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Ford Motor Company

Ford Motor CompanyFEarnings & Financial Report

NYSE · Consumer Discretionary · Automobile Manufacturers

The Ford Motor Company is an American multinational automobile manufacturer headquartered in Dearborn, Michigan, United States. It was founded by Henry Ford and incorporated on June 16, 1903. The company sells automobiles and commercial vehicles under the Ford brand, and luxury cars under its Lincoln brand. The company is listed on the New York Stock Exchange under the single-letter ticker symbol F and is controlled by the Ford family.

What changed in Ford Motor Company's 10-K — 2022 vs 2023

Top changes in Ford Motor Company's 2023 10-K

395 paragraphs added · 651 removed · 261 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

79 edited+50 added−45 removed52 unchanged
Employee Health and Safety Nothing is more important than the health, safety, and wellbeing of our employees, and we consistently strive to achieve world-class levels of safety through the application of sound policies and best practices. We maintain a robust safety culture to reduce workplace injuries, supported by effective communication, reporting, and external benchmarking.
Employee Health and Safety Nothing is more important than the health, safety and wellbeing of our employees and we consistently strive to achieve world-class levels of safety through the application of sound policies and best practices. We maintain a robust safety culture designed to reduce workplace injuries, supported by effective communication, reporting, and external benchmarking.
Business (Continued) HUMAN CAPITAL RESOURCES People Strategy and Governance We strive to create an employee experience that enables an inclusive environment of excellence, focus, and collaboration among team members, allowing us to deliver short- and long-term business success.
HUMAN CAPITAL RESOURCES People Strategy and Governance We strive to create an employee experience that enables an inclusive environment of excellence, focus, and collaboration among team members, allowing us to deliver short- and long-term business success.
Manufacturers are subject to substantial civil penalties if they fail to meet the CAFE standard in any model year, after taking into account all available credits for the preceding five model years and expected credits for the three succeeding model years.
Manufacturers are subject to civil penalties if they fail to meet the CAFE standard in any model year, after taking into account all available credits for the preceding five model years and expected credits for the three succeeding model years.
Elsewhere, there is a mix of regulations and processes based on U.S. and EU standards. Not all countries have adopted appropriate fuel quality standards to accompany the stringent emission standards adopted. This could lead to compliance problems, particularly if OBD or in-use surveillance requirements are implemented. Global Developments.
Business (Continued) Elsewhere, there is a mix of regulations and processes based on U.S. and EU standards. Not all countries have adopted appropriate fuel quality standards to accompany the stringent emission standards adopted. This could lead to compliance problems, particularly if OBD or in-use surveillance requirements are implemented. Global Developments.
Ford maintains an Executive People Forum consisting of the CEO and top leadership team that meets monthly with a specific focus on people and organizational topics that will enable and accelerate delivery of the business plan. Key topic areas include Compensation & Retention, Diversity, Equity, and Inclusion (“DEI”), Organization Design, Talent Planning & Development, and Culture.
Ford maintains an Executive People Forum consisting of the CEO and top leadership team that meets monthly with a specific focus on people and organizational topics that will enable and accelerate delivery of our Ford+ plan. Key topic areas include Compensation & Retention; Diversity, Equity, and Inclusion (“DEI”); Organization Design; Talent Planning & Development; and Culture.
We have announced plans to significantly increase our electric vehicle production volumes; however, our ability to produce higher volumes of electric vehicles is dependent upon the availability of raw materials necessary for the production of batteries, e.g., lithium, cobalt, nickel, graphite, and manganese, among others.
We have announced plans to significantly increase our electric vehicle production volumes; however, our ability to produce higher volumes of electric vehicles is dependent upon the availability of raw materials and other components necessary for the production of batteries, e.g., lithium, cobalt, nickel, graphite, and manganese, among others.
GOVERNMENTAL STANDARDS Many governmental standards and regulations relating to safety, fuel economy, emissions control, noise control, vehicle recycling, substances of concern, vehicle damage, and theft prevention are applicable to new motor vehicles, engines, and equipment.
GOVERNMENTAL STANDARDS Many governmental standards and regulations relating to safety, fuel economy, air pollution emissions control, noise control, vehicle recycling, substances of concern, vehicle damage, and theft prevention are applicable to new motor vehicles, engines, and equipment.
EPA standards were automatically adopted in Canada by reference for the 2022-2025 model years, and draft amendments for a few standalone administrative elements not automatically adopted by reference were published in December 2022.
EPA standards were automatically adopted in Canada by reference for the 2022-2026 model years, and draft amendments for a few standalone administrative elements not automatically adopted by reference were published in December 2022.
Vehicle Safety U.S. Requirements. The National Traffic and Motor Vehicle Safety Act of 1966 (the “Safety Act”) regulates vehicles and vehicle equipment in two primary ways. First, the Safety Act prohibits the sale in the United States of any new vehicle or equipment that does not conform to applicable vehicle safety standards established by NHTSA.
The National Traffic and Motor Vehicle Safety Act of 1966 (the “Safety Act”) regulates vehicles and vehicle equipment in two primary ways. First, the Safety Act prohibits the sale in the United States of any new vehicle or equipment that does not conform to applicable vehicle safety standards established by NHTSA.
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, such as semiconductors, or raw materials, such as lithium, cobalt, nickel, graphite, and manganese, can disrupt Ford’s production of vehicles.
Operational Risks 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.
As described below under “ To facilitate access to the raw materials necessary for the production of electric vehicles, Ford has entered into, and expects to continue to enter into, multi-year commitments to raw material suppliers that subject Ford to risks associated with lower future demand for such materials as well as costs that fluctuate and are difficult to accurately forecast ” as well as in the Liquidity and Capital Resources section in Item 7 below, we have entered into, and expect to continue to enter into, offtake agreements and other long-term purchase contracts that obligate us, subject to certain conditions such as quality or minimum output, to purchase a certain percentage or minimum amount of output from certain raw materials suppliers.
As described below under “ 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 ” as well as in the Liquidity and Capital Resources section in Item 7 below, we have entered into and we may, in the future, enter into offtake agreements and other long-term purchase contracts that obligate us, subject to certain conditions such as quality or minimum output, to purchase a certain percentage or minimum amount of output from certain raw materials suppliers.
The reports are available through Ford Credit’s website located at www.fordcredit.com/investor-center and can also be found on the SEC’s website located at www.sec.gov . The foregoing information regarding Ford Credit’s website and its content is for convenience only and not deemed to be incorporated by reference into this Report nor filed with the SEC. 6 Item 1.
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. 7 Item 1.
In an effort to support the Paris Accord, some countries are adopting yearly increases in CO 2 taxes, where such a system is in place, and publishing dates by when internal combustion powered vehicles may no longer be registered, e.g., Norway in 2025 and the United Kingdom and the Netherlands in 2030. Other National Requirements.
In an effort to support the Paris Accord, some countries are adopting yearly increases in CO 2 taxes, where such a system is in place, and publishing dates by when internal combustion powered vehicles may no longer be registered, e.g., Norway in 2025 and the Netherlands in 2030. Other National Emissions Control Requirements.
As described above under “ 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, such as semiconductors, or raw materials, such as lithium, cobalt, nickel, graphite, and manganese, can disrupt Ford’s production of vehicles ,” to facilitate our access to such raw materials, we have entered into, and expect to continue to enter into, offtake agreements and other long-term purchase contracts.
As described above under “ 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 our access to such raw materials, we have entered into and we may, in the future, enter into offtake agreements and other long-term purchase contracts.
Ford also faces the risk of advance premium payments for both passenger cars and light commercial vehicles in all European markets due to, for example, unexpected market fluctuations and shorter lead times impacting average fleet performance. 10 Item 1. Business (Continued) The United Nations developed a technical regulation for passenger car emissions and CO 2 .
Ford also faces the risk of advance premium payments for both passenger cars and light commercial vehicles in all European markets due to, for example, unexpected market fluctuations and shorter lead times impacting average fleet performance. The United Nations developed a technical regulation for passenger car emissions and CO 2 .
The collective recommendations to the Board and its committees are how we proactively manage our human capital and create an employee experience that allows employees and our organization to thrive.
Collective recommendations to the Board and its committees are an important part of how we proactively manage our human capital and create an employee experience that allows employees and our organization to thrive.
These protocols impose additional requirements relating to testing, evaluation, and mandatory safety features, and compliance with them (or any subsequent updates to them) may be costly. 12 Item 1.
These protocols impose additional requirements relating to testing, evaluation, and mandatory safety features, and compliance with them (or any subsequent updates to them) may be costly.
The EU CO 2 requirements are likely to trigger further measures. In addition, delayed vehicle launches and supply shortages, as well as an insufficient charging infrastructure and lower demand for ZEV and low CO 2 emission vehicles as certain electric vehicle incentives are reduced, can trigger compliance risks in all European markets. Other National Requirements.
The EU CO 2 requirements are likely to trigger further measures. In addition, delayed vehicle launches and supply shortages, as well as an insufficient charging infrastructure and lower demand for ZEV and low CO 2 emission vehicles as certain electric vehicle incentives are reduced or for other reasons, can trigger compliance risks in all European markets. 11 Item 1.
In the event the supplier under those agreements or any of our or our suppliers’ raw material supply contracts is unable to deliver sufficient quantities of raw materials needed for our or our suppliers’ production operations, e.g., if a mine does not produce at expected levels, or the raw materials do not otherwise satisfy our requirements, and we or our suppliers are unable to find an alternative resource with sufficient quantities, at reasonable prices, responsibly sourced, and in a timely manner, it could impact our ability to produce electric vehicles.
In the event the supplier under those agreements or any of our or our suppliers’ raw material supply contracts is unable to deliver sufficient quantities of raw materials needed for our or our suppliers’ production operations, e.g., if a mine does not produce at expected levels, or the raw materials do not otherwise satisfy our requirements, and we or our suppliers are unable to find an alternative resource with sufficient quantities, at reasonable prices, responsibly sourced (e.g., in compliance with the Uyghur Forced Labor Prevention Act and similar regulations and standards), and in a timely manner, it could impact our ability to produce electric vehicles.
Meeting or exceeding many safety standards is costly and has continued to evolve as global compliance and public domain (e.g., New Car Assessment Programs (“NCAPs”), Insurance Institute for Highway Safety (“IIHS”)) requirements continue to evolve, are increasing in demands, and lack harmonization globally.
Meeting or exceeding many safety standards is costly and has continued to evolve as global compliance requirements and public domain (e.g., New Car Assessment Programs (“NCAPs”), Insurance Institute for Highway Safety (“IIHS”), and the China Insurance Auto Safety Index) ratings and assessments continue to evolve, are increasing in demands, and lack harmonization globally.
In addition, manufacturing and other automotive assembly facilities are subject to stringent standards regulating air emissions, water discharges, and the handling and disposal of hazardous substances. The most significant of the standards and regulations affecting us are discussed below: Vehicle Emissions Control U.S. Requirements - Federal and California Tailpipe Emission Standards. Both the U.S.
In addition, manufacturing and other automotive assembly facilities are subject to stringent standards regulating air emissions, water discharges, and the handling and disposal of hazardous substances. The most significant of the standards and regulations affecting us are discussed below: U.S. Vehicle Emissions Standards and Fuel Economy Federal and California Emissions Standards. Both the U.S.
The EU has established vehicle safety standards and regulations and is likely to adopt additional or more stringent requirements in the future, especially in the areas of access to in-vehicle data, artificial intelligence, and autonomous vehicles. 11 Item 1. Business (Continued) The European General Safety Regulation (“GSR”) introduced UN-ECE regulations, which are required for the European Type Approval process.
The EU has established vehicle safety standards and regulations and is likely to adopt additional or more stringent requirements in the future, especially in the areas of access to in-vehicle data, artificial intelligence, and autonomous vehicle technologies. The European General Safety Regulation (“GSR”) introduced UN-ECE regulations, which are required for the European Type Approval process.
To facilitate access to the raw materials necessary for the production of electric vehicles, Ford has entered into, and expects to continue to enter into, multi-year commitments to raw material suppliers that subject Ford to risks associated with lower future demand for such materials as well as costs that fluctuate and are difficult to accurately forecast.
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.
In South America, most countries are evolving to implement more stringent requirements accepting Europe and U.S. regulations, except Brazil, which has a unique local process called PROCONVE based on U.S. regulations for light-duty vehicles and European regulations for heavy-duty vehicles. 8 Item 1.
Mexico and most countries in Central America, the Caribbean, and South America are evolving to implement more stringent requirements accepting Europe and U.S. regulations, except Brazil, which has a unique local process called PROCONVE based on U.S. regulations for light-duty vehicles and European regulations for heavy-duty vehicles.
As discussed above, the EU Commission has announced a “Green Deal” that is likely to trigger more stringent requirements for CO 2 emissions (including stricter CO 2 fleet regulations) and other regulated emissions and include recycling and substance restrictions.
As discussed above, the EU Commission has announced a “Green Deal” with more stringent requirements for CO 2 emissions (including stricter CO 2 fleet regulations) and other regulated emissions and include recycling and substance restrictions.
Under the level one (VI(a)) standard, which is currently in place nationwide in China, the emissions limits are comparable to the EU Stage VI limits, except for carbon monoxide, which is 30% lower than the EU Stage VI limit.
Under the level one (VI(a)) standard, the emissions limits are comparable to the EU Stage VI limits, except for carbon monoxide, which is 30% lower than the EU Stage VI limit.
European Union (“EU”) and U.K. regulations, directives, and related legislation limit the amount of regulated pollutants that may be emitted by new motor vehicles and engines sold in the EU and the United Kingdom.
Global Vehicle Emissions Standards and Fuel Economy European Emissions Standards. EU and U.K. regulations, directives, and related legislation limit the amount of regulated pollutants that may be emitted by new motor vehicles and engines sold in the European Union and the United Kingdom.
Corporate governance expenses are primarily administrative, delivering benefit on behalf of the global enterprise, that are not allocated to operating segments. These include expenses related to setting and directing global policy, providing oversight and stewardship, and promoting the Company’s interests.
Corporate 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. INTEREST ON DEBT Interest on Debt consists of interest expense on Company debt excluding Ford Credit.
While the EU Commission targets net climate neutrality by 2050 and a more ambitious 2030 interim target (a 55% instead of 40% CO 2 reduction compared to 1990), several countries, such as Germany, have adopted stricter interim targets and earlier net climate neutrality targets.
While the EU Commission targets net climate neutrality by 2050 and an ambitious 2030 interim target (a 55% CO 2 reduction across all industries compared to 1990), several countries, such as Germany, have adopted stricter interim targets and earlier net climate neutrality targets.
Any difference between North American and UN-ECE based regulations can add complexity and costs to the development of global platform vehicles, and we continue to support efforts to harmonize regulations to reduce vehicle design complexity while providing a common level of safety performance; several on-going bilateral negotiations on free trade can potentially contribute to this goal.
Any difference between North American and UN-ECE based regulations can add complexity and costs to the development of global platform vehicles, and we continue to support efforts to harmonize regulations to reduce vehicle design complexity while providing a common level of safety performance; we are seeking new opportunities in bilateral negotiations that can potentially contribute to this goal.
In recent years, EPA and CARB have increased their focus on the use of “defeat devices.” Defeat devices are elements of design (typically embedded in software) that improperly cause the emission control system to function less effectively during normal on-road driving than during an official laboratory emissions test, without justification.
Vehicle emissions regulators continue to focus on the use of “defeat devices.” Defeat devices are elements of design (typically embedded in software) that improperly cause the emission control system to function less effectively during normal on-road driving than during an official laboratory emissions test, without justification.
Testing is expected to continue on an ongoing basis. In addition, plaintiffs’ attorneys are pursuing consumer class action lawsuits based on alleged excessive emissions from cars and trucks, which could, in turn, prompt further investigations by regulators. Vehicle Fuel Economy and Greenhouse Gas Standards U.S. Requirements - Light-Duty Vehicles .
Testing is expected to continue on an ongoing basis. In addition, plaintiffs’ attorneys are pursuing consumer class action lawsuits based on alleged excessive emissions from cars and trucks, which could, in turn, prompt further investigations by regulators. European GHG Requirements.
Our ERGs and FAB Councils are instrumental in providing a voice to our globally diverse workforce as well as sharing valuable insights into the development of products, services, and experiences. Our business has developed DEI action plans specific to each region’s unique needs and culture.
Our ERGs are instrumental in providing a voice to our globally diverse workforce as well as sharing valuable insights into the development of products, services, and experiences. Ford empowers leaders to develop DEI action plans specific to the unique needs and culture of each function and region.
Both China Stage VII light-duty vehicle and heavy duty vehicle emission regulations are currently under pre-study, and the Ministry of Ecology and Environment has advised that the Stage VII regulations will have more stringent limits on pollutant emissions and will establish limits for greenhouse gas (primarily CO 2 ) tailpipe emissions.
Both China Stage VII light-duty vehicles and heavy-duty vehicles emission regulations are expected to be drafted between 2024 and 2025, and the Ministry of Ecology and Environment has advised that the Stage VII regulations will have more stringent limits on pollutant emissions and will establish limits for greenhouse gas (primarily CO 2 ) tailpipe emissions.
California has also instituted ZEV regulations governing medium- and heavy-duty vehicles, beginning with the 2024 model year. These stringent ZEV requirements covering light-, medium-, and heavy-duty vehicles could entail significant costs and compliance challenges, and include complex warranty and recall requirements.
Also, California has instituted ZEV regulations governing medium- and heavy-duty vehicles, beginning with the 2024 model year. These stringent ZEV requirements covering light-, medium-, and heavy-duty vehicles could yield significant costs and compliance challenges, and include complex warranty and recall requirements. As of December 31, 2023, sixteen states have adopted California’s ZEV requirements.
Business (Continued) CORPORATE OTHER Corporate Other primarily includes corporate governance expenses, interest income (excluding interest earned on our extended service contract portfolio that is included in our Automotive segment) and gains and losses from our cash, cash equivalents, and marketable securities (excluding gains and losses on investments in equity securities), and foreign exchange derivatives gains and losses associated with intercompany lending.
Business (Continued) CORPORATE OTHER Corporate Other primarily includes corporate governance expenses, past service pension and other postretirement employee benefits (“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.
Business (Continued) Finally, the extent to which our People Leaders are equipped to care for, inspire, and empower our people plays a vital role in our strategy, and we are committed to helping our leaders strengthen these capabilities with dedicated learning paths and non-traditional learning opportunities.
Finally, the extent to which our People Leaders are equipped to drive our transformation plays a vital role in our strategy, and we are committed to helping our leaders strengthen their capabilities with dedicated traditional and non-traditional learning opportunities.
In 2022, NHTSA finalized more stringent fuel economy standards for model years 2024-2026, which are substantially aligned with EPA’s GHG standards.
In 2022, NHTSA finalized more stringent fuel economy standards for model years 2024-2026, which are substantially aligned with EPA’s GHG standards. These standards are subject to a legal challenge, with a court decision expected in 2024.
The heavy-duty vehicle and engine GHG emissions regulations for the 2021 model year and beyond were published in May 2018 and are in line with U.S. requirements, subject to any change in those requirements.
The heavy-duty vehicle and engine GHG emissions regulations for the 2021 model year and beyond were published in May 2018 and are in line with U.S. requirements, subject to any change in those requirements. Ford expects that the federal government in Canada will continue to align its standards with the new EPA standards for the 2027 model year and beyond.
Diversity, Equity, and Inclusion At Ford, we believe that creating a Culture of Inclusion for all our employees is both foundational to achieving our Ford+ plan and the right thing to do.
Business (Continued) Diversity, Equity, and Inclusion At Ford, we believe that creating and sustaining a culture of diversity, equity, and inclusion for all our employees is foundational to both achieving our Ford+ plan and treating employees with dignity and respect.
The initial target levels get significantly more stringent every five years (2025, 2030, and 2035, after which all new vehicles must be zero emission), requiring significant investments in propulsion technologies and extensive fleet management forcing low CO 2 emissions. The United Kingdom and Switzerland have introduced similar rules, and the United Kingdom is considering adopting ZEV mandates.
The initial target levels get significantly more stringent every five years (2025, 2030, and 2035, after which all new light-duty vehicles must be zero emission), requiring significant investments in propulsion technologies and extensive fleet management to enable low CO 2 emissions for our fleet.
In addition, new requirements for tailpipe and non-tailpipe emissions will be included in the upcoming Euro 7 regulation, and the lead-time for engineering and type approval may potentially be too short.
In addition, new requirements for tailpipe and non-tailpipe emissions will be included in the upcoming Euro 7 regulation.
The NEV mandate requires that OEMs generate a specific amount of NEV credits each year, with NEV credits of at least 16%, 18%, 28%, and 38% of the annual ICE passenger vehicle production or import volume required in 2022, 2023, 2024, and 2025, respectively. Future percentages are currently under consideration. As discussed below in Item 1A.
The NEV mandate requires that OEMs generate a specific amount of NEV credits each year, with NEV credits of at least 28% and 38% of the annual ICE passenger vehicle production or import volumes required in 2024 and 2025, respectively.
Such actions likely would include restricting offerings of selected engines and popular options; increasing market support programs for Ford’s most fuel-efficient vehicles; and ultimately curtailing the production and sale of certain vehicles, such as high-performance cars, utilities, and/or full-size light trucks in order to maintain compliance. U.S. Requirements - Heavy-Duty Vehicles.
Such actions could include restricting offerings of selected engines and popular options; taking actions to increase sales of Ford’s most fuel-efficient vehicles; and ultimately curtailing the production and sale of certain internal combustion vehicles, such as high-performance cars, utility vehicles, and/or full-size light trucks in order to maintain compliance.
Business (Continued) Retail Sales, Industry Volume, and Market Share Retail sales, industry volume, and market share in each region and in certain key markets within each region during the past three years were as follows: Retail Sales (a) Industry Volume (b) Market Share (c) (in millions of units) (in millions of units) (as a percentage) 2020 2021 2022 2020 2021 2022 2020 2021 2022 United States 2.0 1.9 1.9 14.9 15.4 14.2 13.7 % 12.4 % 13.1 % Canada 0.2 0.2 0.2 1.6 1.7 1.6 15.1 14.3 15.2 Mexico — — — 1.0 1.0 1.1 4.0 4.0 3.8 North America 2.3 2.2 2.2 17.6 18.4 17.3 13.2 12.0 12.5 Brazil 0.1 — — 2.1 2.1 2.1 6.8 1.7 1.7 Argentina — — — 0.3 0.4 0.4 9.7 7.9 7.0 South America 0.2 0.1 0.1 3.1 3.6 3.7 6.2 2.6 2.1 United Kingdom 0.2 0.2 0.2 1.9 2.0 1.9 12.9 11.8 12.1 Germany 0.2 0.2 0.2 3.3 3.0 3.0 7.4 5.7 5.7 EU20 (d) 1.0 0.9 0.8 13.7 13.7 13.0 7.1 6.4 6.4 Türkiye 0.1 0.1 0.1 0.8 0.8 0.8 12.4 9.7 10.5 Europe 1.1 1.0 0.9 15.1 15.1 14.4 7.2 6.4 6.5 China (e) 0.6 0.6 0.5 25.2 26.3 23.9 2.4 2.4 2.1 Australia 0.1 0.1 0.1 0.9 1.1 1.1 6.5 6.8 6.2 India 0.1 — — 2.8 3.5 4.1 1.7 1.0 — ASEAN (f) 0.1 0.1 0.1 1.3 1.4 1.7 5.3 5.3 5.7 Russia — — — 1.5 1.7 1.7 0.9 1.2 — International Markets Group 0.3 0.3 0.3 17.5 18.7 20.3 1.7 1.8 1.4 Global / Total Company 4.5 4.2 4.0 78.5 82.1 79.6 5.8 % 5.1 % 5.0 % __________ (a) Retail sales represents primarily sales by dealers and is based, in part, on estimated vehicle registrations; includes medium and heavy trucks.
Sales, Industry Volume, and Market Share Sales, industry volume, and market share in certain key markets during the past three years were as follows: Sales (a) Industry Volume (b) Market Share (c) (in millions of units) (in millions of units) (as a percentage) 2021 2022 2023 2021 2022 2023 2021 2022 2023 United States 1.9 1.9 2.0 15.4 14.2 16.1 12.4 % 13.1 % 12.4 % China (d) 0.6 0.5 0.5 26.3 23.9 25.1 2.4 2.1 1.8 Canada 0.2 0.2 0.2 1.7 1.6 1.8 14.3 15.2 13.7 United Kingdom 0.2 0.2 0.2 2.0 1.9 2.3 11.8 12.1 10.8 Germany 0.2 0.2 0.2 3.0 3.0 3.2 5.7 5.7 5.1 Türkiye 0.1 0.1 0.1 0.8 0.8 1.3 9.7 10.5 8.9 Italy (e) 0.1 0.1 0.1 1.7 1.5 1.8 6.2 6.4 6.1 France (e) 0.1 0.1 0.1 2.1 2.0 2.3 3.4 3.9 3.9 __________ (a) Represents primarily sales by dealers, sales to the government, and leases to Ford management, and is based, in part, on estimated vehicle registrations; includes medium and heavy trucks.
Risk Factors under “ Ford may need to substantially modify its product plans to comply with safety, emissions, fuel economy, autonomous vehicle, and other regulations, ” a production disruption, stop ship, lower than planned market acceptance of our vehicles, or other intervening events may cause us to modify our product plans or, in some cases, purchase credits in order to comply with fuel economy standards.
Risk Factors under “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,” in addition to the rates of EV growth, production disruptions, stop ships, supply chain limitations, lower-than-planned market acceptance of our vehicles, and/or other circumstances may cause us to modify product plans or, in some cases, purchase credits in order to comply with emissions standards, fuel economy standards, or ZEV requirements.
California’s light-duty vehicle ZEV regulation, which uses a system based on credits that can be banked and carried forward, mandates annual increases in the production and sale of battery-electric, fuel cell, and plug-in hybrid vehicles. For 2025 model year, this regulation will require approximately 22% of a manufacturer’s California light-duty vehicle sales volume be ZEVs.
California ZEV Requirements. The California vehicle emissions program includes requirements for manufacturers to produce and deliver for sale zero-emission vehicles (“ZEVs”). California’s light-duty vehicle ZEV regulation, which uses a system based on credits that can be banked and carried forward, mandates annual increases in the production and sale of battery-electric, fuel cell, and plug-in hybrid vehicles.
Beginning with the 2012 model year, EPA and NHTSA jointly promulgated harmonized GHG and fuel economy regulations under what came to be known as the “One National Program” (“ONP”) framework.
Beginning with the 2012 model year, EPA and NHTSA jointly promulgated harmonized GHG and fuel economy regulations under what came to be known as the “One National Program” (“ONP”) framework, and California agreed that compliance with the federal program would satisfy compliance with its own GHG requirements, thereby avoiding a patchwork of federal and state standards.
CARB has adopted new emissions regulations applicable to model year 2024 heavy-duty engines, as well as extended heavy-duty warranty requirements beginning with the 2022 model year, and EPA has proposed more stringent heavy-duty standards beginning with the 2027 model year. These rules include more stringent emissions standards, as well as new requirements affecting durability testing, warranty, and OBD.
CARB has also adopted new emissions regulations applicable to model year 2024 and later heavy-duty engines, as well as extended heavy-duty warranty requirements beginning with model year 2022.
In 2021, Canada started preliminary consultations on several new proposed regulations, including Administrative Monetary Penalties (“AMPs”) and Analysis of Technical Information for Vehicles and Equipment (“ACTIVE”) regulations. Draft language for the AMPs regulation was published in May 2022 with final regulations expected to be published at the end of 2023.
In 2021, Canada started preliminary consultations on several new proposed regulations, including Administrative Monetary Penalties (“AMPs”) and Analysis of Technical Information for Vehicles and Equipment (“ACTIVE”) regulations. Final regulations for AMPs took effect in October 2023. Draft regulations for ACTIVE are expected to be released in 2024 and will likely contain some reporting requirements that are unique to Canada.
At December 31, 2022, approximately 57,000 hourly employees in the United States were represented by the UAW. 15 ITEM 1A. Risk Factors. We have listed below the material risk factors applicable to us grouped into the following categories: Operational Risks; Macroeconomic, Market, and Strategic Risks; Financial Risks; and Legal and Regulatory Risks.
We have listed below the material risk factors applicable to us grouped into the following categories: Operational Risks; Macroeconomic, Market, and Strategic Risks; Financial Risks; and Legal and Regulatory Risks.
China set a target of 5.0L/100km for the 2020 passenger vehicle industry fuel consumption fleet average, which lowers to 4.0L/100km by 2025 based on the New European Driving Cycle system. The government is projecting a further fuel consumption reduction in 2030, and is targeting 3.5L/100km based on the WLTP cycle (“WLTC”) system.
The fuel consumption requirement uses a weight-based approach to establish targets, with year-over-year target reductions. China set a target of 4.6L/100km for the 2025 passenger vehicle industry fuel consumption fleet average and is projecting a further fuel consumption reduction to a target of 3.5L/100km in 2030, based on the WLTP.
Both federal and California regulations also require motor vehicles to be equipped with on-board diagnostic (“OBD”) systems that monitor emission-related systems and components. In addition, light- and medium-duty vehicles and heavy-duty engines must be certified by EPA prior to sale in the United States and by CARB prior to sale in California and the relevant states. Canada accepts EPA certification.
Light- and medium-duty vehicles and heavy-duty engines or vehicles must be certified by EPA prior to sale in the United States and by CARB prior to sale in California and the relevant opt-in states. Canada accepts EPA certification.
Compliance with ZEV rules depends on market conditions (including the pace of adoption of EVs), technology readiness, and battery raw material availability as well as the availability of adequate infrastructure to support vehicle charging. European Requirements.
Compliance with ZEV requirements depends on market conditions (including consumer preference for and the pricing of EVs) in each jurisdiction where the requirements apply (such as California and each opt-in state), technology readiness, and battery raw material availability as well as the availability of adequate infrastructure to support vehicle charging. Federal Fuel Economy Requirements - Light-Duty Vehicles.
Substantially all of the hourly employees in our Automotive operations are represented by unions and covered by collective bargaining agreements. In the United States, approximately 99% of these unionized hourly employees in our Automotive segment are represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW” or “United Auto Workers”).
In the United States, approximately 99% of these unionized hourly employees are represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW” or “United Auto Workers”). At December 31, 2023, approximately 59,000 hourly employees in the United States were represented by the UAW. 16 ITEM 1A. Risk Factors.
These new rules are expected to impose increased challenges and costs on the development of light-duty vehicles. If any federal or state agency imposes and enforces fuel economy and GHG standards that are misaligned with market conditions, Ford would likely be forced to take various actions that could have substantial adverse effects on its sales volumes and results of operations.
Stringent federal or state agency fuel economy and GHG standards that are misaligned with market conditions could also force Ford to take various actions that could have substantial adverse effects on its sales volumes and operations.
We will continue our efforts to reduce workplace injuries. Employee Wellbeing Initiatives Our global, holistic approach to wellbeing encompasses the financial, social, mental/emotional, physical, and professional needs of our employees. Foundational to our wellbeing philosophy is providing a broad array of resources and solutions to educate employees, build capability, and meet individual and organizational wellbeing needs and goals.
Foundational to our wellbeing philosophy is providing a broad array of resources and solutions to educate employees, build capability, and meet individual and organizational wellbeing needs and goals.
Compliance with automobile emissions standards depends in part on the widespread availability of high-quality and consistent automotive fuels that the vehicles were designed to use.
Compliance with automobile emissions standards depends in part on the widespread availability of high-quality and consistent automotive fuels that the vehicles were designed to use. Legislative, regulatory, and judicial developments related to fuel quality at both the national and state levels could affect vehicle manufacturers’ warranty costs as well as their ability to comply with vehicle emissions standards.
Ford offers 12 Employee Resource Groups (“ERGs”) that represent various dimensions of our employee population, including racial, ethnic, gender, religious, sexual orientation and gender identity, ability, and generational communities with chapters throughout the world, in addition to Ford Advocacy for Belonging (“FAB”) Councils in every region.
Ford offers 10 global Employee Resource Groups (“ERGs”) that represent various dimensions of our employee population, including race, ethnicity, gender, religion, sexual orientation and gender identity, disability, and generation with chapters throughout the world.
This holistic DEI strategy includes a strong focus on racial equity, growing representation of diverse talent throughout the pipeline, and DEI education.
This holistic DEI strategy includes a strong focus on equity throughout the employee experience, monitoring the diversity within both internal and external talent pipelines, and DEI education.
China’s Corporate Average Fuel Consumption and New Energy Vehicle (“NEV”) Credit Administrative Rules contain fuel consumption requirements as well as credit mandates for NEV passenger vehicles, i.e., plug-in hybrids, battery electric vehicles, or fuel cell vehicles. The fuel consumption requirement uses a weight-based approach to establish targets, with year-over-year target reductions.
Other provinces have signaled their interest in light-duty ZEV sales regulations but are waiting to assess the provincial impact of the final federal ZEV regulations. China’s Corporate Average Fuel Consumption and New Energy Vehicle (“NEV”) Credit Administrative Rules contain fuel consumption requirements as well as credit mandates for NEV passenger vehicles, i.e., plug-in hybrids, electric vehicles, or fuel cell vehicles.
Similarly, environmental rating systems exist in various regions, e.g., Green NCAP in Europe. In China, C-NCAP has a stringent rating structure to decrease the number of five-star ratings. Further, the China Insurance Auto Safety Index (similar to IIHS) has been implemented, with higher standards for passenger and pedestrian protection and driver assistance technologies.
Similarly, environmental rating systems exist in various regions, e.g., Green NCAP in Europe. In China, C-NCAP has a stringent rating structure to decrease the number of five-star ratings. In Southeast Asia, an updated NCAP test and rating protocol is similarly forecast to be effective beginning in 2026, and is expected to put greater emphasis on assessment of driver assistance technologies.
We verify compliance with regulatory requirements as well as our internal safety standards and regularly report to Company management on key safety issues, including significant incidents and high potential near-misses, to prevent recurrences. We also participate in multi-industry groups, within and outside the automotive sector, to share safety best practices and collaborate to address common issues.
We verify compliance with regulatory requirements as well as our internal safety standards. To prevent recurrence of workplace injuries, regular updates are provided to Company management on key safety issues, including safety key performance indicators (“KPI”), significant incidents, and high potential near misses.
Environmental Protection Agency (“EPA”) and the California Air Resources Board (“CARB”) have established motor vehicle tailpipe and evaporative emissions standards that become increasingly stringent over time. Seventeen states have adopted California’s light-duty standards, four states have adopted California’s heavy-duty standards, and other states are expected to join.
Environmental Protection Agency (“EPA”) and the California Air Resources Board (“CARB”) have established motor vehicle tailpipe and evaporative emissions standards that become increasingly stringent over time. In addition to regulating emissions of certain pollutants for which EPA has adopted ambient health-based standards, EPA and CARB also regulate greenhouse gas (“GHG”) emissions from vehicles.
From an enterprise perspective, we have taken several concrete steps to further these efforts, including embedding DEI into our corporate strategy and governance, ensuring that revisions to employee expected behaviors enable an inclusive culture, and establishing objectives for progress for every salaried employee.
From an enterprise perspective, we have taken several concrete steps to further these efforts, including embedding DEI into our corporate strategy and governance, highlighting DEI in the expected behaviors that support Ford’s operating system, and forming an enterprise DEI Council composed of leaders to drive integration across employees, suppliers, dealers, and customers.
To avoid a “bifurcated” regulatory scenario in which California and the 15 other states that adopted California’s GHG standards enforce one set of rules, while a different set of rules applies in the rest of the country, Ford reached an agreement with California on a set of terms for an alternative framework in which Ford committed to meet a designated set of standards on a national basis in lieu of the California regulatory program.
During this time, Ford reached an agreement with California on a set of terms for an alternative framework in which Ford committed to meet a designated set of standards on a national basis for model years 2021 through 2026 that were more stringent than the then-rolled back federal standards in lieu of the California regulatory program.
Because the vast majority of GHGs emitted by a vehicle are the result of fuel combustion, GHG emission standards are similar to fuel economy standards. Thus, NHTSA and EPA coordinate with each other on their fuel economy and GHG standards, respectively, to avoid potential inconsistencies.
Historically, NHTSA and EPA have therefore coordinated with each other on their fuel economy and GHG standards, respectively, to avoid potential inconsistencies.
The law requires NHTSA to promulgate and enforce separate CAFE standards applicable to each manufacturer’s fleet of domestic passenger cars, imported passenger cars, and light-duty trucks. EPA also regulates vehicle greenhouse gas (“GHG”) emissions under the Clean Air Act.
The law requires NHTSA to promulgate and enforce separate CAFE standards applicable to each manufacturer’s fleet of domestic passenger cars, imported passenger cars, and light-duty trucks. 9 Item 1. Business (Continued) Because the vast majority of GHGs emitted by a vehicle are the result of fuel combustion, GHG emissions correspond closely with fuel economy.
Compliance with emissions standards, OBD requirements, and related regulations can be challenging and can drive increased product development costs, warranty costs, and vehicle recalls.
Compliance with emissions standards, OBD requirements, and related regulations can be challenging and can drive increased product development costs, higher retail prices, warranty costs, and vehicle recalls. For light- and medium-duty passenger cars and light trucks, EPA promulgated a rule in 2021 establishing GHG standards applicable from model years 2023 through 2026.
The more stringent level two (VI(b)) standard’s emissions limits are approximately 30-50% lower than the EU Stage VI limits, depending on the pollutant. While level two (VI(b)) is not slated for nationwide implementation until July 2023, the government has encouraged the more economically developed cities and provinces to pull ahead implementation.
The more stringent level two (VI(b)) standard’s emissions limits, which are currently in place nationwide in China, are approximately 30-50% lower than the EU Stage VI limits, depending on the pollutants.
In Ford’s case, the standards primarily affect heavy-duty pickup trucks and vans, plus vocational vehicles such as shuttle buses and delivery trucks. As the heavy-duty standards increase in stringency, it may become more difficult to comply while continuing to offer a full lineup of heavy-duty trucks. European Requirements.
As the heavy-duty standards increase in stringency, it may become more difficult to comply while continuing to offer a full lineup of heavy-duty trucks. The new rules promulgated by EPA and CARB are expected to impose increased challenges and costs on Ford and other manufacturers of light-, medium-, and heavy-duty vehicles and engines.
From a capability perspective, we are leveraging best practices in assessments and talent management to strengthen our current capabilities and future pipeline while reinforcing a culture of belonging, collaboration, empowerment, and innovation. The performance management process is reviewed regularly to ensure we set clear expectations, measure individual performance, and reward appropriately.
This is important as we build our expertise in growth areas such as software, electrification, and integrated services. From a capability perspective, we leverage best practices in assessments and talent management to strengthen our current capabilities and future pipeline while reinforcing a culture of excellence, focus, and collaboration.
As we expand our business priorities to include autonomous vehicles and broader mobility products and services, our financial exposure has increased. Second, the Safety Act requires that defects related to motor vehicle safety be remedied through safety recall campaigns. A manufacturer is obligated to recall vehicles if it determines the vehicles do not comply with a safety standard.
Second, the Safety Act requires that defects related to motor vehicle safety be remedied through safety recall campaigns. A manufacturer is obligated to recall vehicles if it or NHTSA determines the vehicles contain a non-compliance or a defect resulting in an unreasonable risk to safety.
In 2020, EPA introduced significantly less stringent fuel economy and GHG standards applicable to model years 2021-2026. The federal government also revoked California’s authority to set and enforce its own vehicle GHG standards, as well as the authority of other states that opted in to California’s standards.
In 2019, EPA revoked California’s authority to set and enforce its own vehicle GHG standards that apply through model year 2025, together with the authority of the opt-in states to implement California’s standards.
Our diversity statistics include the following as of December 31, 2022 (based on self-reporting at the date of hire): 28.8% of our salaried employees worldwide are females (excludes certain employees in Europe in accordance with the European Union’s General Data Protection Regulation); 25.4% of our total salaried and hourly employees in the United States are females; and 36.2% of our total salaried and hourly employees in the United States are minorities.
Our diversity statistics include the following as of December 31, 2023: 27.9% of our salaried employees worldwide identify as females; 25.5% of our total salaried and hourly employees in the United States identify as female; and 36.7% of our total salaried and hourly employees in the United States identify as a minority.
We are committed to creating an environment where employees and People Leaders care for each other as we deliver Ford+. Employee Sentiment Strategy We leverage our ask/listen/observe framework to understand employee sentiment at Ford. This approach is a holistic and consistent methodology that enables us to understand how employees are feeling in real time and act accordingly.
We are committed to creating an environment where employees and People Leaders care for each other as we deliver Ford+. 15 Item 1. Business (Continued) Employee Sentiment Strategy We gather feedback from our employees through a variety of channels throughout the year.
Our Safety Record Any loss of life or serious injury in the workplace is unacceptable and deeply regretted. Unfortunately, there were two fatal incidents in 2022 in our China region.
Our safety team also participates in multi-industry benchmarking groups, within and outside the automotive sector, to share safety best practices and collaborate on common health and safety concerns. Our Safety Record Any loss of life or serious injury in the workplace is unacceptable and deeply regretted. Unfortunately, there was one employee fatality incident in 2023.
The federal government has published draft light-duty ZEV sales requirements through an amendment to the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations and has also published its intent to develop ZEV sales requirements for heavy-duty vehicles. Other provinces have signaled their interest in light-duty ZEV sales regulations but are awaiting the finalization of the federal ZEV regulations.
On December 20, 2023, the Canadian federal government also published light-duty ZEV sales requirements through amendments to the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations. The amendments require annual sales percentages starting with 20% for the 2026 model year to 100% by the 2035 model year.
In August 2022, California approved a sweeping revision to the ZEV regulation. Beginning with the 2026 model year, the revised ZEV rule mandates a 35% ZEV sales requirement, rising to 100% by 2035. The revised regulation also imposes significant restrictions on credit usage, and new requirements for EV battery durability.
By model year 2025, this regulation will require approximately 22% of a manufacturer’s California light-duty vehicle sales volume be ZEVs. In ACC II, California has revised the ZEV regulation in a way that will continue to increase ZEV sales. Beginning with model year 2026, the revised ZEV rule mandates a 35% light-duty ZEV sales requirement, rising to 100% by 2035.
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(d) EU20 markets are United Kingdom, Germany, France, Italy, Spain, Austria, Belgium, Czech Republic, Denmark, Finland, Greece, Hungary, Ireland, the Netherlands, Norway, Poland, Portugal, Romania, Sweden, and Switzerland. (e) China includes Taiwan; China market share includes Ford brand and JMC brand vehicles produced and sold by our unconsolidated affiliates. (f) ASEAN includes Philippines, Thailand, and Vietnam. U.S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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We rely on information technology networks and systems, including in-vehicle systems and mobile devices, some of which are managed by suppliers, to process, transmit, and store electronic information that is important to the operation of our business, our vehicles, and the services we offer.
We rely on information technology networks and information systems, including in-vehicle systems and mobile devices, some of which are managed by suppliers, to process, transmit, and store electronic information that is important to the operation of our business, our vehicles, and the services we offer.
We are subject to laws, rules, guidelines from privacy regulators, and regulations in the United States and other countries (such as the European Union’s and the U.K.’s General Data Protection Regulations and the California Consumer Privacy Act) relating to the collection, use, cross-border data transfer, and security of personal information of consumers, employees, or others, including laws that may require us to notify regulators and affected individuals of a data security incident.
We are subject to laws, rules, guidelines from privacy and other regulators, and regulations in the United States and other countries (such as the European Union’s and the U.K.’s General Data Protection Regulations and the California Consumer Privacy Act) relating to the collection, use, cross-border data transfer, and security of personal information of consumers, employees, or others, including laws that may require us to notify regulators and affected individuals of a data security incident.
Further, our ability to successfully grow through capacity expansion and investments in the areas of electrification, connectivity, digital and physical services, and software services depends on many factors, including advancements in technology, regulatory changes, infrastructure development (e.g., a widespread vehicle charging network), and other factors that are difficult to predict, that may significantly affect the future of electric and autonomous vehicles, digital and physical services, and software services.
Further, our ability to successfully grow through capacity expansion and investments in the areas of electrification, connectivity, digital and physical services, and software services depends on many factors, including advancements in technology, regulatory changes, infrastructure development (e.g., a widespread vehicle charging network), and other factors that are difficult to predict, that may significantly affect the future of electric vehicles, autonomous technologies, digital and physical services, and software services.
Steps taken by governments to apply or consider applying tariffs on automobiles, parts, and other products and materials have the potential to disrupt existing supply chains, impose additional costs on our business, and may lead to other countries attempting to retaliate by imposing tariffs, which would make our products more expensive for customers, and, in turn, could make our products less competitive.
Steps taken by governments to apply or consider applying tariffs on automobiles, parts, and other products and materials have the potential to disrupt existing supply chains, impose additional costs on our business, and could lead to other countries attempting to retaliate by imposing tariffs, which would make our products more expensive for customers, and, in turn, could make our products less competitive.
Further, Ford Credit’s ability to obtain securitized funding under its committed asset-backed liquidity programs and certain other asset-backed securitization transactions is subject to having a sufficient amount of assets eligible for these programs, as well as Ford Credit’s ability to obtain appropriate credit ratings and, for certain committed programs, derivatives to manage the interest rate risk.
Further, Ford Credit’s ability to obtain securitized funding under its committed asset-backed liquidity programs and certain other asset-backed securitization transactions is subject to having a sufficient amount of assets eligible for these programs, as well as Ford Credit’s ability to obtain appropriate credit ratings for those transactions and, for certain committed programs, derivatives to manage the interest rate risk.
Increased scrutiny of automaker emission compliance by regulators around the world has led to new regulations, more stringent enforcement programs, additional field actions, demands for reporting on the field performance of emissions components and higher scrutiny of field data, and/or delays in regulatory approvals.
Increased scrutiny of automaker emission compliance by regulators around the world has led to new regulations, more stringent enforcement programs, additional field actions, demands for reporting on the field performance of emissions components and higher scrutiny of field data, and delays in regulatory approvals.
We monitor and manage these exposures as an integral part of our overall risk management program, which recognizes the unpredictability of markets and seeks to reduce potentially adverse effects on our business.
We monitor and attempt to manage these exposures as an integral part of our overall risk management program, which recognizes the unpredictability of markets and seeks to reduce potentially adverse effects on our business.
Until 2021, most of our manufacturing facilities in South America were located in Brazil, where the state or federal governments historically offered significant incentives to manufacturers to encourage capital investment, increase manufacturing production, and create jobs. As a result, the performance of our South American operations had been impacted favorably by government incentives to a substantial extent.
For example, until 2021, most of our manufacturing facilities in South America were located in Brazil, where the state or federal governments historically offered significant incentives to manufacturers to encourage capital investment, increase manufacturing production, and create jobs. As a result, the performance of our South American operations had been impacted favorably by government incentives to a substantial extent.
Government investigations against Ford or Ford Credit could result in fines, penalties, or orders that could have an adverse impact on our financial condition, results of operations, or the operation of our business. Moreover, compliance with governmental standards does not necessarily prevent individual or class action lawsuits, which can entail significant cost and risk.
Government investigations against Ford or Ford Credit could result in fines, penalties, orders, or other resolutions that could have an adverse impact on our financial condition, results of operations, or the operation of our business. Moreover, compliance with governmental standards does not necessarily prevent individual or class action lawsuits, which can entail significant cost and risk.
In addition, a restructuring or the implementation of a new or different business strategy may lead to the disruption of our existing business operations, including distracting management from current operations.
In addition, the implementation of a new or different business strategy may lead to the disruption of our existing business operations, including distracting management from current operations.
Given the worldwide scope of our supply chain and operations, we and our suppliers face a risk of disruption or operating inefficiencies that may increase costs due to the adverse physical effects of climate change, which are predicted to increase the frequency and severity of weather and other natural events, e.g., wildfires, extended droughts, and extreme temperatures.
Risk Factors (Continued) Given the worldwide scope of our supply chain and operations, we and our suppliers face a risk of disruption or operating inefficiencies that may increase costs due to the adverse physical effects of climate change, which are predicted to increase the frequency and severity of weather and other natural events, e.g., wildfires, extended droughts, and extreme temperatures.
Moreover, regulatory actions seeking to impose significant financial penalties for noncompliance and/or legal actions (including pursuant to laws providing for private rights of action by consumers) could be brought against us in the event of a data compromise, misuse of consumer information, or perceived or actual non-compliance with data protection or privacy requirements.
Moreover, regulatory actions seeking to impose significant financial penalties for noncompliance and/or legal actions (including pursuant to laws providing for private rights of action by consumers) could be brought against us in the event of a data compromise, misuse of consumer information, or perceived or actual non-compliance with data protection, privacy, or artificial intelligence requirements.
In order to secure critical materials for production of electric vehicles, we have entered into and plan to continue to enter into offtake agreements and other long-term purchase contracts with raw materials suppliers and make investments in certain raw material and battery suppliers; however, we may not realize the anticipated benefits of these actions and our efforts to have such suppliers, particularly those in less developed markets, adopt Ford’s sustainability and other standards may be unsuccessful, which could have an adverse impact on our reputation.
In order to secure critical materials for production of electric vehicles, we have entered into and may, in the future, enter into offtake agreements and other long-term purchase contracts with raw materials suppliers and make investments in certain raw material and battery suppliers; however, we may not realize the anticipated benefits of these actions and our efforts to have such suppliers, particularly those in less developed markets, adopt Ford’s sustainability and other standards may be unsuccessful, which could have an adverse impact on our reputation.
Such incidents could materially disrupt operational systems; result in loss of trade secrets or other proprietary or competitively sensitive information; compromise the privacy of personal information of consumers, employees, or others; jeopardize the security of our facilities; affect the performance of in-vehicle systems or services we offer; and/or impact the safety of our vehicles.
Such incidents could materially disrupt operational information systems; result in loss or unwilling publication of trade secrets or other proprietary or competitively sensitive information; compromise the privacy of personal information of consumers, employees, or others; jeopardize the security of our facilities; affect the performance of in-vehicle systems or services we offer; and/or impact the safety of our vehicles.
Changes in commodity and energy prices (from tariffs and the actions taken by Russia in Ukraine, as discussed above under “ With a global footprint, Ford’s results could be adversely affected by economic or geopolitical developments, including protectionist trade policies such as tariffs, or other events ,” or otherwise), currency exchange rates, and interest rates cannot always be predicted, hedged, or offset with price increases to eliminate earnings volatility.
Changes in commodity and energy prices (from tariffs and the actions taken by Russia in Ukraine, as discussed above under “ 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 ,” or otherwise), currency exchange rates, and interest rates cannot always be predicted, hedged, or offset with price increases to eliminate earnings volatility.
Further, the U.S. government, other governments, and international organizations could impose additional sanctions or export controls that could restrict us from doing business directly or indirectly in or with certain countries or parties, which could include affiliates. Industry sales volume can be volatile and could decline if there is a financial crisis, recession, or significant geopolitical event.
Further, the U.S. government, other governments, and international organizations could impose additional sanctions or export controls that could restrict us from doing business directly or indirectly in or with certain countries or parties, which could include affiliates. Industry sales volume can be volatile and could decline if there is a financial crisis, recession, public health emergency, or significant geopolitical event.
In addition, a number of governments, as well as non-governmental organizations, publicly assess vehicles to their own protocols. The protocols could change, and any negative perception regarding the performance of our vehicles subjected to such tests could reduce future sales.
In addition, a number of governments, as well as non-governmental organizations, publicly assess vehicles to their own protocols. Any negative perception regarding the performance of our vehicles subjected to such tests could reduce future sales.
Ford and Ford Credit could be affected by the continued development of more stringent privacy, data use, and data protection laws and regulations as well as consumers’ heightened expectations to safeguard their personal information.
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.
With increased consumer interconnectedness through the internet, social media, and other media, mere allegations relating to quality, safety, fuel efficiency, sustainability, corporate social responsibility, or other key attributes can negatively impact our reputation or market acceptance of our products or services, even where such allegations prove to be inaccurate or unfounded.
Risk Factors (Continued) With increased consumer interconnectedness through the internet, social media, and other media, mere allegations relating to quality, safety, fuel efficiency, sustainability, corporate social responsibility, or other key attributes can negatively impact our reputation or market acceptance of our products or services, even where such allegations prove to be inaccurate or unfounded.
The Dodd-Frank Act directs federal agencies to adopt rules to regulate the finance industry and the capital markets and gives the Consumer Financial Protection Bureau (“CFPB”) broad rule-making and enforcement authority for a wide range of consumer financial protection laws that regulate consumer finance businesses, such as Ford Credit’s automotive financing business.
Risk Factors (Continued) The Dodd-Frank Act directs federal agencies to adopt rules to regulate the finance industry and the capital markets and gives the Consumer Financial Protection Bureau (“CFPB”) broad rule-making and enforcement authority for a wide range of consumer financial protection laws that regulate consumer finance businesses, such as Ford Credit’s automotive financing business.
For example, if we are unable to differentiate our products and services from those of our competitors, develop innovative new products and services, or sufficiently tailor our products and services to customers in other markets, there could be insufficient demand for our products and services, which could have an adverse impact on our financial condition or results of operations.
For example, if we are unable to differentiate our products and services from those of our competitors, develop innovative new products and services, or sufficiently tailor our products and services to customers in other markets, there could be insufficient demand for our products and services, which could have an adverse impact on our financial condition or results of operations. 22 Item 1A.
Further, any unauthorized release of personal information could harm our reputation, disrupt our business, cause us to expend significant resources, and lead to a loss of consumer confidence resulting in an adverse impact on our business and/or consumers deciding to withhold or withdraw consent for our collection or use of data. 26 Item 1A.
Further, any unauthorized release of personal information could harm our reputation, disrupt our business, cause us to expend significant resources, and lead to a loss of consumer confidence resulting in an adverse impact on our business and/or consumers deciding to withhold or withdraw consent for our collection or use of data.
Risk Factors (Continued) Macroeconomic, Market, and Strategic Risks 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.
Macroeconomic, Market, and Strategic Risks 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.
Risk Factors (Continued) Ford Credit could be subject to new or increased credit regulations, consumer protection regulations, or other regulations. As a finance company, Ford Credit is highly regulated by governmental authorities in the locations in which it operates, which can impose significant additional costs and/or restrictions on its business.
Ford Credit could be subject to new or increased credit regulations, consumer protection regulations, or other regulations. As a finance company, Ford Credit is highly regulated by governmental authorities in the locations in which it operates, which can impose significant additional costs and/or restrictions on its business.
Further, our customers and investors evaluate how well we are progressing on our announced climate goals and aspirations, and if we are not on track to achieve those goals and aspirations on a timely basis, or if the expectations of our customers and investors change and we do not adequately address their expectations, our reputation could be impacted, and customers may choose to purchase the products and services of, investors may choose to invest in, and suppliers and vendors may choose to do business with other companies. 21 Item 1A.
Further, our customers, investors, and other stakeholders evaluate how well we are progressing on our announced climate goals and aspirations, and if we are not on track to achieve those goals and aspirations on a timely basis, or if the expectations of our customers and investors change and we do not adequately address their expectations, our reputation could be impacted, and customers may choose to purchase the products and services of, investors may choose to invest in, and suppliers and vendors may choose to do business with other companies.
Risk Factors (Continued) Moreover, new offerings, including those related to electric vehicles and autonomous driving technologies, may present technological challenges that could be costly to implement and overcome and may subject us to customer claims if they do not operate as anticipated.
Moreover, new offerings, including those related to electric vehicles and autonomous driving technologies, may present technological challenges that could be costly to implement and overcome and may subject us to customer claims if they do not operate as anticipated.
If our cash flows and capital resources are insufficient to meet any pension or OPEB obligations, we could be forced to reduce or delay investments and capital expenditures, suspend dividend payments, seek additional capital, or restructure or refinance our indebtedness.
If our cash flows and capital resources are insufficient to meet any pension or OPEB obligations, we could be forced to reduce or delay investments and capital expenditures, suspend dividend payments, seek additional capital, or restructure or refinance our indebtedness. 27 Item 1A.
In the United States, for example, Ford Credit’s operations are subject to regulation and supervision under various federal, state, and local laws, including the federal Truth-in-Lending Act, Consumer Leasing Act, Equal Credit Opportunity Act, and Fair Credit Reporting Act.
In the United States, for example, Ford Credit’s operations are subject to regulation and supervision under various federal, state, and local laws, including the federal Truth-in-Lending Act, Consumer Leasing Act, Equal Credit Opportunity Act, and Fair Credit Reporting Act. 29 Item 1A.
A work stoppage or other limitation on production could occur at Ford’s facilities, at a facility in its supply chain, or at one of its logistics providers for any number of reasons, including as a result of labor issues, including shortages of available employees, disputes under existing collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements, absenteeism, public health issues (e.g., COVID-19), stay-at-home orders, or in response to potential restructuring actions (e.g., plant closures); as a result of supplier financial distress or other production constraints, such as limited quantities of components, including but not limited to semiconductors, or raw materials, quality issues, capacity limitations, or other difficulties; as a result of a natural disaster (including climate-related physical risk); cyber incidents; or for other reasons.
A work stoppage or other limitation on production could occur at Ford’s facilities, at a facility in its supply chain, or at one of its logistics providers for any number of reasons, including as a result of labor issues, including shortages of available employees, disputes under existing collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements, absenteeism, public health issues (e.g., COVID), stay-at-home orders, or in response to potential restructuring actions (e.g., plant closures); as a result of supplier financial distress or other production constraints, such as limited quantities of components or raw materials, quality issues, capacity limitations, or other difficulties; as a result of a natural disaster (including climate-related physical risk); social unrest; cybersecurity incidents; or for other reasons.
Changes in international trade policy can also have a substantial adverse effect on our financial condition or results of operations.
Changes in international trade policy can also have a substantial adverse effect on our financial condition, results of operations, or our business in general.
Risk Factors (Continued) 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.
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.
The vast majority of the hourly employees in our Ford Blue and Ford Model e manufacturing operations in the United States and Canada are represented by unions and covered by collective bargaining agreements. These agreements provide guaranteed wage and benefit levels throughout the contract term and some degree of income security, subject to certain conditions.
The vast majority of the hourly employees in our manufacturing operations in the United States and Canada are represented by unions and covered by collective bargaining agreements. These agreements provide guaranteed wage and benefit levels throughout the contract term and some degree of income security, subject to certain conditions.
Legal and Regulatory Risks 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.
Risk Factors (Continued) Legal and Regulatory Risks 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.
A substantial number of our employees in other regions are represented by unions or government councils, and legislation or custom promoting retention of manufacturing or other employment in the state, country, or region may constrain as a practical matter our ability to sell or close manufacturing or other facilities.
A substantial number of our employees in other regions are represented by unions or government councils, and legislation or custom promoting retention of manufacturing or other employment in the state, country, or region may constrain as a practical matter our ability to sell or close manufacturing or other facilities or increase the cost of doing so.
When paired with the IRA’s tax credit for the construction of certain electric vehicle charging infrastructure, Ford expects the commercial clean vehicle credit will significantly influence commercial fleets in their evaluation of a transition from internal combustion engine vehicles to EVs and PHEVs.
When paired with the IRA’s tax credit for the construction of certain electric vehicle charging infrastructure, Ford expects the commercial clean vehicle credit will influence commercial fleets, governmental fleets, and other vehicle purchasers in their evaluation of a transition from internal combustion engine vehicles to EVs and PHEVs.
Risk Factors (Continued) 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, natural or man-made disasters, adverse effects of climate change, financial distress, production difficulties, capacity limitations, or other factors.
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.
We and other companies continue to develop autonomous vehicle technologies, and the U.S. and foreign governments are continuing to develop the regulatory framework that will govern autonomous vehicles.
We and other companies continue to develop autonomous vehicle and driver assist technologies, and the U.S. and foreign governments are continuing to develop the regulatory framework that will govern autonomous vehicles and related technologies.
Our networks and in-vehicle systems, sharing similar architectures, could also be impacted by, or a data breach may result from, the negligence or misconduct of insiders or third parties who have access to our networks and systems.
Our networks and in-vehicle systems, sharing similar architectures, could also be impacted by, or a cybersecurity incident may result from, the negligence or misconduct of insiders or third-parties who have access to our networks and systems.
Item 1A. Risk Factors (Continued) Unlike our historical arrangements with suppliers, which are typically annual commitments, under multi-year offtake agreements and other long-term purchase contracts, the risks associated with lower-than-expected electric vehicle production volumes or changes in battery technology that reduce the need for certain raw materials are borne by Ford rather than our suppliers.
Item 1A. Risk Factors (Continued) Unlike our historical arrangements with suppliers, under multi-year offtake agreements and other long-term purchase contracts, the risks associated with lower-than-expected electric vehicle production volumes or changes in battery technology that reduce the need for certain raw materials, batteries, or their components are borne by Ford rather than our suppliers.
If we are unable to optimize our capital allocation among vehicles, services, technology, and other calls on capital, or we are otherwise not successful in executing Ford+ (or are delayed for reasons outside of our control), we may not be able to realize the full benefits of our plan, which could have an adverse effect on our financial condition or results of operations.
If we are unable to optimize our capital allocation among vehicles, services, technology, and other calls on capital, make sufficient progress to become competitive on cost and quality, or we are otherwise not successful in executing Ford+ (or are delayed for reasons outside of our control), we may not be able to realize the full benefits of our plan, which could have an adverse effect on our financial condition or results of operations.
In addition, since new technologies are subject to market acceptance, a malfunction involving any manufacturer’s autonomous vehicle may negatively impact the perception of autonomous vehicles and erode customer trust. Ford’s results are dependent on sales of larger, more profitable vehicles, particularly in the United States.
In addition, since new technologies are subject to market acceptance, a malfunction involving any manufacturer’s autonomous vehicle may negatively impact the perception of autonomous vehicles and autonomous vehicle technologies and erode customer trust. 23 Item 1A. Risk Factors (Continued) Ford’s results are dependent on sales of larger, more profitable vehicles, particularly in the United States.
With a global footprint, Ford’s results could be adversely affected by economic or geopolitical developments, including protectionist trade policies such as tariffs, or other events.
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.
In addition to compensation considerations, current and potential employees are increasingly placing a premium on various intangibles, such as working for companies with a clear purpose and strong brand reputation, flexible work arrangements, and other considerations, such as embracing sustainability and diversity, equity, and inclusion initiatives.
While compensation considerations remain important, current and potential employees are increasingly placing a premium on various intangibles, such as working for companies with a clear purpose and strong brand reputation, flexible work arrangements, and other considerations, such as embracing sustainability and diversity, equity, and inclusion initiatives.
If the market for electrified vehicles does not develop at the rate we expect, even if the regulatory framework encourages a rapid adoption of electrified vehicles, there is a negative perception of our vehicles or about electric vehicles in general, or if consumers prefer our competitors’ vehicles, there could be an adverse impact on our financial condition or results of operations.
If the market for electrified vehicles does not develop at the rate we expect, even if the regulatory framework encourages a rapid adoption of electrified vehicles, there is a negative perception of our vehicles or about electric vehicles in general, we are unable to or are delayed in developing or embracing new technologies or processes, or if consumers prefer our competitors’ vehicles, there could be an adverse impact on our financial condition or results of operations.
Actual return volumes may be influenced by these factors, as well as by contractual lease-end values relative to auction values. In 2022, Ford Credit experienced lower-than-expected return volumes. If auction values decrease significantly in the future, return volumes could exceed Ford Credit’s expectations.
Actual return volumes may be influenced by these factors, as well as by contractual lease-end values relative to auction values. If auction values decrease significantly in the future, return volumes could exceed Ford Credit’s expectations.
Moreover, a cyber incident could harm our reputation, cause customers to lose trust in our security measures, and/or subject us to regulatory actions or litigation, which may result in fines, penalties, judgments, or injunctions, and a cyber incident involving us or one of our suppliers could impact production, our internal operations, or our ability to deliver products and services to our customers. 19 Item 1A.
Moreover, a cybersecurity incident could harm our reputation, cause customers to lose trust in our security measures, and/or subject us to regulatory actions or litigation, which may result in fines, penalties, judgments, or injunctions, and a cybersecurity incident involving us or one of our suppliers could impact our production, internal operations, business strategy, results of operations, financial condition, or our ability to deliver products and services to our customers .
The cost to comply with existing government regulations (in addition to the cost of any field service actions that may result from regulatory actions) is substantial and additional regulations, changes in regulatory interpretations, or changes in consumer preferences that affect vehicle mix, as well as a non-compliance with applicable laws and regulations, could have a substantial adverse impact on our financial condition or results of operations.
The cost to comply with government regulations concerning new vehicle standards and in-use vehicle requirements, including field service actions, is substantial. Additional regulations, changes in regulatory interpretations, or changes in consumer preferences that affect vehicle mix, as well as any non-compliance with applicable laws and regulations, could have a substantial adverse impact on our financial condition or results of operations.
Despite security measures, we are at risk for interruptions, outages, and compromises of: (i) operational systems (including business, financial, accounting, product development, consumer receivables, data processing, or manufacturing processes); (ii) facility security systems; and/or (iii) in-vehicle systems or mobile devices, whether caused by a ransomware or other cyber attack, security breach, or other reasons, e.g., a natural disaster, fire, acts of terrorism or war, or an overburdened infrastructure system.
Despite devoting significant resources to our cybersecurity program, we are at risk for interruptions, outages, and compromises of: (i) operational information systems (including business, financial, accounting, product development, consumer receivables, data processing, or manufacturing processes); (ii) facility security systems; and/or (iii) in-vehicle systems or mobile devices, whether caused by a ransomware or other cybersecurity incident, security breach, or other reason (e.g., a natural disaster, fire, acts of terrorism or war, or an overburdened infrastructure system).
For a discussion of economic trends, see Item 7. 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. The global automotive industry is intensely competitive, with installed manufacturing capacity generally exceeding current demand.
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. The global automotive industry is intensely competitive, with installed manufacturing capacity generally exceeding current demand.
To the extent actual results are less favorable than our assumptions, we may recognize a remeasurement loss in our results, which could be substantial. For additional information regarding our assumptions, see “Critical Accounting Estimates” in Item 7 and Note 17 of the Notes to the Financial Statements. 24 Item 1A.
To the extent actual results are less favorable than our assumptions, we may recognize a remeasurement loss in our results, which could be substantial. For additional information regarding our assumptions, see “Critical Accounting Estimates” in Item 7 and Note 17 of the Notes to the Financial Statements. Pension and other postretirement liabilities could adversely affect Ford’s liquidity and financial condition.
Litigation also is inherently uncertain, and we could experience significant adverse results, including compensatory and punitive damage awards, a disgorgement of profits or revenue, or injunctive relief, any of which could have an adverse effect on our financial condition, results of operations, or our business in general.
Litigation also is inherently uncertain, and we have in the past experienced and could in the future experience significant adverse results, including compensatory and punitive damage awards, a disgorgement of profits or revenue, or injunctive relief, any of which could have an adverse effect on our financial condition, results of operations, or our business in general, particularly with larger jury verdicts becoming more prevalent.
However, there are limits on our ability to reduce emissions and increase fuel economy over a given time frame and many factors are involved that could delay or impede our plans, primarily relating to the cost and effectiveness of available technologies, consumer acceptance of new technologies and changes in vehicle mix (as described in more detail above under “ 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 ”), willingness of consumers to absorb the additional costs of new technologies, the appropriateness (or lack thereof) of certain technologies for use in particular vehicles, the widespread availability (or lack thereof) of supporting infrastructure for new technologies, including charging for electric vehicles, the availability (or lack thereof) of the raw materials and component supply to make batteries and other elements of electric vehicles, and the human, engineering, and financial resources necessary to deploy new technologies across a wide range of products and powertrains in a short time.
Those factors primarily relate to the cost and effectiveness of available technologies; consumer acceptance of new technologies and their costs; changes in vehicle mix (as described in more detail above under “ 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 ”); the appropriateness (or lack thereof) of certain technologies for use in particular vehicles; the widespread availability (or lack thereof) of supporting infrastructure for new technologies, including charging for electric vehicles; the availability (or lack thereof) of the raw materials and component supply to make affordable batteries and other elements of electric vehicles; and the human, engineering, and financial resources necessary to deploy new technologies across a wide range of products and powertrains in a short time.
This risk exposure rises as we continue to develop and produce vehicles with increased connectivity. Moreover, we, our suppliers, and our dealers have been the target of cyber attacks in the past, and such attacks will continue and evolve in the future, which may cause cyber incidents to be more difficult to detect for periods of time.
This risk exposure rises as we continue to develop and produce vehicles with increased connectivity. Moreover, we, our suppliers, and our dealers have been the target of cybersecurity incidents and such threats are continuing and evolving, which may cause cybersecurity incidents to be more difficult to detect for periods of time.
A decrease in, expiration without renewal of, or other cessation or clawback of government incentives for any of our business units, as a result of administrative decision or otherwise, could have a substantial adverse impact on our financial condition or results of operations.
The impact of these incentives can be significant in a particular market during a reporting period. A decrease in, expiration without renewal of, or other cessation or clawback of government incentives for any of our operations, as a result of administrative decision or otherwise, could have a substantial adverse impact on our financial condition or results of operations.
Accordingly, a significant disruption to our production schedule could have a substantial adverse effect on our financial condition or results of operations and may impact our strategy to comply with fuel economy standards as discussed below under “ 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’s ability to maintain a competitive cost structure could be affected by labor or other constraints.
Accordingly, a significant disruption to our production schedule could have a substantial adverse effect on our financial condition or results of operations and may impact our strategy to comply with fuel economy standards as discussed below under “ 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.” Failure to develop and deploy secure digital services that appeal to customers could have a negative impact on Ford’s business.
Risk Factors (Continued) We are continuing to make changes to our product cycle plan to improve the fuel economy of our petroleum-powered vehicles and to offer more propulsion choices, such as electrified vehicles, with lower GHG emissions. Electrification is our core strategy to comply with current and anticipated environmental laws and regulations in major markets.
We regularly refine our product cycle plan to improve the fuel economy of our internal combustion vehicles and to offer more propulsion choices, such as hybrid and electrified vehicles, that generate lower GHG emissions. Electrification is our core strategy to comply with current and anticipated environmental laws and regulations in major markets.
In addition, we sponsor plans to provide OPEB for retired employees (primarily health care and life insurance benefits). See Note 17 of the Notes to the Financial Statements for more information about these plans. These benefit plans impose significant liabilities on us and could require us to make additional cash contributions, which could impair our liquidity.
See Note 17 of the Notes to the Financial Statements for more information about these plans. These benefit plans impose significant liabilities on us and could require us to make additional cash contributions, which could impair our liquidity.
This may expose us to heightened risks as a result of economic, geopolitical, or other events, including governmental takeover (i.e., nationalization) of our manufacturing facilities or intellectual property, restrictive exchange or import controls, disruption of operations as a result of systemic political or economic instability, outbreak of war or expansion of hostilities (such as the actions taken by Russia in Ukraine), and acts of terrorism, each of which could impact our supply chain as well as our operations and have a substantial adverse effect on our financial condition or results of operations.
This could include governmental takeover (i.e., nationalization) of our manufacturing facilities or intellectual property, restrictive exchange or import controls, disruption of operations as a result of systemic political or economic instability, outbreak of war or expansion of hostilities (such as the ongoing conflicts between Russia and Ukraine and between Israel and Hamas, heightened tensions in the Red Sea, and potential tensions in the South China Sea), and acts of terrorism, each of which could impact our supply chain as well as our operations and have a substantial adverse effect on our financial condition or results of operations.
In the event we do not purchase the materials pursuant to the terms of these agreements, even if the supplier finds another purchaser, we may be obligated to reimburse the supplier for costs it incurs in finding the new purchaser as well as any lost revenue attributable to the replacement purchaser paying a lower price than required under the pricing mechanism in our agreement.
This may be the case even if the supplier finds another purchaser, as we may be responsible for the costs of finding the new purchaser as well as any lost revenue attributable to the replacement purchaser paying a lower price than required under the pricing mechanism in our agreement.
Results of operations from new activities may be lower than our existing activities, and, if a strategy is unsuccessful, we may not recoup our investments, which may be significant, in that strategy.
Results of operations from new activities may be lower than our existing activities, and, if a strategy is unsuccessful, we may not recoup our investments, which may be significant, in that strategy. Moreover, we may continue to have financial exposure following a strategic divestiture or cessation of operations in a market.
We continually employ capabilities, processes, and other security measures designed to reduce and mitigate the risk of cyber attacks, and we rely on our suppliers to do the same for their operations; however, we may not be aware of all vulnerabilities and such preventative measures cannot provide absolute security and may not be sufficient in all circumstances or mitigate all potential risks, including potential production disruption.
We employ capabilities, processes, and other security measures we believe are designed to detect, reduce, and mitigate the risk of cybersecurity incidents, and have requirements for our suppliers to do the same; however, we may not be aware of all vulnerabilities or might not accurately assess the risks of incidents, and such preventative measures cannot provide absolute security and may not be sufficient in all circumstances or mitigate all potential risks, including potential production disruption or the loss or disclosure of sensitive information.
These incentives are phasing in and will remain in effect until approximately 2032, unless modified by Congress. The IRA’s incentives are having and are expected to have material impacts on the automotive industry and Ford.
The law likewise incentivizes the purchase of clean vehicles and the infrastructure to fuel them. These incentives change over time and will remain in effect until approximately 2032, unless modified by Congress. The IRA’s incentives are having and are expected to have material impacts on the automotive industry and Ford.
Furthermore, if we fail to make progress on our plan at the pace that shareholders expect, it may lead to an increase in shareholder activism, which may disrupt the conduct of our business and divert management’s attention and resources. Ford’s vehicles could be affected by defects that result in delays in new model launches, recall campaigns, or increased warranty costs.
Furthermore, if we fail to make progress on our plan at the pace that shareholders expect, it may lead to an increase in shareholder activism, which may disrupt the conduct of our business and divert management’s attention and resources.
In addition, Ford Credit projects expected residual values (including residual value support payments from Ford) and return volumes for the vehicles it leases. Actual proceeds realized by Ford Credit upon the sale of returned leased vehicles at lease termination may be lower than the amount projected, which would reduce Ford Credit’s return on the lease transaction.
Actual proceeds realized by Ford Credit upon the sale of returned leased vehicles at lease termination may be lower than the amount projected, which would reduce Ford Credit’s return on the lease transaction.
Automakers that better optimize eligibility for their vehicles, as compared to their competition, will have a competitive advantage. Ford Credit could experience higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles. Credit risk is the possibility of loss from a customer’s or dealer’s failure to make payments according to contract terms.
Automakers that better optimize eligibility for their vehicles, as compared to their competition, will have a competitive advantage. 26 Item 1A. Risk Factors (Continued) Ford Credit could experience higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles.
Ford’s ability to attract and retain talented, diverse, and highly skilled employees is critical to its success and competitiveness. Our success depends on our ability to continue to recruit and retain talented and diverse employees who are highly skilled in engineering, software, technology (including digital capabilities and connectivity), marketing, and finance, among other areas.
Ford’s ability to attract, develop, grow, and reward talent is critical to its success and competitiveness. Our success depends on our ability to continue to attract, develop, grow, and reward talented and diverse employees with domain expertise in engineering, software, technology (including digital capabilities and connectivity), integrated services, supply chain, marketing, and finance, among other areas.
If warranty costs are greater than anticipated as a result of increased vehicle and component complexity, the adoption of new technologies, or otherwise, such costs could have an adverse effect on our financial condition or results of operations.
If warranty costs are greater than anticipated as a result of increased vehicle and component complexity, the adoption of new technologies, the time it takes to improve the quality of our products and services (or if such efforts are unsuccessful), or otherwise (including as a result of higher repair costs driven by inflation or other economic factors), such costs could continue to have an adverse effect on our financial condition or results of operations.
This level of competition increases the importance of our ability to anticipate, develop, and deliver products and services that customers desire on a timely basis, in quantities in line with demand, and at costs low enough to be profitable. We have announced our intent to continue making multi-billion dollar investments in electrification and software services.
This level of competition necessitates that we invest in and integrate emerging technologies into our business and increases the importance of our ability to anticipate, develop, and deliver products and services that customers desire on a timely basis, in quantities in line with demand, with the quality they expect, and at costs low enough to be profitable.
Because we, like other manufacturers, have a higher proportion of fixed structural costs, relatively small changes in industry sales volume can have a substantial effect on our cash flow and results of operations.
Because we, like other manufacturers, have a higher proportion of fixed structural costs, relatively small changes in industry sales volume can have a substantial effect on our cash flow and results of operations. Vehicle sales are affected by overall economic and market conditions, consumer behavior, and developing trends such as shared vehicle ownership and ridesharing services.
If we are not perceived as an employer of choice, we may be unable to recruit highly skilled employees. Further, if we lose existing employees with needed skills, or we are unable to upskill and develop existing employees, particularly with the introduction of new technologies, it could have a substantial adverse effect on our business. 20 Item 1A.
Further, if we lose existing employees with needed skills or we are unable to develop existing employees, particularly with the introduction of new technologies and our focus on operational efficiency and quality, it could have a substantial adverse effect on our business.
If fuel prices are relatively low and market conditions do not drive consumers to purchase electric vehicles and other highly fuel-efficient vehicles in large numbers, it may be difficult to meet applicable environmental standards without compromising results.
If fuel prices are relatively low and market conditions or the consumer attributes 28 Item 1A. Risk Factors (Continued) of our vehicles do not lead consumers to purchase electric vehicles and other highly fuel-efficient vehicles in sufficient numbers, it may be difficult to meet applicable environmental standards.
Inflation Reduction Act (“IRA”) provides, among other things, financial incentives in the form of tax credits to grow the domestic supply chain and domestic manufacturing base for electric vehicles, plug-in hybrid vehicles (PHEVs), and other “clean” vehicles. The law likewise incentivizes the purchase of clean vehicles and the infrastructure to fuel them.
Legal Proceedings” for a discussion of tax proceedings in Brazil and the potential requirement for us to post collateral. The U.S. Inflation Reduction Act (“IRA”) provides, among other things, financial incentives in the form of tax credits to grow the domestic supply chain and domestic manufacturing base for electric vehicles, plug-in hybrid vehicles (PHEVs), and other “clean” vehicles.
This excess capacity may further increase price competition in that segment of the market, which could have a substantial adverse effect on our financial condition or results of operations. 22 Item 1A.
As electric vehicle adoption rates increase, the risk of excess capacity, particularly for internal combustion engine trucks and utilities, may be exacerbated. This excess capacity may further increase price competition in that segment of the market, which could have a substantial adverse effect on our financial condition or results of operations.
Should NHTSA determine that the inflators contain a safety defect, Ford and other manufacturers could potentially face significant incremental recall costs. Further, to the extent recall and customer satisfaction actions relate to defective components we receive from suppliers, our ability to recover from the suppliers may be limited by the suppliers’ financial condition.
Further, to the extent recall and customer satisfaction actions relate to defective components we receive from suppliers, our ability to recover from the suppliers may be limited by the suppliers’ financial condition.
Moreover, a production disruption, stop ship, limited availability of necessary components, e.g., batteries or the raw materials necessary for their production, lower than planned market acceptance of our vehicles, or other intervening events may cause us to modify our product plans, or, in some cases, purchase credits, in order to comply with standards regarding fuel economy and air pollution, which could have an adverse effect on our financial condition or results of operations and/or cause reputational harm.
Moreover, the rates of EV growth, production disruptions, stop ships, supply chain limitations, lower-than-planned market acceptance of our vehicles, and/or other circumstances may cause us to modify product plans, or, in some cases, purchase credits, which we have done, in order to comply with emissions standards, fuel economy standards, or ZEV requirements, which could have an adverse effect on our financial condition and results of operations and cause reputational harm.
Moreover, we may continue to have financial exposure following a strategic divestiture or cessation of operations in a market, and restructuring actions may cause us to incur significant costs, record impairments or other charges, subject us to potential claims from employees, suppliers, dealers, or governmental authorities or harm our reputation.
Such restructuring actions have caused us and may in the future cause us to incur significant costs; record impairments or other charges; subject us to potential claims from employees, suppliers, dealers, other counterparties, or governmental authorities (including a reduction or clawback of incentives); disrupt our operations; distract management from current operations; or harm our reputation.
Risk Factors (Continued) Pension and other postretirement liabilities could adversely affect Ford’s liquidity and financial condition. We have defined benefit retirement plans in the United States that cover many of our hourly and salaried employees. We also provide pension benefits to non-U.S. employees and retirees, primarily in Europe.
We have defined benefit retirement plans in the United States that cover many of our hourly and salaried employees. We also provide pension benefits to non-U.S. employees and retirees, primarily in Europe. In addition, we sponsor plans to provide OPEB for retired employees (primarily health care and life insurance benefits).
These initiatives typically involve enormous complexity, may require a significant amount of capital, and may involve a lengthy regulatory approval process. As a result, we may not be able to complete anticipated transactions, the anticipated benefits of these transactions may not be realized, or the benefits may be delayed.
As a result, we may not be able to complete anticipated transactions, the anticipated benefits of these transactions may not be realized, or the benefits may be delayed.
Vehicle sales are affected by overall economic and market conditions and developing trends such as shared vehicle ownership and the transportation as a service model, e.g., ridesharing services. If industry vehicle sales were to decline to levels significantly below our planning assumption, the decline could have a substantial adverse effect on our financial condition, results of operations, and cash flow.
If industry vehicle sales were to decline to levels significantly below our planning assumption, the decline could have a substantial adverse effect on our financial condition, results of operations, and cash flow. For a discussion of economic trends, see Item 7.
Credit risk (which is heavily dependent upon economic factors including unemployment, consumer debt service burden, personal income growth, dealer profitability, and used car prices) has a significant impact on Ford Credit’s business. The level of credit losses Ford Credit may experience could exceed its expectations and adversely affect its financial condition or results of operations.
Credit risk is the possibility of loss from a customer’s or dealer’s failure to make payments according to contract terms. Credit risk (which is heavily dependent upon economic factors including unemployment, consumer debt service burden, personal income growth, dealer profitability, and used car prices) has a significant impact on Ford Credit’s business.

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Item 2. Properties

Properties — owned and leased real estate

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We have one significant consolidated joint venture in our Automotive segment: • Ford Vietnam Limited — a joint venture between Ford (75% partner) and Diesel Song Cong One Member Limited Liability Company (a subsidiary of the Vietnam Engine and Agricultural Machinery Corporation, which in turn is majority owned (87.43%) by the State of Vietnam represented by the Ministry of Industry and Trade) (25% partner).
We have one significant consolidated joint venture, which is in our Ford Blue segment: • Ford Vietnam Limited — a joint venture between Ford (75% partner) and Diesel Song Cong One Member Limited Liability Company (a subsidiary of the Vietnam Engine and Agricultural Machinery Corporation, which in turn is majority owned (87.43%) by the State of Vietnam represented by the Ministry of Industry and Trade) (25% partner).
AAT produces Ford and Mazda products for domestic and export sales. • BlueOval SK, LLC — a 50/50 joint venture among Ford, SK On Co., Ltd., and SK Battery America, Inc.
(“AAT”) — a 50/50 joint venture between Ford and Mazda that owns and operates a manufacturing plant in Rayong, Thailand. AAT produces Ford and Mazda products for domestic and export sales. • BlueOval SK, LLC — a 50/50 joint venture among Ford, SK On Co., Ltd., and SK Battery America, Inc.
Most of our distribution centers are leased (we own approximately 35% of the total square footage, and lease the balance). The majority of the warehouses that we operate are leased, although many of our manufacturing and assembly facilities contain some warehousing space. Substantially all of our sales offices are leased space.
The majority of the warehouses that we operate are leased, although many of our manufacturing and assembly facilities contain some warehousing space. Substantially all of our sales offices are leased space. Approximately 85% of the total square footage of our testing, prototype, and operations space is owned by us.
The joint venture operates one plant in Taiwan. • Ford Otomotiv Sanayi Anonim Sirketi (“Ford Otosan”) — a joint venture in Türkiye among Ford (41% partner), the Koc Group of Türkiye (41% partner), and public investors (18%) that is the sole supplier to us of the Transit, Transit Custom, and Transit Courier commercial vehicles, and, as of July 2022, the sole supplier of the Puma and EcoSport for Europe and is the sole distributor of Ford vehicles in Türkiye.
CAF operates four assembly plants, an engine plant, and a transmission plant in China where it produces and distributes a variety of Ford passenger vehicle models. • Ford Otomotiv Sanayi Anonim Sirketi (“Ford Otosan”) — a joint venture in Türkiye among Ford (41% partner), the Koc Group of Türkiye (41% partner), and public investors (18%) that is the sole supplier to us of the Transit, Transit Custom, and Transit Courier commercial vehicles and the Puma for Europe and the sole distributor of Ford vehicles in Türkiye.
The jury subsequently awarded punitive damages against Ford in the amount of $1.7 billion. We have filed post-trial motions and are seeking a new trial.
The jury subsequently awarded punitive damages against Ford in the amount of $1.7 billion. We filed post-trial motions seeking a new trial, and on September 14, 2023, the trial court denied our post-trial motions. On October 13, 2023, Ford filed a notice of appeal with the Georgia Court of Appeals.
Properties (Continued) • JMC — a publicly-traded company in China with Ford (32% shareholder) and Nanchang Jiangling Investment Co., Ltd. (41% shareholder) as its controlling shareholders. Nanchang Jiangling Investment Co., Ltd. is a 50/50 joint venture between Changan and Jiangling Motors Company Group. The public investors in JMC own 27% of its total outstanding shares.
Nanchang Jiangling Investment Co., Ltd. is a 50/50 joint venture between Changan and Jiangling Motors Company Group. The public investors in JMC own 27% of its total outstanding shares. JMC assembles Ford Transit, a series of Ford SUVs, Ford engines, and non-Ford vehicles and engines for distribution in China and in other export markets.
Approximately 85% of the total square footage of our testing, prototype, and operations space is owned by us. In addition, we maintain and operate manufacturing plants, assembly facilities, parts distribution centers, and engineering centers outside of the United States. We own substantially all of our non-U.S. manufacturing plants, assembly facilities, and engineering centers.
In addition, we maintain and operate manufacturing plants, assembly facilities, parts distribution centers, and engineering centers outside of the United States. We own substantially all of our non-U.S. manufacturing plants, assembly facilities, and engineering centers. The majority of our parts distribution centers outside of the United States are either leased or provided by vendors under service contracts.
ITEM 2. Properties. Our principal properties include manufacturing and assembly facilities, distribution centers, warehouses, sales or administrative offices, and engineering centers. We own substantially all of our U.S. manufacturing and assembly facilities. Our facilities are situated in various sections of the country and include assembly plants, engine plants, casting plants, metal stamping plants, transmission plants, and other component plants.
ITEM 2. Properties. Our principal properties include manufacturing and assembly facilities, distribution centers, warehouses, sales or administrative offices, and testing, prototype, and operations space. We own substantially all of our U.S. manufacturing and assembly facilities.
A hearing on our post-trial motions was held on December 19, 2022, and we believe the law supports our position that Ford is entitled to a new trial with the right to present evidence in its defense. 29
We believe the law supports our position that Ford is entitled to a new trial with the right to present evidence in its defense. ASBESTOS MATTERS Asbestos was used in some brakes, clutches, and other automotive components from the early 1900s.
The facilities described above are, in the opinion of management, suitable and adequate for the manufacture and assembly of our and our joint ventures’ products. The furniture, equipment, and other physical property owned by our Ford Credit operations are not material in relation to the operations’ total assets. ITEM 3. Legal Proceedings.
The furniture, equipment, and other physical property owned by our Ford Credit operations are not material in relation to the operations’ total assets. ITEM 3. Legal Proceedings. The litigation process is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance.
We and the entities that we consolidated as of December 31, 2022 use 13 engineering and research facilities and 44 manufacturing and assembly plants, which includes plants that are operated by us or our consolidated joint venture that support our Automotive segment.
We and the entities that we consolidated as of December 31, 2023 use over 300 operations facilities globally, including testing and prototype, across 24 countries, and 41 manufacturing and assembly plants, which includes plants that are operated by us or our consolidated joint venture that support our Ford Blue, Ford Model e, and Ford Pro segments.
The litigation process is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. See Note 25 of the Notes to the Financial Statements for a discussion of loss contingencies.
See Note 25 of the Notes to the Financial Statements for a discussion of loss contingencies.
Ford Vietnam Limited assembles and distributes a variety of Ford passenger and commercial vehicle models. The joint venture operates one plant in Vietnam. In addition to the plants that we operate directly or that are operated by our consolidated joint venture, additional plants that support our Automotive segment are operated by unconsolidated joint ventures of which we are a partner.
In addition to the plants that we operate directly or that are operated by our consolidated joint venture, additional plants that support our Ford Blue, Ford Model e, and Ford Pro segments are operated by unconsolidated joint ventures of which we are a partner. The most significant of those unconsolidated joint ventures are as follows: • AutoAlliance (Thailand) Co., Ltd.
Ford Otosan also manufactures Ford heavy trucks for markets in Europe, the Middle East, and Africa. The joint venture owns three plants, a parts distribution depot, and a research and development center in Türkiye, and, as of July 2022, a combined vehicle and engine plant in Romania. 28 Item 2.
The joint venture owns three plants, a parts distribution depot, and a research and development center in Türkiye, and a combined vehicle and engine plant in Romania. • JMC — a publicly-traded company in China with Ford (32% shareholder) and Nanchang Jiangling Investment Co., Ltd. (41% shareholder) as its controlling shareholders.
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The majority of our parts distribution centers outside of the United States are either leased or provided by vendors under service contracts.
Added
Our facilities are situated in various sections of the country and include assembly plants, engine plants, casting plants, metal stamping plants, transmission plants, and other component plants. Most of our distribution centers are leased (we own approximately 32% of the total square footage and lease the balance).
Removed
The most significant of our Automotive segment unconsolidated joint ventures are as follows: • AutoAlliance (Thailand) Co., Ltd. (“AAT”) — a 50/50 joint venture between Ford and Mazda that owns and operates a manufacturing plant in Rayong, Thailand.
Added
Ford Vietnam Limited assembles and distributes a variety of Ford passenger and commercial vehicle models. The joint venture operates one plant in Vietnam.
Removed
CAF operates four assembly plants, an engine plant, and a transmission plant in China where it produces and distributes a variety of Ford passenger vehicle models. • Ford Lio Ho Motor Company Ltd.
Added
Ford Otosan also manufactures Ford heavy trucks for markets in Europe, the Middle East, and Africa.
Removed
(“FLH”) — a joint venture in Taiwan between Ford (26% partner) and local partners (74% ownership in aggregate) that assembles a variety of Ford vehicles sourced from Ford. In addition to domestic assembly, FLH imports Ford brand built-up vehicles from Asia Pacific, Europe, and the United States.
Added
JMC operates two assembly plants and one engine plant in Nanchang. 33 Item 2. Properties (Continued) The facilities described above are, in the opinion of management, suitable and adequate for the manufacture and assembly of our and our joint ventures’ products.
Removed
JMC assembles Ford Transit, a series of Ford SUVs, Ford engines, and non-Ford vehicles and engines for distribution in China and in other export markets. JMC operates two assembly plants and one engine plant in Nanchang.
Added
Along with other vehicle manufacturers, we have been the target of asbestos litigation and, as a result, are a defendant in various actions for injuries claimed to have resulted from alleged exposure to Ford parts and other products containing asbestos.
Added
Plaintiffs in these personal injury cases allege various health problems as a result of asbestos exposure, either from component parts found in older vehicles, insulation or other asbestos products in our facilities, or asbestos aboard our former maritime fleet.
Added
We believe that we are targeted more aggressively in asbestos suits because many previously targeted companies have filed for bankruptcy or emerged from bankruptcy relieved of liability for such claims. Most of the asbestos litigation we face involves individuals who claim to have worked on the brakes of our vehicles.
Added
We are prepared to defend these cases and believe that the scientific evidence confirms our long-standing position that there is no increased risk of asbestos-related disease as a result of exposure to the type of asbestos formerly used in the brakes on our vehicles.
Added
The extent of our financial exposure to asbestos litigation remains very difficult to estimate and could include both compensatory and punitive damage awards.
Added
The majority of our asbestos cases do not specify a dollar amount for damages; in many of the other cases the dollar amount specified is the jurisdictional minimum, and the vast majority of these cases involve multiple defendants.
Added
Some of these cases may also involve multiple plaintiffs, and we may be unable to tell from the pleadings which plaintiffs are making claims against us (as opposed to other defendants). Annual payout and defense costs may become significant in the future. Our accrual for asbestos matters includes probable losses for both asserted and unasserted claims. 34

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Competition and Markets Authority Matter. On March 15, 2022, the European Commission (the “Commission”) and the U.K. Competition and Markets Authority (the “CMA”) conducted unannounced inspections at the premises of, and sent formal requests for information to, several companies and associations active in the automotive sector, including Ford.
On March 15, 2022, the European Commission (the “Commission”) and the U.K. Competition and Markets Authority (the “CMA”) conducted unannounced inspections at the premises of, and sent formal requests for information to, several companies and associations active in the automotive sector, including Ford.
Legal Proceedings (Continued) CLASS ACTIONS In light of the fact that few of the purported class actions filed against us in the past have been certified by the courts as class actions, in general we list those actions that (i) have been certified as a class action by a court of competent jurisdiction (and any additional purported class actions that raise allegations substantially similar to an existing and certified class), and (ii) have more than a remote risk of loss, and such loss would likely be significant if the action is resolved unfavorably to us.
CLASS ACTIONS In light of the fact that few of the purported class actions filed against us in the past have been certified by the courts as class actions, in general we list those actions that (i) have been certified as a class action by a court of competent jurisdiction (and any additional purported class actions that raise allegations substantially similar to an existing and certified class), and (ii) have more than a remote risk of loss, and such loss would likely be significant if the action is resolved unfavorably to us.
CONSUMER MATTERS We provide warranties on the vehicles we sell. Warranties are offered for specific periods of time and/or mileage and vary depending upon the type of product and the geographic location of its sale.
Item 3. Legal Proceedings (Continued) CONSUMER MATTERS We provide warranties on the vehicles we sell. Warranties are offered for specific periods of time and/or mileage and vary depending upon the type of product and the geographic location of its sale.
Although the ultimate resolution of these matters may take many years, we consider our overall risk of loss to be remote. Transit Connect Customs Penalty Notice. U.S.
Although the ultimate resolution of these matters may take many years, we consider our overall risk of loss to be remote. 35 Item 3. Legal Proceedings (Continued) Transit Connect Customs Penalty Notice. U.S.
Subsequently, CBP issued a penalty notice to us dated July 22, 2021, and on November 18, 2021, CBP assessed against us a monetary penalty of $1.3 billion and additional duties of $181 million, plus interest. We intend to vigorously defend our actions and contest payment of the penalty and the additional duties. European Commission and U.K.
Subsequently, CBP issued a penalty notice to us dated July 22, 2021, and on November 18, 2021, CBP assessed against us a monetary penalty of $1.3 billion and additional duties of $181 million, plus interest. We are vigorously defending our actions and contesting payment of the penalty and the additional duties. European Commission and U.K. Competition and Markets Authority Matter.
On June 16, 2022, the New Jersey Department of Environmental Protection (“NJDEP”) filed a complaint in the Superior Court of New Jersey (Bergen County) seeking natural resource damages and other claims related to the Ringwood Mines/Landfill Site located in Ringwood, New Jersey. We are defending the NJDEP’s allegations and have filed a motion to dismiss. 30 Item 3.
On June 16, 2022, the New Jersey Department of Environmental Protection (“NJDEP”) filed a complaint in the Superior Court of New Jersey (Bergen County) seeking natural resource damages and other claims related to the Ringwood Mines/Landfill Site located in Ringwood, New Jersey. On February 21, 2023, the court denied our motion to dismiss.
Removed
Item 3. Legal Proceedings (Continued) ASBESTOS MATTERS Asbestos was used in some brakes, clutches, and other automotive components from the early 1900s.
Added
We continue to defend against the NJDEP’s allegations.
Removed
Along with other vehicle manufacturers, we have been the target of asbestos litigation and, as a result, are a defendant in various actions for injuries claimed to have resulted from alleged exposure to Ford parts and other products containing asbestos.
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Plaintiffs in these personal injury cases allege various health problems as a result of asbestos exposure, either from component parts found in older vehicles, insulation or other asbestos products in our facilities, or asbestos aboard our former maritime fleet.
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We believe that we are targeted more aggressively in asbestos suits because many previously targeted companies have filed for bankruptcy or emerged from bankruptcy relieved of liability for such claims. Most of the asbestos litigation we face involves individuals who claim to have worked on the brakes of our vehicles.
Removed
We are prepared to defend these cases and believe that the scientific evidence confirms our long-standing position that there is no increased risk of asbestos-related disease as a result of exposure to the type of asbestos formerly used in the brakes on our vehicles.
Removed
The extent of our financial exposure to asbestos litigation remains very difficult to estimate and could include both compensatory and punitive damage awards.
Removed
The majority of our asbestos cases do not specify a dollar amount for damages; in many of the other cases the dollar amount specified is the jurisdictional minimum, and the vast majority of these cases involve multiple defendants.
Removed
Some of these cases may also involve multiple plaintiffs, and we may be unable to tell from the pleadings which plaintiffs are making claims against us (as opposed to other defendants). Annual payout and defense costs may become significant in the future. Our accrual for asbestos matters includes probable losses for both asserted and unasserted claims.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The declaration and payment of future dividends is at the sole discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, available cash, and current and anticipated cash needs. 34 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The declaration and payment of future dividends is at the sole discretion of our Board of Directors after taking into account various factors, including our financial condition, operating results, available cash, and current and anticipated cash needs.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (Continued) Issuer Purchases of Securities In the fourth quarter of 2022, we completed a modest anti-dilutive share repurchase program to offset the dilutive effect of share-based compensation granted during 2022. The plan authorized repurchases of up to 35 million shares of Ford Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (Continued) Issuer Purchases of Equity Securities In the fourth quarter of 2023, we completed a modest anti-dilutive share repurchase program to offset the dilutive effect of share-based compensation granted during 2023.
Subject to legally available funds, we intend to continue to pay a regular quarterly cash dividend on our outstanding Common Stock and Class B Stock.
On February 6, 2024, we declared a regular dividend of $0.15 per share and a supplemental dividend of $0.18 per share. Subject to legally available funds, we intend to continue to pay a regular quarterly cash dividend on our outstanding Common Stock and Class B Stock.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly-Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2022 through October 31, 2022 — $ — — — November 1, 2022 through November 30, 2022 35,000,000 13.81 35,000,000 — December 1, 2022 through December 31, 2022 — — — — Total / Average 35,000,000 $ 13.81 — — Dividends The table below shows the dividends we paid per share of Common and Class B Stock for each quarterly period in 2021 and 2022: 2021 2022 First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter Dividends per share of Ford Common and Class B Stock $ 0.00 $ 0.00 $ 0.00 $ 0.10 $ 0.10 $ 0.10 $ 0.15 $ 0.15 On February 2, 2023, we declared a regular dividend of $0.15 per share and a supplemental dividend of $0.65 per share.
Dividends The table below shows the dividends we paid per share of Common and Class B Stock for each quarterly period in 2022 and 2023: 2022 2023 First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter (a) Second Quarter Third Quarter Fourth Quarter Dividends per share of Ford Common and Class B Stock $ 0.10 $ 0.10 $ 0.15 $ 0.15 $ 0.80 $ 0.15 $ 0.15 $ 0.15 __________ (a) In the first quarter of 2023, in addition to a regular dividend of $0.15 per share, we paid a supplemental dividend of $0.65 per share.
Removed
Key Trends and Economic Factors Affecting Ford and the Automotive Industry COVID-19 and Supplier Disruptions. The impact of COVID-19, including changes in consumer behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy.
Added
The program authorized repurchases of up to 51 million shares of Ford Common Stock. As shown in the rightmost column of the table below, we do not intend to make any further purchases under this program because its anti-dilutive purpose was fulfilled after purchasing only 31 million shares.
Removed
Outbreaks in certain regions continue to cause intermittent COVID-19-related disruptions in our supply chain and local manufacturing operations. We also continue to face supplier disruptions due to labor shortages and other production issues, in addition to the continuing semiconductor shortage.
Added
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly-Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2023 through October 31, 2023 — $ — — — November 1, 2023 through November 30, 2023 6,713,291 10.25 6,713,291 44,286,709 December 1, 2023 through December 31, 2023 24,286,709 10.95 24,286,709 20,000,000 (a) Total / Average 31,000,000 $ 10.80 31,000,000 __________ (a) The share repurchase program announced November 20, 2023 authorized repurchases of up to 51 million shares of Ford Common Stock.
Removed
Our inconsistent production schedule has been disruptive to our suppliers’ operations, which, in turn, has led to higher costs and production shortfalls. Further, actions taken by Russia in Ukraine have impacted and could further impact our suppliers, particularly our lower tier suppliers, as well as our operations in Europe.
Added
Although we have repurchased 31 million shares and the program was authorized for up to 51 million, we do not intend to make any further purchases under this program because its anti-dilutive purpose has been fulfilled.
Removed
For additional information on the impact of supplier disruptions, see the Outlook section on page 73 . Currency Exchange Rate Volatility. After aggressively easing monetary policy in response to the COVID-19 pandemic, the Federal Reserve, and other central banks around the world, in 2022 began to withdraw monetary stimulus by raising interest rates.
Added
In December 2023, our Board of Directors approved a modest anti-dilutive share repurchase program to offset the dilutive effect of share-based compensation expected to be granted during 2024. The program authorizes repurchases of up to 53 million shares of Ford Common Stock.
Removed
Periods of monetary policy tightening are often associated with heightened financial market and currency volatility, especially for those markets that are outliers in terms of their economic or monetary policy backdrop.
Added
The Company may repurchase shares of Common Stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to satisfy the conditions of Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions.
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This is notable for many emerging markets, which may also face increased exposure to commodity prices and political instability, contributing to unpredictable movements in the value of their exchange rates. In addition to direct impacts on the financial flows of global automotive companies, currency movements can also impact pricing of vehicles exported to overseas markets.
Added
The timing and total amount of repurchases of Ford Common Stock under this program will depend upon business, economic, and market conditions, corporate, legal, and regulatory requirements, prevailing stock prices, trading volume, and other considerations. The share repurchase program may be suspended or discontinued at any time, and does not obligate the Company to acquire any amount of Common Stock.
Removed
In most markets, exchange rates are market-determined, and all are impacted by many different macroeconomic and policy factors, and thus likely to remain volatile. However, in some markets, exchange rates are heavily influenced or controlled by governments. Pricing Pressure.
Added
To the extent the Company elects to make purchases under the share repurchase program, the Company expects to utilize its existing cash and cash equivalents to fund such repurchases.
Removed
Over the last year, prices of both new and used vehicles have increased substantially due to strong demand, supply shortages, and inflationary costs. We have already observed some moderation in the rate of price increases as auto production slowly recovers from the semiconductor shortage, but it is unclear whether prices will decline fully to pre-COVID-19 pandemic levels.
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Over the long term, intense competition and excess capacity are likely to put downward pressure on inflation-adjusted prices for similarly-contented vehicles and contribute to a challenging pricing environment for the automotive industry in most major markets. Commodity and Energy Prices. Prices for commodities remain volatile.
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In some cases, spot prices for various commodities have recently diverged somewhat, as anticipated weakening in global industrial activity mitigates price increases for base metals such as steel and aluminum, while precious metals (e.g., palladium), and raw materials that are used in batteries for electric vehicles (e.g., lithium, cobalt, nickel, graphite, and manganese, among other materials, for batteries) remain high.
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The net impact on us and our suppliers has been higher material costs overall. To help ensure supply of raw materials for critical components (e.g., batteries), we, like others in the industry, have entered into multi-year sourcing agreements and may enter into additional agreements.
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Similar dynamics are impacting energy markets, with Europe particularly exposed to the risk of both higher prices and constraints on supply of natural gas due to the ongoing conflict in Ukraine. Such shortages may impact facilities operated by us or our suppliers, which could have an impact on us in Europe and other regions.
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In the long term, the outcome of de-carbonization and electrification of the vehicle fleet may depress oil demand, but the global energy transition will also contribute to ongoing volatility of oil and other energy prices. For additional information on commodity costs, see the Outlook section on page 73 . Vehicle Profitability.
Removed
Our financial results depend on the profitability of the vehicles we sell, which may vary significantly by vehicle line. In general, larger vehicles tend to command higher prices and be more profitable than smaller vehicles, both across and within vehicle segments.
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For example, in North America, our larger, more profitable vehicles had an average contribution margin that was 120% of our total average contribution margin across all vehicles, whereas our smaller vehicles had significantly lower contribution margins.
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In addition, government regulations aimed at reducing emissions and increasing fuel efficiency (e.g., ZEV mandates and low emission zones), and other factors that accelerate the transition to electrified vehicles, may increase the cost of vehicles by more than the perceived benefit to consumers and dampen margins. 35 Item 7.
Removed
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Trade Policy.
Removed
To the extent governments in various regions implement or intensify barriers to imports, such as erecting tariff or non-tariff barriers or manipulating their currency, and provide advantages to local exporters selling into the global marketplace, there can be a significant negative impact on manufacturers based in other markets.
Removed
While we believe the long-term trend will support the growth of free trade, we will continue to monitor and address developing issues. Inflation and Interest Rates.
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We continue to see near-term impacts on our business due to inflation, including ongoing global price pressures in the wake of Russia’s invasion of Ukraine, driving up energy prices, freight premiums, and other operating costs above normal rates.
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Although headline inflation in the United States and Europe appears to have peaked, as gasoline and natural gas prices recede from the latest spike, core inflation (excluding food and energy prices) remains elevated and is a source of continued cost pressure on businesses and households.
Removed
Interest rates have increased significantly as central banks in developed countries attempt to subdue inflation while government deficits and debt remain at high levels in many global markets. Accordingly, the eventual implications of higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital for the business.
Removed
At Ford Credit, rising interest rates may impact its ability to source funding and offer financing at competitive rates, which could reduce its financing margin. Revenue Our Automotive segment revenue is generated primarily by sales of vehicles, parts, and accessories. Revenue is recorded when control is transferred to our customers (generally, our dealers and distributors).
Removed
For the majority of sales, this occurs when products are shipped from our manufacturing facilities. However, we defer a portion of the consideration received when there is a separate future or stand-ready performance obligation, such as extended service contracts or ongoing vehicle connectivity.
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Revenue related to extended service contracts is recognized over the term of the agreement in proportion to the costs we expect to incur in satisfying the contract obligations; revenue related to other future or stand-ready performance obligations is generally recognized on a straight-line basis over the period in which services are expected to be performed.
Removed
Vehicles sold to daily rental car companies with an obligation to repurchase for a guaranteed amount, exercisable at the option of the customer, are accounted for as operating leases, with lease revenue recognized over the term of the lease.
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Proceeds from the sale of vehicles at auction are recognized in revenue upon transfer of control of the vehicle to the buyer. Most of the vehicles sold by us to our dealers and distributors are financed at wholesale by Ford Credit.
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Upon Ford Credit originating the wholesale receivable related to a dealer’s purchase of a vehicle, Ford Credit pays cash to the relevant Automotive legal entity in payment of the dealer’s obligation for the purchase price of the vehicle. The dealer then pays the wholesale finance receivable to Ford Credit when it sells the vehicle to a retail customer.
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Our Ford Credit segment revenue is generated primarily from interest on finance receivables and revenue from operating leases. Revenue from interest on finance receivables is recognized over the term of the receivable using the interest method and includes the amortization of certain deferred origination costs.
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Revenue from operating leases is recognized on a straight-line basis over the term of the lease. Transactions between our Automotive and Ford Credit segments occur in the ordinary course of business. For example, we offer special retail financing and lease incentives to dealers’ customers who choose to finance or lease our vehicles from Ford Credit.
Removed
The cost for these incentives is included in our estimate of variable consideration at the date the related vehicle sales to our dealers are recorded.
Removed
In order to compensate Ford Credit for the lower interest or lease payments offered to the retail customer, we pay the discounted value of the incentive directly to Ford Credit when it originates the retail finance or lease contract with the dealer’s customer.
Removed
Ford Credit recognizes the incentive amount over the life of retail finance contracts as an element of financing revenue and over the life of lease contracts as a reduction to depreciation. See Note 1 of the Notes to the Financial Statements for a more detailed discussion of transactions between our Automotive and Ford Credit segments. 36 Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Costs and Expenses Our income statement classifies our Company excluding Ford Credit total costs and expenses into two categories: (i) cost of sales, and (ii) selling, administrative, and other expenses.
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We include within cost of sales those costs related to the development, production, and distribution of our vehicles, parts, accessories, and services.
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Specifically, we include in cost of sales each of the following: material costs (including commodity costs); freight costs; warranty, including product recall costs; labor and other costs related to the development and production of our vehicles and connectivity, parts, accessories, and services; depreciation and amortization; and other associated costs.
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We include within selling, administrative, and other expenses labor and other costs not directly related to the development and production of our vehicles, parts, accessories, and services, including such expenses as advertising and sales promotion costs. Certain of our costs, such as material costs, generally vary directly with changes in volume and mix of production.
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In our industry, production volume often varies significantly from quarter to quarter and year to year. Quarterly production volumes experience seasonal shifts throughout the year (including peak retail sales seasons and the impact on production of model changeover and new product launches).
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Annual production volumes are heavily impacted by external economic factors, including the pace of economic growth and factors such as the availability of consumer credit and cost of fuel.
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As a result, we analyze the profit impact of certain cost changes holding constant present-year volume and mix and currency exchange, in order to evaluate our cost trends absent the impact of varying production and currency exchange levels. We analyze these cost changes in the following categories: • Contribution Costs – these costs typically vary with production volume.
Removed
These costs include material (including commodity), warranty, and freight and duty costs. • Structural Costs – these costs typically do not have a directly proportionate relationship to production volume. These costs include manufacturing; vehicle and software engineering; spending-related; advertising and sales promotion; administrative, information technology, and selling; and pension and OPEB costs.
Removed
While contribution costs generally vary directly in proportion to production volume, elements within our structural costs category are impacted to differing degrees by changes in production volume. We also have varying degrees of discretion when it comes to controlling the different elements within our structural costs. For example, depreciation and amortization expense largely is associated with prior capital spending decisions.
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On the other hand, while labor costs do not vary directly with production volume, manufacturing labor costs may be impacted by changes in volume, for example when we increase overtime, add a production shift, or add personnel to support volume increases.
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Other structural costs, such as advertising or engineering costs, do not necessarily have a directly proportionate relationship to production volume. Our structural costs generally are within our discretion, although to varying degrees, and can be adjusted over time in response to external factors. We consider certain structural costs to be a direct investment in future growth and revenue.
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For example, structural costs are necessary to grow our business and improve profitability, invest in new products and technologies, respond to increasing industry sales volume, and grow our market share. Cost of sales and Selling, administrative, and other expenses for full year 2022 were $145.3 billion.
Removed
Our Automotive segment’s material and commodity costs make up the largest portion of these costs and expenses, followed by structural costs. Although material costs are our largest absolute cost, our margins can be affected significantly by changes in any category of costs. 37 Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) RESULTS OF OPERATIONS - 2022 The net loss attributable to Ford Motor Company was $1,981 million in 2022. Company adjusted EBIT was $10,415 million. Net income/(loss) includes certain items (“special items”) that are excluded from Company adjusted EBIT.
Removed
These items are discussed in more detail in Note 26 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.
Removed
Our pre-tax and tax special items were as follows (in millions): 2021 2022 Global Redesign Europe $ (530) $ (151) India (468) (298) South America (803) 53 China (including Taiwan) 150 (380) North America (72) (198) Other 3 7 Subtotal Global Redesign $ (1,720) $ (967) Other Items Gain/(loss) on Rivian investment $ 9,096 $ (7,377) Debt extinguishment premium (1,692) (135) AV strategy including Argo impairment (see Note 14) — (2,812) Ford Credit – Brazil restructuring (see Note 21) 14 (155) Russia suspension of operations/asset write-off — (158) Patent matters related to prior calendar years — (124) Other 82 (35) Subtotal Other Items $ 7,500 $ (10,796) Pension and OPEB Gain/(Loss) Pension and OPEB remeasurement $ 3,873 $ 29 Pension settlements and curtailments (70) (438) Subtotal Pension and OPEB Gain/(Loss) $ 3,803 $ (409) Total EBIT Special Items $ 9,583 $ (12,172) Cash effect of Global Redesign (incl. separations) $ (1,935) $ (377) Provision for/(Benefit from) tax special items (a) $ (1,924) $ (2,573) __________ (a) Includes related tax effect on special items and tax special items.
Removed
We recorded $12.2 billion of pre-tax special item charges in 2022, driven by a $7.4 billion mark-to-market net loss on our Rivian investment and a $2.7 billion impairment on our Argo investment.
Removed
In Note 26 of the Notes to the Financial Statements, special items are reflected as a separate reconciling item, as opposed to being allocated among the Automotive, Mobility, and Ford Credit segments. This reflects the fact that management excludes these items from its review of operating segment results for purposes of measuring segment profitability and allocating resources. 38 Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) COMPANY KEY METRICS The table below shows our full year 2022 key metrics for the Company compared to a year ago. 2021 2022 H / (L) GAAP Financial Measures Cash Flows from Operating Activities ($B) $ 15.8 $ 6.9 $ (8.9) Revenue ($M) 136,341 158,057 16 % Net Income/(Loss) ($M) 17,937 (1,981) $ (19,918) Net Income/(Loss) Margin (%) 13.2 % (1.3) % (14.5) ppts EPS (Diluted) $ 4.45 $ (0.49) $ (4.94) Non-GAAP Financial Measures (a) Company Adj.
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Free Cash Flow ($B) $ 4.6 $ 9.1 $ 4.5 Company Adj. EBIT ($M) 10,000 10,415 415 Company Adj. EBIT Margin (%) 7.3 % 6.6 % (0.7) ppts Adjusted EPS (Diluted) $ 1.59 $ 1.88 $ 0.29 Adjusted ROIC (Trailing Four Qtrs) 9.8 % 11.2 % 1.4 ppts __________ (a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
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In 2022, our diluted earnings per share of Common and Class B Stock was a loss of $0.49 and our diluted adjusted earnings per share was $1.88. Net income/(loss) margin was negative 1.3% in 2022, down from 13.2% a year ago. Company adjusted EBIT margin was 6.6% in 2022, down from 7.3% a year ago.
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The table below shows our full year 2022 net income/(loss) attributable to Ford and Company adjusted EBIT by segment (in millions). 2021 2022 H / (L) Automotive $ 7,397 $ 9,692 $ 2,295 Mobility (1,030) (926) 104 Ford Credit 4,717 2,657 (2,060) Corporate Other (1,084) (1,008) 76 Company Adjusted EBIT (a) 10,000 10,415 415 Interest on Debt (1,803) (1,259) (544) Special Items 9,583 (12,172) 21,755 Taxes / Noncontrolling Interests 157 1,035 (878) Net Income/(Loss) $ 17,937 $ (1,981) $ (19,918) __________ (a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
Removed
The year-over-year decrease of $19.9 billion in net income/(loss) in 2022 includes the effect of special items, including the mark-to-market net loss on our Rivian investment and the impairment on our Argo investment, and lower Ford Credit EBT, partially offset by higher Automotive EBIT.
Removed
The year-over-year increase of $400 million in Company adjusted EBIT primarily reflects higher Automotive EBIT, offset partially by lower Ford Credit EBT. 39 Item 7.
Removed
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Automotive Segment The table below shows our full year 2022 Automotive segment EBIT by business unit (in millions). 2021 2022 H / (L) North America $ 7,377 $ 9,176 $ 1,799 South America (121) 413 534 Europe (154) 47 201 China (including Taiwan) (327) (572) (245) International Markets Group 622 628 6 Automotive Segment $ 7,397 $ 9,692 $ 2,295 The tables below and on the following pages provide full year 2022 key metrics and the change in full year 2022 EBIT compared with full year 2021 by causal factor for our Automotive segment and its regional business units: North America, South America, Europe, China (including Taiwan), and the International Markets Group.
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For a description of these causal factors, see Definitions and Information Regarding Automotive Causal Factors. 2021 2022 H / (L) Key Metrics Market Share (%) 5.1 % 5.0 % (0.1) ppts Wholesale Units (000) 3,942 4,231 289 Revenue ($M) $ 126,150 $ 148,980 $ 22,830 EBIT ($M) 7,397 9,692 2,295 EBIT Margin (%) 5.9 % 6.5 % 0.6 ppts Change in EBIT by Causal Factor (in millions) 2021 Full Year EBIT $ 7,397 Volume / Mix 4,337 Net Pricing 10,867 Cost (11,954) Exchange (525) Other (430) 2022 Full Year EBIT $ 9,692 In 2022, wholesales in our Automotive segment increased 7% from a year ago, primarily reflecting stronger wholesales in North America.
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Full year 2022 Automotive revenue increased 18%, driven by higher wholesales and net pricing, offset partially by weaker currencies. Our full year 2022 Automotive segment EBIT was $9.7 billion, an increase of $2.3 billion from a year ago, with an EBIT margin of 6.5%.
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The EBIT improvement was driven by higher net pricing and higher wholesales, offset partially by inflationary increases on commodity, material, and freight costs, higher structural costs (including growth-related investments), unfavorable mix, weaker currencies, and higher warranty costs. 40 Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) North America 2021 2022 H / (L) Key Metrics Market Share (%) 12.0 % 12.5 % 0.5 ppts Wholesale Units (000) 2,006 2,335 328 Revenue ($M) $ 87,783 $ 108,727 $ 20,944 EBIT ($M) 7,377 9,176 1,799 EBIT Margin (%) 8.4 % 8.4 % — ppts Change in EBIT by Causal Factor (in millions) 2021 Full Year EBIT $ 7,377 Volume / Mix 3,968 Net Pricing 6,580 Cost (8,322) Exchange 245 Other (672) 2022 Full Year EBIT $ 9,176 In North America, 2022 wholesales increased 16% from a year ago, primarily reflecting an improvement in production-related supply constraints and a full year of Bronco and Maverick production.
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Full year 2022 revenue increased 24%, driven by higher wholesales and net pricing. North America’s 2022 EBIT was $9.2 billion, an increase of $1.8 billion from a year ago, with an EBIT margin of 8.4%.
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The EBIT improvement was driven by higher net pricing and higher wholesales, offset partially by inflationary increases on commodity, material, and freight costs, higher structural costs, unfavorable mix, and higher warranty costs.
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South America 2021 2022 H / (L) Key Metrics Market Share (%) 2.6 % 2.1 % (0.5) ppts Wholesale Units (000) 81 83 2 Revenue ($M) $ 2,399 $ 3,096 $ 697 EBIT ($M) (121) 413 534 EBIT Margin (%) (5.1) % 13.4 % 18.5 ppts Change in EBIT by Causal Factor (in millions) 2021 Full Year EBIT $ (121) Volume / Mix (69) Net Pricing 927 Cost (413) Exchange (22) Other 111 2022 Full Year EBIT $ 413 In South America, 2022 wholesales increased 3% from a year ago.
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Full year 2022 revenue increased 29%, driven by higher net pricing, offset partially by weaker currencies. South America’s 2022 EBIT was $413 million, an increase of $534 million from a year ago, with an EBIT margin of 13.4%. The EBIT improvement was driven by higher net pricing, offset partially by inflationary increases on material, commodity, and freight costs.
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The strong results in South America reflect our restructuring efforts and pricing and were further aided by a balance sheet revaluation in Argentina, the effect of which is not expected to be sustained. 41 Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Europe 2021 2022 H / (L) Key Metrics Market Share (%) 6.4 % 6.5 % 0.1 ppts Wholesale Units (000) (a) 891 1,014 123 Revenue ($M) $ 24,466 $ 25,578 $ 1,112 EBIT ($M) (154) 47 201 EBIT Margin (%) (0.6) % 0.2 % 0.8 ppts __________ (a) Includes Ford brand vehicles produced and sold by our unconsolidated affiliate in Türkiye (about 61,000 units in 2021 and 76,000 units in 2022).
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Revenue does not include these sales. Change in EBIT by Causal Factor (in millions) 2021 Full Year EBIT $ (154) Volume / Mix 497 Net Pricing 2,770 Cost (2,751) Exchange (559) Other 244 2022 Full Year EBIT $ 47 In Europe, 2022 wholesales increased 14% from a year ago, primarily reflecting an improvement in production-related supply constraints.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Fair value of an asset group is determined from the perspective of a market-participant considering, among other things, appropriate discount rates, valuation techniques, the most advantageous market, and assumptions about the highest and best use of the asset group.
The fair value of an asset group is determined from the perspective of a market-participant considering, among other things, appropriate discount rates, valuation techniques, the most advantageous market, and assumptions about the highest and best use of the asset group.
As discussed in greater detail in Item 7, our funding sources include sales of receivables in securitizations and other structured financings, unsecured debt issuances, equity and equity-linked issuances, and bank borrowings. We are exposed to a variety of risks, such as loss or damage to property, liability claims, and employee injury.
As discussed in greater detail in Item 7, our funding sources include sales of receivables in securitizations and other structured financings, unsecured debt issuances, equity and equity-linked issuances, and bank borrowings. We are exposed to a variety of other risks, such as loss or damage to property, liability claims, and employee injury.
Ford and Lincoln retail financing is as follows (in millions): Assumption Basis Point Change Increase/(Decrease) Probability of default (lifetime) +/- 100 bps $210/$(210) Loss given default +/- 100 10/(10) Accumulated Depreciation on Vehicles Subject to Operating Leases Accumulated depreciation on vehicles subject to operating leases reduces the value of the leased vehicles in Ford Credit’s operating lease portfolio from their original acquisition value to their expected residual value at the end of the lease term.
Ford and Lincoln retail financing is as follows (in millions): Assumption Basis Point Change Increase/(Decrease) Probability of default (lifetime) +/- 100 bps $230/$(230) Loss given default +/- 100 10/(10) Accumulated Depreciation on Vehicles Subject to Operating Leases Accumulated depreciation on vehicles subject to operating leases reduces the value of the leased vehicles in Ford Credit’s operating lease portfolio from their original acquisition value to their expected residual value at the end of the lease term.
If Ford Credit does not believe the models reflect lifetime expected credit losses for the portfolio, an adjustment is made to reflect management judgment regarding qualitative factors including economic uncertainty, observable changes in portfolio performance, and other relevant factors. 89 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Assumptions Used.
If Ford Credit does not believe the models reflect lifetime expected credit losses for the portfolio, an adjustment is made to reflect management judgment regarding qualitative factors, including economic uncertainty, observable changes in portfolio performance, and other relevant factors. 88 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Assumptions Used.
Plan obligations and expenses are based on existing retirement plan provisions. No assumption is made regarding any potential future changes to benefit provisions beyond those to which we are presently committed (e.g., in existing labor contracts). 84 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Assumptions and Approach Used.
Plan obligations and expenses are based on existing retirement plan provisions. No assumption is made regarding any potential future changes to benefit provisions beyond those to which we are presently committed (e.g., in existing labor contracts). 83 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Assumptions and Approach Used.
Changes in these estimates and judgments may result in a material increase or decrease to our tax provision, which would be recorded in the period in which the change occurs. 86 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Assumptions and Approach Used.
Changes in these estimates and judgments may result in a material increase or decrease to our tax provision, which would be recorded in the period in which the change occurs. 85 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Assumptions and Approach Used.
While these are our best estimates of the impact of the specified interest rate scenario, actual results could differ from those projected. The sensitivity analysis presented assumes interest rate changes are instantaneous, parallel shifts in the yield curve. In reality, interest rate changes of this magnitude are rarely instantaneous or parallel. 94
While these are our best estimates of the impact of the specified interest rate scenario, actual results could differ from those projected. The sensitivity analysis presented assumes interest rate changes are instantaneous, parallel shifts in the yield curve. In reality, interest rate changes of this magnitude are rarely instantaneous or parallel. 92
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Sensitivity Analysis. The December 31, 2022 pension funded status and 2023 expense are affected by year-end 2022 assumptions. Sensitivities to these assumptions may be asymmetric and are specific to the time periods noted.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Sensitivity Analysis. The December 31, 2023 pension funded status and 2024 expense are affected by year-end 2023 assumptions. Sensitivities to these assumptions may be asymmetric and are specific to the time periods noted.
Our de-risking strategy has increased the allocation to fixed income investments and reduced our funded status sensitivity to changes in interest rates. Changes in interest rates should result in offsetting effects in the value of our pension obligation and the value of the fixed income asset portfolio. 85 Item 7.
Our de-risking strategy has increased the allocation to fixed income investments and reduced our funded status sensitivity to changes in interest rates. Changes in interest rates should result in offsetting effects in the value of our pension obligation and the value of the fixed income asset portfolio. 84 Item 7.
See Note 12 of the Notes to the Financial Statements for more information regarding accumulated depreciation on vehicles subject to operating leases. 90 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Sensitivity Analysis.
See Note 12 of the Notes to the Financial Statements for more information regarding accumulated depreciation on vehicles subject to operating leases. 89 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Sensitivity Analysis.
The table below estimates the effect on our funded status of an increase/decrease in discount rates and interest rates (in millions): Basis Point Change Increase/(Decrease) in December 31, 2022 Funded Status Factor U.S. Plans Non-U.S.
The table below estimates the effect on our funded status of an increase/decrease in discount rates and interest rates (in millions): Basis Point Change Increase/(Decrease) in December 31, 2023 Funded Status Factor U.S. Plans Non-U.S.
The table below estimates the effect on pension expense of a higher/lower assumption for these factors (in millions): Basis Point Change Increase/(Decrease) in 2023 Pension Expense Factor U.S. Plans Non-U.S.
The table below estimates the effect on pension expense of a higher/lower assumption for these factors (in millions): Basis Point Change Increase/(Decrease) in 2024 Pension Expense Factor U.S. Plans Non-U.S.
The market approach is another method for measuring the fair value of a reporting unit or asset group. This approach relies on the market value (i.e., market capitalization) of companies that are engaged in the same or similar line of business as the reporting unit or asset group being evaluated.
The market approach is another method for measuring the fair value of an asset group. This approach relies on the market value (i.e., market capitalization) of companies that are engaged in the same or a similar line of business as the asset group being evaluated.
The potential change in the fair value from a 10% change in the underlying exchange rates, in U.S. dollar terms, would have been $1.9 billion at December 31, 2022, compared with $2.2 billion at December 31, 2021. The sensitivity analysis presented is hypothetical and assumes foreign exchange rate changes are instantaneous and adverse across all currencies.
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 December 31, 2023, compared with $1.9 billion at December 31, 2022. The sensitivity analysis presented is hypothetical and assumes foreign exchange rate changes are instantaneous and adverse across all currencies.
Ford and Lincoln operating lease portfolio is as follows (in millions): Assumption Basis Point Change Increase/(Decrease) Future auction values +/- 100 bps $(10)/$10 Return volumes +/- 100 5/(5) Adjustments to the amount of accumulated supplemental depreciation on operating leases are reflected on our balance sheets as Net investment in operating leases and on our income statements in Ford Credit interest, operating, and other expenses. 91 Item 7.
Ford and Lincoln operating lease portfolio is as follows (in millions): Assumption Basis Point Change Increase/(Decrease) Future auction values +/- 100 bps $(20)/$20 Return volumes +/- 100 5/(5) Adjustments to the amount of accumulated supplemental depreciation on operating leases are reflected on our balance sheets as Net investment in operating leases and on our income statements in Ford Credit interest, operating, and other expenses.
The potential change in the fair value from a 10% change in the underlying commodity prices would have been $178 million at December 31, 2022, compared with $215 million at December 31, 2021. The sensitivity analysis presented is hypothetical and assumes commodity price changes are instantaneous and adverse across all commodities.
The potential change in the fair value from a 10% change in the underlying commodity prices would have been $203 million at December 31, 2023, compared with $178 million at December 31, 2022. The sensitivity analysis presented is hypothetical and assumes commodity price changes are instantaneous and adverse across all commodities.
If in future quarters our economic or business projections were to change as a result of our plans or changes in the economic or business environment, there was a significant adverse change in the extent or manner in which a long-lived asset is being used, or there was a current expectation that a long-lived asset group will be disposed of significantly before the end of its useful life, we would undertake additional testing, as appropriate, which could result in an impairment of long-lived assets.
If, in future quarters, our economic or business projections were to change as a result of an update to our plans, a deterioration of the economic or business environment, a significant adverse change in the extent or manner in which a long-lived asset is being used, or an expectation that a long-lived asset group will be disposed of significantly before the end of its useful life, we would undertake additional testing, as appropriate, which could result in an impairment of long-lived assets.
Plans Discount rate - obligation +/- 100 bps $2,700/$(3,200) $2,500/$(3,100) Interest rate - fixed income assets +/- 100 (2,600)/3,100 (1,700)/2,000 Net impact on funded status $100/$(100) $800/$(1,100) The fixed income asset sensitivity shown excludes other fixed income return components (e.g., changes in credit spreads, bond coupon and active management excess returns), and growth asset returns.
Plans Discount rate - obligation +/- 100 bps $2,900/$(3,400) $2,700/$(3,400) Interest rate - fixed income assets +/- 100 (2,800)/3,200 (1,800)/2,200 Net impact on funded status $100/$(200) $900/$(1,200) The fixed income asset sensitivity shown excludes other fixed income return components (e.g., changes in credit spreads, bond coupon and active management excess returns), and growth asset returns.
Quantitative and Qualitative Disclosures About Market Risk (Continued) The net fair value of foreign exchange forward contracts (including adjustments for credit risk) as of December 31, 2022, was an asset of $236 million, compared with a liability of $253 million as of December 31, 2021.
Quantitative and Qualitative Disclosures About Market Risk (Continued) The net fair value of foreign exchange forward contracts (including adjustments for credit risk) as of December 31, 2023, was a liability of $319 million, compared with an asset of $236 million as of December 31, 2022.
For additional information regarding income taxes, see Note 7 of the Notes to the Financial Statements. 87 Item 7.
For additional information regarding income taxes, see Note 7 of the Notes to the Financial Statements. 86 Item 7.
Assuming a hypothetical increase in interest rates of one percentage point, the value of our portfolios would be reduced by $256 million, as calculated as of December 31, 2022. This compares to $250 million, as calculated as of December 31, 2021.
Assuming a hypothetical increase in interest rates of one percentage point, the value of our portfolios would be reduced by $222 million, as calculated as of December 31, 2023. This compares to $256 million, as calculated as of December 31, 2022.
The table below estimates the effect on 2023 OPEB expense of higher/lower assumptions for these factors (in millions): Worldwide OPEB Basis Point Change (Increase)/Decrease 2022 YE Obligation Increase/(Decrease) 2023 Expense Factor Discount rate - obligation +/- 100 bps $415/$(495) N/A Interest rate - service cost and interest cost +/- 25 N/A $5/$(5) Income Taxes Nature of Estimates Required.
The table below estimates the effect on 2024 OPEB expense of higher/lower assumptions for these factors (in millions): Worldwide OPEB Basis Point Change (Increase)/Decrease 2023 YE Obligation Increase/(Decrease) 2024 Expense Factor Discount rate - obligation +/- 100 bps $450/$(540) N/A Interest rate - service cost and interest cost +/- 25 N/A $5/$(5) Income Taxes Nature of Estimates Required.
Plans Interest rate - service cost and interest cost +/- 25 bps $25/$(25) $10/$(10) Expected long-term rate of return on assets +/- 25 (80)/80 (50)/50 The effect of changing multiple factors simultaneously cannot be calculated by combining the individual sensitivities. The sensitivity of pension expense to a change in discount rate assumptions may not be linear.
Plans Interest rate - service cost and interest cost +/- 25 bps $25/$(25) $15/$(15) Expected long-term rate of return on assets +/- 25 (75)/75 (55)/55 The effect of changing multiple factors simultaneously cannot be calculated by combining the individual sensitivities. The sensitivity of pension expense to a change in discount rate assumptions may not be linear.
Our Automotive and Ford Credit segments are exposed to liquidity risk, including the possibility of having to curtail business or being unable to meet financial obligations as they come due because funding sources may be reduced or become unavailable. Our plan is to maintain funding sources to ensure liquidity through a variety of economic or business cycles.
We are exposed to liquidity risk, including the possibility of having to curtail business or being unable to meet financial obligations as they come due because funding sources may be reduced or become unavailable. Our plan is to maintain funding sources to ensure liquidity through a variety of economic or business cycles.
Quantitative and Qualitative Disclosures About Market Risk OVERVIEW We are exposed to a variety of market and other risks, including the effects of changes in foreign currency exchange rates, commodity prices, and interest rates, as well as risks to availability of funding sources, hazard events, and specific asset risks. These risks affect our Automotive and Ford Credit segments differently.
Quantitative and Qualitative Disclosures About Market Risk OVERVIEW We are exposed to a variety of market and other risks, including the effects of changes in foreign currency exchange rates, commodity prices, and interest rates, as well as risks to availability of funding sources, hazard events, and specific asset risks.
Historical returns also are considered when appropriate. The assumption is based on consideration of all inputs, with a focus on long-term trends to avoid short-term market influences. • Salary growth. Our salary growth assumption reflects our actual experience, long-term outlook, and assumed inflation. • Inflation.
The assumption is based on consideration of all inputs, with a focus on long-term trends to avoid short-term market influences. • Salary growth. Our salary growth assumption reflects our actual experience, long-term outlook, and assumed inflation. • Inflation.
An impairment charge is recognized for the amount by which the carrying value of the asset group exceeds its estimated fair value. When an impairment loss is recognized for assets to be held and used, the adjusted carrying amounts of those assets are depreciated over their remaining useful life. Nature of Estimates Required - Held-for-Sale Operations.
An impairment charge is recognized for the amount by which the carrying value of the asset group exceeds its estimated fair value. When an impairment loss is recognized for assets to be held and used, the adjusted carrying amounts of those assets are depreciated over their remaining useful life. Assumptions and Approach Used - Held-and-Used Long-Lived Assets.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) 2022 SUPPLEMENTAL INFORMATION The tables below provide supplemental consolidating financial information and other financial information. Company excluding Ford Credit includes our Automotive and Mobility reportable segments, Corporate Other, Interest on Debt, and Special Items.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) 2023 SUPPLEMENTAL INFORMATION The tables below provide supplemental consolidating financial information and other financial information. 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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Selected Other Information. Equity. At December 31, 2021, total equity attributable to Ford was $48.5 billion, an increase of $17.8 billion compared with December 31, 2020. At December 31, 2022, total equity attributable to Ford was $43.2 billion, a decrease of $5.3 billion compared with December 31, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) Selected Other Information. Equity. At December 31, 2022, total equity attributable to Ford was $43.2 billion, a decrease of $5.3 billion compared with December 31, 2021. At December 31, 2023, total equity attributable to Ford was $42.8 billion, a decrease of $0.4 billion compared with December 31, 2022.
The weighted average discount rate used to determine the benefit obligation for worldwide OPEB plans at December 31, 2022 was 5.48%, compared with 2.97% at December 31, 2021, resulting in a worldwide net remeasurement gain of $1.3 billion, which has been recognized within net periodic benefit cost and reported as a special item. Sensitivity Analysis.
The weighted average discount rate used to determine the benefit obligation for worldwide OPEB plans at December 31, 2023 was 5.10%, compared with 5.48% at December 31, 2022, resulting in a worldwide net remeasurement loss of $286 million, which has been recognized within net periodic benefit cost and reported as a special item. Sensitivity Analysis.
Benefit payments are discounted at the rates on the curve to determine the year-end obligations. • Expected long-term rate of return on plan assets. Our expected long-term rate of return considers inputs from a range of advisors for capital market returns, inflation, bond yields, and other variables, adjusted for specific aspects of our investment strategy by plan.
Benefit payments are discounted at the rates on the curve to determine the year-end obligations. • Expected long-term rate of return on plan assets. Our expected long-term rate of return considers inputs from a range of advisors for capital market returns, adjusted for specific aspects of our investment strategy by plan. Historical returns also are considered when appropriate.
We presently believe that global valuation allowances of $822 million are required and that we ultimately will recover the remaining $14 billion of deferred tax assets.
We presently believe that global valuation allowances of $4.2 billion are required and that we ultimately will recover the remaining $16 billion of deferred tax assets.
These strategies would be a source of additional positive evidence and, depending on their nature, could be heavily weighted. In assessing the realizability of deferred tax assets, we consider the trade-offs between cash preservation and cash outlays to preserve tax credits. During 2022, we reversed $405 million of U.S. valuation allowances primarily as a result of planning actions.
These strategies would be a source of additional positive evidence and, depending on their nature, could be heavily weighted. In assessing the realizability of deferred tax assets, we consider the trade-offs between cash preservation and cash outlays to preserve tax credits.
The detail for the changes is shown below (in billions): 2021 vs 2020 Increase/ (Decrease) 2022 vs 2021 Increase/ (Decrease) Net income/(loss) $ 17.9 $ (2.0) Shareholder distributions (0.4) (2.5) Other comprehensive income/(loss) — (1.0) Adoption of accounting standards — — Common stock issued (including share-based compensation impacts) 0.3 0.2 Total $ 17.8 $ (5.3) 83 Item 7.
The detail for the changes is shown below (in billions): 2022 vs 2021 Increase/ (Decrease) 2023 vs 2022 Increase/ (Decrease) Net income/(loss) $ (2.0) $ 4.3 Shareholder distributions (a) (2.5) (5.4) Other comprehensive income/(loss) (1.0) 0.3 Adoption of accounting standards — — Common stock issued (including share-based compensation impacts) 0.2 0.4 Total $ (5.3) $ (0.4) ________ (a) Includes cash dividends, dividend equivalents, and anti-dilutive share repurchases. 82 Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED For a discussion of recent accounting standards, see Note 3 of the Notes to the Financial Statements. 92 ITEM 7A.
ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED For a discussion of recent accounting standards, see Note 3 of the Notes to the Financial Statements. 90 ITEM 7A.
We test our long-lived asset groups when changes in circumstances indicate their carrying value may not be recoverable.
Nature of Estimates Required - Held-and-Used Long-Lived Assets. We test our long-lived asset groups when changes in circumstances indicate their carrying value may not be recoverable.
Foreign currency risk, commodity risk, and interest rate risk are measured and quantified using a model to evaluate the sensitivity of market value to instantaneous, parallel shifts in rates and/or prices. Foreign Currency Risk. Foreign currency risk is the possibility that our financial results could be worse than planned because of changes in currency exchange rates.
We also are exposed to changes in prices of commodities used in the production of our vehicles and changes in interest rates. Foreign currency risk, commodity risk, and interest rate risk are measured and quantified using a model to evaluate the sensitivity of market value to instantaneous, parallel shifts in rates and/or prices. Foreign Currency Risk.
The year-end 2022 weighted average discount rate was 5.51% for U.S. plans and 4.42% for non-U.S. plans, reflecting increases of 260 and 267 basis points, respectively, compared with year-end 2021. In 2022, the U.S. actual return on assets was negative 21.20%, which was lower than the expected long-term rate of return of 5.75%.
The year-end 2023 weighted average discount rate was 5.17% for U.S. plans and 3.98% for non-U.S. plans, reflecting decreases of 34 and 44 basis points, respectively, compared with year-end 2022. In 2023, the U.S. actual return on assets was 7.41%, which was higher than the expected long-term rate of return of 6.25%.
As we transition to a greater mix of electric vehicles, we expect to increase our reliance on lithium, cobalt, nickel, graphite, and manganese, among other materials, for batteries.
As we transition to a greater mix of electric vehicles, we expect to increase our reliance on lithium, cobalt, nickel, graphite, and manganese, among other materials, for batteries. Our practice is to use derivative instruments to hedge the price risk with respect to forecasted purchases of certain commodities consistent with our overall risk management strategy.
For 2023, the expected long-term rate of return on assets is 6.25% for U.S. plans, up 50 basis points from 2022, and 4.13% for non-U.S. plans, up 84 basis points compared with a year ago, reflecting higher nominal risk-free rates and a higher consensus on capital market return expectations from advisors. De-risking Strategy .
For 2024, the expected long-term rate of return on assets is 5.93% for U.S. plans, down 32 basis points from 2023, reflecting lower capital market return expectations, and 4.53% for non-U.S. plans, up 40 basis points compared with a year ago, reflecting return expectations in those markets and a higher return seeking mix for certain plans. De-risking Strategy .
The market and counterparty risks of our Automotive and Ford Credit segments are discussed and quantified below. AUTOMOTIVE MARKET RISK Our Automotive segment frequently has expenditures and receipts denominated in foreign currencies, including the following: purchases and sales of finished vehicles and production parts, debt and other payables, subsidiary dividends, and investments in foreign operations.
COMPANY EXCLUDING FORD CREDIT MARKET RISK We frequently have expenditures and receipts denominated in foreign currencies, including the following: purchases and sales of finished vehicles and production parts, debt and other payables, subsidiary dividends, and investments in foreign operations. These expenditures and receipts create exposures to changes in exchange rates.
The extent to which we hedge is also impacted by our ability to achieve designated hedge accounting. The net fair value of commodity forward contracts (including adjustments for credit risk) as of December 31, 2022, was a liability of $49 million, compared with an asset of $220 million as of December 31, 2021.
The net fair value of commodity forward contracts (including adjustments for credit risk) as of December 31, 2023, was a liability of $9 million, compared with a liability of $49 million as of December 31, 2022.
In total, higher rates and pension asset losses, in addition to demographic and other updates, resulted in a net remeasurement loss of $1.3 billion, which has been recognized within net periodic benefit cost and reported as a special item.
In total, lower discount rates compared to year-end 2022, partially offset by asset gains in excess of our assumptions resulted in a net remeasurement loss of $1.8 billion, which has been recognized within net periodic benefit cost and reported as a special item.
In addition, to the extent available we also consider third-party valuations that were prepared for other business purposes. During 2022, we continued to progress our global redesign. Against this backdrop, we determined that there were triggering events related to our South America and International Markets Group (“IMG”) business units.
In addition, to the extent available we also consider third-party valuations that were prepared for other business purposes. During 2023, we identified triggering events related to our Ford Blue Europe asset group.
When measuring possible impairment, future cash flows are discounted at a rate that is consistent with a weighted-average cost of capital that we anticipate a potential market participant would use. Weighted-average cost of capital is an estimate of the overall risk-adjusted pre-tax rate of return expected by equity and debt holders of a business enterprise. • Economic projections.
The growth rate is the expected rate at which an asset group’s earnings stream is projected to grow beyond the planning period. • Discount rate. When measuring possible impairment, future cash flows are discounted at a rate that is consistent with a weighted-average cost of capital that we anticipate a potential market participant would use.
Accordingly, our practice is to use derivative instruments to hedge our economic exposure with respect to forecasted revenues and costs, assets, liabilities, and firm commitments denominated in certain foreign currencies consistent with our overall risk management strategy. In our hedging actions, we use derivative instruments commonly used by corporations to reduce foreign exchange risk (e.g., forward contracts). 93 Item 7A.
Foreign currency risk is the possibility that our financial results could be worse than planned because of changes in currency exchange rates. Accordingly, our practice is to use derivative instruments to hedge our economic exposure with respect to forecasted revenues and costs, assets, liabilities, and firm commitments denominated in certain foreign currencies consistent with our overall risk management strategy.
Accordingly, our practice is to use derivative instruments to hedge the price risk with respect to forecasted purchases of certain commodities that we can economically hedge and consistent with our overall risk management strategy. In our hedging actions, we use derivative instruments commonly used by corporations to reduce commodity price risk (e.g., financially settled forward contracts).
In our hedging actions, we use derivative instruments commonly used by corporations to reduce commodity price risk (e.g., financially settled forward contracts). The extent to which we hedge is also impacted by materiality of the risk in the context of our overall portfolio, market liquidity, and/or our ability to achieve designated hedge accounting.
Our asset groups presently are the regional Automotive business units (i.e., North America, South America, Europe, China (including Taiwan), and the International Markets Group), Ford Credit, and the separate legal entities within the Mobility segment. Asset groupings for impairment analysis are reevaluated when events occur, such as changes in organizational structure and management reporting.
Asset groupings for impairment analysis are reevaluated when events occur, such as changes in organizational structure and management reporting. Following the organizational and segment structure change in the beginning of 2023, our asset groups are: Ford Blue North America, Ford Blue Europe, Ford Blue Rest of World, Ford Model e, Ford Pro, Ford Credit, and Ford Next.
These projections are derived using our internal business plan forecasts that are updated at least annually and reviewed by our Board of Directors. 88 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) • Long-term growth rate.
These projections are derived using our internal business plan forecasts that are updated at least annually and reviewed by our Board of Directors. • Long-term growth rate. A growth rate is used to calculate the terminal value of the business and is added to the present value of the debt-free interim cash flows.
Non-U.S. actual return on assets was negative 25.40%, which was lower than the expected long-term rate of return of 3.29%. The lower returns are explained by losses on fixed income and growth assets, both of which were consistent with broader market performance.
Non-U.S. actual return on assets was 5.56%, which was higher than the expected long-term rate of return of 4.13%. The higher returns are explained primarily by gains on fixed income assets.
Our interest rate sensitivity analysis on the investment portfolios includes cash and cash equivalents and net marketable securities.
Our interest rate sensitivity analysis on our investment portfolios includes cash and cash equivalents and net marketable securities. At December 31, 2023, we had Company cash of $28.8 billion in our investment portfolios, compared to $32.3 billion at December 31, 2022.
The following tables provide supplemental cash flow information (in millions): For the Year Ended December 31, 2022 Cash flows from operating activities Company excluding Ford Credit Ford Credit Eliminations Consolidated Net income/(loss) $ (4,361) $ 2,209 $ — $ (2,152) Depreciation and tooling amortization 5,361 2,281 — 7,642 Other amortization 62 (1,211) — (1,149) Held for sale impairment charges 32 — — 32 Brazil manufacturing exit non-cash charges (excluding accelerated depreciation of $17) (82) — — (82) (Gains)/Losses on extinguishment of debt 135 (14) — 121 Provision for/(Benefit from) credit and insurance losses 11 35 — 46 Pension and OPEB expense/(income) (378) — — (378) Equity method investment dividends received in excess of (earnings)/losses and impairments 3,321 3 — 3,324 Foreign currency adjustments (273) 246 — (27) Net realized and unrealized (gains)/losses on cash equivalents, marketable securities, and other investments 7,440 78 — 7,518 Net (gain)/loss on changes in investments in affiliates 146 1 — 147 Stock compensation 325 11 — 336 Provision for deferred income taxes (2,234) 324 — (1,910) Decrease/(Increase) in finance receivables (wholesale and other) — (10,560) — (10,560) Decrease/(Increase) in intersegment receivables/payables 274 (274) — — Decrease/(Increase) in accounts receivable and other assets (984) (199) — (1,183) Decrease/(Increase) in inventory (2,576) — — (2,576) Increase/(Decrease) in accounts payable and accrued and other liabilities 7,098 170 — 7,268 Other 788 (352) — 436 Interest supplements and residual value support to Ford Credit (1,836) 1,836 — — Net cash provided by/(used in) operating activities $ 12,269 $ (5,416) $ — $ 6,853 Cash flows from investing activities Capital spending $ (6,808) $ (58) $ — $ (6,866) Acquisitions of finance receivables and operating leases — (45,533) — (45,533) Collections of finance receivables and operating leases — 46,276 — 46,276 Proceeds from sale of business 449 — — 449 Purchases of marketable securities and other investments (13,880) (3,578) — (17,458) Sales and maturities of marketable securities and other investments 14,956 4,161 — 19,117 Settlements of derivatives (90) 184 — 94 Capital contributions to equity method investments (733) (5) — (738) Other 310 2 — 312 Investing activity (to)/from other segments 2,130 (30) (2,100) — Net cash provided by/(used in) investing activities $ (3,666) $ 1,419 $ (2,100) $ (4,347) Cash flows from financing activities Cash payments for dividends and dividend equivalents $ (2,009) $ — $ — $ (2,009) Purchases of common stock (484) — — (484) Net changes in short-term debt 85 5,375 — 5,460 Proceeds from issuance of long-term debt 3,295 42,175 — 45,470 Payments on long-term debt (3,897) (41,758) — (45,655) Other (192) (79) — (271) Financing activity to/(from) other segments — (2,100) 2,100 — Net cash provided by/(used in) financing activities $ (3,202) $ 3,613 $ 2,100 $ 2,511 Effect of exchange rate changes on cash, cash equivalents, and restricted cash $ (227) $ (187) $ — $ (414) 80 Item 7.
The following tables provide supplemental cash flow information (in millions): For the Year Ended December 31, 2023 Cash flows from operating activities Company excluding Ford Credit Ford Credit Eliminations Consolidated Net income/(loss) $ 2,996 $ 1,333 $ — $ 4,329 Depreciation and tooling amortization 5,336 2,354 — 7,690 Other amortization 28 (1,195) — (1,167) Provision for/(Benefit from) credit and insurance losses 107 331 — 438 Pension and OPEB expense/(income) 3,052 — — 3,052 Equity method investment dividends received in excess of (earnings)/losses and impairments (29) (4) — (33) Foreign currency adjustments (49) (185) — (234) Net realized and unrealized (gains)/losses on cash equivalents, marketable securities, and other investments 236 (31) — 205 Net (gain)/loss on changes in investments in affiliates (9) — — (9) Stock compensation 446 14 — 460 Provision for/(Benefit from) deferred income taxes (1,032) (617) — (1,649) Decrease/(Increase) in finance receivables (wholesale and other) — (4,827) — (4,827) Decrease/(Increase) in intersegment receivables/payables 167 (167) — — Decrease/(Increase) in accounts receivable and other assets (2,512) (108) — (2,620) Decrease/(Increase) in inventory (1,219) — — (1,219) Increase/(Decrease) in accounts payable and accrued and other liabilities 9,602 227 — 9,829 Other 539 134 — 673 Interest supplements and residual value support to Ford Credit (3,921) 3,921 — — Net cash provided by/(used in) operating activities $ 13,738 $ 1,180 $ — $ 14,918 Cash flows from investing activities Capital spending $ (8,156) $ (80) $ — $ (8,236) Acquisitions of finance receivables and operating leases — (54,505) — (54,505) Collections of finance receivables and operating leases — 44,561 — 44,561 Purchases of marketable securities and other investments (6,551) (2,039) — (8,590) Sales and maturities of marketable securities and other investments 9,895 2,805 — 12,700 Settlements of derivatives 7 (145) — (138) Capital contributions to equity method investments (2,733) — — (2,733) Other (687) — — (687) Investing activity (to)/from other segments — (3) 3 — Net cash provided by/(used in) investing activities $ (8,225) $ (9,406) $ 3 $ (17,628) Cash flows from financing activities Cash payments for dividends and dividend equivalents $ (4,995) $ — $ — $ (4,995) Purchases of common stock (335) — — (335) Net changes in short-term debt (115) (1,424) — (1,539) Proceeds from issuance of long-term debt — 51,659 — 51,659 Payments on long-term debt (212) (41,753) — (41,965) Other (102) (139) — (241) Financing activity to/(from) other segments 3 — (3) — Net cash provided by/(used in) financing activities $ (5,756) $ 8,343 $ (3) $ 2,584 Effect of exchange rate changes on cash, cash equivalents, and restricted cash $ (262) $ 158 $ — $ (104) 79 Item 7.
The following table provides supplemental income statement information (in millions): For the Year Ended December 31, 2022 Company excluding Ford Credit Ford Credit Consolidated Revenues $ 149,079 $ 8,978 $ 158,057 Total costs and expenses (a) 145,295 6,486 151,781 Operating income/(loss) 3,784 2,492 6,276 Interest expense on Company debt excluding Ford Credit 1,259 — 1,259 Other income/(loss), net (5,288) 138 (5,150) Equity in net income/(loss) of affiliated companies (2,910) 27 (2,883) Income/(Loss) before income taxes (5,673) 2,657 (3,016) Provision for/(Benefit from) income taxes (1,312) 448 (864) Net income/(loss) (4,361) 2,209 (2,152) Less: Income/(loss) attributable to noncontrolling interests (171) — (171) Net income/(loss) attributable to Ford Motor Company $ (4,190) $ 2,209 $ (1,981) __________ (a) Ford Credit excludes a specials charge of $10 million. 81 Item 7.
The following table provides supplemental income statement information (in millions): For the Year Ended December 31, 2023 Company excluding Ford Credit Ford Credit Consolidated Revenues $ 165,901 $ 10,290 $ 176,191 Total costs and expenses 161,252 9,481 170,733 Operating income/(loss) 4,649 809 5,458 Interest expense on Company debt excluding Ford Credit 1,302 — 1,302 Other income/(loss), net (1,093) 490 (603) Equity in net income/(loss) of affiliated companies 382 32 414 Income/(Loss) before income taxes 2,636 1,331 3,967 Provision for/(Benefit from) income taxes (360) (2) (362) Net income/(loss) 2,996 1,333 4,329 Less: Income/(loss) attributable to noncontrolling interests (18) — (18) Net income/(loss) attributable to Ford Motor Company $ 3,014 $ 1,333 $ 4,347 80 Item 7.
Removed
The following tables provide supplemental balance sheet information (in millions): December 31, 2022 Assets Company excluding Ford Credit Ford Credit Eliminations Consolidated Cash and cash equivalents $ 14,741 $ 10,393 $ — $ 25,134 Marketable securities 17,443 1,493 — 18,936 Ford Credit finance receivables, net — 38,720 — 38,720 Trade and other receivables, net 4,575 11,154 — 15,729 Inventories 14,080 — — 14,080 Assets held for sale 97 — — 97 Other assets 2,527 1,253 — 3,780 Receivable from other segments 49 1,462 (1,511) — Total current assets 53,512 64,475 (1,511) 116,476 Ford Credit finance receivables, net — 49,903 — 49,903 Net investment in operating leases 951 21,821 — 22,772 Net property 37,032 233 — 37,265 Equity in net assets of affiliated companies 2,678 120 — 2,798 Deferred income taxes 15,394 158 — 15,552 Other assets 9,890 1,228 — 11,118 Receivable from other segments — 16 (16) — Total assets $ 119,457 $ 137,954 $ (1,527) $ 255,884 Liabilities Payables $ 24,507 $ 1,098 $ — $ 25,605 Other liabilities and deferred revenue 18,611 2,486 — 21,097 Company excluding Ford Credit debt payable within one year 730 — — 730 Ford Credit debt payable within one year — 49,434 — 49,434 Payable to other segments 1,511 — (1,511) — Total current liabilities 45,359 53,018 (1,511) 96,866 Other liabilities and deferred revenue 22,964 2,533 — 25,497 Company excluding Ford Credit long-term debt 19,200 — — 19,200 Ford Credit long-term debt — 69,605 — 69,605 Deferred income taxes 628 921 — 1,549 Payable to other segments 16 — (16) — Total liabilities $ 88,167 $ 126,077 $ (1,527) $ 212,717 82 Item 7.
Added
The following tables provide supplemental balance sheet information (in millions): December 31, 2023 Assets Company excluding Ford Credit Ford Credit Eliminations Consolidated Cash and cash equivalents $ 14,204 $ 10,658 $ — $ 24,862 Marketable securities 14,520 789 — 15,309 Ford Credit finance receivables, net — 46,425 — 46,425 Trade and other receivables, net 5,771 9,830 — 15,601 Inventories 15,651 — — 15,651 Other assets 2,658 975 — 3,633 Receivable from other segments 1,716 1,773 (3,489) — Total current assets 54,520 70,450 (3,489) 121,481 Ford Credit finance receivables, net — 55,650 — 55,650 Net investment in operating leases 1,052 20,332 — 21,384 Net property 40,551 270 — 40,821 Equity in net assets of affiliated companies 5,431 117 — 5,548 Deferred income taxes 16,795 190 — 16,985 Other assets 9,959 1,482 — 11,441 Receivable from other segments — 30 (30) — Total assets $ 128,308 $ 148,521 $ (3,519) $ 273,310 Liabilities Payables $ 25,092 $ 900 $ — $ 25,992 Other liabilities and deferred revenue 23,273 2,597 — 25,870 Company excluding Ford Credit debt payable within one year 477 — — 477 Ford Credit debt payable within one year — 49,192 — 49,192 Payable to other segments 3,373 116 (3,489) — Total current liabilities 52,215 52,805 (3,489) 101,531 Other liabilities and deferred revenue 26,519 1,895 — 28,414 Company excluding Ford Credit long-term debt 19,467 — — 19,467 Ford Credit long-term debt — 80,095 — 80,095 Deferred income taxes 668 337 — 1,005 Payable to other segments 30 — (30) — Total liabilities $ 98,899 $ 135,132 $ (3,519) $ 230,512 81 Item 7.
Removed
As a result of the new organizational and segment structure that will be implemented in 2023, our asset groups are expected to be Ford Blue North America, Ford Blue Europe, Ford Blue Rest of World, Ford Model e, Ford Pro, Ford Credit, and Ford Next (formerly Mobility). Nature of Estimates Required - Held-and-Used Long-Lived Assets.
Added
Weighted-average cost of capital is an estimate of the overall risk-adjusted pre-tax rate of return expected by equity and debt holders of a business enterprise. 87 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) • Economic projections.
Removed
We perform an impairment test on a disposal group to be discontinued, held for sale, or otherwise disposed of when we have committed to an action and the action is expected to be completed within one year.
Added
In each situation in which we experienced a triggering event during the year, we tested our long-lived assets for impairment using our internal economic and business projections, and determined that the carrying values of the long-lived assets were recoverable.
Removed
We estimate fair value to approximate the expected proceeds to be received less cost to sell and compare it to the carrying value of the disposal group. An impairment charge is recognized when the carrying value exceeds the estimated fair value. Assumptions and Approach Used - Held-and-Used Long-Lived Assets.
Added
The market and counterparty risks of the Company excluding Ford Credit as well as our Ford Credit segment are discussed and quantified below.
Removed
A growth rate is used to calculate the terminal value of the business and is added to the present value of the debt-free interim cash flows. The growth rate is the expected rate at which an asset group’s business unit’s earnings stream is projected to grow beyond the planning period. • Discount rate.
Added
In our hedging actions, we use derivative instruments commonly used by corporations to reduce foreign exchange risk (e.g., forward contracts). The extent to which we hedge is also impacted by materiality of the risk in the context of our overall portfolio, market liquidity, and/or our ability to achieve designated hedge accounting. 91 Item 7A.
Removed
We also assessed our expected new 2023 asset groups, which consist of Ford Blue North America, Ford Blue Europe, Ford Blue Rest of World, Ford Model e, Ford Pro, Ford Credit and Ford Next and assessed these groups for triggering events and potential impairment.
Removed
We determined that the carrying values of the long-lived assets were recoverable at December 31, 2022 under our existing assets groups as well as under our anticipated 2023 asset groups.
Removed
Assumptions and Approach Used - Held-for-Sale Operations . In the third quarter of 2022, we entered into an agreement to sell our Sanand, India vehicle assembly and powertrain plants to Tata Passenger Electric Mobility Limited (“Tata”). The sale transaction included the land, buildings, and other fixed assets (excluding the powertrain machinery and equipment) for the plants.
Removed
Accordingly, we have reported $88 million of fixed assets for this operation as held for sale for the period ended December 31, 2022. We recognized pre-tax impairment charges in Cost of sales of $32 million in the third quarter of 2022 to adjust the carrying value of the held-for-sale assets to fair value less costs to sell.
Removed
We determined fair value using the market approach, estimated based on the negotiated value of the assets. On January 10, 2023, we completed the sale of the plants to Tata. See Note 22 of the Notes to the Financial Statements for more information regarding held-for-sale operations.
Removed
These expenditures and receipts create exposures to changes in exchange rates. We also are exposed to changes in prices of commodities used in the production of our vehicles and changes in interest rates.
Removed
At December 31, 2022, Company cash consisted of $0.2 billion of Rivian marketable securities and $32.1 billion of cash in our investment portfolios, compared to $10.6 billion of Rivian marketable securities and $26.0 billion of cash in our investment portfolios at December 31, 2021.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+1 added−2 removed13 unchanged
As a result of this policy, Ford Credit believes its market risk exposure, relating to changes in currency exchange rates at December 31, 2022, is insignificant. Derivative Fair Values. The net fair value of Ford Credit’s derivative financial instruments at December 31, 2022 was a liability of $2.0 billion, compared to an asset of $553 million at December 31, 2021.
As a result of this policy, Ford Credit believes its market risk exposure, relating to changes in currency exchange rates at December 31, 2023, is insignificant. Derivative Fair Values. The net fair value of Ford Credit’s derivative financial instruments at December 31, 2023 was a liability of $1.3 billion, compared to a liability of $2.0 billion at December 31, 2022.
If interest rates or other factors change, Ford Credit’s actual prepayment experience could be different than projected. 95 Item 7A. Quantitative and Qualitative Disclosures About Market Risk (Continued) Foreign Currency Risk. Ford Credit’s policy is to minimize exposure to changes in currency exchange rates.
Ford Credit’s repayment projections ahead of contractual maturity are based on historical experience. If interest rates or other factors change, Ford Credit’s actual prepayment experience could be different than projected. 93 Item 7A. Quantitative and Qualitative Disclosures About Market Risk (Continued) Foreign Currency Risk. Ford Credit’s policy is to minimize exposure to changes in currency exchange rates.
Embedded in the model are assumptions regarding the reinvestment of maturing asset principal, refinancing of maturing debt, replacement of maturing derivatives, exercise of options embedded in debt and derivatives, and predicted repayment of retail financing and operating lease contracts ahead of contractual maturity. Ford Credit’s repayment projections ahead of contractual maturity are based on historical experience.
The model Ford Credit uses to conduct this analysis is heavily dependent on assumptions. Embedded in the model are assumptions regarding the reinvestment of maturing asset principal, refinancing of maturing debt, replacement of maturing derivatives, exercise of options embedded in debt and derivatives, and predicted repayment of retail financing and operating lease contracts ahead of contractual maturity.
Our exposures are monitored on a regular basis and included in periodic reports to our Treasurer. Substantially all of our counterparty exposures are with counterparties that have an investment grade rating. Investment grade is our guideline for minimum counterparty long-term ratings.
The exposure limits are lower for smaller and lower-rated counterparties, counterparties that have relatively higher CDS spreads, and for longer dated exposures. Our exposures are monitored on a regular basis and included in periodic reports to our Treasurer. Substantially all of our counterparty exposures are with counterparties that have an investment grade rating.
We enter into master agreements with counterparties that allow netting of certain exposures in order to manage this risk. Exposures primarily relate to investments in fixed income instruments and derivative contracts used for managing interest rate, foreign currency exchange rate, and commodity price risk.
Exposures primarily relate to investments in fixed income instruments and derivative contracts used for managing interest rate, foreign currency exchange rate, and commodity price risk. We, together with Ford Credit, establish exposure limits for each counterparty to minimize risk and provide counterparty diversification.
We, together with Ford Credit, establish exposure limits for each counterparty to minimize risk and provide counterparty diversification. Our approach to managing counterparty risk is forward-looking and proactive, allowing us to take risk mitigation actions before risks become losses.
Our approach to managing counterparty risk is forward-looking and proactive, allowing us to take risk mitigation actions before risks become losses. Exposure limits are established based on our overall risk tolerance, which is calculated from counterparty credit ratings and market-based credit default swap (“CDS”) spreads.
Ford Credit’s pre-tax cash flow sensitivity to interest rate movement at December 31 was as follows (in millions): Pre-Tax Cash Flow Sensitivity 2021 2022 One percentage point instantaneous increase in interest rates $ (76) $ 127 One percentage point instantaneous decrease in interest rates (a) 76 (127) __________ (a) Pre-tax cash flow sensitivity given a one percentage point decrease in interest rates requires an assumption of negative interest rates in markets where existing interest rates are below one percent.
Ford Credit’s pre-tax cash flow sensitivity to interest rate movement at December 31 was as follows (in millions): Pre-Tax Cash Flow Sensitivity 2022 2023 One percentage point instantaneous increase in interest rates $ 127 $ 78 One percentage point instantaneous decrease in interest rates (127) (78) While the sensitivity analysis presented is Ford Credit’s best estimate of the impacts of the specified assumed interest rate scenarios, its actual results could differ from those projected.
The decline in net fair value was driven by higher U.S. interest rates and a stronger U.S. dollar. COUNTERPARTY RISK Counterparty risk relates to the loss we could incur if an obligor or counterparty defaulted on an investment or a derivative contract.
COUNTERPARTY RISK Counterparty risk relates to the loss we could incur if an obligor or counterparty defaulted on an investment or a derivative contract. We enter into master agreements with counterparties that allow netting of certain exposures in order to manage this risk.
Removed
While the sensitivity analysis presented is Ford Credit’s best estimate of the impacts of the specified assumed interest rate scenarios, its actual results could differ from those projected. The model Ford Credit uses to conduct this analysis is heavily dependent on assumptions.
Added
Investment grade is our guideline for minimum counterparty long-term ratings.
Removed
Exposure limits are established based on our overall risk tolerance, which is calculated from counterparty credit ratings and market-based credit default swap (“CDS”) spreads. The exposure limits are lower for smaller and lower-rated counterparties, counterparties that have relatively higher CDS spreads, and for longer dated exposures.

Other F 10-K year-over-year comparisons