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

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

COMPANY KEY METRICS

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

Second QuarterFirst Half
20232024H / (L)20232024H / (L)
GAAP Financial Measures
Cash Flows from Operating Activities ($B)$5.0$5.5$0.5$7.8$6.9$(0.9)
Revenue ($M)44,95447,8086%86,42890,5855%
Net Income/(Loss) ($M)1,9171,831$(86)3,6743,163$(511)
Net Income/(Loss) Margin (%)4.3%3.8%(0.4) ppts4.3%3.5%(0.8) ppts
EPS (Diluted)$0.47$0.46$(0.01)$0.91$0.79$(0.12)
Non-GAAP Financial Measures (a)
Company Adj. Free Cash Flow ($B)$2.9$3.2$0.3$3.6$2.8$(0.9)
Company Adj. EBIT ($M)3,7862,757(1,029)7,1655,520(1,645)
Company Adj. EBIT Margin (%)8.4%5.8%(2.7) ppts8.3%6.1%(2.2) ppts
Adjusted EPS (Diluted)$0.72$0.47$(0.25)$1.34$0.97$(0.37)
Adjusted ROIC (Trailing Four Quarters)14.2%11.1%(3.1) ppts

(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.

Second QuarterFirst Half
20232024H / (L)20232024H / (L)
Ford Blue$2,308$1,171$(1,137)$4,931$2,076$(2,855)
Ford Model e(1,080)(1,143)(63)(1,802)(2,463)(661)
Ford Pro2,3912,5641733,7575,5721,815
Ford Next(26)(13)13(70)(22)48
Ford Credit390343(47)693669(24)
Corporate Other(197)(165)32(344)(312)32
Company Adjusted EBIT (a)3,7862,757(1,029)7,1655,520(1,645)
Interest on Debt(304)(270)34(612)(548)64
Special Items(1,194)(49)1,145(2,106)(922)1,184
Taxes / Noncontrolling Interests(371)(607)(236)(773)(887)(114)
Net Income/(Loss)$1,917$1,831$(86)$3,674$3,163$(511)

(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

Second QuarterFirst Half
Key Metrics20232024H / (L)20232024H / (L)
Wholesale Units (000) (a)720741211,4261,367(59)
Revenue ($M)$25,002$26,670$1,668$50,126$48,424$(1,702)
EBIT ($M)2,3081,171(1,137)4,9312,076(2,855)
EBIT Margin (%)9.2%4.4%(4.8) ppts9.8%4.3%(5.6) ppts

(a)Includes Ford and Lincoln brand and JMC brand vehicles produced and sold in China by our unconsolidated affiliates (about 107,000 units in Q2 2023 and 105,000 units in Q2 2024).

Change in EBIT by Causal Factor (in millions)
Second Quarter 2023 EBIT$2,308
Volume / Mix299
Net Pricing194
Cost(1,408)
Exchange(200)
Other(22)
Second Quarter 2024 EBIT$1,171

In the second quarter of 2024, Ford Blue’s wholesales increased 3% from a year ago, driven primarily by higher F-150, Maverick, and Ranger volumes, offset partially by ceasing production of the Fiesta in Europe. Second quarter 2024 revenue increased 7%, driven primarily by higher wholesales.

Ford Blue’s second quarter 2024 EBIT was $1.2 billion, a decrease of $1.1 billion from a year ago, with an EBIT margin of 4.4%. The lower EBIT was primarily driven by higher warranty costs, higher material costs for new products, and higher manufacturing cost, offset partially by higher wholesales.

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

Ford Model e Segment

Second QuarterFirst Half
Key Metrics20232024H / (L)20232024H / (L)
Wholesale Units (000)3426(8)4736(10)
Revenue ($M)$1,834$1,149$(685)$2,541$1,264$(1,277)
EBIT ($M)(1,080)(1,143)(63)(1,802)(2,463)(661)
EBIT Margin (%)(58.9)%(99.5)%(40.6) ppts(70.9)%(194.8)%(123.9) ppts
Change in EBIT by Causal Factor (in millions)
Second Quarter 2023 EBIT$(1,080)
Volume / Mix(202)
Net Pricing(254)
Cost422
Exchange(45)
Other16
Second Quarter 2024 EBIT$(1,143)

In the second quarter of 2024, Ford Model e’s wholesales decreased 23% from a year ago to 26,000 units due to competitive market conditions. Second quarter 2024 revenue decreased 37%, primarily driven by lower wholesales and lower net pricing.

Ford Model e’s second quarter 2024 EBIT loss was $1.1 billion, a $63 million higher loss than a year ago, with an EBIT margin of negative 99.5%. The lower EBIT was primarily driven by lower net pricing, lower wholesales, and adverse mix, offset partially by favorable material cost, including lower battery-related raw materials.

Ford Pro Segment

Second QuarterFirst Half
Key Metrics20232024H / (L)20232024H / (L)
Wholesale Units (000) (a)3653751070278381
Revenue ($M)$15,589$16,988$1,399$28,838$35,007$6,169
EBIT ($M)2,3912,5641733,7575,5721,815
EBIT Margin (%)15.3%15.1%(0.2) ppts13.0%15.9%2.9 ppts

(a)Includes Ford brand vehicles produced and sold by our unconsolidated affiliate Ford Otosan in Türkiye (about 24,000 units in Q2 2023 and 21,000 units in Q2 2024).

Change in EBIT by Causal Factor (in millions)
Second Quarter 2023 EBIT$2,391
Volume / Mix498
Net Pricing275
Cost(586)
Exchange100
Other(114)
Second Quarter 2024 EBIT$2,564

In the second quarter of 2024, Ford Pro’s wholesales increased 3% from a year ago. Second quarter 2024 revenue increased 9%, reflecting higher wholesales, favorable mix, and higher net pricing driven by continued strong demand for our products.

Ford Pro’s second quarter 2024 EBIT was $2.6 billion, an increase of $173 million from a year ago, with an EBIT margin of 15.1%. The improvement in EBIT was driven by higher volume, favorable mix, and higher net pricing, offset partially by higher growth-related structural costs and higher manufacturing costs.

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

Definitions and Information Regarding Ford Blue, Ford Model e, and Ford Pro Causal Factors

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

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

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

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

  • Cost:

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

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

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

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

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

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

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

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

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

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

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

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

  • SAAR – seasonally adjusted annual rate

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

Ford Next Segment

The Ford Next segment primarily includes expenses and investments for emerging business initiatives aimed at creating value for Ford in vehicle-adjacent market segments. Ford Next’s second quarter 2024 EBIT loss was $13 million, a $13 million improvement from a year ago.

Ford Credit Segment

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

The tables below provide second quarter and first half 2024 key metrics and the change in second quarter 2024 EBT compared with second quarter 2023 by causal factor for the Ford Credit segment. For a description of these causal factors, see Definitions and Information Regarding Ford Credit Causal Factors.

Second QuarterFirst Half
Key Metrics20232024H / (L)20232024H / (L)
Total Net Receivables ($B)$126.1$137.7$11.6
Loss-to-Receivables (bps) (a)214120284416
Auction Values (b)$33,445$30,515(9)%$32,135$29,145(9)%
EBT ($M)390343$(47)693669$(24)
ROE (%)9%8%(1) ppts9%7%(2) ppts
Other Balance Sheet Metrics
Debt ($B)$123.7$130.5$6.8
Net Liquidity ($B)28.928.3(0.6)
Financial Statement Leverage (to 1)9.99.6(0.3)

(a)U.S. retail financing only.

(b)U.S. 36-month off-lease second quarter auction values at Q2 2024 mix and YTD amounts at YTD 2024 mix.

Change in EBT by Causal Factor (in millions)
Second Quarter 2023 EBT$390
Volume / Mix53
Financing Margin144
Credit Loss(54)
Lease Residual(123)
Exchange(1)
Other(66)
Second Quarter 2024 EBT$343

Ford Credit’s total net receivables of $137.7 billion were 9% higher than a year ago, explained primarily by higher consumer and non-consumer financing. The second quarter 2024 U.S. loss-to-receivables (“LTR”) ratio of 41 basis points increased from a year ago, and U.S. auction values in the second quarter of 2024 were lower year over year.

Ford Credit’s second quarter 2024 EBT of $343 million was $47 million lower than a year ago, explained primarily by higher operating lease depreciation reflecting higher lease return rates, higher insurance losses due to severe weather events (included in Other), and higher credit losses, offset partially by higher financing margin, higher volume, and favorable mix.

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

Definitions and Information Regarding Ford Credit Causal Factors

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

*•*Volume and Mix:

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

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

*•*Financing Margin:

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

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

*•*Credit Loss:

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

◦Net charge-off changes are primarily driven by the number of repossessions, severity per repossession, and recoveries. Changes in the allowance for credit losses are primarily driven by changes in historical trends in credit losses and recoveries, changes in the composition and size of Ford Credit’s present portfolio, changes in trends in historical used vehicle values, and changes in forward looking macroeconomic conditions. For additional information, refer to the “Critical Accounting Estimates - Allowance for Credit Losses” section of Item 7 of Part II of our 2023 Form 10-K Report

*•*Lease Residual:

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

◦Residual gain and loss changes are primarily driven by the number of vehicles returned to Ford Credit and sold, and the difference between the auction value and the depreciated value (which includes both base and accumulated supplemental depreciation) of the vehicles sold. Changes in accumulated supplemental depreciation are primarily driven by changes in Ford Credit’s estimate of the expected auction value at the end of the lease term and changes in Ford Credit’s estimate of the number of vehicles that will be returned to it and sold. Depreciation on vehicles subject to operating leases includes early termination losses on operating leases due to customer default events. For additional information, refer to the “Critical Accounting Estimates - Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 of Part II of our 2023 Form 10-K Report

  • Exchange:

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

*•*Other:

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

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

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

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

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

  • Cash (as shown in the Funding Structure and Liquidity tables) – Cash, cash equivalents, marketable securities, and restricted cash, excluding amounts related to insurance activities

  • Debt (as shown in the Key Metrics and Leverage tables) – Debt on Ford Credit’s balance sheets. Includes debt issued in securitizations and payable only out of collections on the underlying securitized assets and related enhancements. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions

  • Earnings Before Taxes (“EBT”) – Reflects Ford Credit’s income before income taxes

  • Loss-to-Receivables (“LTR”) Ratio – LTR ratio is calculated using net charge-offs divided by average finance receivables, excluding unearned interest supplements and the allowance for credit losses

  • Return on Equity (“ROE”) (as shown in the Key Metrics table) – Reflects return on equity calculated by annualizing net income for the period and dividing by monthly average equity for the period

  • Securitization and Restricted Cash (as shown in the Liquidity table) – Securitization cash is held for the benefit of the securitization investors (for example, a reserve fund). Restricted cash primarily includes cash held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements

  • Securitizations (as shown in the Public Term Funding Plan table) – Public securitization transactions, Rule 144A offerings sponsored by Ford Credit, and widely distributed offerings by Ford Credit Canada

  • Term Asset-Backed Securities (as shown in the Funding Structure table) – Obligations issued in securitization transactions that are payable only out of collections on the underlying securitized assets and related enhancements

  • Total Net Receivables (as shown in the Key Metrics table) – Includes finance receivables (retail financing and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance sheets and are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations of Ford Credit or the claims of Ford Credit’s other creditors

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

Corporate Other

Corporate Other primarily includes corporate governance expenses, 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. In the second quarter of 2024, Corporate Other had a $165 million EBIT loss, a $32 million improvement from a year ago.

Interest on Debt

Interest on Debt, which consists of interest expense on Company debt excluding Ford Credit, was $270 million in the second quarter of 2024, $34 million lower than a year ago.

Taxes

Our Provision for/(Benefit from) income taxes for the second quarter and first half of 2024 was a provision of $605 million and $883 million, respectively, resulting in effective tax rates of 24.8% and 21.8%, respectively.

Our second quarter and first half 2024 adjusted effective tax rates, which exclude special items, were 23.1% and 21.6%, respectively.

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

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

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2024, total balance sheet cash, cash equivalents, marketable securities, and restricted cash, including Ford Credit and entities held for sale, was $34.8 billion.

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

Company excluding Ford Credit

December 31, 2023June 30, 2024
Balance Sheets ($B)
Company Cash$28.8$26.6
Liquidity46.444.8
Debt(19.9)(20.4)
Cash Net of Debt8.96.2
Pension Funded Status ($B) (a)
Funded Plans$2.1$2.7
Unfunded Plans(4.4)(4.1)
Total Global Pension$(2.3)$(1.4)
Total Funded Status OPEB$(4.7)$(4.6)

(a)Balances at June 30, 2024 reflect net funded status at December 31, 2023, 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 2023.

Liquidity. Our key priority is to maintain a strong balance sheet to withstand potential stress scenarios, while having resources available to invest in and grow our business. At June 30, 2024, we had Company cash of $26.6 billion and liquidity of $44.8 billion. At June 30, 2024, about 86% of Company cash was held by consolidated entities domiciled in the United States.

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

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

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

Material Cash Requirements. Our material cash requirements include:

  • Capital expenditures (for additional information, see the “Changes in Company Cash” section below) and other payments for engineering, software, product development, and implementation of our plans for electric vehicles

  • Purchase of raw materials and components to support the manufacturing and sale of vehicles (including electric vehicles), parts, and accessories (for additional information, see the Aggregate Contractual Obligations table and the accompanying description of our “Purchase obligations” in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 of our 2023 Form 10-K Report)

  • Purchase of regulatory compliance credits

  • Marketing incentive payments to dealers

  • Payments for warranty and field service actions (for additional information, see Note 18 of the Notes to the Financial Statements herein)

  • Debt repayments (for additional information, see the Aggregate Contractual Obligations table in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 and Note 19 of the Notes the Financial Statements in our 2023 Form 10-K Report)

  • Discretionary and mandatory payments to our global pension plans (for additional information, see the Aggregate Contractual Obligations table in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 of our 2023 Form 10-K Report, the “Changes in Company Cash” section below, and Note 11 of the Notes to the Financial Statements herein)

  • Employee wages, benefits, and incentives

  • Operating lease payments (for additional information, see the Aggregate Contractual Obligations table in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 and Note 18 of the Notes to the Financial Statements in our 2023 Form 10-K Report)

  • Cash effects related to the restructuring of our business

  • Strategic acquisitions and investments to grow our business, including electrification

Subject to approval by our Board of Directors, shareholder distributions in the form of dividend payments and/or a share repurchase program (including share repurchases to offset the anti-dilutive effect of increased share-based compensation) may require the expenditure of a material amount of cash. We target shareholder distributions of 40% to 50% of adjusted free cash flow. Moreover, we may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, e.g., legal contingencies, uncertain tax positions, and other matters.

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

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

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

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

Our finished product inventory at June 30, 2024 was higher than at December 31, 2023, primarily reflecting new vehicle launches and units awaiting final quality review.

In response to, or in anticipation of, supplier disruptions, we may stockpile certain components or raw materials to help prevent disruption in our production of vehicles. Such actions could have a short-term adverse impact on our cash and increase our inventory. Moreover, in order to secure critical materials for production of electric vehicles, we have entered into and we may, in the future, enter into offtake agreements with raw material suppliers and make investments in certain raw material and battery suppliers, including contributing up to a maximum of $6.6 billion in capital to BlueOval SK, LLC over a five-year period ending in 2026. Our actual capital outlay could vary significantly based on the final project costs and potential financing opportunities. Such investments could have an additional adverse impact on our cash in the near-term.

The terms of the offtake agreements we have entered into, and those we may enter into in the future, vary by transaction, though they generally obligate us to purchase a certain percentage or minimum amount of output produced by the counterparty over an agreed upon period of time. The purchase price mechanism included in the offtake agreement is typically based on the market price of the material at the time of delivery. The terms may also include conditions to our obligation to purchase the materials, such as quality or minimum output. Subject to satisfaction of those conditions, we will be obligated to purchase the materials at the cost determined by the purchase price mechanism. As of June 30, 2024, our estimated expenditures for the maximum quantity that we are committed to purchase under these offtake agreements through 2035, subject to certain conditions, consist of approximately $3.7 billion of purchase obligations and approximately $6.8 billion of contingent purchase obligations based on our present forecast; however, our forecast could fluctuate from period to period based on market prices, which could result in significant increases or decreases in our estimate. The actual price paid for these materials will be recorded on our balance sheet at the time of purchase. In the event that we do not expect to consume all of the materials we are obligated to purchase pursuant to the terms of these agreements, we may sell the excess materials to a replacement purchaser or back to the supplier. The resale price may or may not be the same as the original purchase price, depending on then-current market conditions and negotiated terms. As a result, in certain instances when the purchase price mechanism under our agreements is higher than the expected resale price of the excess materials, we have recorded and may in the future record accruals related to the resale. Accruals recorded to date for such items have been immaterial.

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

As market conditions dictate, we have and may in the future enter into additional offtake agreements with raw material suppliers or renegotiate existing agreements. In addition, as mentioned above, we may seek to resell excess materials. Based on the offtake agreements we have entered into thus far, the earliest date by which we could be obligated to purchase any output, subject to satisfaction of the applicable conditions, will be in the first half of 2025. 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 our offtake agreements and other long-term purchase contracts.

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 June 30, 2024, the outstanding amount of Ford receivables that suppliers elected to sell to the SCF financial institutions was $194 million. The amount settled through the SCF program during the first half of 2024 was $767 million.

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

Second QuarterFirst Half
2023202420232024
Company Excluding Ford Credit
Company Adjusted EBIT excluding Ford Credit (a)$3.4$2.4$6.5$4.9
Capital spending$(1.9)$(2.1)$(3.7)$(4.2)
Depreciation and tooling amortization1.31.32.62.5
Net spending$(0.6)$(0.8)$(1.1)$(1.6)
Receivables$(0.6)$(0.2)$(0.2)$(0.2)
Inventory(1.4)1.3(3.4)(1.8)
Trade Payables1.4(1.2)1.70.8
Changes in working capital$(0.7)$—$(1.9)$(1.2)
Ford Credit distributions$—$0.2$—$0.2
Interest on debt and cash taxes(0.7)(0.5)(1.3)(1.2)
All other and timing differences1.62.01.41.8
Company adjusted free cash flow (a)$2.9$3.2$3.6$2.8
Restructuring$(0.1)$(0.3)$(0.1)$(0.5)
Changes in debt—0.2(0.2)0.4
Funded pension contributions(0.1)(0.1)(0.2)(0.6)
Shareholder distributions(0.6)(0.8)(3.8)(2.2)
All other(0.9)(0.7)(1.7)(2.1)
Change in cash$1.1$1.5$(2.4)$(2.2)

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

Note: Numbers may not sum due to rounding.

Our second quarter 2024 Net cash provided by/(used in) operating activities was positive $5.5 billion, $0.5 billion higher than a year ago (see page 61 for additional information). The increase reflects lower working capital and higher Ford Credit operating cash flow. Company adjusted free cash flow was $3.2 billion, $0.3 billion higher than a year ago, primarily driven by lower working capital.

Capital spending was $2.1 billion in the second quarter of 2024, an increase of $0.2 billion from a year ago. We continue to expect full year 2024 capital spending to be in the range of $8 billion to $9 billion.

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

Second quarter 2024 working capital impact was flat, driven by lower inventory, offset by higher trade receivables and lower trade payables, each compared to March 31, 2024. All other and timing differences were positive $2.0 billion. Timing differences include differences between accrual-based EBIT and the associated cash flows (e.g., marketing incentive and warranty payments to dealers, JV equity income, compensation payments, and pension and OPEB income or expense). Cash outflows related to our warranty accruals are expected to occur over several years.

In the second quarter of 2024, we contributed $83 million to our global funded pension plans. We expect to contribute about $1 billion to our global funded pension plans in 2024.

Shareholder distributions (including a regular cash dividend and anti-dilutive share repurchases) were $0.8 billion in the second quarter of 2024.

Available Credit Lines. Total Company committed credit lines, excluding Ford Credit, at June 30, 2024 were $20.1 billion, consisting of $13.5 billion of our corporate credit facility, $2.0 billion of our supplemental revolving credit facility, $2.5 billion of our 364-day revolving credit facility, and $2.1 billion of local credit facilities. At June 30, 2024, the utilized portion of the corporate credit facility was $6 million, representing amounts utilized for letters of credit. In addition, $1.7 billion of committed Company credit lines, excluding Ford Credit, was utilized under local credit facilities for our affiliates as of June 30, 2024.

Our corporate, supplemental, and 364-day revolving credit facilities were amended as of April 22, 2024 to extend the maturity dates of the commitments under each facility and increase the size of our 364-day revolving credit facility. Lenders under our corporate credit facility have $25 million of commitments maturing on April 26, 2026, $3.4 billion of commitments maturing on April 22, 2027, $0.1 billion of commitments maturing on April 26, 2028, and $10.0 billion of commitments maturing on April 20, 2029. Lenders under our supplemental revolving credit facility have $2.0 billion of commitments maturing on April 22, 2027. Lenders under our 364-day revolving credit facility have $2.5 billion of commitments maturing on April 21, 2025.

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

The corporate credit facility is unsecured and free of material adverse change conditions to borrowing, restrictive financial covenants (for example, interest or fixed-charge coverage ratio, debt-to-equity ratio, and minimum net worth requirements), and credit rating triggers that could limit our ability to obtain funding or trigger early repayment. The corporate credit facility contains a liquidity covenant that requires us to maintain a minimum of $4 billion in aggregate of domestic cash, cash equivalents, and loaned and marketable securities and/or availability under the corporate credit facility, supplemental revolving credit facility, and 364-day revolving credit facility. If our senior, unsecured, long-term debt does not maintain at least two investment grade ratings from Fitch, Moody’s, and S&P, the guarantees of certain subsidiaries will be required. The terms and conditions of the supplemental and 364-day revolving credit facilities are consistent with our corporate credit facility. Ford Credit has been designated as a subsidiary borrower under the corporate credit facility and the 364-day revolving credit facility.

Debt. As shown in Note 12 of the Notes to the Financial Statements, at June 30, 2024, Company debt excluding Ford Credit was $20.4 billion. This balance is $0.5 billion higher than at December 31, 2023.

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

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

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

Ford Credit Segment

Ford Credit remains well capitalized with a strong balance sheet and funding diversified across platforms and markets. Ford Credit ended the second quarter of 2024 with $28.3 billion of liquidity, up $2.6 billion from year-end. Ford Credit continues to have robust access to capital markets, completing $22 billion of public term issuances through July 23, 2024.

Key elements of Ford Credit’s funding strategy include:

  • Maintain strong liquidity and funding diversity

  • Prudently access public markets

  • Continue to leverage retail deposits in Europe

  • Flexibility to increase asset-backed securities mix as needed; preserving assets and committed capacity

  • Target financial statement leverage of 9:1 to 10:1

  • Maintain self-liquidating balance sheet

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

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

June 30, 2023December 31, 2023June 30, 2024
Funding Structure
Term unsecured debt$52.2$54.1$59.2
Term asset-backed securities55.658.053.9
Retail Deposits / Ford Interest Advantage15.917.217.4
Other2.41.41.1
Equity12.513.413.6
Adjustments for cash(12.5)(10.9)(7.5)
Total Net Receivables$126.1$133.2$137.7
Securitized Funding as Percent of Total Debt45.0%44.9%41.3%

Net receivables of $137.7 billion at June 30, 2024 were funded primarily with term unsecured debt and term asset-backed securities. Securitized funding as a percent of total debt was 41.3% as of June 30, 2024.

Public Term Funding Plan. The following table shows Ford Credit’s issuances for full year 2022 and 2023, planned issuances for full year 2024, and its global public term funding issuances through July 23, 2024, excluding short-term funding programs (in billions):

2022 Actual2023 Actual2024 ForecastThrough July 23
Unsecured$6$14$ 14-17$12
Securitizations (a)101414-1610
Total public$16$28$ 28-33$22

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

For 2024, Ford Credit now projects full year public term funding in the range of $28 billion to $33 billion.

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

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

June 30, 2023December 31, 2023June 30, 2024
Liquidity Sources (a)
Cash$12.5$10.9$7.5
Committed asset-backed facilities42.342.942.5
Other unsecured credit facilities2.62.42.2
Total liquidity sources$57.4$56.2$52.2
Utilization of Liquidity (a)
Securitization and restricted cash$(2.9)$(2.8)$(2.8)
Committed asset-backed facilities(23.1)(27.5)(21.1)
Other unsecured credit facilities(1.2)(0.4)(0.2)
Total utilization of liquidity$(27.2)$(30.7)$(24.1)
Available liquidity$30.2$25.5$28.1
Other adjustments(1.3)0.20.2
Net liquidity available for use$28.9$25.7$28.3

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

Ford Credit’s net liquidity available for use will fluctuate quarterly based on factors including near-term debt maturities, receivable growth and decline, and timing of funding transactions. At June 30, 2024, Ford Credit’s net liquidity available for use was $28.3 billion, $2.6 billion higher than year-end 2023, reflecting strong access to public funding markets. At June 30, 2024, Ford Credit’s liquidity sources, including cash, committed asset-backed facilities, and unsecured credit facilities, totaled $52.2 billion, down $4.0 billion from year-end 2023, primarily explained by lower cash due to higher receivables.

Material Cash Requirements. Ford Credit’s material cash requirements include: (1) the purchase of retail financing and operating lease contracts from dealers and providing wholesale financing for dealers to finance new and used vehicles; and (2) debt repayments (for additional information on debt, see the “Aggregate Contractual Obligations” table in the “Liquidity and Capital Resources - Company Excluding Ford Credit” section in Item 7 and Note 19 of the Notes to the Financial Statements in our 2023 Form 10-K Report). In addition, subject to approval by Ford Credit’s Board of Directors, shareholder distributions may require the expenditure of a material amount of cash. Moreover, Ford Credit may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, e.g., legal contingencies, uncertain tax positions, and other matters.

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

Funding and Liquidity Risks. Ford Credit’s funding plan is subject to risks and uncertainties, many of which are beyond its control, including disruption in the capital markets, that could impact both unsecured debt and asset-backed securities issuance and the effects of regulatory changes on the financial markets. Refer to the “Liquidity - Ford Credit Segment - Funding and Liquidity Risks” section of Item 7 of Part II of our 2023 Form 10-K Report for more information.

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

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

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

June 30, 2023December 31, 2023June 30, 2024
Leverage Calculation
Debt$123.7$129.3$130.5
Equity (a)12.513.413.6
Financial statement leverage (to 1)9.99.79.6

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

Ford Credit plans its leverage by considering market conditions and the risk characteristics of its business. At June 30, 2024, Ford Credit’s financial statement leverage was 9.6:1. Ford Credit targets financial statement leverage in the range of 9:1 to 10:1.

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

Total Company

Pension Plans - Funded Balances. As of June 30, 2024, our total Company pension underfunded status reported on our consolidated balance sheets was $1.4 billion and reflects the net funded status at December 31, 2023, updated for: service and interest cost; expected return on assets; curtailments, settlements, and associated interim remeasurement (where applicable); separation expense; actual benefit payments; and cash contributions. For plans without interim remeasurement, the discount rate and rate of expected return assumptions are unchanged from year-end 2023.

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

Four Quarters Ending
June 30, 2023June 30, 2024
Adjusted Net Operating Profit/(Loss) After Cash Tax
Net income/(loss) attributable to Ford$4.1$3.8
Add: Noncontrolling interest(0.2)—
Less: Income tax(0.5)0.2
Add: Cash tax(1.0)(1.2)
Less: Interest on debt(1.3)(1.2)
Less: Total pension/OPEB income/(cost)(0.6)(2.6)
Add: Pension/OPEB service costs(0.7)(0.6)
Net operating profit/(loss) after cash tax$4.5$5.7
Less: Special items (excl. pension/OPEB) pre-tax(5.1)(2.0)
Adjusted net operating profit/(loss) after cash tax$9.6$7.7
Invested Capital
Equity$43.6$43.6
Debt (excl. Ford Credit)19.620.4
Net pension and OPEB liability4.66.0
Invested capital (end of period)$67.8$70.0
Average invested capital$67.6$69.1
ROIC (a)6.7%8.2%
Adjusted ROIC (Non-GAAP) (b)14.2%11.1%

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

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

Note: Numbers may not sum due to rounding.

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

CREDIT RATINGS

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

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

There have been no rating actions taken by these NRSROs since the filing of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.

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

NRSRO RATINGS
FordFord CreditNRSROs
Issuer Default / Corporate / Issuer RatingLong-Term Senior UnsecuredOutlook / TrendLong-Term Senior UnsecuredShort-Term UnsecuredOutlook / TrendMinimum Long-Term Investment Grade Rating
DBRSBBB (low)BBB (low)StableBBB (low)R-2 (low)StableBBB (low)
FitchBBB-BBB-StableBBB-F3StableBBB-
Moody’sN/ABa1StableBa1NPStableBaa3
S&PBBB-BBB-StableBBB-A-3StableBBB-

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

OUTLOOK

We provided 2024 Company guidance in our earnings release furnished on Form 8-K dated July 24, 2024. The guidance is based on our expectations as of July 24, 2024, and assumes no material change to our current assumptions for inflation, logistics issues, production, or macroeconomic conditions. Our actual results could differ materially from our guidance due to risks, uncertainties, and other factors, including those set forth in “Risk Factors” in Item 1A of our 2023 Form 10-K Report and as updated by our subsequent filings with the SEC.

2024 Guidance
Total Company
Adjusted EBIT (a)$10 - $12 billion
Adjusted Free Cash Flow (a)$7.5 - $8.5 billion
Capital spending$8 - $9 billion
Ford Credit
EBTAbout $1.5 billion

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

For full-year 2024, we expect adjusted EBIT of $10 billion to $12 billion and adjusted free cash flow of $7.5 billion to $8.5 billion.

On a segment basis, we expect:

  • Ford Pro EBIT of $9 billion to $10 billion driven by continued growth and favorable mix, offset partially by moderated pricing

  • Ford Blue EBIT of $6 billion to $6.5 billion, reflecting a balanced market equation and higher product, manufacturing, and warranty costs, offset partially by cost efficiencies

  • Ford Model e EBIT loss of $5 billion to $5.5 billion driven by continued pricing pressure and investments in new electric vehicles

  • Ford Credit EBT of about $1.5 billion

Our outlook for 2024 assumes:

  • Flat to modest U.S. industry growth at 16 million to 16.5 million

  • Full year of all-new Super Duty, which drives positive pricing and mix in Ford Pro

  • Lower industry pricing

  • $2 billion of cost reductions in material, freight, and manufacturing

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

Cautionary Note on Forward-Looking Statements

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

  • Ford is highly dependent on its suppliers to deliver components in accordance with Ford’s production schedule and specifications, and a shortage of or inability to acquire key components or raw materials, such as lithium, cobalt, nickel, graphite, and manganese, can disrupt Ford’s production of vehicles;

  • To facilitate access to the raw materials and other components necessary for the production of electric vehicles, Ford has entered into and may, in the future, enter into multi-year commitments to raw material and other suppliers that subject Ford to risks associated with lower future demand for such items as well as costs that fluctuate and are difficult to accurately forecast;

  • Ford’s long-term competitiveness depends on the successful execution of Ford+;

  • Ford’s vehicles could be affected by defects that result in recall campaigns, increased warranty costs, or delays in new model launches, and the time it takes to improve the quality of our vehicles and services could continue to have an adverse effect on our business;

  • Ford may not realize the anticipated benefits of existing or pending strategic alliances, joint ventures, acquisitions, divestitures, or business strategies;

  • Ford may not realize the anticipated benefits of restructuring actions and such actions may cause Ford to incur significant charges, disrupt our operations, or harm our reputation;

  • Operational information systems, security systems, vehicles, and services could be affected by cybersecurity incidents, ransomware attacks, and other disruptions and impact Ford and Ford Credit as well as their suppliers and dealers;

  • Ford’s production, as well as Ford’s suppliers’ production, and/or the ability to deliver products to consumers could be disrupted by labor issues, public health issues, natural or man-made disasters, adverse effects of climate change, financial distress, production difficulties, capacity limitations, or other factors;

  • Failure to develop and deploy secure digital services that appeal to customers could have a negative impact on Ford’s business;

  • Ford’s ability to maintain a competitive cost structure could be affected by labor or other constraints;

  • Ford’s ability to attract, develop, grow, and reward talent is critical to its success and competitiveness;

  • Ford’s new and existing products and digital, software, and physical services are subject to market acceptance and face significant competition from existing and new entrants in the automotive and digital and software services industries, and its reputation may be harmed if it is unable to achieve the initiatives it has announced;

  • Ford’s results are dependent on sales of larger, more profitable vehicles, particularly in the United States;

  • With a global footprint and supply chain, Ford’s results and operations could be adversely affected by economic or geopolitical developments, including protectionist trade policies such as tariffs, or other events;

  • Industry sales volume can be volatile and could decline if there is a financial crisis, recession, public health emergency, or significant geopolitical event;

  • Ford may face increased price competition or a reduction in demand for its products resulting from industry excess capacity, currency fluctuations, competitive actions, or other factors, particularly for electric vehicles;

  • Inflationary pressure and fluctuations in commodity and energy prices, foreign currency exchange rates, interest rates, and market value of Ford or Ford Credit’s investments, including marketable securities, can have a significant effect on results;

  • Ford and Ford Credit’s access to debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts could be affected by credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors;

  • The impact of government incentives on Ford’s business could be significant, and Ford’s receipt of government incentives could be subject to reduction, termination, or clawback;

  • Ford Credit could experience higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles;

  • Economic and demographic experience for pension and OPEB plans (e.g., discount rates or investment returns) could be worse than Ford has assumed;

  • Pension and other postretirement liabilities could adversely affect Ford’s liquidity and financial condition;

  • Ford and Ford Credit could experience unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, services, perceived environmental impacts, or otherwise;

  • Ford may need to substantially modify its product plans and facilities to comply with safety, emissions, fuel economy, autonomous driving technology, environmental, and other regulations;

  • Ford and Ford Credit could be affected by the continued development of more stringent privacy, data use, data protection, and artificial intelligence laws and regulations as well as consumers’ heightened expectations to safeguard their personal information; and

  • Ford Credit could be subject to new or increased credit regulations, consumer protection regulations, or other regulations.

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

We cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. For additional discussion, see “Item 1A. Risk Factors” in our 2023 Form 10-K Report, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

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

NON-GAAP FINANCIAL MEASURES THAT SUPPLEMENT GAAP MEASURES

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

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

Pre-Tax Special ItemSignificance Guideline
∘ Pension and OPEB remeasurement gains and losses∘ No minimum
∘ Gains and losses on investments in equity securities∘ No minimum
∘ 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∘ Generally $100 million or more
∘ Other items that we do not necessarily consider to be indicative of earnings from ongoing operating activities∘ $500 million or more for individual field service actions; generally $100 million or more for other items

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

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

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

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

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

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

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

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

Non-GAAP Financial Measure Reconciliations

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

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

Second QuarterFirst Half
2023202420232024
Net income/(loss) attributable to Ford (GAAP)$1,917$1,831$3,674$3,163
Income/(Loss) attributable to noncontrolling interests99254
Net income/(loss)$2,016$1,833$3,679$3,167
Less: (Provision for)/Benefit from income taxes(272)(605)(768)(883)
Income/(Loss) before income taxes$2,288$2,438$4,447$4,050
Less: Special items pre-tax(1,194)(49)(2,106)(922)
Income/(Loss) before special items pre-tax$3,482$2,487$6,553$4,972
Less: Interest on debt(304)(270)(612)(548)
Adjusted EBIT (Non-GAAP)$3,786$2,757$7,165$5,520
Memo:
Revenue ($B)$45.0$47.8$86.4$90.6
Net income/(loss) margin (GAAP) (%)4.3%3.8%4.3%3.5%
Adjusted EBIT margin (Non-GAAP) (%)8.4%5.8%8.3%6.1%

Earnings per Share Reconciliation to Adjusted Earnings per Share

Second QuarterFirst Half
2023202420232024
Diluted After-Tax Results ($M)
Diluted after-tax results (GAAP)$1,917$1,831$3,674$3,163
Less: Impact of pre-tax and tax special items (a)(1,012)(79)(1,722)(732)
Adjusted net income/(loss) – diluted (Non-GAAP)$2,929$1,910$5,396$3,895
Basic and Diluted Shares (M)
Basic shares (average shares outstanding)4,0033,9853,9963,982
Net dilutive options, unvested restricted stock units, unvested restricted stock shares, and convertible debt38373940
Diluted shares4,0414,0224,0354,022
Earnings/(Loss) per share – diluted (GAAP)$0.47$0.46$0.91$0.79
Less: Net impact of adjustments(0.25)(0.01)(0.43)(0.18)
Adjusted earnings/(loss) per share – diluted (Non-GAAP)$0.72$0.47$1.34$0.97

(a)Includes adjustment for noncontrolling interest in the second quarter and first half of 2023.

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

Effective Tax Rate Reconciliation to Adjusted Effective Tax Rate

Second QuarterFirst Half
2023202420232024Memo: FY 2023
Pre-Tax Results ($M)
Income/(Loss) before income taxes (GAAP)$2,288$2,438$4,447$4,050$3,967
Less: Impact of special items(1,194)(49)(2,106)(922)(5,147)
Adjusted earnings before taxes (Non-GAAP)$3,482$2,487$6,553$4,972$9,114
Taxes ($M)
(Provision for)/Benefit from income taxes (GAAP) (a)$(272)$(605)$(768)$(883)$362
Less: Impact of special items (b)177(30)3211901,273
Adjusted (provision for)/benefit from income taxes (Non-GAAP)$(449)$(575)$(1,089)$(1,073)$(911)
Tax Rate (%)
Effective tax rate (GAAP)11.9%24.8%17.3%21.8%(9.1)%
Adjusted effective tax rate (Non-GAAP)12.9%23.1%16.6%21.6%10.0%

(a)Full Year 2023 reflects benefits from U.S. research tax credits and legal entity restructuring within our leasing operations and China.

(b)Full Year 2023 reflects benefits from China legal entity restructuring.

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

Second QuarterFirst Half
2023202420232024
Net cash provided by/(used in) operating activities (GAAP)$5,035$5,508$7,835$6,893
Less: Items not included in Company Adjusted Free Cash Flows
Ford Credit operating cash flows$581$685$1,207$1,866
Funded pension contributions(109)(83)(234)(633)
Restructuring (including separations) (a)(118)(289)(199)(465)
Ford Credit tax payments/(refunds) under tax sharing agreement——(5)(33)
Other, net(73)4(213)(605)
Add: Items included in Company Adjusted Free Cash Flows
Company excluding Ford Credit capital spending$(1,927)$(2,078)$(3,687)$(4,151)
Ford Credit distributions—150—150
Settlement of derivatives92(26)20(3)
Company adjusted free cash flow (Non-GAAP)$2,919$3,237$3,612$2,758

(a)Restructuring excludes cash flows reported in investing activities.

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

SUPPLEMENTAL INFORMATION

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

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

For the period ended June 30, 2024
Second Quarter
Company excluding Ford CreditFord CreditConsolidated
Revenues$44,811$2,997$47,808
Total costs and expenses43,1672,75845,925
Operating income/(loss)1,6442391,883
Interest expense on Company debt excluding Ford Credit270—270
Other income/(loss), net53494628
Equity in net income/(loss) of affiliated companies18710197
Income/(Loss) before income taxes2,0953432,438
Provision for/(Benefit from) income taxes51788605
Net income/(loss)1,5782551,833
Less: Income/(Loss) attributable to noncontrolling interests2—2
Net income/(loss) attributable to Ford Motor Company$1,576$255$1,831
For the period ended June 30, 2024
First Half
Company excluding Ford CreditFord CreditConsolidated
Revenues$84,701$5,884$90,585
Total costs and expenses82,0195,45887,477
Operating income/(loss)2,6824263,108
Interest expense on Company debt excluding Ford Credit548—548
Other income/(loss), net9012251,126
Equity in net income/(loss) of affiliated companies34618364
Income/(Loss) before income taxes3,3816694,050
Provision for/(Benefit from) income taxes703180883
Net income/(loss)2,6784893,167
Less: Income/(Loss) attributable to noncontrolling interests4—4
Net income/(loss) attributable to Ford Motor Company$2,674$489$3,163

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

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

June 30, 2024
AssetsCompany excluding Ford CreditFord CreditEliminationsConsolidated
Cash and cash equivalents$12,505$7,448$—$19,953
Marketable securities13,931682—14,613
Ford Credit finance receivables, net—47,434—47,434
Trade and other receivables, net6,03510,767—16,802
Inventories17,183——17,183
Other assets3,2721,261—4,533
Receivable from other segments1,2912,270(3,561)—
Total current assets54,21769,862(3,561)120,518
Ford Credit finance receivables, net—58,159—58,159
Net investment in operating leases1,17020,375—21,545
Net property40,420289—40,709
Equity in net assets of affiliated companies7,090125—7,215
Deferred income taxes16,307156516,468
Other assets10,7911,181—11,972
Receivable from other segments7512(87)—
Total assets$130,070$150,159$(3,643)$276,586
Liabilities
Payables$24,550$908$—$25,458
Other liabilities and deferred revenue24,4002,980—27,380
Debt payable within one year1,71248,853—50,565
Payable to other segments3,427134(3,561)—
Total current liabilities54,08952,875(3,561)103,403
Other liabilities and deferred revenue26,6241,665—28,289
Long-term debt18,69481,642—100,336
Deferred income taxes6113475963
Payable to other segments1275(87)—
Total liabilities$100,030$136,604$(3,643)$232,991

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

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

For the period ended June 30, 2024
First Half
Cash flows from operating activitiesCompany excluding Ford CreditFord CreditEliminationsConsolidated
Net income/(loss)$2,678$489$—$3,167
Depreciation and tooling amortization2,5501,245—3,795
Other amortization29(801)—(772)
Provision for credit and insurance losses7310—317
Pension and OPEB expense/(income)201——201
Equity method investment dividends received in excess of (earnings)/losses and impairments(117)(7)—(124)
Foreign currency adjustments202(29)—173
Net realized and unrealized (gains)/losses on cash equivalents, marketable securities, and other investments44—8
Stock compensation2669—275
Provision for/(Benefit from) deferred income taxes15749—206
Decrease/(Increase) in finance receivables (wholesale and other)—(1,865)—(1,865)
Decrease/(Increase) in intersegment receivables/payables457(457)——
Decrease/(Increase) in accounts receivable and other assets(1,357)(246)—(1,603)
Decrease/(Increase) in inventory(1,845)——(1,845)
Increase/(Decrease) in accounts payable and accrued and other liabilities4,968301—5,269
Other(303)(6)—(309)
Interest supplements and residual value support to Ford Credit(2,870)2,870——
Net cash provided by/(used in) operating activities$5,027$1,866$—$6,893
Cash flows from investing activities
Capital spending$(4,151)$(43)$—$(4,194)
Acquisitions of finance receivables and operating leases—(29,542)—(29,542)
Collections of finance receivables and operating leases—22,530—22,530
Purchases of marketable and other investments(5,974)(95)—(6,069)
Sales and maturities of marketable securities and other investments6,612200—6,812
Settlements of derivatives(3)(234)—(237)
Capital contributions to equity method investments(1,299)——(1,299)
Other78——78
Investing activity (to)/from other segments1504(154)—
Net cash provided by/(used in) investing activities$(4,587)$(7,180)$(154)$(11,921)
Cash flows from financing activities
Cash payments for dividends and dividend equivalents$(1,925)$—$—$(1,925)
Purchases of common stock(244)——(244)
Net changes in short-term debt421(1,429)—(1,008)
Proceeds from issuance of long-term debt—28,960—28,960
Payments of long-term debt(79)(25,066)—(25,145)
Other(161)(93)—(254)
Financing activity to/(from) other segments(4)(150)154—
Net cash provided by/(used in) financing activities$(1,992)$2,222$154$384
Effect of exchange rate changes on cash, cash equivalents, and restricted cash$(90)$(150)$—$(240)

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

Selected Other Information.

Equity. At June 30, 2024, total equity attributable to Ford was $43.6 billion, an increase of $0.8 billion compared with December 31, 2023. The detail for this change is shown below (in billions):

Increase/ (Decrease)
Net income/(loss)$3.2
Shareholder distributions(2.2)
Other comprehensive income/(loss), net(0.3)
Common stock issued (including share-based compensation impacts)0.1
Total$0.8

U.S. Sales by Type. The following table shows second quarter 2024 U.S. sales volume and U.S. wholesales segregated by electric, hybrid, and internal combustion vehicles. U.S. sales volume represents primarily sales by dealers, sales to the government, and leases to Ford management, and is based, in part, on estimated vehicle registrations and includes medium and heavy trucks.

U.S. SalesU.S. Wholesales
Electric Vehicles23,95724,323
Hybrid Vehicles53,82265,360
Internal Combustion Vehicles458,271490,285
Total Vehicles536,050579,968

ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

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

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