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Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☑ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2023

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission file number 1-3950

Ford Motor Company

(Exact name of Registrant as specified in its charter)


Delaware		38-0549190
(State of incorporation)		(I.R.S. Employer Identification No.)

One American Road
Dearborn,	Michigan	48126
(Address of principal executive offices)		(Zip code)

313-322-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbols	Name of each exchange on which registered
Common Stock, par value $.01 per share	F	New York Stock Exchange
6.200% Notes due June 1, 2059	FPRB	New York Stock Exchange
6.000% Notes due December 1, 2059	FPRC	New York Stock Exchange
6.500% Notes due August 15, 2062	FPRD	New York Stock Exchange

Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of April 28, 2023, Ford had outstanding 3,929,918,250 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit Index begins on page 65

FORD MOTOR COMPANY

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended March 31, 2023


	Table of Contents	Page
	Part I - Financial Information
Item 1	Financial Statements	1
	Consolidated Statements of Cash Flows	1
	Consolidated Income Statements	2
	Consolidated Statements of Comprehensive Income	2
	Consolidated Balance Sheets	3
	Consolidated Statements of Equity	4
	Notes to the Financial Statements	5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
	Results of Operations	33
	Ford Blue Segment	35
	Ford Model e Segment	36
	Ford Pro Segment	36
	Ford Next Segment	38
	Ford Credit Segment	39
	Corporate Other	42
	Interest on Debt	42
	Taxes	42
	Liquidity and Capital Resources	43
	Credit Ratings	51
	Outlook	52
	Cautionary Note on Forward-Looking Statements	53
	Non-GAAP Financial Measures That Supplement GAAP Measures	55
	Non-GAAP Financial Measure Reconciliations	57
	Supplemental Information	59
	Accounting Standards Issued But Not Yet Adopted	62
Item 3	Quantitative and Qualitative Disclosures About Market Risk	63
Item 4	Controls and Procedures	63

	Part II - Other Information
Item 1	Legal Proceedings	64
Item 6	Exhibits	65
	Signature	66

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


	For the periods ended March 31,
	2022		2023
	First Quarter
	(unaudited)
Cash flows from operating activities
Net income/(loss)	$	(3,119)	$	1,663
Depreciation and tooling amortization	1,857		1,897
Other amortization	(310)		(272)
Provision for/(Benefit from) credit and insurance losses	(66)		83
Pension and other postretirement employee benefits (“OPEB”) expense/(income) (Note 13)	(213)		303
Equity method investment dividends received in excess of (earnings)/losses and impairments	199		(7)
Foreign currency adjustments	32		(94)
Net realized and unrealized (gains)/losses on cash equivalents, marketable securities, and other investments (Note 4)	5,454		51
Net (gain)/loss on changes in investments in affiliates (Note 4)	125		(4)
Stock compensation	67		100
Provision for/(Benefit from) deferred income taxes	(1,053)		17
Decrease/(Increase) in finance receivables (wholesale and other)	(2,192)		(656)
Decrease/(Increase) in accounts receivable and other assets	(956)		(732)
Decrease/(Increase) in inventory	(2,755)		(1,967)
Increase/(Decrease) in accounts payable and accrued and other liabilities	1,714		2,323
Other	132		95
Net cash provided by/(used in) operating activities	(1,084)		2,800

Cash flows from investing activities
Capital spending	(1,370)		(1,780)
Acquisitions of finance receivables and operating leases	(10,278)		(12,543)
Collections of finance receivables and operating leases	11,988		11,170
Purchases of marketable securities and other investments	(4,319)		(2,545)
Sales and maturities of marketable securities and other investments	7,115		4,413
Settlements of derivatives	212		(41)
Capital contributions to equity method investments	(25)		(699)
Other	(8)		48
Net cash provided by/(used in) investing activities	3,315		(1,977)

Cash flows from financing activities
Cash payments for dividends and dividend equivalents	(405)		(3,193)
Purchases of common stock	—		—
Net changes in short-term debt	(614)		(2,211)
Proceeds from issuance of long-term debt	12,489		13,912
Payments of long-term debt	(12,975)		(12,242)
Other	(156)		(140)
Net cash provided by/(used in) financing activities	(1,661)		(3,874)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(24)		70

Net increase/(decrease) in cash, cash equivalents, and restricted cash	$	546	$	(2,981)

Cash, cash equivalents, and restricted cash at beginning of period (Note 7)	$	20,737	$	25,340
Net increase/(decrease) in cash, cash equivalents, and restricted cash	546		(2,981)
Cash, cash equivalents, and restricted cash at end of period (Note 7)	$	21,283	$	22,359

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(in millions, except per share amounts)


	For the periods ended March 31,
	2022		2023
	First Quarter
	(unaudited)
Revenues
Company excluding Ford Credit	$	32,195	$	39,085
Ford Credit	2,281		2,389
Total revenues (Note 3)	34,476		41,474

Costs and expenses
Cost of sales	29,036		34,669
Selling, administrative, and other expenses	2,740		2,506
Ford Credit interest, operating, and other expenses	1,357		2,186
Total costs and expenses	33,133		39,361
Operating income/(loss)	1,343		2,113
Interest expense on Company debt excluding Ford Credit	308		308
Other income/(loss), net (Note 4)	(4,850)		224
Equity in net income/(loss) of affiliated companies	(33)		130
Income/(Loss) before income taxes	(3,848)		2,159
Provision for/(Benefit from) income taxes	(729)		496
Net income/(loss)	(3,119)		1,663
Less: Income/(Loss) attributable to noncontrolling interests	(9)		(94)
Net income/(loss) attributable to Ford Motor Company	$	(3,110)	$	1,757

EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 6)
Basic income/(loss)	$	(0.78)	$	0.44
Diluted income/(loss)	(0.78)		0.44

Weighted-average shares used in computation of earnings/(loss) per share
Basic shares	4,008		3,990
Diluted shares	4,008		4,029

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


	For the periods ended March 31,
	2022		2023
	First Quarter
	(unaudited)
Net income/(loss)	$	(3,119)	$	1,663
Other comprehensive income/(loss), net of tax (Note 18)
Foreign currency translation	146		493
Marketable securities	(253)		110
Derivative instruments	144		(55)
Pension and other postretirement benefits	8		3
Total other comprehensive income/(loss), net of tax	45		551
Comprehensive income/(loss)	(3,074)		2,214
Less: Comprehensive income/(loss) attributable to noncontrolling interests	(9)		(94)
Comprehensive income/(loss) attributable to Ford Motor Company	$	(3,065)	$	2,308

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions)


	December 31, 2022		March 31, 2023
	(unaudited)
ASSETS
Cash and cash equivalents (Note 7)	$	25,134	$	22,144
Marketable securities (Note 7)	18,936		17,369
Ford Credit finance receivables, net of allowance for credit losses of $255 and $261 (Note 8)	38,720		40,350
Trade and other receivables, less allowances of $105 and $93	15,729		14,920
Inventories (Note 9)	14,080		16,212
Other assets	3,877		4,128
Total current assets	116,476		115,123
Ford Credit finance receivables, net of allowance for credit losses of $590 and $609 (Note 8)	49,903		51,084
Net investment in operating leases	22,772		22,008
Net property	37,265		37,970
Equity in net assets of affiliated companies	2,798		3,448
Deferred income taxes	15,552		15,572
Other assets	11,118		11,595
Total assets	$	255,884	$	256,800

LIABILITIES
Payables	$	25,605	$	26,028
Other liabilities and deferred revenue (Note 12 and Note 20)	21,097		21,827
Debt payable within one year (Note 14)
Company excluding Ford Credit	730		522
Ford Credit	49,434		47,528

Total current liabilities	96,866		95,905
Other liabilities and deferred revenue (Note 12 and Note 20)	25,497		25,908
Long-term debt (Note 14)
Company excluding Ford Credit	19,200		19,190
Ford Credit	69,605		72,052
Deferred income taxes	1,549		1,548
Total liabilities	212,717		214,603

EQUITY
Common Stock, par value $0.01 per share (4,082 million shares issued of 6 billion authorized)	41		41
Class B Stock, par value $0.01 per share (71 million shares issued of 530 million authorized)	1		1
Capital in excess of par value of stock	22,832		22,889
Retained earnings	31,754		30,270
Accumulated other comprehensive income/(loss) (Note 18)	(9,339)		(8,788)
Treasury stock	(2,047)		(2,047)
Total equity attributable to Ford Motor Company	43,242		42,366
Equity attributable to noncontrolling interests	(75)		(169)
Total equity	43,167		42,197
Total liabilities and equity	$	255,884	$	256,800


The following table includes assets to be used to settle liabilities of the consolidated variable interest entities (“VIEs”). These assets and liabilities are included in the consolidated balance sheets above.
	December 31, 2022		March 31, 2023
	(unaudited)
ASSETS
Cash and cash equivalents	$	2,274	$	2,438
Ford Credit finance receivables, net	49,142		50,454
Net investment in operating leases	12,545		9,472
Other assets	264		162
LIABILITIES
Other liabilities and deferred revenue	$	2	$	3
Debt	45,451		45,758

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(in millions, unaudited)


	Equity Attributable to Ford Motor Company
	Capital Stock		Cap. in Excess of Par Value of Stock		Retained Earnings		Accumulated Other Comprehensive Income/(Loss) (Note 18)		Treasury Stock		Total		Equity Attributable to Non-controlling Interests		Total Equity
Balance at December 31, 2021	$	41	$	22,611	$	35,769	$	(8,339)	$	(1,563)	$	48,519	$	103	$	48,622
Net income/(loss)	—		—		(3,110)		—		—		(3,110)		(9)		(3,119)
Other comprehensive income/(loss), net	—		—		—		45		—		45		—		45
Common Stock issued (a)	1		(61)		—		—		—		(60)		—		(60)
Treasury stock/other	—		—		—		—		(1)		(1)		5		4
Dividends and dividend equivalents declared ($0.10 per share) (b)	—		—		(408)		—		—		(408)		—		(408)
Balance at March 31, 2022	$	42	$	22,550	$	32,251	$	(8,294)	$	(1,564)	$	44,985	$	99	$	45,084













Balance at December 31, 2022	$	42	$	22,832	$	31,754	$	(9,339)	$	(2,047)	$	43,242	$	(75)	$	43,167
Net income/(loss)	—		—		1,757		—		—		1,757		(94)		1,663
Other comprehensive income/(loss), net	—		—		—		551		—		551		—		551
Common Stock issued (a)	—		57		—		—		—		57		—		57
Treasury stock/other	—		—		—		—		—		—		—		—
Dividends and dividend equivalents declared ($0.80 per share) (b)	—		—		(3,241)		—		—		(3,241)		—		(3,241)
Balance at March 31, 2023	$	42	$	22,889	$	30,270	$	(8,788)	$	(2,047)	$	42,366	$	(169)	$	42,197

(a)Includes impact of share-based compensation.

(b)Dividends and dividend equivalents declared for Common and Class B Stock. On February 2, 2023, we declared a regular dividend of $0.15 per share and a supplemental dividend of $0.65 per share.

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents


Footnote		Page
Note 1	Presentation	6
Note 2	New Accounting Standards	6
Note 3	Revenue	7
Note 4	Other Income/(Loss)	8
Note 5	Income Taxes	8
Note 6	Capital Stock and Earnings/(Loss) Per Share	8
Note 7	Cash, Cash Equivalents, and Marketable Securities	9
Note 8	Ford Credit Finance Receivables and Allowance for Credit Losses	12
Note 9	Inventories	16
Note 10	Other Investments	16
Note 11	Goodwill	16
Note 12	Other Liabilities and Deferred Revenue	17
Note 13	Retirement Benefits	18
Note 14	Debt	19
Note 15	Derivative Financial Instruments and Hedging Activities	20
Note 16	Employee Separation Actions and Exit and Disposal Activities	22
Note 17	Acquisitions and Divestitures	23
Note 18	Accumulated Other Comprehensive Income/(Loss)	24
Note 19	Variable Interest Entities	25
Note 20	Commitments and Contingencies	26
Note 21	Segment Information	29

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION

For purposes of this report, “Ford,” the “Company,” “we,” “our,” “us,” or similar references mean Ford Motor Company, our consolidated subsidiaries, and our consolidated VIEs of which we are the primary beneficiary, unless the context requires otherwise. We also make reference to Ford Motor Credit Company LLC, herein referenced to as Ford Credit. Our consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X. We reclassified certain prior year amounts in our consolidated financial statements to conform to the current year presentation.

In the opinion of management, these unaudited financial statements reflect a fair statement of our results of operations and financial condition for the periods, and at the dates, presented. The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K Report”).

NOTE 2. NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards

Accounting Standards Update (“ASU”) 2022-02, Financial Instruments – Credit Losses, Troubled Debt Restructurings and Vintage Disclosures. Effective January 1, 2023, we adopted the new standard, which eliminates the troubled debt recognition and measurement guidance and requires disclosure of current period gross charge-offs by year of origination (vintage disclosure). Adoption of the new standard did not have a material impact to our consolidated financial statements or financial statement disclosures.

ASU 2022-04, Liabilities – Supplier Finance Programs, Disclosure of Supplier Finance Program Obligations. Effective January 1, 2023, we adopted the new standard, which requires that entities that use supplier finance programs disclose information about the nature and potential magnitude of the programs, activity during the period, and changes from period to period.

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 do not provide any guarantees in connection with it. As of March 31, 2023, the outstanding amount of Ford receivables that suppliers elected to sell to the SCF financial institutions, reported in Payables, was $265 million. The amount settled through the SCF program during the first quarter of 2023 was $452 million.

We also adopted the following ASUs during 2023, none of which had a material impact to our consolidated financial statements or financial statement disclosures:


ASU		Effective Date
2022-01	Derivatives and Hedging – Fair Value Hedging – Portfolio Layer Hedging	January 1, 2023
2022-03	Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions	January 1, 2023
2018-12	Targeted Improvements to the Accounting for Long Duration Contracts (and related amendments)	January 1, 2023

Accounting Standards Issued But Not Yet Adopted

ASUs issued but not yet adopted were assessed and determined to be not applicable or are not expected to have a material impact on our consolidated financial statements or financial statement disclosures.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. REVENUE

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


	First Quarter 2022
	Company excluding Ford Credit		Ford Credit		Consolidated
Vehicles, parts, and accessories	$	30,991	$	—	$	30,991
Used vehicles	429		—		429
Services and other revenue (a)	722		19		741
Revenues from sales and services	32,142		19		32,161

Leasing income	53		1,211		1,264
Financing income	—		1,040		1,040
Insurance income	—		11		11
Total revenues	$	32,195	$	2,281	$	34,476

	First Quarter 2023
	Company excluding Ford Credit		Ford Credit		Consolidated
Vehicles, parts, and accessories	$	37,927	$	—	$	37,927
Used vehicles	469		—		469
Services and other revenue (a)	645		17		662
Revenues from sales and services	39,041		17		39,058

Leasing income	44		1,049		1,093
Financing income	—		1,301		1,301
Insurance income	—		22		22
Total revenues	$	39,085	$	2,389	$	41,474

(a)Includes extended service contract revenue.

The amount of consideration we receive and revenue we recognize on our vehicles, parts, and accessories varies with changes in return rights and marketing incentives we offer to our customers and their customers. Estimates of marketing incentives are based on expected retail and fleet sales volumes, mix of products to be sold, and incentive programs to be offered. Customer acceptance of products and programs, as well as other market conditions, will impact these estimates. As a result of changes in our estimate of marketing incentives, we recorded an increase of $211 million in the first quarter of 2022 and a decrease of $178 million in the first quarter of 2023 related to revenue recognized in prior periods.

We had a balance of $4.4 billion and $4.5 billion of unearned revenue associated primarily with outstanding extended service contracts reported in Other liabilities and deferred revenue at December 31, 2022 and March 31, 2023, respectively*.* We expect to recognize approximately $1.1 billion of the unearned amount in the remainder of 2023, $1.2 billion in 2024, and $2.2 billion thereafter. We recognized $365 million and $380 million of unearned amounts from prior years as revenue during the first quarter of 2022 and 2023, respectively.

Amounts paid to dealers to obtain extended service contracts are deferred and recorded as Other assets. We had a balance of $315 million and $324 million in deferred costs as of December 31, 2022 and March 31, 2023, respectively. We recognized $22 million and $26 million of amortization during the first quarter of 2022 and 2023, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. OTHER INCOME/(LOSS)

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


	First Quarter
	2022		2023
Net periodic pension and OPEB income/(cost), excluding service cost (Note 13)	$	459	$	(165)
Investment-related interest income	61		348
Interest income/(expense) on income taxes	5		(4)
Realized and unrealized gains/(losses) on cash equivalents, marketable securities, and other investments (a)	(5,454)		(51)
Gains/(Losses) on changes in investments in affiliates	(125)		4

Royalty income	144		103
Other	60		(11)
Total	$	(4,850)	$	224

(a) Includes a $5.4 billion loss and a $25 million loss on our Rivian investment in the first quarter of 2022 and 2023, respectively.

NOTE 5. INCOME TAXES

For interim tax reporting, we estimate one single effective tax rate for tax jurisdictions not subject to a valuation allowance, which is applied to the year-to-date ordinary income/(loss). Tax effects of significant unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

NOTE 6. CAPITAL STOCK AND EARNINGS/(LOSS) PER SHARE

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

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


	First Quarter
	2022		2023
Net income/(loss) attributable to Ford Motor Company	$	(3,110)	$	1,757

Basic and Diluted Shares
Basic shares (average shares outstanding)	4,008		3,990
Net dilutive options, unvested restricted stock units, unvested restricted stock shares, and convertible debt (a)	—		39
Diluted shares	4,008		4,029

(a) In the first quarter of 2022, there were 56 million shares excluded from the calculation of diluted earnings/(loss) per share, due to their anti-dilutive effect.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

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


		December 31, 2022
	Fair Value Level	Company excluding Ford Credit		Ford Credit		Consolidated
Cash and cash equivalents
U.S. government	1	$	3,295	$	1,045	$	4,340
U.S. government agencies	2	2,245		150		2,395
Non-U.S. government and agencies	2	1,048		199		1,247
Other cash equivalents	2	10		—		10
Corporate debt	2	593		792		1,385
Total marketable securities classified as cash equivalents		7,191		2,186		9,377
Cash, time deposits, and money market funds		7,550		8,207		15,757
Total cash and cash equivalents		$	14,741	$	10,393	$	25,134

Marketable securities
U.S. government	1	$	4,947	$	187	$	5,134
U.S. government agencies	2	2,641		221		2,862
Non-U.S. government and agencies	2	2,625		658		3,283
Corporate debt	2	6,755		266		7,021
Equities (a)	1	223		—		223
Other marketable securities	2	252		161		413
Total marketable securities		$	17,443	$	1,493	$	18,936

Restricted cash		$	79	$	127	$	206


		March 31, 2023
	Fair Value Level	Company excluding Ford Credit		Ford Credit		Consolidated
Cash and cash equivalents
U.S. government	1	$	1,958	$	1,183	$	3,141
U.S. government agencies	2	2,320		1,045		3,365
Non-U.S. government and agencies	2	150		70		220
Other cash equivalents	2	—		—		—
Corporate debt	2	68		439		507
Total marketable securities classified as cash equivalents		4,496		2,737		7,233
Cash, time deposits, and money market funds		8,333		6,578		14,911
Total cash and cash equivalents		$	12,829	$	9,315	$	22,144

Marketable securities
U.S. government	1	$	4,605	$	173	$	4,778
U.S. government agencies	2	2,300		270		2,570
Non-U.S. government and agencies	2	2,245		548		2,793
Corporate debt	2	6,212		421		6,633
Equities (a)	1	182		—		182
Other marketable securities	2	250		163		413
Total marketable securities		$	15,794	$	1,575	$	17,369

Restricted cash		$	82	$	133	$	215

(a)Includes $194 million and $147 million of Rivian common shares valued at $18.43 and $15.48 per share as of December 31, 2022 and March 31, 2023, respectively. In the first quarter of 2023, we sold 1 million of our Rivian common shares for about $21.6 million in total proceeds. Net unrealized gains/losses recognized during full year 2022 and the first quarter of 2023 on all equity securities held at December 31, 2022 and March 31, 2023 were a $968 million loss and a $22 million loss, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

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


	December 31, 2022
									Fair Value of Securities with Contractual Maturities
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Within 1 Year		After 1 Year through 5 Years		After 5 Years
Company excluding Ford Credit
U.S. government	$	4,797	$	1	$	(145)	$	4,653	$	1,008	$	3,645	$	—
U.S. government agencies	2,508		—		(119)		2,389		1,244		1,109		36
Non-U.S. government and agencies	2,248		—		(132)		2,116		294		1,810		12
Corporate debt	7,511		6		(197)		7,320		3,117		4,195		8
Other marketable securities	246		—		(9)		237		—		181		56
Total	$	17,310	$	7	$	(602)	$	16,715	$	5,663	$	10,940	$	112

	March 31, 2023
									Fair Value of Securities with Contractual Maturities
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Within 1 Year		After 1 Year through 5 Years		After 5 Years
Company excluding Ford Credit
U.S. government	$	4,557	$	8	$	(109)	$	4,456	$	1,058	$	3,387	$	11
U.S. government agencies	2,338		—		(94)		2,244		1,122		1,104		18
Non-U.S. government and agencies	2,320		2		(105)		2,217		407		1,798		12
Corporate debt	6,399		13		(157)		6,255		2,007		4,247		1
Other marketable securities	233		—		(7)		226		—		170		56
Total	$	15,847	$	23	$	(472)	$	15,398	$	4,594	$	10,706	$	98

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


	First Quarter
	2022		2023
Company excluding Ford Credit
Sales proceeds	$	4,004	$	1,163
Gross realized gains	6		1
Gross realized losses	6		12

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

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


	December 31, 2022
	Less than 1 Year				1 Year or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Company excluding Ford Credit
U.S. government	$	2,860	$	(52)	$	1,570	$	(93)	$	4,430	$	(145)
U.S. government agencies	707		(14)		1,658		(105)		2,365		(119)
Non-U.S. government and agencies	751		(23)		1,271		(109)		2,022		(132)
Corporate debt	4,571		(79)		1,737		(118)		6,308		(197)
Other marketable securities	123		(4)		108		(5)		231		(9)
Total	$	9,012	$	(172)	$	6,344	$	(430)	$	15,356	$	(602)

	March 31, 2023
	Less than 1 Year				1 Year or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Company excluding Ford Credit
U.S. government	$	1,825	$	(22)	$	1,684	$	(87)	$	3,509	$	(109)
U.S. government agencies	465		(3)		1,658		(91)		2,123		(94)
Non-U.S. government and agencies	276		(4)		1,685		(101)		1,961		(105)
Corporate debt	3,152		(50)		2,012		(107)		5,164		(157)
Other marketable securities	107		(3)		101		(4)		208		(7)
Total	$	5,825	$	(82)	$	7,140	$	(390)	$	12,965	$	(472)

We determine credit losses on AFS debt securities using the specific identification method. During the first quarter of 2023, we did not recognize any credit loss. The unrealized losses on securities are due to changes in interest rates and market liquidity.

Cash, Cash Equivalents, and Restricted Cash

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


	December 31, 2022		March 31, 2023
Cash and cash equivalents	$	25,134	$	22,144
Restricted cash (a)	206		215

Total cash, cash equivalents, and restricted cash	$	25,340	$	22,359

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

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

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

For all finance receivables, Ford Credit defines “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date.

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


	December 31, 2022		March 31, 2023
Consumer
Retail installment contracts, gross	$	66,954	$	68,259
Finance leases, gross	6,765		6,990
Retail financing, gross	73,719		75,249
Unearned interest supplements	(2,305)		(2,435)
Consumer finance receivables	71,414		72,814
Non-Consumer
Dealer financing	18,054		19,490
Non-Consumer finance receivables	18,054		19,490
Total recorded investment	$	89,468	$	92,304

Recorded investment in finance receivables	$	89,468	$	92,304
Allowance for credit losses	(845)		(870)
Total finance receivables, net	$	88,623	$	91,434

Current portion	$	38,720	$	40,350
Non-current portion	49,903		51,084
Total finance receivables, net	$	88,623	$	91,434

Net finance receivables subject to fair value (a)	$	82,200	$	84,812
Fair value (b)	79,521		82,966

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

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

Ford Credit’s finance leases are comprised of sales-type and direct financing leases. Financing revenue from finance leases for the first quarter of 2022 and 2023 was $77 million and $83 million, respectively, and is included in Ford Credit revenues on our consolidated income statements.

At December 31, 2022 and March 31, 2023, accrued interest was $187 million and $198 million, respectively, which we report in Other assets in the current assets section of our consolidated balance sheets.

Included in the recorded investment in finance receivables at December 31, 2022 and March 31, 2023, were consumer receivables of $43.9 billion and $43.9 billion, respectively, and non-consumer receivables of $18.2 billion and $17.6 billion, respectively, (including Ford Blue, Ford Model e, and Ford Pro receivables sold to Ford Credit, which we report in Trade and other receivables) that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. The receivables are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations or the claims of Ford Credit’s other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Credit Quality

Consumer Portfolio. Credit quality ratings for consumer receivables are based on Ford Credit’s aging analysis. Consumer receivables credit quality ratings are as follows:

*•*Pass – current to 60 days past due;

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

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

The credit quality analysis of consumer receivables at December 31, 2022 was as follows (in millions):


	Amortized Cost Basis by Origination Year
	Prior to 2018		2018		2019		2020		2021		2022		Total		Percent
Consumer
31 - 60 days past due	$	41	$	60	$	91	$	181	$	150	$	126	$	649	0.9	%
61 - 120 days past due	9		12		20		39		40		29		149		0.2
Greater than 120 days past due	9		4		5		7		7		6		38		0.1
Total past due	59		76		116		227		197		161		836		1.2
Current	883		2,563		6,137		13,844		18,357		28,794		70,578		98.8
Total	$	942	$	2,639	$	6,253	$	14,071	$	18,554	$	28,955	$	71,414	100.0	%

The credit quality analysis of consumer receivables at March 31, 2023 was as follows (in millions):


	Amortized Cost Basis by Origination Year
	Prior to 2019		2019		2020		2021		2022		2023		Total		Percent
Consumer
31 - 60 days past due	$	75	$	72	$	149	$	135	$	150	$	10	$	591	0.8	%
61 - 120 days past due	11		13		28		30		36		1		119		0.2
Greater than 120 days past due	12		4		8		10		6		—		40		—
Total past due	98		89		185		175		192		11		750		1.0
Current	2,574		5,065		12,184		16,542		26,921		8,778		72,064		99.0
Total	$	2,672	$	5,154	$	12,369	$	16,717	$	27,113	$	8,789	$	72,814	100.0	%

Gross charge-offs	$	17	$	12	$	23	$	22	$	22	$	—	$	96

Non-Consumer Portfolio. The credit quality of dealer financing receivables is evaluated based on Ford Credit’s internal dealer risk rating analysis. Ford Credit uses a proprietary model to assign each dealer a risk rating. This model uses historical dealer performance data to identify key factors about a dealer that are considered most significant in predicting a dealer’s ability to meet its financial obligations. Ford Credit also considers numerous other financial and qualitative factors of the dealer’s operations, including capitalization and leverage, liquidity and cash flow, profitability, and credit history with Ford Credit and other creditors.

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

Group I – strong to superior financial metrics;
Group II – fair to favorable financial metrics;
Group III – marginal to weak financial metrics; and
Group IV – poor financial metrics, including dealers classified as uncollectible.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

The credit quality analysis of dealer financing receivables at December 31, 2022 was as follows (in millions):


	Amortized Cost Basis by Origination Year														Wholesale Loans
	Dealer Loans
	Prior to 2018		2018		2019		2020		2021		2022		Total				Total			Percent
Group I	$	402	$	148	$	35	$	67	$	185	$	224	$	1,061	$	13,888		$	14,949		82.8	%
Group II	2		21		—		5		2		42		72		2,751			2,823			15.6
Group III	—		—		—		—		—		10		10		233			243			1.4
Group IV	—		—		1		—		—		3		4		35			39			0.2
Total (a)	$	404	$	169	$	36	$	72	$	187	$	279	$	1,147	$	16,907		$	18,054		100.0	%

(a)Total past due dealer financing receivables at December 31, 2022 were $9 million.

The credit quality analysis of dealer financing receivables at March 31, 2023 was as follows (in millions):


	Amortized Cost Basis by Origination Year														Wholesale Loans
	Dealer Loans
	Prior to 2019		2019		2020		2021		2022		2023		Total				Total			Percent
Group I	$	516	$	33	$	67	$	179	$	83	$	189	$	1,067	$	15,951		$	17,018		87.3	%
Group II	3		—		2		2		1		51		59		2,115			2,174			11.1
Group III	—		—		—		—		—		10		10		255			265			1.4
Group IV	—		1		—		—		—		3		4		29			33			0.2
Total (a)	$	519	$	34	$	69	$	181	$	84	$	253	$	1,140	$	18,350		$	19,490		100.0	%

Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—		$	—

(a)Total past due dealer financing receivables at March 31, 2023 were $7 million.

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

Loan Modifications. Consumer and non-consumer receivables that have a modified interest rate and/or a term extension (including receivables that were modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code) are typically considered to be loan modifications. Ford Credit does not grant modifications to the principal balance of the receivables. If a receivable is modified in a reorganization proceeding, all payment requirements of the reorganization plan need to be met before remaining balances are forgiven.

The use of interest rate modifications and term extensions helps Ford Credit mitigate financial loss. Term extensions may assist in cases where Ford Credit believes the customer will recover from short-term financial difficulty and resume regularly scheduled payments. The effect of most loan modifications made to borrowers experiencing financial difficulty is included in the historical trends used to measure the allowance for credit losses. A loan modification that improves the delinquency status of a borrower reduces the probability of default, which results in a lower allowance for credit losses. At March 31, 2023, an insignificant portion of Ford Credit's total finance receivables portfolio had been granted a loan modification, and these modifications are generally treated as a continuation of the existing loan.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Allowance for Credit Losses

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

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

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

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


	First Quarter 2022
	Consumer		Non-Consumer		Total
Allowance for credit losses
Beginning balance	$	903	$	22	$	925
Charge-offs	(62)		—		(62)
Recoveries	43		1		44
Provision for/(Benefit from) credit losses	(59)		(5)		(64)
Other (a)	1		1		2
Ending balance	$	826	$	19	$	845


	First Quarter 2023
	Consumer		Non-Consumer		Total
Allowance for credit losses
Beginning balance	$	838	$	7	$	845
Charge-offs	(96)		—		(96)
Recoveries	38		1		39
Provision for/(Benefit from) credit losses	78		(1)		77
Other (a)	5		—		5
Ending balance	$	863	$	7	$	870

(a) Primarily represents amounts related to translation adjustments.

During the first quarter of 2023, the allowance for credit losses increased $25 million, driven by an increase in Ford Credit finance receivables. Net charge-offs increased from a year ago reflecting normalization from extraordinarily low levels. The impact of higher inflation and higher interest rates on future credit losses remains uncertain. Ford Credit will continue to monitor economic trends and conditions and portfolio performance and will adjust the reserve accordingly.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. INVENTORIES

Inventories were as follows (in millions):


	December 31, 2022		March 31, 2023
Raw materials, work-in-process, and supplies	$	5,997	$	6,464
Finished products	8,083		9,748
Total inventories	$	14,080	$	16,212

Our finished product inventory at March 31, 2023 was higher than at December 31, 2022, reflecting higher in-transit and in-plant inventory.

NOTE 10. OTHER INVESTMENTS

We have investments in entities not accounted for under the equity method for which fair values are not readily available. We record these investments at cost (less impairment, if any), adjusted for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We report the carrying value of these investments in Other assets in the non-current assets section of our consolidated balance sheets. These investments were $384 million and $350 million at December 31, 2022 and March 31, 2023, respectively. The cumulative net unrealized gain from adjustments related to Other Investments held at March 31, 2023 was $101 million.

NOTE 11. GOODWILL

The net carrying amount of goodwill was $603 million and $609 million at December 31, 2022 and March 31, 2023, respectively, and is reported in Other assets in the non-current assets section of our consolidated balance sheets.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 12. OTHER LIABILITIES AND DEFERRED REVENUE

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


	December 31, 2022		March 31, 2023
Current
Dealer and dealers’ customer allowances and claims	$	9,219	$	9,881
Deferred revenue	2,404		2,582
Employee benefit plans	2,020		1,505
Accrued interest	935		938
Operating lease liabilities	404		415
OPEB (a)	329		328
Pension (a)	196		198
Other (b)	5,590		5,980
Total current other liabilities and deferred revenue	$	21,097	$	21,827
Non-current
Dealer and dealers’ customer allowances and claims	$	6,095	$	6,538
Pension (a)	5,673		5,835
OPEB (a)	4,130		4,069
Deferred revenue	4,883		4,835
Operating lease liabilities	1,101		1,201
Employee benefit plans	834		829
Other (b)	2,781		2,601
Total non-current other liabilities and deferred revenue	$	25,497	$	25,908

(a)Balances at March 31, 2023 reflect pension and OPEB liabilities at December 31, 2022, 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 2022. Included in Other assets are pension assets of $5.7 billion and $5.8 billion at December 31, 2022 and March 31, 2023, respectively.

(b)Includes current derivative liabilities of $1.3 billion at both December 31, 2022 and March 31, 2023. Includes non-current derivative liabilities of $1.7 billion and $1.2 billion at December 31, 2022 and March 31, 2023, respectively (see Note 15).

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 13. RETIREMENT BENEFITS

Defined Benefit Plans - Expense

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


	First Quarter
	Pension Benefits
	U.S. Plans				Non-U.S. Plans				Worldwide OPEB
	2022		2023		2022		2023		2022		2023
Service cost	$	125	$	72	$	111	$	61	$	10	$	5
Interest cost	263		408		134		237		37		58
Expected return on assets	(642)		(486)		(268)		(219)		—		—
Amortization of prior service costs/(credits)	—		—		7		5		(1)		1
Net remeasurement (gain)/loss	—		113		—		—		—		—
Separation programs/other	4		2		7		4		—		—
Settlements and curtailments	—		42		—		—		—		—
Net periodic benefit cost/(income)	$	(250)	$	151	$	(9)	$	88	$	46	$	64

The service cost component is included in Cost of sales and Selling, administrative, and other expenses. Other components of net periodic benefit cost/(income) are included in Other income/(loss), net on our consolidated income statements.

In the first quarter of 2023, we paid lump sums for one of our U.S. pension plans, which resulted in a remeasurement and settlement expenses of $113 million and $42 million, respectively.

Pension Plan Contributions

During 2023, we continue to expect to contribute between $500 million and $600 million of cash to our global funded pension plans. We also expect to make about $400 million of benefit payments to participants in unfunded plans. In the first quarter of 2023, we contributed $125 million to our global funded pension plans and made $99 million of benefit payments to participants in unfunded plans.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 14. DEBT

The carrying value of Company debt excluding Ford Credit and Ford Credit debt was as follows (in millions):


	December 31, 2022		March 31, 2023
Company excluding Ford Credit
Debt payable within one year
Short-term	$	359	$	186
Long-term payable within one year
Other debt	372		336
Unamortized (discount)/premium	(1)		—
Total debt payable within one year	730		522
Long-term debt payable after one year
Public unsecured debt securities	14,935		14,935
Convertible notes (a)	2,300		2,300
U.K. Export Finance Program	1,654		1,702
Other debt	682		616
Unamortized (discount)/premium	(180)		(176)
Unamortized issuance costs	(191)		(187)
Total long-term debt payable after one year	19,200		19,190
Total Company excluding Ford Credit	$	19,930	$	19,712
Fair value of Company debt excluding Ford Credit (b)	$	18,557	$	19,046
Ford Credit
Debt payable within one year
Short-term	$	19,624	$	17,890
Long-term payable within one year
Unsecured debt	7,980		10,128
Asset-backed debt	21,839		19,502
Unamortized (discount)/premium	—		—
Unamortized issuance costs	(13)		(16)
Fair value adjustments (c)	4		24
Total debt payable within one year	49,434		47,528
Long-term debt payable after one year
Unsecured debt	39,620		41,237
Asset-backed debt	31,840		32,449
Unamortized (discount)/premium	23		17
Unamortized issuance costs	(184)		(209)
Fair value adjustments (c)	(1,694)		(1,442)
Total long-term debt payable after one year	69,605		72,052
Total Ford Credit	$	119,039	$	119,580
Fair value of Ford Credit debt (b)	$	117,214	$	118,688

(a)As of March 31, 2023, each $1,000 principal amount of the notes will be convertible into 63.0921 shares of our Common Stock, which is equivalent to a conversion price of approximately $15.85 per share. We recognized issuance cost amortization of $2 million during both the first quarter of 2022 and 2023.

(b)At December 31, 2022 and March 31, 2023, the fair value of debt includes $359 million and $186 million of Company excluding Ford Credit short-term debt, respectively, and $16.9 billion and $14.8 billion of Ford Credit short-term debt, respectively, carried at cost, which approximates fair value. All other debt is categorized within Level 2 of the fair value hierarchy.

(c)These adjustments are related to hedging activity and include discontinued hedging relationship adjustments of $31 million and $(31) million at December 31, 2022 and March 31, 2023, respectively. The carrying value of hedged debt was $33.3 billion and $36.5 billion at December 31, 2022 and March 31, 2023, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 15. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, our operations are exposed to global market risks, including the effect of changes in foreign currency exchange rates, certain commodity prices, and interest rates. To manage these risks, we enter into highly effective derivative contracts. We have elected to apply hedge accounting to certain derivatives. Derivatives that are designated in hedging relationships are evaluated for effectiveness using regression analysis at the time they are designated and throughout the hedge period. Some derivatives do not qualify for hedge accounting; for others, we elect not to apply hedge accounting.

Income Effect of Derivative Financial Instruments

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


	First Quarter
Cash flow hedges	2022		2023
Reclassified from AOCI to Cost of sales
Foreign currency exchange contracts (a)	$	(90)	$	26
Commodity contracts (b)	58		(9)
Fair value hedges
Interest rate contracts
Net interest settlements and accruals on hedging instruments	76		(140)
Fair value changes on hedging instruments	(986)		250
Fair value changes on hedged debt	991		(279)
Cross-currency interest rate swap contracts
Net interest settlements and accruals on hedging instruments	(3)		(14)
Fair value changes on hedging instruments	(37)		22
Fair value changes on hedged debt	41		(19)
Derivatives not designated as hedging instruments
Foreign currency exchange contracts (c)	(46)		(3)
Cross-currency interest rate swap contracts	(227)		85
Interest rate contracts	123		(12)
Commodity contracts	109		(11)
Total	$	9	$	(104)

(a)For the first quarter of 2022 and 2023, a $128 million loss and a $63 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax.

(b)For the first quarter of 2022 and 2023, a $284 million gain and an $8 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax.

(c)For the first quarter of 2022 and 2023, a $44 million loss and a $19 million gain, respectively, were reported in Cost of sales, and a $2 million loss and a $22 million loss, respectively, were reported in Other income/(loss), net.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 15. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

Derivative assets and liabilities are reported on our consolidated balance sheets at fair value and are presented on a gross basis. The notional amounts of the derivative instruments do not necessarily represent amounts exchanged by the parties and are not a direct measure of our financial exposure. We also enter into master agreements with counterparties that may allow for netting of exposures in the event of default or breach of the counterparty agreement. Collateral represents cash received or paid under reciprocal arrangements that we have entered into with our derivative counterparties, which we do not use to offset our derivative assets and liabilities.

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


	December 31, 2022						March 31, 2023
	Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities
Cash flow hedges
Foreign currency exchange contracts	$	11,536	$	376	$	52	$	16,998	$	316	$	102
Commodity contracts	990		16		56		1,012		15		40
Fair value hedges
Interest rate contracts	16,883		—		1,653		19,042		15		1,302
Cross-currency interest rate swap contracts	885		—		161		1,421		4		135
Derivatives not designated as hedging instruments
Foreign currency exchange contracts	20,851		162		285		19,718		136		164
Cross-currency interest rate swap contracts	6,635		15		653		6,115		38		528
Interest rate contracts	63,210		931		483		57,312		753		397
Commodity contracts	841		26		35		949		32		39
Total derivative financial instruments, gross (a) (b)	$	121,831	$	1,526	$	3,378	$	122,567	$	1,309	$	2,707

Current portion			$	1,101	$	1,656			$	813	$	1,462
Non-current portion			425		1,722				496		1,245
Total derivative financial instruments, gross			$	1,526	$	3,378			$	1,309	$	2,707

(a)At December 31, 2022 and March 31, 2023, we held collateral of $210 million and $180 million, respectively, and we posted collateral of $201 million and $203 million, respectively.

(b)At December 31, 2022 and March 31, 2023, the fair value of assets and liabilities available for counterparty netting was $451 million and $438 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 16. EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES

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

Company Excluding Ford Credit

Employee separation actions and exit and disposal activities include employee separation costs, facility and other asset-related charges (e.g., impairment, accelerated depreciation), dealer and supplier payments, other statutory and contractual obligations, and other expenses, which are recorded in Cost of sales and Selling, administrative, and other expenses. Below are actions that have been initiated:

Brazil. Exited manufacturing operations in 2021 resulting in the closure of facilities in Camaçari, Taubaté, and Troller
India. Ceased vehicle manufacturing in Sanand in the fourth quarter of 2021 and ceased manufacturing in Chennai in the third quarter of 2022. A sale of the Sanand vehicle assembly and powertrain plants was completed in the first quarter of 2023 (see Note 17)
Spain. Ceased production of the Mondeo at the Valencia plant in the first quarter of 2022
China. Ceased development of certain product programs in the first quarter of 2023

In addition, we are continuing to reduce our global workforce and take other restructuring actions, including the separation of salaried workers, primarily in Europe, as announced in the first quarter of 2023.

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


	First Quarter
	2022		2023
Beginning balance	$	950	$	588
Changes in accruals (a)	66		629
Payments	(205)		(83)
Foreign currency translation	18		(8)
Ending balance	$	829	$	1,126

(a)Excludes pension costs of $7 million and $4 million in the first quarter of 2022 and 2023, respectively.

We recorded $23 million and $48 million in the first quarter of 2022 and 2023, respectively, for accelerated depreciation and other non-cash items. In addition, we recognized a $32 million pre-tax net gain on sale of assets in the first quarter of 2022.

We recorded costs of $64 million and $681 million in the first quarter of 2022 and 2023, respectively, related to the actions above. We estimate that we will incur total charges in 2023 that range between $1.5 billion and $2 billion related to such actions, primarily attributable to employee separations and supplier settlements. We continue to review our global businesses and may take additional restructuring actions where a path to sustained profitability is not feasible when considering the capital allocation required for those businesses.

Ford Credit

Accumulated foreign currency translation losses included in Accumulated other comprehensive income/(loss) at March 31, 2023 of $223 million are associated with Ford Credit’s investments in Brazil and Argentina that have ceased operations. We expect to reclassify these losses to income upon substantially complete liquidation of Ford Credit’s investments, which may occur over multiple reporting periods. In the first quarter of 2022, we reclassified losses of $119 million to Other income/(loss), net, upon the liquidation of three investments in Brazil. Although the timing for the completion of the remaining actions is uncertain, we expect the majority of losses to be recognized in 2024 or later.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 17. ACQUISITIONS AND DIVESTITURES

Company Excluding Ford Credit

Argo AI, LLC (“Argo AI”). In October 2022, Ford and Volkswagen AG (“VW”), who held equal interests that together comprised a majority ownership of Argo AI, initiated the process of exiting the joint development of highly automated driving technology (L4) through Argo AI. Argo AI is in the process of winding down operations. The carrying value of our equity method investment in Argo AI was $0 at both December 31, 2022 and March 31, 2023; in addition, we had $65 million and $4 million at December 31, 2022 and March 31, 2023, respectively, in Other liabilities and deferred revenue related to our funding commitment for our share of Argo AI’s expenses previously incurred.

Sanand, India (“Sanand”) Plants. In the third quarter of 2022, we entered into an agreement to sell our Sanand vehicle assembly and powertrain plants to Tata Passenger Electric Mobility Limited (“Tata”), a subsidiary of Tata Motors Limited. The sale transaction included the land, buildings, and other fixed assets (excluding the powertrain machinery and equipment) for the plants. We recognized, in Cost of sales, pre-tax impairment charges of $32 million in the third quarter of 2022 to adjust the carrying value of the assets to fair value less costs to sell. We determined fair value using the market approach, based on the negotiated value of the assets. Accordingly, we reported $88 million of fixed assets for this operation as held for sale for the period ended December 31, 2022, which we report in Other assets in the current assets section of our consolidated balance sheets.

On January 10, 2023, we completed the sale of the plants to Tata. Ford will continue to operate the powertrain facility by leasing back the associated land and building. As a result of the sale transaction, we derecognized the fixed assets and recognized the powertrain facility operating lease right-of-use asset and related lease liability in the first quarter of 2023. The fair value of the cash consideration received approximated the carrying value of the fixed assets at the time of sale.

Ford Romania S.R.L. (“Ford Romania”). On July 1, 2022, we completed the sale of Ford Romania, our wholly-owned Romanian manufacturing subsidiary, to Ford Otosan, a joint venture in which Ford has a 41% ownership share. The transaction resulted in deconsolidation of our Ford Romania subsidiary in the third quarter of 2022. The fair value of consideration received, consisting of cash and a note receivable, approximated the carrying value of Ford Romania at the time of sale. The Ford Romania plant in Craiova, Romania will continue to manufacture Ford-branded vehicles for Ford and Ford Otosan. Ford’s portion of the output is expected to be significant; as a result, at the time of the sale there were about $100 million of assets, such as embedded leases, and related liabilities that continue to be reported as part of our financial statements.

Skinny Labs Inc., dba Spin (“Spin”). On April 1, 2022, we completed the sale of Spin, our wholly-owned micro-mobility provider, to TIER Mobility SE, a German-based micro-mobility provider, which resulted in the deconsolidation of our Spin subsidiary in the second quarter of 2022. In exchange for our shares of Spin, we received preferred equity in TIER Mobility SE, which is reflected in our consolidated balance sheets in Other assets as of the second quarter of 2022. The fair value of the preferred equity approximated the carrying value of Spin at the time of the transaction.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

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


	First Quarter
	2022		2023
Foreign currency translation
Beginning balance	$	(5,487)	$	(6,416)
Gains/(Losses) on foreign currency translation	(71)		485
Less: Tax/(Tax benefit) (a)	(96)		(10)
Net gains/(losses) on foreign currency translation	25		495
(Gains)/Losses reclassified from AOCI to net income (b)	121		(2)
Other comprehensive income/(loss), net of tax	146		493
Ending balance	$	(5,341)	$	(5,923)

Marketable securities
Beginning balance	$	(19)	$	(442)
Gains/(Losses) on available for sale securities	(330)		135
Less: Tax/(Tax benefit)	(77)		33
Net gains/(losses) on available for sale securities	(253)		102
(Gains)/Losses reclassified from AOCI to net income	—		11
Less: Tax/(Tax benefit)	—		3
Net (gains)/losses reclassified from AOCI to net income	—		8
Other comprehensive income/(loss), net of tax	(253)		110
Ending balance	$	(272)	$	(332)

Derivative instruments
Beginning balance	$	(193)	$	129
Gains/(Losses) on derivative instruments	156		(55)
Less: Tax/(Tax benefit)	37		(14)
Net gains/(losses) on derivative instruments	119		(41)
(Gains)/Losses reclassified from AOCI to net income	32		(17)
Less: Tax/(Tax benefit)	7		(3)
Net (gains)/losses reclassified from AOCI to net income (c)	25		(14)
Other comprehensive income/(loss), net of tax	144		(55)
Ending balance	$	(49)	$	74

Pension and other postretirement benefits
Beginning balance	$	(2,640)	$	(2,610)
Amortization and recognition of prior service costs/(credits)	6		6
Less: Tax/(Tax benefit)	1		1
Net prior service costs/(credits) reclassified from AOCI to net income	5		5
Translation impact on non-U.S. plans	3		(2)
Other comprehensive income/(loss), net of tax	8		3
Ending balance	$	(2,632)	$	(2,607)

Total AOCI ending balance at March 31	$	(8,294)	$	(8,788)

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

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

(c)Reclassified to Cost of sales. During the next twelve months, we expect to reclassify existing net gains on cash flow hedges of $147 million (see Note 15).

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. VARIABLE INTEREST ENTITIES

Certain of our affiliates are variable interest entities in which we are not the primary beneficiary. Our maximum exposure to any potential losses associated with these unconsolidated affiliates is limited to our equity investments, accounts receivable, loans, and guarantees and was $1.0 billion and $1.6 billion at December 31, 2022 and March 31, 2023, respectively. Of these amounts, guarantees of $113 million at both December 31, 2022 and March 31, 2023 related to certain obligations of our VIEs also are included in Note 20.

On July 13, 2022, Ford, SK On Co., Ltd., and SK Battery America, Inc. (a wholly owned subsidiary of SK On) completed the creation of BlueOval SK, LLC, a 50/50 joint venture that will build and operate electric vehicle battery plants in Tennessee and Kentucky to supply batteries to Ford and Ford affiliates. BlueOval SK is a variable interest entity of which we are not the primary beneficiary, and we use the equity method of accounting for our investment. As of March 31, 2023, Ford has contributed to BlueOval SK $1.3 billion of its agreed capital contribution of up to $6.6 billion through 2026, subject to any adjustments agreed to by the parties.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. COMMITMENTS AND CONTINGENCIES

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

Guarantees and Indemnifications

Financial Guarantees. Financial guarantees and indemnifications are recorded at fair value at their inception. Subsequent to initial recognition, the guarantee liability is adjusted at each reporting period to reflect the current estimate of expected payments resulting from possible default events over the remaining life of the guarantee. The maximum potential payments for financial guarantees were $518 million and $522 million at December 31, 2022 and March 31, 2023, respectively. The carrying value of recorded liabilities related to financial guarantees was $31 million and $55 million at December 31, 2022 and March 31, 2023, respectively.

Our financial guarantees consist of debt and lease obligations of certain joint ventures, as well as certain financial obligations of outside third parties, including suppliers, to support our business and economic growth. Expiration dates vary through 2037, and guarantees will terminate on payment and/or cancellation of the underlying obligation. A payment by us would be triggered by failure of the joint venture or other third party to fulfill its obligation covered by the guarantee. In some circumstances, we are entitled to recover from a third party amounts paid by us under the guarantee.

Non-Financial Guarantees. Non-financial guarantees and indemnifications are recorded at fair value at their inception. We regularly review our performance risk under these arrangements, and in the event it becomes probable we will be required to perform under a guarantee or indemnity, the amount of probable payment is recorded. The maximum potential payments for non-financial guarantees were $273 million and $165 million at December 31, 2022 and March 31, 2023, respectively. The carrying value of recorded liabilities related to non-financial guarantees was $0 at both December 31, 2022 and March 31, 2023.

Included in the $165 million of maximum potential payments at March 31, 2023 are guarantees for the resale value of vehicles sold in certain arrangements to daily rental companies. The maximum potential payment of $159 million as of March 31, 2023 represents the total proceeds we guarantee the rental company will receive on resale. Reflecting our present estimate of proceeds the rental companies will receive on resale from third parties, we do not expect we will have to pay under the guarantee.

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. COMMITMENTS AND CONTINGENCIES (Continued)

Litigation and Claims

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

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

We accrue for matters when losses are deemed probable and reasonably estimable. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood that we will prevail, and the severity of any potential loss. We reevaluate and update our accruals as matters progress over time.

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

For the remaining matters, where our historical experience with similar matters is of more limited value (i.e., “non-pattern matters”), we evaluate the matters primarily based on the individual facts and circumstances. For non-pattern matters, we evaluate whether there is a reasonable possibility of a material loss in excess of any accrual that can be estimated. Our estimate of reasonably possible loss in excess of our accruals for all material matters currently reflects indirect tax, customs, and regulatory matters, for which we estimate the aggregate risk to be a range of up to about $2 billion.

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. COMMITMENTS AND CONTINGENCIES (Continued)

Warranty and Field Service Actions

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

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

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


	First Quarter
	2022		2023
Beginning balance	$	8,451	$	9,193
Payments made during the period	(984)		(990)
Changes in accrual related to warranties issued during the period	793		972
Changes in accrual related to pre-existing warranties	21		226
Foreign currency translation and other	38		(117)
Ending balance	$	8,319	$	9,284

Changes to our estimated costs are reported as changes in accrual related to pre-existing warranties in the table above. Our estimate of reasonably possible costs in excess of our accruals for material field service actions and customer satisfaction actions is a range of up to about $700 million in the aggregate.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 21. SEGMENT INFORMATION

We report segment information consistent with the way our chief operating decision maker (“CODM”) evaluates the operating results and performance of the Company.

On January 1, 2023, we implemented a new operating model and reporting structure. As a result of this change, we analyze the results of our business through the following segments: Ford Blue, Ford Model e, and Ford Pro (combined, replacing the previous Automotive segment), Ford Next (previously the Mobility segment), and Ford Credit. Company adjusted earnings before interest and taxes (“EBIT”) include the financial results of these five reportable segments and Corporate Other, and net income comprises the financial results of the five reportable segments and Corporate Other, as well as Interest on Debt, Special Items, and Taxes.

Additionally, past service pension and OPEB income and expense plus related assets, previously reported in the Automotive segment, have been realigned to Corporate Other.

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

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

Ford Blue Segment

Ford Blue primarily includes the sale of Ford and Lincoln internal combustion engine (“ICE”) and hybrid vehicles, service parts, accessories, and digital services for retail customers, together with the associated costs of development, manufacture, and distribution of the vehicles, parts, accessories, and services. This segment focuses on developing Ford and Lincoln ICE and hybrid vehicles. Additionally, this segment provides hardware engineering and manufacturing capabilities to Ford Model e and manufactures vehicles on behalf of Ford Pro and, in certain cases, Ford Model e. Ford Blue also includes:

All sales for markets not presently in scope for Ford Model e or Ford Pro (as further described below)
In markets outside of the United States and Canada, sales to commercial, government, and rental customers of ICE and hybrid vehicles not considered core to Ford Pro
Sales of electric vehicles (“EVs”) by our unconsolidated affiliates in China
All sales of vehicles manufactured and sold to other OEMs

Ford Model e Segment

Ford Model e primarily includes the sale of our electric vehicles, service parts, accessories, and digital services for retail customers, together with the associated costs of development, manufacture, and distribution of the vehicles, parts, accessories, and services. This segment focuses on developing EV and digital vehicle technologies, as well as software development. Additionally, Ford Model e provides software and connected vehicle technologies on behalf of the enterprise, and manufactures certain EVs, including for Ford Pro. Ford Model e operates in North America, Europe, and China. Ford Model e also includes EV and related sales not considered core to Ford Pro to commercial, government, and rental customers in Europe, China, and Mexico.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 21. SEGMENT INFORMATION (Continued)

Ford Pro Segment

Ford Pro primarily includes the sale of Ford and Lincoln vehicles, service parts, accessories, and services for commercial, government, and rental customers. Included in this segment are sales of all core Ford Pro vehicles, such as Super Duty and the Transit range of vans in North America and Europe and all sales of Ranger in Europe. In the United States and Canada, Ford Pro also includes all vehicle sales to commercial, government, and rental customers. This segment focuses on selling ICE, hybrid, and electric vehicles, and providing digital and physical services to optimize and maintain fleets, including telematics and EV charging solutions. This segment reflects external sales of vehicles produced by Ford Blue and Ford Model e, and the costs (including intersegment markup) associated with acquiring vehicles for sale and providing services are reflected in this segment. Ford Pro operates in North America and Europe.

Ford Next Segment

The Ford Next segment (formerly the Mobility segment) primarily includes expenses and investments for emerging business initiatives aimed at creating value for Ford in vehicle-adjacent market segments.

Ford Credit Segment

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

Corporate Other

Corporate Other primarily includes corporate governance expenses, past service pension and OPEB income and expense, interest income (excluding Ford Credit interest income and interest earned on our extended service contract portfolio) and gains and losses from our cash, cash equivalents, and marketable securities (excluding gains and losses on investments in equity securities), and foreign exchange derivatives gains and losses associated with intercompany lending. Corporate governance expenses are primarily administrative, delivering benefit on behalf of the global enterprise, that are not allocated to operating segments. These include expenses related to setting and directing global policy, providing oversight and stewardship, and promoting the Company’s interests. Corporate Other assets include: cash, cash equivalents and marketable securities, tax related assets, defined benefit pension plan net assets, and other assets managed centrally.

Interest on Debt

Interest on Debt is presented as a separate reconciling item and consists of interest expense on Company debt excluding Ford Credit.

Special Items

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 21. SEGMENT INFORMATION (Continued)

Segment Revenue, Cost, and Asset Principles for Ford Blue, Ford Model e, and Ford Pro

External vehicle and digital services revenue is generally vehicle-specific and included in the segment responsible for the external vehicle sale. A majority of parts and accessories revenue and cost is attributed to customer sales channels or vehicle lines based on recent end customer sales and is included in the respective segment.

In the normal course of business, Ford Blue, Ford Model e, and Ford Pro transact between segments and cooperate to leverage synergies, including developing and manufacturing vehicles on behalf of another segment. When one segment produces a vehicle that is sold externally by another segment, an intersegment transaction occurs. The producing segment will report intersegment revenue to recoup the costs associated with the unit produced. This includes material cost, labor and overhead (including depreciation and amortization), inbound freight, and an intersegment markup. The intersegment markup amount is set to deliver a competitive return to the producing segment for its manufacturing and distribution service. Costs are reflected in the associated segment externally reporting the vehicle sale, as detailed in the table below:


Income Statement Elements	Examples	Segment Reporting
Costs specific to a particular vehicle	Bill of material cost and initial warranty accrual	Reported in the segment externally selling the vehicle
Costs identifiable by product line	Manufacturing and logistics costs, depreciation & amortization expense, direct research & development costs	Typically identifiable to the product line or production location. Reported in the segment externally selling the vehicle, based on relative volume
Shared costs	Selling, general & administrative expense, and indirect / cross product line research & development costs	Typically shared across all segments, generally based on relative volume. Certain costs clearly linked to a segment are reported in the specific segment
Intersegment markup costs for intersegment vehicle transactions	Contract manufacturing and distribution fees	Reported in the segment externally selling the vehicle, for each applicable vehicle transaction

Assets are reported in each segment, aligned to the appropriate operational responsibility. Manufacturing assets, e.g., our plants and the machinery and equipment therein, are included in our Ford Blue and Ford Model e segments. Manufacturing assets producing only, or primarily, EVs and related components are reflected in Ford Model e. Manufacturing assets that support the production of ICE and hybrid vehicles, including those producing ICE and electric in the same facility, are included in Ford Blue. Vendor tooling dedicated to producing EV parts is reported in Ford Model e. There are no Ford manufacturing assets or vendor tooling reported in Ford Pro. Regardless of the segment reporting the asset, depreciation and amortization expense is reflected on the basis of production volume and reported in the segment that reports the external vehicle sale.

Equity in net income/(loss) of affiliated companies is included in Income/(Loss) before income taxes, based primarily on which segment the entity supports or has the majority of the entity’s purchases or sales. The table below shows the segment reporting for our most significant unconsolidated entities:


Ford Blue	Ford Model e	Ford Pro
∘ Changan Ford Automobile Corporation, Ltd. (“CAF”)	∘ BlueOval SK, LLC	∘ Ford Otomotiv Sanayi Anonim Sirketi (“Ford Otosan”)
∘ Jiangling Motors Corporation, Ltd. (“JMC”)
∘ AutoAlliance (Thailand) Co., Ltd. (“AAT”)

Next: Item 1. Financial Statements (Continued)