	6,911	$	1,155
Mobility	(271)		(244)		27		(688)		(707)		(19)
Ford Credit	1,077		599		(478)		3,662		2,466		(1,196)
Corporate Other	(269)		(250)		19		(772)		(819)		(47)
Company Adjusted EBIT (a)	2,993		1,803		(1,190)		7,958		7,851		(107)
Interest on Debt	(439)		(321)		(118)		(1,365)		(941)		(424)
Special Items	(669)		(2,607)		1,938		(31)		(11,092)		11,061
Taxes / Noncontrolling Interests	(53)		298		(351)		(907)		912		(1,819)
Net Income/(Loss)	$	1,832	$	(827)	$	(2,659)	$	5,655	$	(3,270)	$	(8,925)

(a)See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Automotive Segment

The table below shows our third quarter and first nine months 2022 Automotive segment EBIT by business unit (in millions).


	Third Quarter						First Nine Months
	2021		2022		H / (L)		2021		2022		H / (L)
North America	$	2,420	$	1,309	$	(1,111)	$	5,555	$	6,169	$	614
South America	2		149		147		(157)		303		460
Europe	(52)		204		256		5		421		416
China (including Taiwan)	(39)		(193)		(154)		(177)		(367)		(190)
International Markets Group	125		229		104		530		385		(145)
Automotive Segment	$	2,456	$	1,698	$	(758)	$	5,756	$	6,911	$	1,155

The tables below and on the following pages provide third quarter and first nine months 2022 key metrics and the change in third quarter 2022 EBIT compared with third quarter 2021 by causal factor for our Automotive segment and its regional business units: North America, South America, Europe, China (including Taiwan), and the International Markets Group. For a description of these causal factors, see Definitions and Information Regarding Automotive Causal Factors.


	Third Quarter								First Nine Months
Key Metrics	2021			2022			H / (L)		2021			2022			H / (L)
Market Share (%)	4.9		%	4.9		%	— ppts		5.1		%	5.0		%	(0.1) ppts
Wholesale Units (000)	1,012			1,086			74		2,838			3,084			246
Revenue ($M)	$	33,211		$	37,194		$	3,983	$	90,893		$	107,214		$	16,321
EBIT ($M)	2,456			1,698			(758)		5,756			6,911			1,155
EBIT Margin (%)	7.4		%	4.6		%	(2.8) ppts		6.3		%	6.4		%	0.1 ppts


Change in EBIT by Causal Factor (in millions)
Third Quarter 2021 EBIT	$	2,456
Volume / Mix	(277)
Net Pricing	3,398
Cost	(3,542)
Exchange	(127)
Other	(210)
Third Quarter 2022 EBIT	$	1,698

In the third quarter of 2022, wholesales increased 7% from a year ago, driven by reduced supply constraints (including semiconductors) on production and electric vehicle scaling. Third quarter 2022 revenue increased 12%, driven by higher net pricing and wholesales, offset partially by weaker currencies.

Our third quarter 2022 Automotive segment EBIT was $1.7 billion, a decrease of $758 million from a year ago, and our third quarter 2022 Automotive EBIT margin was 4.6%. The lower EBIT was driven by inflationary increases on commodity, material, and freight costs, unfavorable mix, and weaker currencies, offset partially by higher net pricing and higher wholesales. Our results include inflation-related supplier payments of $1.3 billion, primarily in North America, which were about $1 billion higher than originally expected, as indicated in our Current Report on Form 8-K dated September 19, 2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

North America


	Third Quarter								First Nine Months
Key Metrics	2021			2022			H / (L)		2021			2022			H / (L)
Market Share (%)	11.2		%	12.8		%	1.7 ppts		11.3		%	12.6		%	1.3 ppts
Wholesale Units (000)	546			568			22		1,407			1,700			293
Revenue ($M)	$	24,032		$	26,340		$	2,308	$	61,992		$	77,714		$	15,722
EBIT ($M)	2,420			1,309			(1,111)		5,555			6,169			614
EBIT Margin (%)	10.1		%	5.0		%	(5.1) ppts		9.0		%	7.9		%	(1.1) ppts


Change in EBIT by Causal Factor (in millions)
Third Quarter 2021 EBIT	$	2,420
Volume / Mix	(672)
Net Pricing	2,061
Cost	(2,341)
Exchange	96
Other	(255)
Third Quarter 2022 EBIT	$	1,309

In North America, third quarter 2022 wholesales increased 4% from a year ago. Third quarter 2022 revenue increased 10%, driven by higher net pricing and wholesales, offset partially by unfavorable mix.

North America’s third quarter 2022 EBIT was $1.3 billion, a decrease of $1.1 billion from a year ago, with an EBIT margin of 5.0%. The lower EBIT was driven by inflationary increases on commodity, material, and freight costs and unfavorable mix, offset partially by higher net pricing. Our results include inflation-related supplier payments of $1.2 billion, which were about $1 billion higher than originally expected, as indicated in our Current Report on Form 8-K dated September 19, 2022.

South America


	Third Quarter								First Nine Months
Key Metrics	2021			2022			H / (L)		2021			2022			H / (L)
Market Share (%)	2.4		%	2.0		%	(0.5) ppts		2.8		%	2.1		%	(0.7) ppts
Wholesale Units (000)	20			23			3		55			57			1
Revenue ($M)	$	627		$	883		$	256	$	1,605		$	2,160		$	555
EBIT ($M)	2			149			147		(157)			303			460
EBIT Margin (%)	0.3		%	16.9		%	16.6 ppts		(9.8)		%	14.0		%	23.8 ppts


Change in EBIT by Causal Factor (in millions)
Third Quarter 2021 EBIT	$	2
Volume / Mix	(16)
Net Pricing	302
Cost	(156)
Exchange	(14)
Other	31
Third Quarter 2022 EBIT	$	149

In South America, third quarter 2022 wholesales increased 17% from a year ago. Third quarter 2022 revenue increased 41%, driven by higher net pricing, offset partially by weaker currencies.

South America’s third quarter 2022 EBIT was $149 million, an improvement of $147 million from a year ago, with an EBIT margin of 16.9%. The EBIT improvement was driven by higher net pricing, offset partially by inflationary increases on commodity, material, and freight costs. The strong results in South America reflect our restructuring efforts and pricing and were further aided by currencies, including a balance sheet revaluation, the effect of which is not expected to be sustained.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Europe


	Third Quarter								First Nine Months
Key Metrics	2021			2022			H / (L)		2021			2022			H / (L)
Market Share (%)	6.2		%	6.6		%	0.4 ppts		6.5		%	6.5		%	— ppts
Wholesale Units (000) (a)	218			273			55		678			749			71
Revenue ($M)	$	6,066		$	6,757		$	691	$	18,726		$	19,428		$	702
EBIT ($M)	(52)			204			256		5			421			416
EBIT Margin (%)	(0.9)		%	3.0		%	3.9 ppts		0.0		%	2.2		%	2.2 ppts

(a)Includes Ford brand vehicles produced and sold by our unconsolidated affiliate in Turkey (about 12,000 units in Q3 2021 and 18,000 units in Q3 2022). Revenue does not include these sales.


Change in EBIT by Causal Factor (in millions)
Third Quarter 2021 EBIT	$	(52)
Volume / Mix	306
Net Pricing	793
Cost	(781)
Exchange	(139)
Other	77
Third Quarter 2022 EBIT	$	204

In Europe, third quarter 2022 wholesales increased 25% from a year ago, primarily reflecting reduced supply constraints (including semiconductors) on production. Third quarter 2022 revenue increased 11%, driven by higher wholesales and net pricing, offset partially by weaker currencies.

Europe’s third quarter 2022 EBIT was $204 million, an improvement of $256 million from a year ago, with an EBIT margin of 3.0%. The higher EBIT was driven by higher net pricing and wholesales, offset partially by inflationary increases on commodity, material, and freight costs and weaker currencies.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

China (Including Taiwan)


	Third Quarter								First Nine Months
Key Metrics	2021			2022			H / (L)		2021			2022			H / (L)
Market Share (%)	2.5		%	2.0		%	(0.5) ppts		2.3		%	2.2		%	(0.2) ppts
Wholesale Units (000) (a)	162			137			(26)		463			378			(84)
Revenue ($M)	$	592		$	432		$	(160)	$	1,966		$	1,431		$	(535)
EBIT ($M)	(39)			(193)			(154)		(177)			(367)			(190)
EBIT Margin (%)	(6.6)		%	(44.7)		%	(38.1) ppts		(9.0)		%	(25.6)		%	(16.6) ppts

China Unconsolidated Affiliates
Wholesale Units (000) (b)	160			134			(27)		449			370			(79)
Ford Equity Income/(Loss) ($M)	$	77		$	58		$	(19)	$	144		$	175		$	31

(a)Includes vehicles produced and sold by our unconsolidated affiliates. Revenue does not include these sales.

(b)Includes Ford and Lincoln brand and JMC brand vehicles produced and sold in China and Ford brand vehicles produced in Taiwan by Lio Ho Group.


Change in EBIT by Causal Factor (in millions)
Third Quarter 2021 EBIT	$	(39)
Volume / Mix	(63)
Net Pricing	8
Cost	(25)
Exchange	(33)
Other (Including Joint Ventures)	(41)
Third Quarter 2022 EBIT	$	(193)

In China, third quarter 2022 wholesales decreased 16% from a year ago, driven by lower commercial vehicle and compact segment sales. Third quarter 2022 revenue at our consolidated operations decreased 27%, primarily driven by lower component sales to our joint ventures in China.

China’s third quarter 2022 EBIT loss was $193 million, a $154 million higher loss than a year ago, with an EBIT margin of negative 44.7%. The EBIT decrease was driven by lower volume, weaker currencies, higher marketing expenses on new products, and lower profits at our joint ventures.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

International Markets Group


	Third Quarter								First Nine Months
Key Metrics	2021			2022			H / (L)		2021			2022			H / (L)
Market Share (%)	1.8		%	1.4		%	(0.4) ppts		1.8		%	1.2		%	(0.5) ppts
Wholesale Units (000) (a)	66			86			20		235			201			(34)
Revenue ($M)	$	1,894		$	2,782		$	888	$	6,604		$	6,481		$	(123)
EBIT ($M)	125			229			104		530			385			(145)
EBIT Margin (%)	6.6		%	8.2		%	1.6 ppts		8.0		%	5.9		%	(2.1) ppts

(a)Includes Ford brand vehicles produced and sold by our unconsolidated affiliate in Russia (about 5,000 units in Q3 2021 and 0 units in Q3 2022). Revenue does not include these sales.


Change in EBIT by Causal Factor (in millions)
Third Quarter 2021 EBIT	$	125
Volume / Mix	167
Net Pricing	233
Cost	(239)
Exchange	(38)
Other	(19)
Third Quarter 2022 EBIT	$	229

In our International Markets Group, third quarter 2022 wholesales increased 30% from a year ago, primarily reflecting the positive impact of the next generation Ranger and Everest launches. Third quarter 2022 revenue increased 47%, driven by higher wholesales and net pricing and favorable mix, offset partially by weaker currencies.

Our International Markets Group’s third quarter 2022 EBIT was $229 million, an increase of $104 million from a year ago, with an EBIT margin of 8.2%. The EBIT increase was driven by higher net pricing and wholesales, offset partially by higher material cost for our new products, inflationary increases on commodity, material, and freight costs, and weaker currencies.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Definitions and Information Regarding Automotive Causal Factors

In general, we measure year-over-year change in Automotive segment EBIT using the causal factors listed below, with net pricing and cost variances calculated at present-period volume and mix and exchange:

*•*Market Factors (exclude the impact of unconsolidated affiliate wholesale units):

*◦*Volume and Mix – primarily measures EBIT variance from changes in wholesale unit volumes (at prior-year average contribution margin per unit) driven by changes in industry volume, market share, and dealer stocks, as well as the EBIT variance resulting from changes in product mix, including mix among vehicle lines and mix of trim levels and options within a vehicle line

*◦*Net Pricing – primarily measures EBIT variance driven by changes in wholesale unit prices to dealers and marketing incentive programs such as rebate programs, low-rate financing offers, special lease offers, and stock adjustments on dealer inventory

Cost:

*◦*Contribution Costs – primarily measures EBIT variance driven by per-unit changes in cost categories that typically vary with volume, such as material costs (including commodity and component costs), warranty expense, and freight and duty costs

*◦*Structural Costs – primarily measures EBIT variance driven by absolute change in cost categories that typically do not have a directly proportionate relationship to production volume. Structural costs include the following cost categories:

*▪*Manufacturing, Including Volume-Related – consists primarily of costs for hourly and salaried manufacturing personnel, plant overhead (such as utilities and taxes), and new product launch expense. These costs could be affected by volume for operating pattern actions such as overtime, line-speed, and shift schedules

*▪*Engineering and Connectivity – consists primarily of costs for vehicle and software engineering personnel, prototype materials, testing, and outside engineering and software services

*▪*Spending-Related – consists primarily of depreciation and amortization of our manufacturing and engineering assets, but also includes asset retirements and operating leases

*▪*Advertising and Sales Promotions – includes costs for advertising, marketing programs, brand promotions, customer mailings and promotional events, and auto shows

*▪*Administrative, Information Technology, and Selling – includes primarily costs for salaried personnel and purchased services related to our staff activities, information technology, and selling functions

*▪*Pension and OPEB – consists primarily of past service pension costs and other postretirement employee benefit costs

*•*Exchange – primarily measures EBIT variance driven by one or more of the following: (i) transactions denominated in currencies other than the functional currencies of the relevant entities, (ii) effects of converting functional currency income to U.S. dollars, (iii) effects of remeasuring monetary assets and liabilities of the relevant entities in currencies other than their functional currency, or (iv) results of our foreign currency hedging

*•*Other – includes a variety of items, such as parts and services earnings, royalties, government incentives, and compensation-related changes

In addition, definitions and calculations used in this report include:

*•*Wholesales and Revenue – wholesale unit volumes include all Ford and Lincoln badged units (whether produced by Ford or by an unconsolidated affiliate) that are sold to dealerships, units manufactured by Ford that are sold to other manufacturers, units distributed by Ford for other manufacturers, local brand units produced by our China joint venture, Jiangling Motors Corporation, Ltd. (“JMC”), that are sold to dealerships, and Ford badged vehicles produced in Taiwan by Lio Ho Group. Vehicles sold to daily rental car companies that are subject to a guaranteed repurchase option (i.e., rental repurchase), as well as other sales of finished vehicles for which the recognition of revenue is deferred (e.g., consignments), also are included in wholesale unit volumes. Revenue from certain vehicles in wholesale unit volumes (specifically, Ford badged vehicles produced and distributed by our unconsolidated affiliates, as well as JMC brand vehicles) are not included in our revenue

*•*Industry Volume and Market Share – based, in part, on estimated vehicle registrations; includes medium and heavy duty trucks

SAAR – seasonally adjusted annual rate

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

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.

In our Mobility segment, our third quarter 2022 EBIT loss was $244 million, a $27 million improvement from a year ago. The loss reflects our strategic investments in our autonomous vehicle capabilities and support of our mobility initiatives.

Although Argo AI has made progress on developing highly automated driving technology (L4), to achieve commercially viable scale, Argo AI’s technology requires significant additional capital investment and time. In the third quarter of 2022, we made the strategic decision to shift our capital spending from L4 technology being developed by Argo AI to advanced L2/L3 systems, which we believe will ultimately be essential to achieve profitable commercialization of L4 autonomy at scale in the future. Additionally, because of the significant additional capital and time required to achieve commercialization of L4, as well as other macroeconomic factors, Argo AI has been unable to attract new investors. After performing external outreach in the third quarter to assess market interest in acquiring either Argo AI or its technology components and conducting internal reviews to evaluate opportunities to leverage Argo AI’s technology, Ford determined that Argo AI no longer has value as a going concern. As a result, we reassessed the carrying value of our investment in Argo AI as of September 30, 2022, and in October, Ford and VW initiated the process of exiting the joint development of L4 technology through Argo AI. Accordingly, in the third quarter of 2022, we recorded as a special item a $2.7 billion pre-tax impairment on our Argo AI investment, and on October 26, 2022, we announced that Argo AI plans to wind down operations.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Ford Credit Segment

Ford Credit files periodic reports with the SEC that contain additional information regarding Ford Credit. The reports are available through Ford Credit’s website located at www.fordcredit.com/investor-center and can also be found on the SEC’s website located at www.sec.gov. The foregoing information regarding Ford Credit’s website and its content is for convenience only and not deemed to be incorporated by reference into this Report nor filed with the SEC.

The tables below provide third quarter and year-to-date 2022 key metrics and the change in third quarter 2022 EBT compared with third quarter 2021 by causal factor for the Ford Credit segment. For a description of these causal factors, see Definitions and Information Regarding Ford Credit Causal Factors.


	Third Quarter									First Nine Months
Key Metrics	2021			2022			H / (L)			2021			2022			H / (L)
Total Net Receivables ($B)	$	117		$	116		(1)		%	$	117		$	116		(1)		%
Loss-to-Receivables (bps) (a)	—			18			18			5			10			5
Auction Values (b)	$	30,350		$	30,305		—		%	$	26,715		$	30,635		15		%
EBT ($M)	1,077			599			$	(478)		3,662			2,466			$	(1,196)
ROE (%)	29		%	15		%	(14) ppts			32		%	21		%	(11) ppts

Other Balance Sheet Metrics
Debt ($B)										$	119		$	108		(9)		%
Net Liquidity ($B)										33			21			(36)		%
Financial Statement Leverage (to 1)										9.6			9.4			(0.2)

(a)U.S. retail financing only.

(b)U.S. 36-month off-lease third quarter auction values at Q3 2022 mix and first nine months amounts at first nine months 2022 mix.


Change in EBT by Causal Factor (in millions)
Third Quarter 2021 EBT	$	1,077
Volume / Mix	(46)
Financing Margin	(136)
Credit Loss	(96)
Lease Residual	(211)
Exchange	(15)
Other	26
Third Quarter 2022 EBT	$	599

Ford Credit’s total net receivables of $116 billion were $1 billion (1%) lower than a year ago, reflecting the impact of currency exchange rates, lower consumer financing, and fewer operating leases, offset partially by increased non-consumer financing. The loss-to-receivables (“LTR”) ratio remained at a low level in the third quarter of 2022, at 18 basis points, though higher than a year ago as losses begin to normalize from historic lows. U.S. auction values in the third quarter of 2022 were about flat compared to a year ago.

Ford Credit’s third quarter 2022 EBT of $599 million was $478 million lower than a year ago, primarily reflecting lower lease residual gains driven by lower lease return volume, unfavorable changes in net financing margin, and lower credit loss reserve releases, offset partially by positive market valuation adjustments to derivatives, which is included in Other.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Definitions and Information Regarding Ford Credit Causal Factors

In general, we measure year-over-year changes in Ford Credit’s EBT using the causal factors listed below:

*•*Volume and Mix:

◦Volume primarily measures changes in net financing margin driven by changes in average net receivables excluding the allowance for credit losses at prior period financing margin yield (defined below in financing margin) at prior period exchange rates. Volume changes are primarily driven by the volume of new and used vehicles sold and leased, the extent to which Ford Credit purchases retail financing and operating lease contracts, the extent to which Ford Credit provides wholesale financing, the sales price of the vehicles financed, the level of dealer inventories, Ford-sponsored special financing programs available exclusively through Ford Credit, and the availability of cost-effective funding

◦Mix primarily measures changes in net financing margin driven by period-over-period changes in the composition of Ford Credit’s average net receivables excluding the allowance for credit losses by product within each region

*•*Financing Margin:

◦Financing margin variance is the period-to-period change in financing margin yield multiplied by the present period average net receivables excluding the allowance for credit losses at prior period exchange rates. This calculation is performed at the product and country level and then aggregated. Financing margin yield equals revenue, less interest expense and scheduled depreciation for the period, divided by average net receivables excluding the allowance for credit losses for the same period

◦Financing margin changes are driven by changes in revenue and interest expense. Changes in revenue are primarily driven by the level of market interest rates, cost assumptions in pricing, mix of business, and competitive environment. Changes in interest expense are primarily driven by the level of market interest rates, borrowing spreads, and asset-liability management

*•*Credit Loss:

◦Credit loss is the change in the provision for credit losses at prior period exchange rates. For analysis purposes, management splits the provision for credit losses into net charge-offs and the change in the allowance for credit losses

◦Net charge-off changes are primarily driven by the number of repossessions, severity per repossession, and recoveries. Changes in the allowance for credit losses are primarily driven by changes in historical trends in credit losses and recoveries, changes in the composition and size of Ford Credit’s present portfolio, changes in trends in historical used vehicle values, and changes in forward looking macroeconomic conditions. For additional information, refer to the “Critical Accounting Estimates - Allowance for Credit Losses” section of Item 7 of Part II of our 2021 Form 10-K Report

*•*Lease Residual:

◦Lease residual measures changes to residual performance at prior period exchange rates. For analysis purposes, management splits residual performance primarily into residual gains and losses, and the change in accumulated supplemental depreciation

◦Residual gain and loss changes are primarily driven by the number of vehicles returned to Ford Credit and sold, and the difference between the auction value and the depreciated value (which includes both base and accumulated supplemental depreciation) of the vehicles sold. Changes in accumulated supplemental depreciation are primarily driven by changes in Ford Credit’s estimate of the expected auction value at the end of the lease term and changes in Ford Credit’s estimate of the number of vehicles that will be returned to it and sold. Accumulated depreciation reflects early termination losses on operating leases due to customer default events. For additional information, refer to the “Critical Accounting Estimates - Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 of Part II of our 2021 Form 10-K Report

Exchange:

◦Reflects changes in EBT driven by the effects of converting functional currency income to U.S. dollars

*•*Other:

◦Primarily includes operating expenses, other revenue, insurance expenses, and other income/(loss) at prior period exchange rates

◦Changes in operating expenses are primarily driven by salaried personnel costs, facilities costs, and costs associated with the origination and servicing of customer contracts

◦In general, other income/(loss) changes are primarily driven by changes in earnings related to market valuation adjustments to derivatives (primarily related to movements in interest rates) and other miscellaneous items

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

In addition, the following definitions and calculations apply to Ford Credit when used in this report:

Cash (as shown in the Funding Structure and Liquidity tables) – Cash, cash equivalents, and marketable securities, excluding amounts related to insurance activities
Debt (as shown in the Key Metrics and Leverage tables) – Debt on Ford Credit’s balance sheets. Includes debt issued in securitizations and payable only out of collections on the underlying securitized assets and related enhancements. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions
Earnings Before Taxes (“EBT”) – Reflects Ford Credit’s income before income taxes
Loss-to-Receivables (“LTR”) Ratio – LTR ratio is calculated using net charge-offs divided by average finance receivables, excluding unearned interest supplements and the allowance for credit losses
Return on Equity (“ROE”) (as shown in the Key Metrics table) – Reflects return on equity calculated by annualizing net income for the period and dividing by monthly average equity for the period
Securitization and Restricted Cash (as shown in the Liquidity table) – Securitization cash is held for the benefit of the securitization investors (for example, a reserve fund). Restricted cash primarily includes cash held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements
Securitizations (as shown in the Public Term Funding Plan table) – Public securitization transactions, Rule 144A offerings sponsored by Ford Credit, and widely distributed offerings by Ford Credit Canada
Term Asset-Backed Securities (as shown in the Funding Structure table) – Obligations issued in securitization transactions that are payable only out of collections on the underlying securitized assets and related enhancements
Total Net Receivables (as shown in the Key Metrics table) – Includes finance receivables (retail financing and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance sheets and are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations of Ford Credit or the claims of Ford Credit’s other creditors

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

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. In the third quarter of 2022, Corporate Other had a $250 million loss, compared with a $269 million loss a year ago. The improvement was driven by higher Automotive interest income due to increases in interest rates (primarily Fed Funds).

Interest on Debt

Interest on Debt, which consists of interest expense on Company debt excluding Ford Credit, was $321 million in the third quarter of 2022, $118 million lower than a year ago, primarily explained by U.S. debt restructuring actions undertaken during the fourth quarter of 2021 and third quarter of 2022.

Taxes

Our Provision for/(Benefit from) income taxes for the third quarter and first nine months of 2022 was a benefit of $195 million and $771 million, respectively. This resulted in effective tax rates of 17.3% and 18.4%, respectively.

Our third quarter and first nine months of 2022 adjusted effective tax rates, which exclude special items, were 23.5% and 21.7%, respectively.

We regularly review our organizational structure and income tax elections for affiliates in non-U.S. and U.S. tax jurisdictions, which may result in changes in affiliates that are included in or excluded from our U.S. tax return. Any future changes to our structure, as well as any changes in income tax laws in the countries that we operate, could cause increases or decreases to our deferred tax balances and related valuation allowances.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2022, total balance sheet cash, cash equivalents, marketable securities, and restricted cash, including Ford Credit and entities held for sale, was $40.3 billion.

We consider our key balance sheet metrics to be: (i) Company cash, which includes cash equivalents, marketable securities, and restricted cash, including cash held for sale, excluding Ford Credit’s cash, cash equivalents, marketable securities, and restricted cash; and (ii) Company liquidity, which includes Company cash, less restricted cash, and total available committed credit lines, excluding Ford Credit’s total available committed credit lines.

Company excluding Ford Credit


	December 31, 2021		September 30, 2022
Balance Sheets ($B)
Company Cash	$	36.5	$	32.0
Liquidity	52.4		49.2
Debt	(20.4)		(20.3)
Cash Net of Debt	16.1		11.8

Pension Funded Status ($B) (a)
Funded Plans	$	5.8	$	7.2
Unfunded Plans	(6.1)		(6.0)
Total Global Pension	$	(0.3)	$	1.2

Total Funded Status OPEB	$	(6.0)	$	(5.8)

(a)Balances at September 30, 2022 reflect net funded status at December 31, 2021, updated for service and interest cost; expected return on assets; curtailments, settlements, and associated interim remeasurement (where applicable); separation expense; actual benefit payments; and cash contributions. The discount rate and rate of expected return assumptions are unchanged from year-end 2021.

Liquidity. One of our key priorities is to maintain a strong balance sheet, while at the same time having resources available to invest in and grow our business. At September 30, 2022, we had Company cash of $32.0 billion and liquidity of $49.2 billion, including approximately $800 million of Rivian marketable securities. In the third quarter, we sold approximately 52 million of our Rivian shares resulting in proceeds of about $1.8 billion. As marketable securities increase or decrease in value, Company cash and liquidity will likewise increase or decrease. At September 30, 2022, about 91% of Company cash was held by consolidated entities domiciled in the United States.

To be prepared for an economic downturn, we target an ongoing Company cash balance at or above $20 billion plus significant additional liquidity above our Company cash target. We expect to have periods when we will be above or below this amount due to: (i) future cash flow expectations, such as for investments in future opportunities, capital investments, debt maturities, pension contributions, or restructuring requirements, (ii) short-term timing differences, and (iii) changes in the global economic environment.

Our Company cash investments (excluding the Rivian marketable securities) primarily include U.S. Department of Treasury obligations, federal agency securities, bank time deposits with investment-grade institutions, investment-grade corporate securities, investment-grade commercial paper, and debt obligations of a select group of non-U.S. governments, non-U.S. governmental agencies, and supranational institutions. The average maturity of these investments is approximately one year and adjusted based on market conditions and liquidity needs. We monitor our Company cash levels and average maturity on a daily basis.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Material Cash Requirements. Our material cash requirements include:

Capital expenditures (for additional information, see the “Changes in Company Cash” section below) and other payments for engineering, software, product development, and implementation of our plans for battery electric vehicles
Purchase of raw materials and components to support the manufacturing and sale of vehicles (including electric vehicles), parts, and accessories (for additional information, see the Aggregate Contractual Obligations table and the accompanying description of our “Purchase obligations” in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 of our 2021 Form 10-K Report)
Marketing incentive payments to dealers
Payments for warranty and field service actions (for additional information, see Note 21 of the Notes to the Financial Statements herein)
Debt repayments (for additional information, see the Aggregate Contractual Obligations table in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 and Note 19 of the Notes the Financial Statements in our 2021 Form 10-K Report)
Discretionary and mandatory payments to our global pension plans (for additional information, see the Aggregate Contractual Obligations table in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 of our 2021 Form 10-K Report, the “Changes in Company Cash” section below, and Note 14 of the Notes to the Financial Statements herein)
Employee wages, benefits, and incentives
Operating lease payments (for additional information, see the Aggregate Contractual Obligations table in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 and Note 18 of the Notes to the Financial Statements in our 2021 Form 10-K Report)
Cash effects related to the global redesign of our business (for additional information, see the “Changes in Company Cash” section below)
Strategic acquisitions and investments to grow our business, including electrification

Subject to approval by our Board of Directors, shareholder distributions in the form of dividend payments and/or a share repurchase program may require the expenditure of a material amount of cash. Moreover, we may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, e.g., legal contingencies, uncertain tax positions, and other matters.

We plan to utilize our liquidity (as described above) and our cash flows from business operations to fund our material cash requirements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Changes in Company Cash. In managing our business, we classify changes in Company cash into operating and non-operating items. Operating items include: Company adjusted EBIT excluding Ford Credit EBT, capital spending, depreciation and tooling amortization, changes in working capital, Ford Credit distributions, interest on debt, cash taxes, and all other and timing differences (including timing differences between accrual-based EBIT and associated cash flows). Non-operating items include: global redesign (including separation payments), changes in Company debt excluding Ford Credit, contributions to funded pension plans, shareholder distributions, and other items (including gains and losses on investments in equity securities, acquisitions and divestitures, and other transactions with Ford Credit).

With respect to “Changes in working capital,” in general we carry relatively low Automotive segment trade receivables compared with our trade payables because the majority of our Automotive wholesales are financed (primarily by Ford Credit) immediately upon the sale of vehicles to dealers, which generally occurs shortly after being produced. In contrast, our Automotive trade payables are based primarily on industry-standard production supplier payment terms of about 45 days. As a result, our cash flow deteriorates if wholesale volumes (and the corresponding revenue) decrease while trade payables continue to become due. Conversely, our cash flow improves if wholesale volumes (and the corresponding revenue) increase while new trade payables are generally not due for about 45 days. For example, the suspension of production at most of our assembly plants and lower industry volumes due to COVID-19 in early 2020 resulted in an initial deterioration of our cash flow, while the subsequent resumption of manufacturing operations and return to pre-COVID-19 production levels at most of our assembly plants resulted in a subsequent improvement of our cash flow. Even in normal economic conditions, however, these working capital balances generally are subject to seasonal changes that can impact cash flow. For example, we typically experience cash flow timing differences associated with inventories and payables due to our annual summer and December shutdown periods when production, and therefore inventories and wholesale volumes, are usually at their lowest levels, while payables continue to come due and be paid. The net impact of this typically results in cash outflows from changes in our working capital balances during these shutdown periods.

Our inventory includes vehicles completed but awaiting installation of components, including semiconductors. As a result of the shortage, our inventory is higher than in periods prior to the supply shortage.

In response to, or in anticipation of, supplier disruptions, we may stockpile certain components or raw materials to help prevent disruption in our production of vehicles. Such actions could have a short-term adverse impact on our cash and increase our inventory. Moreover, in order to secure critical materials for production of electric vehicles, we have entered into and plan to continue to enter into offtake agreements with raw material suppliers and make investments in certain raw material and battery suppliers, including contributing up to $6.6 billion in capital to BlueOval SK, LLC over a five-year period ending in 2026. Such investments, which are part of our plan to invest over $50 billion in electric vehicles through 2026, could have an additional adverse impact on our cash in the near-term.

The terms of the offtake agreements we have entered into, and those we may enter into in the future, vary by transaction, though they generally obligate us to purchase a certain percentage or minimum amount of output produced by the counterparty over an agreed upon period of time. The purchase price mechanism included in the offtake agreement is typically based on the market price of the material at the time of delivery or an agreed upon formula or market index. The terms also include conditions to our obligation to purchase the materials, such as quality or minimum output. Subject to satisfaction of those conditions, we will be obligated to purchase the materials at the cost determined by the purchase price mechanism. Based on the offtake agreements we have entered into thus far, the earliest date by which we could be obligated to purchase any output, subject to satisfaction of the applicable conditions, will be in 2024.

Financial institutions participate in a supply chain finance (“SCF”) program that enables our suppliers, at their sole discretion, to sell their Ford receivables (i.e., our payment obligations to the suppliers) to the financial institutions on a non-recourse basis in order to be paid earlier than our payment terms provide. Our suppliers’ voluntary inclusion of invoices in the SCF program has no bearing on our payment terms, the amounts we pay, or our liquidity. We have no economic interest in a supplier’s decision to participate in the SCF program, and we have no direct financial relationship with the SCF financial institutions. Moreover, we do not provide any guarantees in connection with the SCF program. As of September 30, 2022, the outstanding amount of Ford receivables that suppliers elected to sell to the SCF financial institutions was $228 million. The amount settled through the SCF program during the first nine months of 2022 was $971 million.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Changes in Company cash excluding Ford Credit are summarized below (in billions):


	Third Quarter				First Nine Months
	2021		2022		2021		2022
Company Excluding Ford Credit
Company Adjusted EBIT excluding Ford Credit (a)	$	1.9	$	1.2	$	4.3	$	5.4

Capital spending	$	(1.6)	$	(1.6)	$	(4.4)	$	(4.5)
Depreciation and tooling amortization	1.3		1.3		3.8		3.9
Net spending	$	(0.3)	$	(0.3)	$	(0.6)	$	(0.6)

Receivables	$	(0.1)	$	(0.1)	$	(0.7)	$	(0.6)
Inventory	(0.2)		(1.7)		(3.2)		(4.1)
Trade Payables	4.1		3.9		1.1		5.9
Changes in working capital	$	3.8	$	2.2	$	(2.8)	$	1.1

Ford Credit distributions	$	1.5	$	0.5	$	6.5	$	2.1
Interest on debt and cash taxes	(0.4)		(0.3)		(1.5)		(1.2)
All other and timing differences	1.2		0.3		(3.6)		(0.2)
Company adjusted free cash flow (a)	$	7.8	$	3.6	$	2.3	$	6.6

Global Redesign (including separations)	$	(0.3)	$	(0.2)	$	(1.6)	$	—
Changes in debt	(0.2)		1.0		1.8		0.1
Funded pension contributions	(0.2)		(0.1)		(0.6)		(0.5)
Shareholder distributions	—		(0.6)		—		(1.4)
All other (b)	(0.7)		(0.3)		(1.1)		(9.3)
Change in cash	$	6.4	$	3.3	$	0.7	$	(4.5)

(a)See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.

(b)Includes a $0.6 billion gain and a $7.3 billion loss on our Rivian investment in the third quarter and first nine months of 2022, respectively.

Note: Numbers may not sum due to rounding.

Our third quarter 2022 Net cash provided by/(used in) operating activities was positive $3.8 billion, a decrease of $3.2 billion from a year ago (see page 64 for additional information), driven by lower net income, higher inventory, and less favorable timing differences. Company adjusted free cash flow was $3.6 billion, $4.2 billion lower than a year ago, driven by higher inventory, lower Ford Credit distributions, less favorable timing differences, and lower adjusted EBIT.

Capital spending was $1.6 billion in the third quarter of 2022, unchanged from a year ago. We now expect full year 2022 capital spending to be about $6.5 billion.

Third quarter 2022 working capital impact was $2.2 billion positive, driven by higher trade payables, partially offset by higher inventory, each compared to June 30, 2022. All other and timing differences were positive $0.3 billion, reflecting assorted differences including differences between accrual-based EBIT and the associated cash flows (e.g., pension and OPEB income or expense; compensation payments; marketing incentive and warranty payments to dealers).

In the third quarter of 2022, we contributed $130 million to our global funded pension plans. We expect to contribute about $600 million to our global funded pension plans in 2022.

Shareholder distributions were $603 million in the third quarter of 2022, all of which was attributable to our regular quarterly dividend. On October 26, 2022, we announced that we are reinstating a modest anti-dilutive share repurchase program to offset the dilutive effect of share-based compensation. The plan authorizes repurchases of up to 35 million shares of Ford Common Stock.

We previously announced our plan for the global redesign of our business, pursuant to which we are working to turn around automotive operations, compete like a challenger, and capitalize on our strengths by allocating more capital, more resources, and more talent to our strongest businesses and vehicle franchises. Beginning with the actions we took in 2018, we expect our global redesign to have a potential cash effect of about $6 billion through 2023. The cash effect related to our global redesign activities was $3.6 billion through September 30, 2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Available Credit Lines. Total Company committed credit lines, excluding Ford Credit, at September 30, 2022 were $19.1 billion, consisting of $13.5 billion of our corporate credit facility, $2.0 billion of our supplemental revolving credit facility, $1.75 billion of our 364-day revolving credit facility, and $1.9 billion of local credit facilities. At September 30, 2022, the utilized portion of the corporate credit facility was $25 million, representing amounts utilized for letters of credit, and the utilized portion of our 364-day revolving credit facility was $350 million. In addition, $1.6 billion of committed Company credit lines, excluding Ford Credit, was utilized under local credit facilities for our affiliates as of September 30, 2022.

Lenders under our corporate revolving credit facility have $3.4 billion of commitments maturing on June 23, 2025 and $10.1 billion of commitments maturing on June 23, 2027. Lenders under our supplemental revolving credit facility have $0.1 billion of commitments maturing on September 29, 2024 and $1.9 billion of commitments maturing on June 23, 2025. Lenders under our 364-day revolving credit facility have $1.75 billion of commitments maturing on June 22, 2023.

The corporate, supplemental, and 364-day credit agreements include certain sustainability-linked targets, pursuant to which the applicable margin and facility fees may be adjusted if Ford achieves, or fails to achieve, the specified targets related to global manufacturing facility greenhouse gas emissions, renewable electricity consumption, and Ford Europe CO2 tailpipe emissions.

On October 26, 2022, Ford amended its 364-day revolving credit facility to provide for the designation of domestic subsidiary borrowers and designated Ford Credit as a subsidiary borrower.

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 supplemental and 364-day revolving credit facilities are consistent with our corporate credit facility.

Each of the corporate credit facility, supplemental revolving credit facility, and 364-day revolving credit facility 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: 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; Ford Smart Mobility LLC; and Ford Trading Company, LLC.

Debt. As shown in Note 15 of the Notes to the Financial Statements, at September 30, 2022, Company debt excluding Ford Credit was $20.3 billion, $100 million lower than at December 31, 2021 and $900 million higher than at June 30, 2022. The increase from the end of the second quarter primarily reflects our $600 million retail bond and $1.8 billion green bond issuances in August, partially offset by our redemption of $1.1 billion of higher-coupon debt and $400 million repayment under our 364-day revolving credit facility in September.

Leverage. We manage Company debt (excluding Ford Credit) levels with a leverage framework that targets investment grade credit ratings through a normal business cycle. The leverage framework includes a ratio of total Company debt (excluding Ford Credit), underfunded pension liabilities, operating leases, and other adjustments, divided by Company adjusted EBIT (excluding Ford Credit EBT), and further adjusted to exclude depreciation and tooling amortization (excluding Ford Credit).

Ford Credit’s leverage is calculated as a separate business as described in the ”Liquidity and Capital Resources - Ford Credit Segment” section of Item 2. Ford Credit is self-funding and its debt, which is used to fund its operations, is separate from our Company debt excluding Ford Credit.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Ford Credit Segment

Ford Credit ended the third quarter of 2022 with $20.9 billion of liquidity. During the quarter, Ford Credit completed $2 billion of public term funding.

Key elements of Ford Credit’s funding strategy include:

Maintain strong liquidity
Prudently access public markets
Continue growth of retail deposits in Europe
Flexibility to increase ABS mix as needed; preserving assets and committed capacity
Target financial statement leverage of 9:1 to 10:1
Maintain self-liquidating balance sheet

Ford Credit’s liquidity profile continues to be diverse, robust, and focused on maintaining liquidity levels that meet its business and funding requirements. Ford Credit regularly stress tests its balance sheet and liquidity to ensure that it can continue to meet its financial obligations through economic cycles.

The following table shows funding for Ford Credit’s net receivables (in billions):


	September 30, 2021			December 31, 2021			September 30, 2022
Funding Structure
Term unsecured debt	$	62.0		$	59.4		$	46.4
Term asset-backed securities	45.1			45.4			48.9
Ford Interest Advantage / Retail Deposits	11.9			12.9			12.7
Other	(0.6)			(0.2)			3.6
Equity	12.4			12.4			11.4
Adjustments for cash	(14.3)			(12.4)			(7.5)
Total Net Receivables	$	116.5		$	117.5		$	115.5

Securitized Funding as Percent of Total Debt	37.9		%	38.5		%	45.3		%

Net receivables were $115.5 billion at September 30, 2022 and were funded primarily with term unsecured debt and term asset-backed securities. Securitized funding as a percent of total debt was 45.3% at the end of the third quarter of 2022.

Public Term Funding Plan. The following table shows Ford Credit’s issuances for full year 2020 and 2021, planned issuances for full year 2022, and its global public term funding issuances through October 25, 2022, excluding short-term funding programs (in billions):


	2020 Actual		2021 Actual		2022 Forecast	Through October 25
Unsecured	$	14	$	5	$ 5 - 7	$	5
Securitizations (a)	13		9		9 - 10	8
Total public	$	27	$	14	$ 14 - 17	$	13

(a)See Definitions and Information Regarding Ford Credit Causal Factors section.

For 2022, Ford Credit now projects full year public term funding in the range of $14 billion to $17 billion. Through October 25, 2022, Ford Credit has completed $13 billion of public term issuances.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Liquidity. The following table shows Ford Credit’s liquidity sources and utilization (in billions):


	September 30, 2021		December 31, 2021		September 30, 2022
Liquidity Sources (a)
Cash	$	14.3	$	12.4	$	7.5
Committed asset-backed facilities	37.7		37.1		34.2
Other unsecured credit facilities	2.7		2.7		2.1
Total liquidity sources	$	54.7	$	52.2	$	43.8

Utilization of Liquidity (a)
Securitization and restricted cash	$	(6.1)	$	(3.9)	$	(2.7)
Committed asset-backed facilities	(11.5)		(12.5)		(20.0)
Other unsecured credit facilities	(0.4)		(1.0)		(0.5)
Total utilization of liquidity	$	(18.0)	$	(17.4)	$	(23.2)

Gross liquidity	$	36.7	$	34.8	$	20.6
Asset-backed capacity in excess of eligible receivables and other adjustments	(3.7)		(2.8)		0.3
Net liquidity available for use	$	33.0	$	32.0	$	20.9

(a)See Definitions and Information Regarding Ford Credit Causal Factors section.

Ford Credit’s net liquidity available for use will fluctuate quarterly based on factors including near-term debt maturities, receivable growth and decline, and timing of funding transactions. At September 30, 2022, Ford Credit’s net liquidity available for use was $20.9 billion, $11.1 billion lower than year-end 2021. Ford Credit’s net liquidity remains robust, while reflecting a smaller balance sheet and lower near-term debt maturities following Ford Credit’s $3 billion debt repurchase completed in the second quarter of 2022. At September 30, 2022, Ford Credit’s liquidity sources, including cash, committed asset-backed facilities, and unsecured credit facilities, totaled $43.8 billion, down $8.4 billion from year-end 2021. Ford Credit continues to be well capitalized with a strong balance sheet.

Material Cash Requirements. Ford Credit’s material cash requirements include: (1) the purchase of retail financing and operating lease contracts from dealers and providing wholesale financing for dealers to finance new and used vehicles; and (2) debt repayments (for additional information on debt, see the “Balance Sheet Liquidity Profile” section below and the “Aggregate Contractual Obligations” table in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 and Note 19 of the Notes to the Financial Statements in our 2021 Form 10-K Report). In addition, subject to approval by Ford Credit’s Board of Directors, shareholder distributions may require the expenditure of a material amount of cash. Moreover, Ford Credit may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, e.g., legal contingencies, uncertain tax positions, and other matters.

Ford Credit plans to utilize its liquidity (as described above) and its cash flows from business operations to fund its material cash requirements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Balance Sheet Liquidity Profile. Ford Credit defines its balance sheet liquidity profile as the cumulative maturities, including the impact of expected prepayments and allowance for credit losses, of its finance receivables, investment in operating leases, and cash, less the cumulative debt maturities over upcoming annual periods. Ford Credit’s balance sheet is inherently liquid because of the short-term nature of its finance receivables, investment in operating leases, and cash. Ford Credit ensures its cumulative debt maturities have a longer tenor than its cumulative asset maturities. This positive maturity profile is intended to provide Ford Credit with additional liquidity after all of its assets have been funded and is in addition to its liquidity available to protect for stress scenarios.

The following table shows Ford Credit’s cumulative maturities for assets and total debt for the periods presented and unsecured long-term debt maturities in the individual periods presented (in billions):


	October - December 2022		2023		2024		2025 and Beyond
Balance Sheet Liquidity Profile
Assets (a)	$	38	$	69	$	93	$	127
Total debt (b)	26		56		76		110
Memo: Unsecured long-term debt maturities	3		8		11		25

(a)Includes gross finance receivables less the allowance for credit losses (including certain finance receivables that are reclassified in consolidation to Trade and other receivables, net), investment in operating leases net of accumulated depreciation, cash and cash equivalents, and marketable securities (excluding amounts related to insurance activities). Amounts shown include the impact of expected prepayments.

(b)Excludes unamortized debt (discount)/premium, unamortized issuance costs, and fair value adjustments.

Maturities of investment in operating leases consist primarily of the portion of rental payments attributable to depreciation over the remaining life of the lease and the expected residual value at lease termination. Maturities of finance receivables and investment in operating leases in the table above include expected prepayments for Ford Credit’s retail installment sale contracts and investment in operating leases. The table above also reflects adjustments to debt maturities to match the asset-backed debt maturities with the underlying asset maturities.

All wholesale securitization transactions and wholesale receivables are shown maturing in the next 12 months, even if the maturities extend beyond third quarter 2023. The retail securitization transactions under certain committed asset-backed facilities are assumed to amortize immediately rather than amortizing after the expiration of the commitment period. As of September 30, 2022, Ford Credit had $127 billion of assets, $59 billion of which were unencumbered.

Funding and Liquidity Risks. Ford Credit’s funding plan is subject to risks and uncertainties, many of which are beyond its control, including disruption in the capital markets, that could impact both unsecured debt and asset-backed securities issuance and the effects of regulatory changes on the financial markets. Refer to the “Liquidity - Ford Credit Segment - Funding and Liquidity Risks” section of Item 7 of Part II of our 2021 Form 10-K Report for more information.

Leverage. Ford Credit uses leverage, or the debt-to-equity ratio, to make various business decisions, including evaluating and establishing pricing for finance receivable and operating lease financing, and assessing its capital structure.

The table below shows the calculation of Ford Credit’s financial statement leverage (in billions):


	September 30, 2021		December 31, 2021		September 30, 2022
Leverage Calculation
Debt	$	119.0	$	117.7	$	108.0
Equity (a)	12.4		12.4		11.4
Financial statement leverage (to 1)	9.6		9.5		9.4

(a)Total shareholder’s interest reported on Ford Credit’s balance sheets.

Ford Credit plans its leverage by considering market conditions and the risk characteristics of its business. At September 30, 2022, Ford Credit’s financial statement leverage was 9.4:1. Ford Credit targets financial statement leverage in the range of 9:1 to 10:1.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Total Company

Pension Plans - Funded Balances. As of September 30, 2022, our total Company pension overfunded status reported on our consolidated balance sheets was $1.2 billion and reflects the net funded status at December 31, 2021, updated for: service and interest cost; expected return on assets; curtailments, settlements, and associated interim remeasurement (where applicable); separation expense; actual benefit payments; and cash contributions. For plans without interim remeasurement, the discount rate and rate of expected return assumptions are unchanged from year-end 2021.

Return on Invested Capital (“ROIC”). We analyze total Company performance using an adjusted ROIC financial metric based on an after-tax, rolling four quarter average. The following table contains the calculation of our ROIC for the periods shown (in billions):


	Four Quarters Ending
	September 30, 2021			September 30, 2022
Adjusted Net Operating Profit/(Loss) After Cash Tax
Net income/(loss) attributable to Ford	$	2.9		$	9.0
Add: Noncontrolling interest	—			0.1
Less: Income tax	0.1			1.8
Add: Cash tax	(0.6)			(0.6)
Less: Interest on debt	(1.8)			(1.4)
Less: Total pension/OPEB income/(cost)	(0.4)			4.3
Add: Pension/OPEB service costs	(1.1)			(1.0)
Net operating profit/(loss) after cash tax	$	3.2		$	2.7
Less: Special items (excl. pension/OPEB) pre-tax	(3.6)			(4.9)
Adjusted net operating profit/(loss) after cash tax	$	6.9		$	7.6

Invested Capital
Equity	$	36.7		$	42.1
Debt (excl. Ford Credit)	25.6			20.3
Net pension and OPEB liability	10.6			4.6
Invested capital (end of period)	$	73.0		$	66.9
Average invested capital	$	70.9		$	71.0

ROIC (a)	4.6		%	3.8		%
Adjusted ROIC (Non-GAAP) (b)	9.7		%	10.7		%

(a)Calculated as the sum of net operating profit/(loss) after cash tax from the last four quarters, divided by the average invested capital over the last four quarters.

(b)Calculated as the sum of adjusted net operating profit/(loss) after cash tax from the last four quarters, divided by the average invested capital over the last four quarters.

Note: Numbers may not sum due to rounding.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

CREDIT RATINGS

Our short-term and long-term debt is rated by four credit rating agencies designated as nationally recognized statistical rating organizations (“NRSROs”) by the U.S. Securities and Exchange Commission: DBRS, Fitch, Moody’s, and S&P.

In several markets, locally recognized rating agencies also rate us. A credit rating reflects an assessment by the rating agency of the credit risk associated with a corporate entity or particular securities issued by that entity. Rating agencies’ ratings of us are based on information provided by us and other sources. Credit ratings are not recommendations to buy, sell, or hold securities and are subject to revision or withdrawal at any time by the assigning rating agency. Each rating agency may have different criteria for evaluating company risk and, therefore, ratings should be evaluated independently for each rating agency.

There have been no rating actions taken by these NRSROs since the filing of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.

The following table summarizes certain of the credit ratings and outlook presently assigned by these four NRSROs:


	NRSRO RATINGS
	Ford			Ford Credit			NRSROs
	Issuer Default / Corporate / Issuer Rating	Long-Term Senior Unsecured	Outlook / Trend	Long-Term Senior Unsecured	Short-Term Unsecured	Outlook / Trend	Minimum Long-Term Investment Grade Rating
DBRS	BB (high)	BB (high)	Positive	BB (high)	R-4	Positive	BBB (low)
Fitch	BB+	BB+	Positive	BB+	B	Positive	BBB-
Moody’s	N/A	Ba2	Stable	Ba2	NP	Stable	Baa3
S&P	BB+	BB+	Positive	BB+	B	Positive	BBB-

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

OUTLOOK

We provided 2022 Company guidance in our earnings release furnished on Form 8-K dated October 26, 2022. Our actual results could differ materially from our guidance due to risks, uncertainties, and other factors, including those set forth in “Risk Factors” in Item 1A of our 2021 Form 10-K Report and as updated by our subsequent filings with the SEC.


						2022 Guidance
Total Company
Adjusted EBIT (a)						About $11.5 billion
Adjusted Free Cash Flow (a)						$9.5 - $10.0 billion
Capital spending						About $6.5 billion
Pension contributions						About $0.6 billion
Global Redesign EBIT charges (b)						About $1 billion
Global Redesign cash effects (b)						$0.5 - $1.0 billion

Ford Credit
EBT						About $2.7 billion

(a)When we provide guidance for adjusted EBIT and adjusted free cash flow, we do not provide guidance for the most comparable GAAP measures because, as described in more detail below in “Non-GAAP Measures That Supplement GAAP Measures,” they include items that are difficult to predict with reasonable certainty.

(b)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. Such actions may result in global redesign EBIT charges and cash effects in 2022 that are incremental to those set forth in the table.

For full-year 2022, we now expect adjusted EBIT of about $11.5 billion, which would be about 15% higher than 2021. We also now expect full-year adjusted free cash flow of $9.5 billion to $10.0 billion, reflecting the strength in the Company’s automotive operations, including our restructured businesses in regions outside of North America.

Our guidance assumes about a 10% year-over-year increase in wholesale shipments; significantly higher earnings in North America and aggregate profitability in the rest of the world; and strong, but lower, EBT from Ford Credit of about $2.7 billion.

Other assumptions include:

No further deterioration in the supply chain
Continued strong pent-up demand and orders for our newest products
Persistent strength in pricing
High commodity and broad-based inflationary costs of about $9 billion
Strong, though lower, auction values at Ford Credit, along with higher borrowing costs
Continuation of the strong dollar

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Cautionary Note on Forward-Looking Statements

Statements included or incorporated by reference herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:

Ford and Ford Credit’s financial condition and results of operations have been and may continue to be adversely affected by public health issues, including epidemics or pandemics such as COVID-19;
Ford is highly dependent on its suppliers to deliver components in accordance with Ford’s production schedule, and a shortage of key components, such as semiconductors, or raw materials can disrupt Ford’s production of vehicles;
Ford’s long-term competitiveness depends on the successful execution of Ford+;
Ford’s vehicles could be affected by defects that result in delays in new model launches, recall campaigns, or increased warranty costs;
Ford may not realize the anticipated benefits of existing or pending strategic alliances, joint ventures, acquisitions, divestitures, or new business strategies;
Operational systems, security systems, vehicles, and services could be affected by cyber incidents, ransomware attacks, and other disruptions;
Ford’s production, as well as Ford’s suppliers’ production, could be disrupted by labor issues, natural or man-made disasters, financial distress, production difficulties, capacity limitations, or other factors;
Ford’s ability to maintain a competitive cost structure could be affected by labor or other constraints;
Ford’s ability to attract and retain talented, diverse, and highly skilled employees is critical to its success and competitiveness;
Ford’s new and existing products, digital and physical services, and mobility services are subject to market acceptance and face significant competition from existing and new entrants in the automotive, mobility, and digital services industries;
Ford’s near-term results are dependent on sales of larger, more profitable vehicles, particularly in the United States;
With a global footprint, Ford’s results could be adversely affected by economic, geopolitical, protectionist trade policies, or other events, including tariffs;
Industry sales volume in any of Ford’s key markets can be volatile and could decline if there is a financial crisis, recession, or significant geopolitical event;
Ford may face increased price competition or a reduction in demand for its products resulting from industry excess capacity, currency fluctuations, competitive actions, or other factors;
Inflationary pressure and fluctuations in commodity prices, foreign currency exchange rates, interest rates, and market value of Ford or Ford Credit’s investments, including marketable securities, can have a significant effect on results;
Ford and Ford Credit’s access to debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts could be affected by credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors;
Ford’s receipt of government incentives could be subject to reduction, termination, or clawback;
Ford Credit could experience higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles;
Economic and demographic experience for pension and other postretirement benefit plans (e.g., discount rates or investment returns) could be worse than Ford has assumed;
Pension and other postretirement liabilities could adversely affect Ford’s liquidity and financial condition;
Ford and Ford Credit could experience unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, services, perceived environmental impacts, or otherwise;
Ford may need to substantially modify its product plans to comply with safety, emissions, fuel economy, autonomous vehicle, and other regulations;
Ford and Ford Credit could be affected by the continued development of more stringent privacy, data use, and data protection laws and regulations as well as consumers’ heightened expectations to safeguard their personal information; and
Ford Credit could be subject to new or increased credit regulations, consumer protection regulations, or other regulations.

We cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. For additional discussion, see “Item 1A. Risk Factors” in our 2021 Form 10-K Report, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

NON-GAAP FINANCIAL MEASURES THAT SUPPLEMENT GAAP MEASURES

We use both generally accepted accounting principles (“GAAP”) and non-GAAP financial measures for operational and financial decision making, and to assess Company and segment business performance. The non-GAAP measures listed below are intended to be considered by users as supplemental information to their equivalent GAAP measures, to aid investors in better understanding our financial results. We believe that these non-GAAP measures provide useful perspective on underlying operating results and trends, and a means to compare our period-over-period results. These non-GAAP measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP measures may not be the same as similarly titled measures used by other companies due to possible differences in method and in items or events being adjusted.

*•*Company Adjusted EBIT (Most Comparable GAAP Measure: Net Income/(Loss) Attributable to Ford) – Earnings before interest and taxes (EBIT) excludes interest on debt (excl. Ford Credit Debt), taxes, and pre-tax special items. This non-GAAP measure is useful to management and investors because it focuses on underlying operating results and trends, and improves comparability of our period-over-period results. Our management ordinarily excludes special items from its review of the results of the operating segments for purposes of measuring segment profitability and allocating resources. Our categories of pre-tax special items and the applicable significance guideline for each item (which may consist of a group of items related to a single event or action) are as follows:


Pre-Tax Special Item						Significance Guideline
∘ Pension and OPEB remeasurement gains and losses						∘ No minimum

∘ Gains and losses on investments in equity securities						∘ No minimum

∘ 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						∘ Generally $100 million or more

∘ Other items that we do not necessarily consider to be indicative of earnings from ongoing operating activities						∘ $500 million or more for individual field service actions; generally $100 million or more for other items

When we provide guidance for adjusted EBIT, we do not provide guidance on a net income basis because the GAAP measure will include potentially significant special items that have not yet occurred and are difficult to predict with reasonable certainty, including gains and losses on pension and OPEB remeasurements and on investments in equity securities.

*•*Company Adjusted EBIT Margin (Most Comparable GAAP Measure: Company Net Income/(Loss) Margin) – Company Adjusted EBIT margin is Company adjusted EBIT divided by Company revenue. This non-GAAP measure is useful to management and investors because it allows users to evaluate our operating results aligned with industry reporting.

Adjusted Earnings/(Loss) Per Share (Most Comparable GAAP Measure: Earnings/(Loss) Per Share) – Measure of Company’s diluted net earnings/(loss) per share adjusted for impact of pre-tax special items (described above), tax special items, and restructuring impacts in noncontrolling interests. The measure provides investors with useful information to evaluate performance of our business excluding items not indicative of earnings from ongoing operating activities. When we provide guidance for adjusted earnings/(loss) per share, we do not provide guidance on an earnings/(loss) per share basis because the GAAP measure will include potentially significant special items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-end, including pension and OPEB remeasurement gains and losses.

*•*Adjusted Effective Tax Rate (Most Comparable GAAP Measure: Effective Tax Rate) – Measure of Company’s tax rate excluding pre-tax special items (described above) and tax special items. The measure provides an ongoing effective rate which investors find useful for historical comparisons and for forecasting. When we provide guidance for adjusted effective tax rate, we do not provide guidance on an effective tax rate basis because the GAAP measure will include potentially significant special items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-end, including pension and OPEB remeasurement gains and losses.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Company Adjusted Free Cash Flow (Most Comparable GAAP Measure: Net Cash Provided By/(Used In) Operating Activities) – Measure of Company’s operating cash flow excluding Ford Credit’s operating cash flows. The measure contains elements management considers operating activities, including Company excluding Ford Credit capital spending, Ford Credit distributions to its parent, and settlement of derivatives. The measure excludes cash outflows for funded pension contributions, global redesign (including separations), and other items that are considered operating cash flows under U.S. GAAP. This measure is useful to management and investors because it is consistent with management’s assessment of the Company’s operating cash flow performance. When we provide guidance for Company adjusted free cash flow, we do not provide guidance for net cash provided by/(used in) operating activities because the GAAP measure will include items that are difficult to quantify or predict with reasonable certainty, including cash flows related to the Company's exposures to foreign currency exchange rates and certain commodity prices (separate from any related hedges), Ford Credit's operating cash flows, and cash flows related to special items, including separation payments, each of which individually or in the aggregate could have a significant impact to our net cash provided by/(used in) our operating activities.

*•*Adjusted ROIC – Calculated as the sum of adjusted net operating profit/(loss) after cash tax from the last four quarters, divided by the average invested capital over the last four quarters. Adjusted Return on Invested Capital (“Adjusted ROIC”) provides management and investors with useful information to evaluate the Company’s after-cash tax operating return on its invested capital for the period presented. Adjusted net operating profit/(loss) after cash tax measures operating results less special items, interest on debt (excl. Ford Credit Debt), and certain pension/OPEB costs. Average invested capital is the sum of average balance sheet equity, debt (excl. Ford Credit Debt), and net pension/OPEB liability.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Non-GAAP Financial Measure Reconciliations

The following tables show our Non-GAAP financial measure reconciliations.

Net Income/(Loss) Reconciliation to Adjusted EBIT ($M)


	Third Quarter								First Nine Months
2021				2022				2021				2022
Net income/(loss) attributable to Ford (GAAP)	$	1,832			$	(827)			$	5,655			$	(3,270)
Income/(Loss) attributable to noncontrolling interests	(10)				(103)				(18)				(141)
Net income/(loss)	$	1,822			$	(930)			$	5,637			$	(3,411)
Less: (Provision for)/Benefit from income taxes	(63)				195				(925)				771
Income/(Loss) before income taxes	$	1,885			$	(1,125)			$	6,562			$	(4,182)
Less: Special items pre-tax	(669)				(2,607)				(31)				(11,092)
Income/(Loss) before special items pre-tax	$	2,554			$	1,482			$	6,593			$	6,910
Less: Interest on debt	(439)				(321)				(1,365)				(941)
Adjusted EBIT (Non-GAAP)	$	2,993			$	1,803			$	7,958			$	7,851

Memo:
Revenue ($B)	$	35.7			$	39.4			$	98.7			$	114.1
Net income/(loss) margin (GAAP) (%)	5.1		%		(2.1)		%		5.7		%		(2.9)		%
Adjusted EBIT margin (Non-GAAP) (%)	8.4		%		4.6		%		8.1		%		6.9		%

Earnings per Share Reconciliation to Adjusted Earnings per Share


	Third Quarter						First Nine Months
2021			2022			2021			2022
Diluted After-Tax Results ($M)
Diluted after-tax results (GAAP)	$	1,832		$	(827)		$	5,655		$	(3,270)
Less: Impact of pre-tax and tax special items	(209)			(2,063)			287			(8,819)
Adjusted net income/(loss) – diluted (Non-GAAP)	$	2,041		$	1,236		$	5,368		$	5,549

Basic and Diluted Shares (M)
Basic shares (average shares outstanding)	3,995			4,021			3,989			4,017
Net dilutive options, unvested restricted stock units, unvested restricted stock shares, and convertible debt	41			38			38			42
Diluted shares	4,036			4,059			4,027			4,059

Earnings/(Loss) per share – diluted (GAAP) (a)	$	0.45		$	(0.21)		$	1.40		$	(0.81)
Less: Net impact of adjustments	(0.06)			(0.51)			0.07			(2.18)
Adjusted earnings/(loss) per share – diluted (Non-GAAP)	$	0.51		$	0.30		$	1.33		$	1.37

(a)In the third quarter and first nine months of 2022, there were 38 million and 42 million shares, respectively, excluded from the calculation of diluted

earnings/(loss) per share, due to their anti-dilutive effect.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Effective Tax Rate Reconciliation to Adjusted Effective Tax Rate


	Third Quarter						First Nine Months
	2021			2022			2021			2022			Memo: FY 2021
Pre-Tax Results ($M)
Income/(Loss) before income taxes (GAAP)	$	1,885		$	(1,125)		$	6,562		$	(4,182)		$	17,780
Less: Impact of special items	(669)			(2,607)			(31)			(11,092)			9,583
Adjusted earnings before taxes (Non-GAAP)	$	2,554		$	1,482		$	6,593		$	6,910		$	8,197

Taxes ($M)
(Provision for)/Benefit from income taxes (GAAP)	$	(63)		$	195		$	(925)		$	771		$	130
Less: Impact of special items	460			544			318			2,273			1,924
Adjusted (provision for)/benefit from income taxes (Non-GAAP)	$	(523)		$	(349)		$	(1,243)		$	(1,502)		$	(1,794)

Tax Rate (%)
Effective tax rate (GAAP)	3.3		%	17.3		%	14.1		%	18.4		%	(0.7)		%
Adjusted effective tax rate (Non-GAAP)	20.5		%	23.5		%	18.9		%	21.7		%	21.9		%

Net Cash Provided by/(Used in) Operating Activities Reconciliation to Company Adjusted Free Cash Flow ($M)


	Third Quarter						First Nine Months
2021			2022			2021			2022
Net cash provided by/(used in) operating activities (GAAP)	$	7,008		$	3,812		$	12,256		$	5,675

Less: Items not included in Company Adjusted Free Cash Flows
Ford Credit operating cash flows	$	(341)		$	(439)		$	14,295		$	(2,198)
Funded pension contributions	(209)			(130)			(602)			(458)
Global Redesign (including separations) (a)	(301)			(179)			(1,545)			(492)
Ford Credit tax payments/(refunds) under tax sharing agreement	—			22			4			22
Other, net	(5)			(150)			(275)			(150)

Add: Items included in Company Adjusted Free Cash Flows
Company excluding Ford Credit capital spending	$	(1,562)		$	(1,613)		$	(4,424)		$	(4,465)
Ford Credit distributions	1,500			500			6,500			2,100
Settlement of derivatives	(42)			26			(200)			54
Company adjusted free cash flow (Non-GAAP)	$	7,760		$	3,601		$	2,255		$	6,640

(a)Global Redesign excludes cash flows reported in investing activities.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

SUPPLEMENTAL INFORMATION

The tables below provide supplemental consolidating financial information, other financial information, and U.S. sales by type. Company excluding Ford Credit includes our Automotive and Mobility reportable segments, Corporate Other, Interest on Debt, and Special Items. Eliminations, where presented, primarily represent eliminations of intersegment transactions and deferred tax netting.

Selected Cash Flow Information. The following tables provide supplemental cash flow information (in millions):


	For the period ended September 30, 2022
	First Nine Months
Cash flows from operating activities	Company excluding Ford Credit		Ford Credit		Eliminations		Consolidated
Net income/(loss)	$	(5,542)	$	2,131	$	—	$	(3,411)
Depreciation and tooling amortization	3,995		1,674		—		5,669
Other amortization	74		(950)		—		(876)
(Gains)/Losses on extinguishment of debt	135		(14)		—		121
Held for sale impairment charges	32		—		—		32
Provision for/(Benefit from) credit and insurance losses	11		(81)		—		(70)
Pension and OPEB expense/(income)	(595)		—		—		(595)
Equity method investment dividends received in excess of (earnings)/losses and impairments	2,983		(8)		—		2,975
Foreign currency adjustments	(246)		175		—		(71)
Net realized and unrealized (gains)/losses on cash equivalents, marketable securities, and other investments	7,277		88		—		7,365
Net (gain)/loss on changes in investments in affiliates	136		1		—		137
Stock compensation	269		8		—		277
Provision for/(Benefit from) deferred income taxes	(1,835)		278		—		(1,557)
Decrease/(Increase) in finance receivables (wholesale and other)	—		(6,601)		—		(6,601)
Decrease/(Increase) in intersegment receivables/payables	(161)		161		—		—
Decrease/(Increase) in accounts receivable and other assets	(2,172)		(198)		—		(2,370)
Decrease/(Increase) in inventory	(4,160)		—		—		(4,160)
Increase/(Decrease) in accounts payable and accrued and other liabilities	8,218		235		—		8,453
Other	794		(437)		—		357
Interest supplements and residual value support to Ford Credit	(1,340)		1,340		—		—
Net cash provided by/(used in) operating activities	$	7,873	$	(2,198)	$	—	$	5,675


Cash flows from investing activities	Company excluding Ford Credit		Ford Credit		Eliminations		Consolidated
Capital spending	$	(4,761)	$	(40)	$	—	$	(4,801)
Acquisitions of finance receivables and operating leases	—		(32,988)		—		(32,988)
Collections of finance receivables and operating leases	—		35,676		—		35,676
Proceeds from sale of business	435		—		—		435
Purchases of marketable and other investments	(10,774)		(3,341)		—		(14,115)
Sales and maturities of marketable securities and other investments	12,623		3,585		—		16,208
Settlements of derivatives	54		179		—		233
Other	(25)		2		—		(23)
Investing activity (to)/from other segments	2,130		(30)		(2,100)		—
Net cash provided by/(used in) investing activities	$	(318)	$	3,043	$	(2,100)	$	625


Cash flows from financing activities	Company excluding Ford Credit		Ford Credit		Eliminations		Consolidated
Cash payments for dividends and dividend equivalents	$	(1,410)	$	—	$	—	$	(1,410)
Purchases of common stock	—		—		—		—
Net changes in short-term debt	513		1,137		—		1,650
Proceeds from issuance of long-term debt	3,295		29,560		—		32,855
Payments of long-term debt	(3,817)		(33,578)		—		(37,395)
Other	(185)		(59)		—		(244)
Financing activity to/(from) other segments	—		(2,100)		2,100		—
Net cash provided by/(used in) financing activities	$	(1,604)	$	(5,040)	$	2,100	$	(4,544)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash	$	(329)	$	(443)	$	—	$	(772)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Selected Income Statement Information. The following table provides supplemental income statement information (in millions):


	For the period ended September 30, 2022
	Third Quarter
	Company excluding Ford Credit		Ford Credit		Consolidated
Revenues	$	37,205	$	2,187	$	39,392
Total costs and expenses (a)	37,211		1,677		38,888
Operating income/(loss)	(6)		510		504
Interest expense on Company debt excluding Ford Credit	321		—		321
Other income/(loss), net	1,237		81		1,318
Equity in net income/(loss) of affiliated companies	(2,634)		8		(2,626)
Income/(Loss) before income taxes	(1,724)		599		(1,125)
Provision for/(Benefit from) income taxes	(346)		151		(195)
Net income/(loss)	(1,378)		448		(930)
Less: Income/(Loss) attributable to noncontrolling interests	(103)		—		(103)
Net income/(loss) attributable to Ford Motor Company	$	(1,275)	$	448	$	(827)

	For the period ended September 30, 2022
	First Nine Months
	Company excluding Ford Credit		Ford Credit		Consolidated
Revenues	$	107,334	$	6,724	$	114,058
Total costs and expenses (a)	104,937		4,406		109,343
Operating income/(loss)	2,397		2,318		4,715
Interest expense on Company debt excluding Ford Credit	941		—		941
Other income/(loss), net	(5,485)		130		(5,355)
Equity in net income/(loss) of affiliated companies	(2,619)		18		(2,601)
Income/(Loss) before income taxes	(6,648)		2,466		(4,182)
Provision for/(Benefit from) income taxes	(1,106)		335		(771)
Net income/(loss)	(5,542)		2,131		(3,411)
Less: Income/(Loss) attributable to noncontrolling interests	(141)		—		(141)
Net income/(loss) attributable to Ford Motor Company	$	(5,401)	$	2,131	$	(3,270)

(a)Ford Credit excludes a specials charge of $10 million.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Selected Balance Sheet Information. The following tables provide supplemental balance sheet information (in millions):


	September 30, 2022
Assets	Company excluding Ford Credit		Ford Credit		Eliminations		Consolidated
Cash and cash equivalents	$	15,197	$	6,351	$	—	$	21,548
Marketable securities	16,780		1,845		—		18,625
Ford Credit finance receivables, net	—		33,902		—		33,902
Trade and other receivables, net	4,154		10,610		—		14,764
Inventories	15,213		—		—		15,213
Assets held for sale	100		—		—		100
Other assets	2,638		1,298		—		3,936
Receivable from other segments	13		971		(984)		—
Total current assets	54,095		54,977		(984)		108,088

Ford Credit finance receivables, net	—		47,683		—		47,683
Net investment in operating leases	1,077		22,478		—		23,555
Net property	35,307		222		—		35,529
Equity in net assets of affiliated companies	2,432		124		—		2,556
Deferred income taxes	14,979		170		—		15,149
Other assets	12,940		1,419		—		14,359
Receivable from other segments	—		15		(15)		—
Total assets	$	120,830	$	127,088	$	(999)	$	246,919


Liabilities	Company excluding Ford Credit		Ford Credit		Eliminations		Consolidated
Payables	$	25,823	$	1,228	$	—	$	27,051
Other liabilities and deferred revenue	16,689		2,377		—		19,066
Debt payable within one year	1,212		42,838		—		44,050
Liabilities held for sale	—		—				—
Payable to other segments	984		—		(984)		—
Total current liabilities	44,708		46,443		(984)		90,167

Other liabilities and deferred revenue	25,463		3,128		—		28,591
Long-term debt	19,073		65,206		—		84,279
Deferred income taxes	917		876		—		1,793
Payable to other segments	15		—		(15)		—
Total liabilities	$	90,176	$	115,653	$	(999)	$	204,830

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Selected Other Information.

Equity. At September 30, 2022, total equity attributable to Ford was $42.1 billion, a decrease of $6.4 billion compared with December 31, 2021. The detail for this change is shown below (in billions):


	Increase/ (Decrease)
Net income/(loss)	$	(3.3)
Shareholder distributions	(1.4)
Other comprehensive income/(loss), net	(1.9)
Common stock issued (including share-based compensation impacts)	0.2
Total	$	(6.4)

U.S. Sales by Type. The following table shows third quarter 2022 U.S. sales volume and U.S. wholesales segregated by truck, SUV, and car sales. U.S. sales volume reflects transactions with (i) retail and fleet customers (as reported by dealers), (ii) governments, and (iii) Ford management. U.S. wholesales reflect sales to dealers.


	U.S. Sales	U.S. Wholesales
Trucks	238,981	257,275
SUVs	215,322	216,655
Cars	10,371	13,037
Total Vehicles	464,674	486,967

ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

For a discussion of recent accounting standards, see Note 2 of the Notes to the Financial Statements.

Previous: Item 1. Financial Statements. · Next: Item 3. Quantitative and Qualitative Disclosures About Market Risk.