Ford Motor 10-Q 2024-06-30

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 June 30, 2024

or

☐ 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)

313-322-3000

(Registrant’s telephone number, including area code)

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

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 July 19, 2024, Ford had outstanding 3,904,397,609 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit Index begins on page 69

FORD MOTOR COMPANY

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended June 30, 2024

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(in millions, except per share amounts)

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FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. SEGMENT INFORMATION (Continued)

Key financial information for the periods ended or at June 30 was as follows (in millions):

(a)Intersegment revenues only reflect finished vehicle transactions between Ford Blue, Ford Model e, and Ford Pro where there is an intersegment markup and are recognized at the time of the intersegment transaction.

(b)Primarily reflects restructuring actions, mark-to-market adjustments for our global pension and OPEB plans, and an accrual for the Transit Connect customs matter (relating to certain Transit Connect vehicles produced between 2009 and 2013).

(c)Primarily reflects our share of charges from an equity method investment resulting from Ford’s ongoing restructuring actions in China.

(d)Primarily includes eliminations of intersegment transactions occurring in the ordinary course of business.

(e)Primarily reflects restructuring actions in Europe (which triggered remeasurement of certain European pension plans) and updated assumptions for the duration of the Oakville Assembly Plant changeover, which is now shorter than originally planned.

(f)Primarily reflects restructuring actions in Europe, buyouts for hourly employees in North America, and the extended duration of the Oakville Assembly Plant changeover.

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

RECENT DEVELOPMENTS

Electric Vehicle Market

Although we continue to invest in our electric vehicle strategy, we have observed lower-than-anticipated industrywide electric vehicle adoption rates and near-term pricing pressures, which has led us, and may in the future lead us, to adjust our spending, production, and/or product launches to better match the pace of electric vehicle adoption. As a result, we have incurred, and may continue to incur, expenses related to payments to our electric vehicle-related suppliers (battery, raw material, or otherwise), inventory adjustments, or other matters. Further, significant unexpected changes in the EV demand environment have led, and may in the future lead, to incremental competitive pricing actions. These market dynamics may continue to occur, which could have a substantial impact on our business.

In addition, slower-than-anticipated development of the electric vehicle market may impact our strategy to comply with regulatory standards, and, in some cases, we plan to utilize credits purchased from third parties to demonstrate regulatory compliance or we may need to modify our product offerings. In the second quarter of 2024, for example, we entered into agreements to purchase about $3.8 billion of regulatory compliance credits for use in North America and Europe for current and future model years. Our obligations under those agreements as well as the ultimate number of credits we may purchase are dependent on the sellers’ delivery of the credits and on the continued existence of the underlying regulatory compliance obligation in the applicable jurisdiction. During the second quarter of 2024, we recorded about $100 million of expense for our anticipated utilization of regulatory compliance credits, which is included in Ford Blue and Ford Pro results. See Item 1A. Risk Factors in our 2023 Form 10‑K Report and as updated by our subsequent filings with the SEC for a discussion of the risks related to lower-than-anticipated electric vehicle volumes and our planned transition to a greater mix of electric vehicles.

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

RESULTS OF OPERATIONS

In the second quarter of 2024, the net income attributable to Ford Motor Company was $1,831 million, and Company adjusted EBIT was $2,757 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 19 of the Notes to the Financial Statements. We report special items separately 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. Our pre-tax and tax special items were as follows (in millions):

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

We recorded $49 million of pre-tax special item charges in the second quarter of 2024, primarily reflecting restructuring actions in Europe (which triggered remeasurement of certain European pension plans) and updated assumptions for the duration of the Oakville Assembly Plant changeover, which is now shorter than originally planned.

In Note 19 of the Notes to the Financial Statements, special items are reflected as a separate reconciling item, as opposed to being allocated among our 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.

COMPANY KEY METRICS

The table below shows our second quarter and first half 2024 key metrics for the Company, compared to a year ago.

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

In the second quarter of 2024, our diluted earnings per share of Common and Class B Stock was $0.46, and our diluted adjusted earnings per share was $0.47.

Net income/(loss) margin was 3.8% in the second quarter of 2024, down 0.4 percentage points from a year ago. Company adjusted EBIT margin was 5.8% in the second quarter of 2024, down 2.7 percentage points from a year ago.

The table below shows our second quarter and first half 2024 net income/(loss) attributable to Ford and Company adjusted EBIT by segment.

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

The year-over-year decrease of $86 million in net income was primarily driven by lower Ford Blue EBIT and higher tax expense, offset partially by lower restructuring costs, the non-recurrence of an accrual for the Transit Connect customs matter, and a pension remeasurement gain. The year-over-year decrease of $1.0 billion in Company adjusted EBIT was driven by lower Ford Blue and Ford Model e EBIT, offset partially by higher Ford Pro EBIT.

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

The tables below and on the following pages provide second quarter and first half 2024 key metrics and the change in second quarter 2024 EBIT compared with second quarter 2023 by causal factor for each of our Ford Blue, Ford Model e, and Ford Pro segments. For a description of these causal factors, see Definitions and Information Regarding Ford Blue, Ford Model e, Ford Pro Causal Factors.

Ford Blue Segment

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Company Excluding Ford Credit

Foreign Currency Risk. The net fair value of foreign exchange forward contracts (including adjustments for credit risk) as of June 30, 2024, was an asset of $51 million, compared with a liability of $319 million as of December 31, 2023. The potential change in the fair value from a 10% change in the underlying exchange rates, in U.S. dollar terms, would have been $3.1 billion at June 30, 2024, compared with $3.1 billion at December 31, 2023.

Commodity Price Risk. The net fair value of commodity forward contracts (including adjustments for credit risk) as of June 30, 2024, was an asset of $54 million, compared with a liability of $9 million at December 31, 2023. The potential change in the fair value from a 10% change in the underlying commodity prices would have been $200 million at June 30, 2024, compared with $203 million at December 31, 2023.

Ford Credit Segment

Interest Rate Risk. To provide a quantitative measure of the sensitivity of its pre-tax cash flow to changes in interest rates, Ford Credit uses interest rate scenarios that assume a hypothetical, instantaneous decrease or increase of one percentage point in all interest rates across all maturities (a “parallel shift”), as well as a base case that assumes that all interest rates remain constant at existing levels. Maturing assets and liabilities are also instantaneously reinvested, capturing 100% of any hypothetical change in interest rates. The differences in pre-tax cash flow between these scenarios and the base case over a 12-month period represent an estimate of the sensitivity of Ford Credit’s pre-tax cash flow. Under this model, Ford Credit estimates that at June 30, 2024, all else constant, such a decrease in interest rates would decrease its pre-tax cash flow by $95 million over the next 12 months, compared with a decrease of $78 million at December 31, 2023. In reality, new assets and liabilities may not immediately capture changes in interest rates, and interest rate changes are rarely instantaneous, parallel, or move exactly the one percentage point assumed in Ford Credit’s analysis. As a result, the actual impact to pre-tax cash flow could be higher or lower than the results detailed above.

Evaluation of Disclosure Controls and Procedures. James D. Farley, Jr., our Chief Executive Officer (“CEO”), and John T. Lawler, our Chief Financial Officer (“CFO”), have performed an evaluation of the Company’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of June 30, 2024, and each has concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by SEC rules and forms, and that such information is accumulated and communicated to the CEO and CFO to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting. There were no changes in internal control over financial reporting during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings.

ENVIRONMENTAL MATTERS

Any legal proceeding arising under any federal, state, or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment, in which (i) a governmental authority is a party, and (ii) we believe there is the possibility of monetary sanctions (exclusive of interest and costs) in excess of $1,000,000 is described on page 35 of our 2023 Form 10-K Report.

OTHER MATTERS

Brazilian Tax Matters (as previously reported on page 35 of our 2023 Form 10-K Report and page 66 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024). One Brazilian state (São Paulo) and the Brazilian federal tax authority currently have outstanding substantial tax assessments against Ford Motor Company Brasil Ltda. (“Ford Brazil”) related to state and federal tax incentives Ford Brazil received for its operations in the Brazilian state of Bahia. The São Paulo assessment is part of a broader conflict among various states in Brazil. The federal legislature enacted laws designed to encourage the states to end that conflict, and in 2017 the states reached an agreement on a framework for resolution. Ford Brazil continues to pursue a resolution under the framework and expects the amount of any remaining assessments by the states to be resolved under that framework. The federal assessments are outside the scope of the legislation.

All of the outstanding assessments have been appealed to the relevant administrative court of each jurisdiction. To proceed with an appeal within the judicial court system, an appellant may be required to post collateral. To date, we have not been required to post any collateral. If we are required to post collateral, which could be in excess of $1 billion, we expect it to be in the form of fixed assets, surety bonds, and/or letters of credit, but we may be required to post cash collateral. Although the ultimate resolution of these matters may take many years, we consider our overall risk of loss to be remote.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In the second quarter of 2024, we repurchased shares of Ford Common Stock as part of an anti-dilutive share repurchase program to offset the dilutive effect of share-based compensation granted during 2024. The program originally authorized repurchases of up to 53 million shares of Ford Common Stock.

During the quarter ended June 30, 2024, no director or officer of the Company adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as each term is defined in Item 408(a) of Regulation S-K.

(a)Incorporated by reference as an exhibit to this Report (file number reference 1-3950, unless otherwise indicated).

(b)Submitted electronically with this Report in accordance with the provisions of Regulation S-T.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FORD MOTOR COMPANY