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FORD MOTOR CO - Quarter Report: 2021 March (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2021

or

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from  __________ to __________
Commission file number 1-3950

Ford Motor Company
(Exact name of Registrant as specified in its charter)
Delaware38-0549190
(State of incorporation)(I.R.S. Employer Identification No.)
One American Road
Dearborn,Michigan48126
(Address of principal executive offices)(Zip code)
313-322-3000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolsName of each exchange on which registered
Common Stock, par value $.01 per shareFNew York Stock Exchange
6.200% Notes due June 1, 2059FPRBNew York Stock Exchange
6.000% Notes due December 1, 2059FPRCNew York Stock Exchange

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

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

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

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

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

As of April 23, 2021, Ford had outstanding 3,920,792,383 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit Index begins on page 70



FORD MOTOR COMPANY
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended March 31, 2021
 Table of ContentsPage
 Part I - Financial Information 
Item 1Financial Statements
Consolidated Statements of Cash Flows
Consolidated Income Statements
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Equity
Notes to the Financial Statements
Item 2Management’s Discussion and Analysis of Financial Condition and Results of Operations
Recent Developments
Results of Operations
Automotive Segment
Mobility Segment
Ford Credit Segment
Corporate Other
Interest on Debt
Taxes
Liquidity and Capital Resources
Credit Ratings
Outlook
Cautionary Note on Forward-Looking Statements
Non-GAAP Financial Measures That Supplement GAAP Measures
Non-GAAP Financial Measure Reconciliations
Supplemental Information
Accounting Standards Issued But Not Yet Adopted
Item 3Quantitative and Qualitative Disclosures About Market Risk
Item 4Controls and Procedures
Part II - Other Information
Item 1Legal Proceedings
Item 2Unregistered Sales of Equity Securities and Use of Proceeds
Item 6Exhibits
Signature

i


PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
For the periods ended March 31,
 20202021
First Quarter
(unaudited)
Cash flows from operating activities  
Net income/(loss)$(1,993)$3,262 
Depreciation and tooling amortization2,444 2,103 
Other amortization(302)(361)
Provision for credit and insurance losses598 (36)
Pension and other post-retirement employee benefits (“OPEB”) expense/(income) (Note 13)(178)(318)
Equity investment dividends received in excess of (earnings)/losses118 68 
Foreign currency adjustments338 350 
Net unrealized (gain)/loss on Other Investments (Note 10)(914)
Net (gain)/loss on changes in investments in affiliates (Note 4)(15)(166)
Stock compensation38 41 
Provision for deferred income taxes702 427 
Decrease/(Increase) in finance receivables (wholesale and other)(1,080)2,699 
Decrease/(Increase) in accounts receivable and other assets39 (588)
Decrease/(Increase) in inventory(1,177)(2,176)
Increase/(Decrease) in accounts payable and accrued and other liabilities194 193 
Other(207)(92)
Net cash provided by/(used in) operating activities (473)4,492 
Cash flows from investing activities
Capital spending(1,780)(1,368)
Acquisitions of finance receivables and operating leases(12,184)(11,695)
Collections of finance receivables and operating leases12,709 12,482 
Proceeds from sale of business (Note 17)1,340 7 
Purchases of marketable securities and other investments(8,244)(11,580)
Sales and maturities of marketable securities and other investments4,998 11,686 
Settlements of derivatives131 31 
Other(84)(54)
Net cash provided by/(used in) investing activities(3,114)(491)
Cash flows from financing activities  
Cash payments for dividends and dividend equivalents(596)(3)
Purchases of common stock—  
Net changes in short-term debt(622)273 
Proceeds from issuance of long-term debt26,691 6,931 
Principal payments on long-term debt(12,948)(14,892)
Other(71)(102)
Net cash provided by/(used in) financing activities12,454 (7,793)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(448)(93)
Net increase/(decrease) in cash, cash equivalents, and restricted cash$8,419 $(3,885)
Cash, cash equivalents, and restricted cash at beginning of period (Note 7)$17,741 $25,935 
Net increase/(decrease) in cash, cash equivalents, and restricted cash8,419 (3,885)
Cash, cash equivalents, and restricted cash at end of period (Note 7)$26,160 $22,050 

The accompanying notes are part of the consolidated financial statements.
1

Item 1. Financial Statements (continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(in millions, except per share amounts)
For the periods ended March 31,
 20202021
 First Quarter
(unaudited)
Revenues
Automotive$31,342 $33,554 
Ford Credit2,967 2,663 
Mobility11 11 
Total revenues (Note 3)34,320 36,228 
Costs and expenses
Cost of sales30,522 29,297 
Selling, administrative, and other expenses2,432 2,843 
Ford Credit interest, operating, and other expenses2,924 1,624 
Total costs and expenses35,878 33,764 
Operating income/(loss)(1,558)2,464 
Interest expense on Company debt excluding Ford Credit227 473 
Other income/(loss), net (Note 4 and Note 10)680 1,872 
Equity in net income/(loss) of affiliated companies(41)79 
Income/(Loss) before income taxes(1,146)3,942 
Provision for/(Benefit from) income taxes847 680 
Net income/(loss)(1,993)3,262 
Less: Income/(Loss) attributable to noncontrolling interests—  
Net income/(loss) attributable to Ford Motor Company$(1,993)$3,262 
EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 6)
Basic income/(loss)$(0.50)$0.82 
Diluted income/(loss)(0.50)0.81 
Weighted-average shares used in computation of earnings/(loss) per share
Basic shares3,9633,980
Diluted shares3,9634,016

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
 For the periods ended March 31,
 20202021
 First Quarter
(unaudited)
Net income/(loss)$(1,993)$3,262 
Other comprehensive income/(loss), net of tax (Note 18)
Foreign currency translation(1,453)289 
Marketable securities14 (65)
Derivative instruments692 (301)
Pension and other postretirement benefits14 1 
Total other comprehensive income/(loss), net of tax(733)(76)
Comprehensive income/(loss)(2,726)3,186 
Less: Comprehensive income/(loss) attributable to noncontrolling interests
—  
Comprehensive income/(loss) attributable to Ford Motor Company$(2,726)$3,186 

The accompanying notes are part of the consolidated financial statements.
2

Item 1. Financial Statements (continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions)
 December 31,
2020
March 31,
2021
 (unaudited)
ASSETS  
Cash and cash equivalents (Note 7)$25,243 $21,826 
Marketable securities (Note 7)24,718 24,281 
Ford Credit finance receivables, net of allowance for credit losses of $394 and $374 (Note 8)
42,401 40,664 
Trade and other receivables, less allowances of $84 and $56
9,993 10,448 
Inventories (Note 9)10,808 12,742 
Assets held for sale (Note 17)47 335 
Other assets3,534 3,636 
Total current assets116,744 113,932 
Ford Credit finance receivables, net of allowance for credit losses of $911 and $849 (Note 8)
55,277 52,570 
Net investment in operating leases27,951 27,811 
Net property37,083 36,361 
Equity in net assets of affiliated companies4,901 4,694 
Deferred income taxes12,423 12,103 
Other assets12,882 13,348 
Total assets$267,261 $260,819 
LIABILITIES  
Payables$22,204 $23,492 
Other liabilities and deferred revenue (Note 12 and Note 20)23,645 20,995 
Debt payable within one year (Note 14)
Company excluding Ford Credit1,374 1,061 
Ford Credit49,969 48,410 
Liabilities held for sale (Note 17)— 291 
Total current liabilities97,192 94,249 
Other liabilities and deferred revenue (Note 12 and Note 20)28,379 28,707 
Long-term debt (Note 14)
Company excluding Ford Credit22,633 24,819 
Ford Credit87,708 78,382 
Deferred income taxes538 688 
Total liabilities236,450 226,845 
EQUITY  
Common Stock, par value $0.01 per share (4,038 million shares issued of 6 billion authorized)
40 40 
Class B Stock, par value $0.01 per share (71 million shares issued of 530 million authorized)
1 
Capital in excess of par value of stock22,290 22,240 
Retained earnings18,243 21,502 
Accumulated other comprehensive income/(loss) (Note 18)(8,294)(8,370)
Treasury stock(1,590)(1,585)
Total equity attributable to Ford Motor Company30,690 33,828 
Equity attributable to noncontrolling interests121 146 
Total equity30,811 33,974 
Total liabilities and equity$267,261 $260,819 
The following table includes assets to be used to settle liabilities of the consolidated variable interest entities (“VIEs”). These assets and liabilities are included in the consolidated balance sheets above.
December 31,
2020
March 31,
2021
(unaudited)
ASSETS  
Cash and cash equivalents$2,822 $4,794 
Ford Credit finance receivables, net51,472 48,902 
Net investment in operating leases12,794 10,026 
Other assets— 2 
LIABILITIES
Other liabilities and deferred revenue$56 $30 
Debt46,770 43,387 

The accompanying notes are part of the consolidated financial statements.
3

Item 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, unaudited)
 Equity Attributable to Ford Motor Company 
 Capital StockCap. In Excess of Par Value of StockRetained EarningsAccumulated Other Comprehensive Income/(Loss) (Note 18)Treasury StockTotalEquity Attributable to Non-controlling InterestsTotal
Equity
Balance at December 31, 2019$41 $22,165 $20,320 $(7,728)$(1,613)$33,185 $45 $33,230 
Adoption of accounting standards— — (202)— — (202)— (202)
Net income/(loss)— — (1,993)— — (1,993)— (1,993)
Other comprehensive income/(loss), net
— — — (733)— (733)— (733)
Common stock issued (a)
— (15)— — — (15)— (15)
Treasury stock/other — — — — 
Dividends and dividend equivalents declared ($0.15 per share) (b)
— — (598)— — (598)— (598)
Balance at March 31, 2020$41 $22,150 $17,527 $(8,461)$(1,607)$29,650 $48 $29,698 
Balance at December 31, 2020$41 $22,290 $18,243 $(8,294)$(1,590)$30,690 $121 $30,811 
Net income/(loss)  3,262   3,262  3,262 
Other comprehensive income/(loss), net
   (76) (76) (76)
Common stock issued (a)
 (50)   (50) (50)
Treasury stock/other     5 5 25 30 
Dividends and dividend equivalents declared (b)  (3)  (3) (3)
Balance at March 31, 2021$41 $22,240 $21,502 $(8,370)$(1,585)$33,828 $146 $33,974 
__________
(a)Includes impacts of share-based compensation.
(b)Dividends and dividend equivalents declared for Common and Class B Stock.

The accompanying notes are part of the consolidated financial statements.
4

Item 1. Financial Statements (Continued)
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1.  PRESENTATION

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

In the opinion of management, these unaudited financial statements reflect a fair statement of our results of operations and financial condition for the periods, and at the dates, presented.  The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.  Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K Report”).

NOTE 2. NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards

Accounting Standards Update (“ASU”) 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes. Effective January 1, 2021, we adopted the amendments in this ASU to simplify the accounting for income taxes. The amendments clarified that an entity may elect, but is not required, to reflect an allocation of consolidated current and deferred tax expense for non-taxable legal entities that are treated as disregarded by taxing authorities in their separately issued financial statements.

With the adoption of the amendments in ASU 2019-12, Ford Credit’s separately issued financial statements no longer reflect an allocation of our consolidated U.S. current and deferred tax expense to it and certain of its U.S. subsidiaries that are treated as disregarded entities for U.S. tax purposes. Adoption of these amendments reduces complexity in accounting for income taxes and better reflects Ford Credit’s external obligations to tax authorities. Following the adoption, in April 2021, we entered into a Second Amended and Restated Tax Sharing Agreement with Ford Credit. The adoption of ASU 2019-12 and the Second Amended and Restated Tax Sharing Agreement had no impact on our consolidated financial position and results of operations. The amendments were adopted on a retrospective basis and are reflected in Ford Credit’s standalone financial statements and disclosures.

ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Effective January 1, 2021, we adopted the new standard, which simplified guidance on the issuer’s accounting for convertible debt instruments and amended certain guidance related to the computation of earnings per share for convertible instruments and contracts in an entity’s own equity. There was no impact on the date of adoption. During the first quarter of 2021, we issued convertible notes (see Note 14).

Accounting Standards Issued But Not Yet Adopted

The Company considers the applicability and impact of all ASUs.  ASUs were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements.
6

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 3. REVENUE

    The following tables disaggregate our revenue by major source for the periods ended March 31 (in millions):
First Quarter 2020
Company excluding
Ford Credit
Ford CreditConsolidated
Vehicles, parts, and accessories$29,841 $— $29,841 
Used vehicles931 — 931 
Services and other revenue (a)523 41 564 
Revenues from sales and services
31,295 41 31,336 
Leasing income58 1,459 1,517 
Financing income— 1,425 1,425 
Insurance income— 42 42 
Total revenues$31,353 $2,967 $34,320 
First Quarter 2021
Company excluding
Ford Credit
Ford CreditConsolidated
Vehicles, parts, and accessories$32,135 $— $32,135 
Used vehicles745 — 745 
Services and other revenue (a)608 16 624 
Revenues from sales and services
33,488 16 33,504 
Leasing income77 1,380 1,457 
Financing income— 1,243 1,243 
Insurance income— 24 24 
Total revenues$33,565 $2,663 $36,228 
__________
(a)Includes extended service contract revenue.

The amount of consideration we receive and revenue we recognize on our vehicles, parts, and accessories varies with changes in return rights and marketing incentives we offer to our customers and their customers. Estimates of marketing incentives are based on expected retail and fleet sales volumes, mix of products to be sold, and incentive programs to be offered. Customer acceptance of products and programs, as well as other market conditions, will impact these estimates. As a result of changes in our estimate of marketing incentives, we recorded a decrease in revenue of $885 million in the first quarter of 2020 and an increase in revenue of $359 million in the first quarter of 2021 related to revenue recognized in prior periods. The change in estimate for the first quarter of 2020 includes additional marketing incentives offered to customers in connection with market conditions affected by the COVID-19 pandemic; conversely, the change in estimate for the first quarter of 2021 reflects lower than expected marketing incentives due to reduced dealer stock levels, which includes the effects of the semiconductor supply shortage.

We sell separately-priced service contracts that extend mechanical and maintenance coverages beyond our base warranty agreements to vehicle owners (“extended service contracts”). We had a balance of $4.2 billion and $4.3 billion of unearned revenue associated with outstanding contracts reported in Other liabilities and deferred revenue at December 31, 2020 and March 31, 2021, respectively. We expect to recognize approximately $1 billion of the unearned amount in the remainder of 2021, $1.2 billion in 2022, and $2.1 billion thereafter. We recognized $330 million and $342 million of unearned amounts as revenue in the first quarter of 2020 and 2021, respectively.

Amounts paid to dealers to obtain these contracts are deferred and recorded as Other assets. We had a balance of $283 million and $302 million in deferred costs as of December 31, 2020 and March 31, 2021, respectively. We recognized $20 million of amortization during the first quarter of 2020 and 2021.
7

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 4. OTHER INCOME/(LOSS)

The amounts included in Other income/(loss), net for the periods ended March 31 were as follows (in millions):
First Quarter
 20202021
Net periodic pension and OPEB income/(cost), excluding service cost
$451 $612 
Investment-related interest income162 72 
Interest income/(expense) on income taxes
(23)(3)
Realized and unrealized gains/(losses) on cash equivalents, marketable securities, and other investments (a)(32)899 
Gains/(Losses) on changes in investments in affiliates15 166 
Royalty income89 171 
Other18 (45)
Total$680 $1,872 
__________
(a)See Note 10 for additional information relating to our investment in Rivian.

NOTE 5. INCOME TAXES

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

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

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

Basic and diluted earnings/(loss) per share were calculated using the following (in millions):
First Quarter
 20202021
Net income/(loss) attributable to Ford Motor Company$(1,993)$3,262 
Basic and Diluted Shares
Basic shares (average shares outstanding)3,963 3,980 
Net dilutive options, unvested restricted stock units, and unvested restricted stock shares (a)— 36 
Diluted shares3,963 4,016 
__________
(a)In the first quarter of 2020, there were 30 million shares excluded from the calculation of diluted earnings/(loss) per share, due to their anti-dilutive effect.
8

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

The fair values of cash, cash equivalents, and marketable securities measured at fair value on a recurring basis were as follows (in millions):
December 31, 2020
 Fair Value LevelCompany excluding Ford CreditFord CreditConsolidated
Cash and cash equivalents  
U.S. government1$2,940 $3,255 $6,195 
U.S. government agencies2850 640 1,490 
Non-U.S. government and agencies2600 717 1,317 
Corporate debt2605 970 1,575 
Total marketable securities classified as cash equivalents
4,995 5,582 10,577 
Cash, time deposits, and money market funds5,899 8,767 14,666 
Total cash and cash equivalents$10,894 $14,349 $25,243 
Marketable securities
U.S. government1$4,709 $1,082 $5,791 
U.S. government agencies23,259 485 3,744 
Non-U.S. government and agencies24,448 2,693 7,141 
Corporate debt27,095 308 7,403 
Equities (a)1113 — 113 
Other marketable securities2234 292 526 
Total marketable securities$19,858 $4,860 $24,718 
Restricted cash$45 $647 $692 
Cash, cash equivalents, and restricted cash in
   held-for-sale assets
$— $— $— 
March 31, 2021
Fair Value LevelCompany excluding Ford CreditFord CreditConsolidated
Cash and cash equivalents  
U.S. government1$1,733 $16 $1,749 
U.S. government agencies2129 50 179 
Non-U.S. government and agencies21,197 1,345 2,542 
Corporate debt2453 945 1,398 
Total marketable securities classified as cash equivalents
3,512 2,356 5,868 
Cash, time deposits, and money market funds7,445 8,513 15,958 
Total cash and cash equivalents$10,957 $10,869 $21,826 
Marketable securities
U.S. government1$4,955 $537 $5,492 
U.S. government agencies23,176 600 3,776 
Non-U.S. government and agencies24,462 2,195 6,657 
Corporate debt27,388 342 7,730 
Equities (a)1100 — 100 
Other marketable securities2252 274 526 
Total marketable securities$20,333 $3,948 $24,281 
Restricted cash$46 $162 $208 
Cash, cash equivalents, and restricted cash in
   held-for-sale assets
$16 $— $16 
__________
(a)Net unrealized gains/losses incurred during the reporting periods on equity securities still held at December 31, 2020 and March 31, 2021 were a $24 million gain and a $13 million loss, respectively.
9

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

The cash equivalents and marketable securities accounted for as available-for-sale (“AFS”) securities were as follows (in millions):
December 31, 2020
Fair Value of Securities with
Contractual Maturities
 Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueWithin 1 YearAfter 1 Year through
5 Years
After 5 Years
Company excluding Ford Credit  
U.S. government$2,894 $44 $— $2,938 $1,649 $1,286 $
U.S. government agencies2,588 15 — 2,603 772 1,629 202 
Non-U.S. government and agencies2,926 31 — 2,957 1,330 1,617 10 
Corporate debt7,482 102 (1)7,583 3,566 3,987 30 
Other marketable securities212 — 215 147 67 
Total$16,102 $195 $(1)$16,296 $7,318 $8,666 $312 
 
March 31, 2021
Fair Value of Securities with
Contractual Maturities
Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueWithin 1 YearAfter 1 Year through
5 Years
After 5 Years
Company excluding Ford Credit
U.S. government$3,590 $33 $— $3,623 $1,600 $2,023 $— 
U.S. government agencies2,399 (11)2,395 418 1,805 172 
Non-U.S. government and agencies2,517 21 (7)2,531 1,172 1,336 23 
Corporate debt7,689 68 (6)7,751 3,895 3,846 10 
Other marketable securities232 — 234 167 66 
Total
$16,427 $131 $(24)$16,534 $7,086 $9,177 $271 

Sales proceeds and gross realized gains/losses from the sale of AFS securities for the periods ended March 31 were as follows (in millions):
First Quarter
20202021
Company excluding Ford Credit
Sales proceeds$1,865 $2,880 
Gross realized gains13 
Gross realized losses
10

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

The present fair values and gross unrealized losses for cash equivalents and marketable securities accounted for as AFS securities that were in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position, were as follows (in millions):
December 31, 2020
Less than 1 Year1 Year or GreaterTotal
 Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Company excluding Ford Credit  
U.S. government$181 $— $— $— $181 $— 
U.S. government agencies83 — — — 83 — 
Non-U.S. government and agencies164 — 10 — 174 — 
Corporate debt1,538 (1)— 1,547 (1)
Other marketable securities23 — 13 — 36 — 
Total
$1,989 $(1)$32 $— $2,021 $(1)
 
March 31, 2021
Less than 1 Year1 Year or GreaterTotal
Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Company excluding Ford Credit
U.S. government$641 $— $— $— $641 $— 
U.S. government agencies1,126 (11)— — 1,126 (11)
Non-U.S. government and agencies703 (7)— — 703 (7)
Corporate debt1,199 (6)— 1,208 (6)
Other marketable securities94 — — 102 — 
Total
$3,763 $(24)$17 $— $3,780 $(24)

We determine credit losses on AFS debt securities using the specific identification method. During the first quarter of 2021, we did not recognize any credit loss. The unrealized losses on securities are due to changes in interest rates and market liquidity.

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash, as reported in the consolidated statements of cash flows, were as follows (in millions):
December 31,
2020
March 31,
2021
Cash and cash equivalents$25,243 $21,826 
Restricted cash (a)692 208 
Cash, cash equivalents, and restricted cash in held-for-sale assets— 16 
Total cash, cash equivalents, and restricted cash$25,935 $22,050 
__________
(a)Included in Other assets in the non-current assets section of our consolidated balance sheets.
11

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 8. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

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

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

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

Ford Credit finance receivables, net were as follows (in millions):
 December 31,
2020
March 31,
2021
Consumer  
Retail installment contracts, gross$73,631 $71,981 
Finance leases, gross8,431 8,192 
Retail financing, gross82,062 80,173 
Unearned interest supplements(3,987)(3,696)
Consumer finance receivables78,075 76,477 
Non-Consumer  
Dealer financing20,908 17,980 
Non-Consumer finance receivables20,908 17,980 
Total recorded investment$98,983 $94,457 
Recorded investment in finance receivables$98,983 $94,457 
Allowance for credit losses(1,305)(1,223)
Total finance receivables, net$97,678 $93,234 
Current portion$42,401 $40,664 
Non-current portion55,277 52,570 
Total finance receivables, net$97,678 $93,234 
Net finance receivables subject to fair value (a)$89,651 $85,436 
Fair value (b)91,238 86,808 
__________
(a)Net finance receivables subject to fair value exclude finance leases.
(b)The fair value of finance receivables is categorized within Level 3 of the fair value hierarchy.

Ford Credit’s finance leases are comprised of sales-type and direct financing leases. Financing revenue from finance leases for the first quarter of 2020 and 2021 was $95 million and $90 million, respectively, and is included in Ford Credit revenues on our consolidated income statements.

At December 31, 2020 and March 31, 2021, accrued interest was $181 million and $164 million, respectively, which we report in Other assets in the current assets section of our consolidated balance sheets.

Included in the recorded investment in finance receivables at December 31, 2020 and March 31, 2021, were consumer receivables of $43.7 billion and $41.2 billion, respectively, and non-consumer receivables of $16.4 billion and $15.3 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. The receivables are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations or the claims of Ford Credit’s other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions.
12

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 8. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Credit Quality

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

Pass – current to 60 days past due;
Special Mention – 61 to 120 days past due and in intensified collection status; and
Substandard – greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged off, as measured using the fair value of collateral less costs to sell.

The credit quality analysis of consumer receivables at December 31, 2020 was as follows (in millions):
Amortized Cost Basis by Origination Year
Prior to 201620162017201820192020TotalPercent
Consumer
31 - 60 days past due$45 $62 $103 $162 $166 $143 $681 0.9 %
61 - 120 days past due12 24 44 45 31 163 0.2 
Greater than 120 days past due11 41 — 
Total past due63 80 134 214 218 176 885 1.1 
Current782 2,518 6,648 13,704 20,822 32,716 77,190 98.9 
Total$845 $2,598 $6,782 $13,918 $21,040 $32,892 $78,075 100.0 %

The credit quality analysis of consumer receivables at March 31, 2021 was as follows (in millions):
Amortized Cost Basis by Origination Year
Prior to 201720172018201920202021TotalPercent
Consumer
31 - 60 days past due$57 $64 $106 $117 $117 $$466 0.6 %
61 - 120 days past due14 25 31 30 110 0.1 
Greater than 120 days past due16 — 40 0.1 
Total past due82 85 138 155 150 616 0.8 
Current2,452 5,450 11,743 18,729 30,560 6,927 75,861 99.2 
Total$2,534 $5,535 $11,881 $18,884 $30,710 $6,933 $76,477 100.0 %

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

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

Group I – strong to superior financial metrics;
Group II – fair to favorable financial metrics;
Group III – marginal to weak financial metrics; and
Group IV – poor financial metrics, including dealers classified as uncollectible.
13

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 8. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

The credit quality analysis of dealer financing receivables at December 31, 2020 was as follows (in millions):
Amortized Cost Basis by Origination YearWholesale Loans
Dealer Loans
Prior to 201620162017201820192020TotalTotalPercent
Group I$503 $129 $110 $188 $70 $248 $1,248 $13,160 $14,408 68.9 %
Group II38 20 11 35 87 194 4,680 4,874 23.3 
Group III— 19 35 69 1,464 1,533 7.3 
Group IV— — — 10 83 93 0.5 
Total (a)
$552 $149 $124 $242 $78 $376 $1,521 $19,387 $20,908 100.0 %
__________
(a)Total past due dealer financing receivables at December 31, 2020 were $99 million.

The credit quality analysis of dealer financing receivables at March 31, 2021 was as follows (in millions):
Amortized Cost Basis by Origination YearWholesale Loans
Dealer Loans
Prior to 201720172018201920202021TotalTotalPercent
Group I$582 $108 $178 $55 $146 $124 $1,193 $10,737 $11,930 66.4 %
Group II31 11 40 23 63 171 4,358 4,529 25.2 
Group III17 — 13 24 65 1,380 1,445 8.0 
Group IV— — 68 76 0.4 
Total (a)
$630 $119 $228 $61 $185 $214 $1,437 $16,543 $17,980 100.0 %
__________
(a)Total past due dealer financing receivables at March 31, 2021 were $70 million.

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

Troubled Debt Restructuring (“TDR”). A restructuring of debt constitutes a TDR if a concession is granted to a debtor for economic or legal reasons related to the debtor’s financial difficulties that Ford Credit otherwise would not consider. Consumer and non-consumer receivables that have a modified interest rate below market rate or that were modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code, except non-consumer receivables that are current with minimal risk of loss, are considered to be TDRs. Ford Credit does not grant concessions on the principal balance of the receivables. If a receivable is modified in a reorganization proceeding, all payment requirements of the reorganization plan need to be met before remaining balances are forgiven.

Allowance for Credit Losses

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

Adjustments to the allowance for credit losses are made by recording charges to Ford Credit interest, operating, and other expenses on our consolidated income statements. The uncollectible portion of a finance receivable is charged to the allowance for credit losses at the earlier of when an account is deemed to be uncollectible or when an account is 120 days delinquent, taking into consideration the financial condition of the customer or borrower, the value of the collateral, recourse to guarantors, and other factors.
14

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 8. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

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

An analysis of the allowance for credit losses related to finance receivables for the periods ended March 31 was as follows (in millions):
First Quarter 2020
 ConsumerNon-ConsumerTotal
Allowance for credit losses
Beginning balance$496 $17 $513 
Adoption of ASU 2016-13 (a)247 252 
Charge-offs(145)(1)(146)
Recoveries43 45 
Provision for credit losses534 52 586 
Other (b)(18)(1)(19)
Ending balance$1,157 $74 $1,231 

First Quarter 2021
 ConsumerNon-ConsumerTotal
Allowance for credit losses
Beginning balance$1,245 $60 $1,305 
Charge-offs(97)— (97)
Recoveries53 56 
Provision for credit losses(30)(10)(40)
Other (b)(1)— (1)
Ending balance$1,170 $53 $1,223 
__________
(a)Cumulative pre-tax adjustments related to the adoption of ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments, were recorded in retained earnings as of January 1, 2020.
(b)Primarily represents amounts related to translation adjustments.

The allowance for credit losses considers economic conditions attributable to the COVID-19 pandemic. The allowance reflects economic uncertainty and an expectation of continued higher unemployment which increases the probability of default and loss given default rates used in Ford Credit’s estimate of the lifetime expected credit losses for its consumer portfolio, especially in the United States.

During the first quarter of 2021, the allowance for credit losses decreased $82 million, primarily reflecting improvement in the economic outlook that caused Ford Credit to lower its expectation of lifetime losses attributable to COVID-19. The full impact of COVID-19 on Ford Credit’s credit losses depends on future developments, such as the ultimate duration and scope of the outbreak (including any potential future waves and the success of vaccination programs), resolution of macroeconomic uncertainty, and the extent to which its customers and dealers are able to utilize government relief and payment deferral programs. Although net charge-offs remained low in the quarter ended March 31, 2021, the future impact of COVID-19 on credit losses remains uncertain. Ford Credit will continue to monitor economic trends and conditions and portfolio performance and will adjust the reserve accordingly.
15

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 9. INVENTORIES

Inventories were as follows (in millions):
 December 31,
2020
March 31,
2021
Raw materials, work-in-process, and supplies$4,676 $5,184 
Finished products6,132 7,558 
Total inventories$10,808 $12,742 

Finished products at March 31, 2021 in the table above include vehicles completed but awaiting installation of components affected by the semiconductor supply shortage, after which, they will proceed through an additional quality review process prior to being shipped to our dealers.

NOTE 10. OTHER INVESTMENTS

We have investments in entities not accounted for under the equity method for which fair values are not readily available. We record these investments at cost (less impairment, if any), adjusted for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We report the carrying value of these investments in Other assets in the non-current assets section of our consolidated balance sheets. These investments were $1.7 billion and $2.8 billion at December 31, 2020 and March 31, 2021, respectively. The increase from December 31, 2020 primarily reflects an observable event of $902 million (measured using an option pricing model) for our investment in Rivian, reported in Other income/(loss), net on our consolidated income statements. The cumulative net unrealized gain from adjustments related to Other Investments held at March 31, 2021 is $1.2 billion.

NOTE 11. GOODWILL

The net carrying amount of goodwill was $258 million and $566 million at December 31, 2020 and March 31, 2021, respectively, and is reported in Other assets in the non-current assets section of our consolidated balance sheets. The increase from December 31, 2020 reflects the acquisition of Getrag Ford Transmissions GmbH in March 2021 (see Note 17).
16

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 12. OTHER LIABILITIES AND DEFERRED REVENUE

Other liabilities and deferred revenue were as follows (in millions):
 December 31,
2020
March 31,
2021
Current
Dealer and dealers’ customer allowances and claims$12,702 $10,882 
Deferred revenue2,161 2,062 
Employee benefit plans1,752 1,604 
Accrued interest1,215 1,130 
OPEB (a)339 340 
Pension (a)193 192 
Operating lease liabilities323 329 
Other4,960 4,456 
Total current other liabilities and deferred revenue$23,645 $20,995 
Non-current  
Pension (a)$10,738 $10,253 
OPEB (a)6,236 6,182 
Dealer and dealers’ customer allowances and claims3,072 3,272 
Deferred revenue4,559 4,550 
Operating lease liabilities991 965 
Employee benefit plans1,074 1,066 
Other1,709 2,419 
Total non-current other liabilities and deferred revenue$28,379 $28,707 
__________
(a)Balances at March 31, 2021 reflect pension and OPEB liabilities at December 31, 2020, updated for: service and interest cost; expected return on assets; curtailments, settlements, and associated interim remeasurement (where applicable); separation expense; actual benefit payments; and cash contributions. For plans without interim remeasurement, the discount rate and rate of expected return assumptions are unchanged from year-end 2020. Included in Other assets are pension assets of $4.3 billion and $4.8 billion at December 31, 2020 and March 31, 2021, respectively.
17

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 13. RETIREMENT BENEFITS

Defined Benefit Plans - Expense

The pre-tax net periodic benefit cost/(income) for our defined benefit pension and OPEB plans for the periods ended March 31 were as follows (in millions):
First Quarter
 Pension Benefits  
 U.S. PlansNon-U.S. PlansWorldwide OPEB
 202020212020202120202021
Service cost$130 $138 $131 $144 $12 $12 
Interest cost323 223 133 99 43 32 
Expected return on assets(699)(702)(267)(285)— — 
Amortization of prior service costs/(credits)
(4)(3)
Net remeasurement (gain)/loss— 423 (80)(484)58 — 
Separation programs/other10 24 37 (1)— 
Settlements and curtailments
— 39 (2)— 
Net periodic benefit cost/(income)
$(235)$124 $(49)$(483)$106 $41 

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

In the first quarter of 2020 and 2021, we recognized $24 million and $38 million, respectively, of expenses related to ongoing global redesign programs. Until our global redesign actions are completed, we anticipate further adjustments to our plans in subsequent periods.

Pension Plan Contributions

During 2021, we expect to contribute between $600 million and $800 million of cash to our global funded pension plans. We also expect to make about $380 million of benefit payments to participants in unfunded plans. In the first quarter of 2021, we contributed $229 million to our worldwide funded pension plans and made $96 million of benefit payments to participants in unfunded plans.
18

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 14. DEBT
The carrying value of Company debt excluding Ford Credit and Ford Credit debt was as follows (in millions):
December 31,
2020
March 31,
2021
Company excluding Ford Credit  
Debt payable within one year
Short-term$613 $185 
Long-term payable within one year  
Public unsecured debt securities
180 266 
U.S. Department of Energy Advanced Technology Vehicles Manufacturing (“DOE ATVM”) Incentive Program148 148 
Other debt434 463 
Unamortized (discount)/premium(1)(1)
Total debt payable within one year1,374 1,061 
Long-term debt payable after one year  
Public unsecured debt securities18,877 18,792 
Convertible notes— 2,300 
Delayed draw term loan1,500 1,500 
DOE ATVM Incentive Program1,064 1,027 
U.K. Export Finance Program854 861 
Other debt768 790 
Unamortized (discount)/premium(242)(234)
Unamortized issuance costs(188)(217)
Total long-term debt payable after one year22,633 24,819 
Total Company excluding Ford Credit$24,007 $25,880 
Fair value of Company debt excluding Ford Credit (a)$27,794 $29,653 
Ford Credit  
Debt payable within one year
Short-term$11,429 $11,976 
Long-term payable within one year  
Unsecured debt17,185 16,222 
Asset-backed debt21,345 20,207 
Unamortized (discount)/premium
Unamortized issuance costs
(17)(19)
Fair value adjustments (b)25 21 
Total debt payable within one year49,969 48,410 
Long-term debt payable after one year
Unsecured debt54,197 48,880 
Asset-backed debt32,276 28,867 
Unamortized (discount)/premium28 33 
Unamortized issuance costs
(235)(224)
Fair value adjustments (b)1,442 826 
Total long-term debt payable after one year87,708 78,382 
Total Ford Credit$137,677 $126,792 
Fair value of Ford Credit debt (a)$139,796 $128,979 
__________
(a)At December 31, 2020 and March 31, 2021, the fair value of debt includes $529 million and $72 million of Company excluding Ford Credit short-term debt and $10.4 billion and $10.8 billion of Ford Credit short-term debt, respectively, carried at cost which approximates fair value. All other debt is categorized within Level 2 of the fair value hierarchy.
(b)These adjustments are related to hedging activity and include discontinued hedging relationship adjustments of $299 million and $273 million at December 31, 2020 and March 31, 2021, respectively. The carrying value of hedged debt was $45.5 billion and $40.7 billion at December 31, 2020 and March 31, 2021, respectively.
19

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 14. DEBT (Continued)

In March 2021, we issued $2.3 billion aggregate principal amount of 0% unsecured Convertible Senior Notes due 2026, including $300 million aggregate principal amount of such notes pursuant to the exercise in full of the overallotment option granted to the initial purchasers. The notes will not bear regular interest and the principal amount of the notes will not accrete. The total net proceeds from the offering, after deducting debt issuance costs, were approximately $2.267 billion.

Each $1,000 principal amount of the notes will initially be convertible into 57.1886 shares of our Common Stock, which is equivalent to an initial conversion price of approximately $17.49 per share, subject to adjustment upon the occurrence of specified events. The notes are convertible, at the option of the noteholders, on or after December 15, 2025. Prior to December 15, 2025, the notes are convertible only under the following circumstances:

During any fiscal quarter commencing after the fiscal quarter ending on September 30, 2021 (and only during such fiscal quarter), if the last reported sale price of our Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the notes on each applicable trading day;
During the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the notes for each day of that five consecutive trading day period was less than 98% of the product of the last reported sale price of our Common Stock and the conversion rate of the notes on such trading day;
If we call any or all of the notes for redemption; or
Upon the occurrence of specific corporate events such as a change in control or certain beneficial distributions to common stockholders (as set forth in the indenture governing the notes).

Upon conversion, we will pay cash up to the aggregate principal amount of the notes to be converted and cash, shares of our Common Stock, or a combination of cash and shares of our Common Stock, at our election for the remainder of our obligation in excess, if any, of the aggregate principal amount of the notes being converted.

We may not redeem the notes prior to March 20, 2024. On or after March 20, 2024, we may redeem all or any portion of the notes for cash equal to 100% of the principal amount of the notes being redeemed if the last reported sale price of our Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period.

If we undergo a fundamental change (e.g., change of control), subject to certain conditions, holders of the notes may require us to repurchase for cash all or any portion of their notes at a repurchase price equal to 100% of the principal amount of the notes. In addition, if specific corporate events occur prior to the maturity date or if we issue a notice of redemption, we will increase the conversion rate by pre-defined amounts for a holder who elects to convert their notes in connection with such a corporate event. During the first quarter of 2021, the conditions allowing holders of the notes to convert were not met.

The notes were issued at par and fees associated with the issuance of these notes is amortized to Interest expense on Company debt excluding Ford Credit over the contractual term of the notes. Amortization of issuance costs for the first quarter of 2021 was de minimis. The effective interest rate of the notes is 0.3%.

The total estimated fair value of the notes as of March 31, 2021 was approximately $2.3 billion. The fair value was determined using commonly employed valuation methodologies applying observable market inputs and is classified within Level 2 of the fair value hierarchy.

The notes did not have an impact on our first quarter 2021 diluted EPS as the average market price of our Common Stock during the quarter did not exceed the conversion price of the notes.
20

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 15. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

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

Income Effect of Derivative Financial Instruments

The gains/(losses), by hedge designation, reported in income for the periods ended March 31 were as follows (in millions):
 First Quarter
Cash flow hedges
20202021
Reclassified from AOCI to Cost of sales
Foreign currency exchange contracts (a)
$(70)$(15)
Commodity contracts (b)
(14)
Fair value hedges
Interest rate contracts
Net interest settlements and accruals on hedging instruments
28 101 
Fair value changes on hedging instruments1,110 (641)
Fair value changes on hedged debt(1,093)590 
Cross-currency interest rate swap contracts
Net interest settlements and accruals on hedging instruments
— (3)
Fair value changes on hedging instruments— (50)
Fair value changes on hedged debt— 44 
Derivatives not designated as hedging instruments
Foreign currency exchange contracts (c)586 233 
Cross-currency interest rate swap contracts
(151)(245)
Interest rate contracts(74)(31)
Commodity contracts(43)55 
Total$279 $46 
__________
(a)For the first quarter of 2020 and 2021, an $897 million gain and a $461 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax.
(b)For the first quarter of 2020 and 2021, a $101 million loss and an $80 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax.
(c)For the first quarter of 2020 and 2021, a $376 million gain and a $181 million gain were reported in Cost of sales, respectively, and a $210 million gain and a $52 million gain were reported in Other income/(loss), net, respectively.
21

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 15. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

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

The fair value of our derivative instruments and the associated notional amounts were as follows (in millions):
December 31, 2020March 31, 2021
NotionalFair Value of
Assets
Fair Value of
Liabilities
NotionalFair Value of
Assets
Fair Value of
Liabilities
Cash flow hedges   
Foreign currency exchange contracts
$15,860 $47 $383 $14,192 $$677 
Commodity contracts703 40 750 103 
Fair value hedges   
Interest rate contracts26,924 1,331 25,646 934 204 
Cross-currency interest rate swap contracts
885 46 — 885 — 
Derivatives not designated as hedging instruments
Foreign currency exchange contracts25,956 172 399 24,341 258 274 
Cross-currency interest rate swap contracts
6,849 557 6,822 275 25 
Interest rate contracts70,318 663 439 61,608 425 314 
Commodity contracts599 74 696 97 
Total derivative financial instruments, gross (a) (b)
$148,094 $2,930 $1,235 $134,940 $2,096 $1,499 
Current portion
$974 $859 $956 $816 
Non-current portion
1,956 376 1,140 683 
Total derivative financial instruments, gross
$2,930 $1,235 $2,096 $1,499 
__________
(a)At December 31, 2020 and March 31, 2021, we held collateral of $9 million and $3 million and we posted collateral of $96 million and $87 million, respectively.
(b)At December 31, 2020 and March 31, 2021, the fair value of assets and liabilities available for counterparty netting was $505 million and $664 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.
22

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 16. EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES

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

Company Excluding Ford Credit

Global Redesign

As previously announced, we are executing a global redesign of our business. Redesign-related activities, including employee separation costs, facility and other asset-related charges (e.g., impairment, accelerated depreciation), dealer and supplier payments, other statutory and contractual obligations, and other expenses, are recorded in Cost of sales and Selling, administrative, and other expenses. Below are actions we have initiated as part of the redesign.

Brazil. In February 2019, Ford Motor Company Brasil Ltda. (“Ford Brazil”), our subsidiary in Brazil, committed to a plan to exit the commercial heavy truck business in South America.  As a result, Ford Brazil ceased production at the São Bernardo do Campo plant in Brazil during 2019. Ford Brazil completed a sale of the plant machinery and equipment in the third quarter of 2020 and the land and buildings in the fourth quarter of 2020.

In December 2020, Ford Brazil committed to a plan to exit manufacturing operations in Brazil, which will result in the closure of facilities in Camaçari, Taubaté, and Troller in 2021. Operations supporting new vehicle production ceased at Camaçari and Taubaté in January 2021; limited service parts production will continue until the second quarter of 2021 to build inventories for aftermarket sales. The Troller plant will cease operations in the fourth quarter of 2021. These actions will not result in Ford Brazil being substantially liquidated, as it will continue imported vehicle sales and customer support operations, and maintain the product development center in Bahia, the proving grounds in Tatuí, São Paulo, and the regional headquarters in São Paulo.

Russia. In March 2019, Ford Sollers Netherlands B.V. (“Ford Sollers”), a joint venture between Ford and Sollers PJSC (“Sollers”) in which Ford had control, announced its plan to restructure its business in Russia to focus exclusively on commercial vehicles and to exit the passenger car segment. As a result of these actions, Ford acquired 100% ownership of Ford Sollers and ceased production at the Naberezhnye Chelny and St. Petersburg vehicle assembly plants and the Elabuga engine plant during the second quarter of 2019.

Subsequent to completion of the restructuring actions, in July 2019, Ford sold a 51% controlling interest in the restructured entity to Sollers, which resulted in deconsolidation of the Ford Sollers subsidiary. Our continued involvement in Ford Sollers is accounted for as an equity method investment.

In the fourth quarter of 2020, we also completed a sale of certain manufacturing assets.

United Kingdom. In June 2019, Ford Motor Company Limited (“Ford of Britain”), a subsidiary of Ford, announced its plan to exit the Ford Bridgend plant in South Wales in 2020. Ford of Britain ceased production at the Bridgend plant and the facility was closed in September 2020.

India. In the third quarter of 2019, Ford committed to a plan to sell specific net assets in our India Automotive operations. On December 31, 2020, Ford and Mahindra & Mahindra Limited mutually determined that we will not complete the joint venture.
23

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 16. EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES (Continued)

Other Global Redesign Actions. In 2018, we announced our plan to end production at the Ford Aquitaine Industries plant in Bordeaux, France. We ceased production and the facility was closed in July 2019. In March 2019, we announced our plan to phase-out the production of the C-Max at the Saarlouis Body and Assembly Plant in Germany. We ceased production of the C-Max in June 2019. In March 2021, we announced our plan to phase-out the production of the Mondeo at the Valencia Plant in Spain. In addition, we are continuing to reduce our global workforce and take other restructuring actions.

The following table summarizes the redesign-related activities for the periods ended March 31, which are recorded in Other liabilities and deferred revenue (in millions):
First Quarter
20202021
Beginning balance$734 $1,732 
Changes in accruals (a)68 193 
Payments(172)(291)
Foreign currency translation(29)(135)
Ending balance$601 $1,499 
__________
(a)Excludes pension costs of $24 million and $38 million in the first quarter of 2020 and 2021, respectively.

We also recorded $14 million and $302 million in the first quarter of 2020 and 2021, respectively, for accelerated depreciation and other non-cash items.

We estimate that we will incur total charges in 2021 that range between $2.2 billion and $2.7 billion related to the actions above, primarily attributable to employee separations, accelerated depreciation, and dealer and supplier settlements. We continue to review our global businesses and may take additional restructuring actions in markets where a path to sustained profitability is not feasible when considering the capital allocation required for those markets.

Other Actions

United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) Voluntary Separation Packages. As agreed in the collective bargaining agreement ratified in November 2019, during the first quarter of 2020, we offered voluntary separation packages to our UAW hourly workforce who were eligible for normal or early retirement, and recorded associated costs of $201 million in Cost of sales. All separations occurred during 2020.
24

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 17. HELD-FOR-SALE OPERATIONS AND CHANGES IN INVESTMENTS IN AFFILIATES

Company Excluding Ford Credit

Ford Lio Ho Motor Co., Ltd. (“FLH”). In the first quarter of 2021, we concluded the terms of a sale of our controlling interest in FLH, a consolidated joint venture with Taiwan investors, and its wholly owned subsidiary FLH Marketing & Service Limited (“FMSL”). FLH and FMSL import, manufacture, and sell Ford-branded vehicles in Taiwan. We have reported the assets and liabilities of these operations as held for sale and ceased depreciation and amortization of those assets.

The assets and liabilities of our Ford Taiwan operations classified as held for sale were as follows (in millions):
March 31,
2021
Assets
Cash and cash equivalents$16 
Trade and other receivables, net12 
Inventories141 
Other assets, current21 
Net property124 
Other assets, non-current
Total Company excluding Ford Credit assets of held-for-sale operations316 
Less: Intercompany asset balances(1)
Total assets of held-for-sale operations (a)$315 
Liabilities
Payables$124 
Other liabilities and deferred revenue, current49 
Company excluding Ford Credit debt payable within one year114 
Other liabilities and deferred revenue, non-current35 
Total Company excluding Ford Credit liabilities of held-for-sale operations322 
Less: Intercompany liability balances(31)
Total liabilities of held-for-sale operations (a)$291 
__________
(a)As of March 31, 2021, intercompany items and transactions have been eliminated on the consolidated balance sheets. Upon closing, the buyer will assume the intercompany assets and liabilities. Accordingly, we have presented those balances in the table for informational purposes.

Held-for-sale assets are measured at the lower of carrying amount and fair value less cost to sell. We determined fair value using a market approach, estimated based on the negotiated value of the assets, and determined the assets held for sale were not impaired.

On April 1, 2021, we completed the sale of our controlling financial interest in FLH and its wholly owned subsidiary FMSL, which will result in deconsolidation of our Ford Taiwan subsidiary in the second quarter of 2021. FLH will continue to import, manufacture, and sell Ford-branded vehicles for at least a five-year period. We expect to recognize a pre-tax gain of about $150 million, which will be reported in Other income/(loss), net in the second quarter of 2021.

Getrag Ford Transmissions GmbH (“GFT”). Prior to March 2021, Ford and Magna International Inc. (“Magna”) equally owned and operated the GFT joint venture for the purpose of developing, manufacturing, and selling transmissions. We accounted for our investment in GFT as an equity method investment. During the first quarter of 2021, GFT recorded restructuring charges, of which our share was $40 million. These charges are included in Equity in net income/(loss) of affiliated companies.
25

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 17. HELD-FOR-SALE OPERATIONS AND CHANGES IN INVESTMENTS IN AFFILIATES (Continued)

On March 1, 2021, we acquired Magna’s shares in a restructured GFT for $254 million. The restructured GFT includes the Halewood, UK and Cologne, Germany transmission plants, but excludes the Bordeaux, France transmission plant and China interests acquired by Magna. We concluded with Magna that these businesses would be better served under separate ownership. The Sanand, India transmission plant will continue under joint Ford/Magna ownership. As a result of the transaction, we consolidated the restructured GFT, remeasured our prior investment in GFT at its $254 million fair value, and recognized a gain of $155 million in Other income/(loss), net. We estimated the fair value of GFT in negotiations with Magna based on the income approach. The significant assumptions used in the valuation included GFT’s cash flows that reflect the approved business plan, discounted at a rate typically used for a company like GFT. See Note 11 for information about goodwill recognized as part of this transaction.

Ford Credit

In the first quarter of 2020, Ford Credit completed the sale of its wholly-owned subsidiary Forso Nordic AB, recognizing a pre-tax loss of $4 million, reported in Other income/(loss), net, and cash proceeds of $1.3 billion.
26

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 18. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

The changes in the balances for each component of accumulated other comprehensive income/(loss) attributable to Ford Motor Company for the periods ended March 31 were as follows (in millions):
First Quarter
20202021
Foreign currency translation
Beginning balance$(4,626)$(5,526)
Gains/(Losses) on foreign currency translation(1,406)394 
Less: Tax/(Tax benefit)27 97 
Net gains/(losses) on foreign currency translation (1,433)297 
(Gains)/Losses reclassified from AOCI to net income (a)(20)(8)
Other comprehensive income/(loss), net of tax(1,453)289 
Ending balance$(6,079)$(5,237)
Marketable securities
Beginning balance$71 $156 
Gains/(Losses) on available for sale securities19 (76)
Less: Tax/(Tax benefit)(19)
Net gains/(losses) on available for sale securities14 (57)
(Gains)/Losses reclassified from AOCI to net income— (11)
Less: Tax/(Tax benefit)— (3)
Net (gains)/losses reclassified from AOCI to net income
— (8)
Other comprehensive income/(loss), net of tax14 (65)
Ending balance$85 $91 
Derivative instruments
Beginning balance$(488)$(266)
Gains/(Losses) on derivative instruments796 (381)
Less: Tax/(Tax benefit)173 (74)
Net gains/(losses) on derivative instruments623 (307)
(Gains)/Losses reclassified from AOCI to net income84 
Less: Tax/(Tax benefit)15 
Net (gains)/losses reclassified from AOCI to net income (b)69 
Other comprehensive income/(loss), net of tax692 (301)
Ending balance$204 $(567)
Pension and other postretirement benefits
Beginning balance$(2,685)$(2,658)
Amortization and recognition of prior service costs/(credits)
Less: Tax/(Tax benefit)
Net prior service costs/(credits) reclassified from AOCI to net income
Translation impact on non-U.S. plans
11 (1)
Other comprehensive income/(loss), net of tax14 
Ending balance$(2,671)$(2,657)
Total AOCI ending balance at March 31$(8,461)$(8,370)
__________
(a)Reclassified to Other income/(loss), net.
(b)Reclassified to Cost of sales. During the next twelve months we expect to reclassify existing net losses on cash flow hedges of $366 million (see Note 15).
27

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 19. VARIABLE INTEREST ENTITIES

Certain of our affiliates are variable interest entities in which we are not the primary beneficiary. Our maximum exposure to any potential losses associated with these affiliates is limited to our investments and was $3 billion at both December 31, 2020 and March 31, 2021.

NOTE 20. COMMITMENTS AND CONTINGENCIES

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

Guarantees and Indemnifications

Financial Guarantees. Financial guarantees and indemnifications are recorded at fair value at their inception. Subsequent to initial recognition, the guarantee liability is adjusted at each reporting period to reflect the current estimate of expected payments resulting from possible default events over the remaining life of the guarantee. The maximum potential payments for financial guarantees were $346 million and $351 million at December 31, 2020 and March 31, 2021, respectively. The carrying value of recorded liabilities related to financial guarantees was $46 million and $29 million at December 31, 2020 and March 31, 2021, respectively.

Our financial guarantees consist of debt and lease obligations of certain joint ventures, as well as certain financial obligations of outside third parties, including suppliers, to support our business and economic growth. Expiration dates vary through 2033, and guarantees will terminate on payment and/or cancellation of the underlying obligation. A payment by us would be triggered by failure of the joint venture or other third party to fulfill its obligation covered by the guarantee. In some circumstances, we are entitled to recover from a third party amounts paid by us under the guarantee.

Non-Financial Guarantees. Non-financial guarantees and indemnifications are recorded at fair value at their inception. We regularly review our performance risk under these arrangements, and in the event it becomes probable we will be required to perform under a guarantee or indemnity, the amount of probable payment is recorded. The maximum potential payments for non-financial guarantees were $245 million and $394 million at December 31, 2020 and March 31, 2021, respectively. The carrying value of recorded liabilities related to non-financial guarantees was $48 million and $86 million at December 31, 2020 and March 31, 2021, respectively.

Included in the $394 million of maximum potential payments at March 31, 2021 are guarantees for the resale value of vehicles sold in certain arrangements to daily rental companies. The maximum potential payment of $388 million as of March 31, 2021 represents the total proceeds we guarantee the rental company will receive on resale.  Reflecting our present estimate of proceeds the rental companies will receive on resale from third parties, we have recorded $85 million as our best estimate of the amount we will have to pay under the guarantee.

In the ordinary course of business, we execute contracts involving indemnifications standard in the industry and indemnifications specific to a transaction, such as the sale of a business. These indemnifications might include and are not limited to claims relating to any of the following: environmental, tax, and shareholder matters; intellectual property rights; power generation contracts; governmental regulations and employment-related matters; dealer, supplier, and other commercial contractual relationships; and financial matters, such as securitizations. Performance under these indemnities generally would be triggered by a breach of contract claim brought by a counterparty, including a joint venture or alliance partner, or a third-party claim. While some of these indemnifications are limited in nature, many of them do not limit potential payment. Therefore, we are unable to estimate a maximum amount of future payments that could result from claims made under these unlimited indemnities.
28

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 20. COMMITMENTS AND CONTINGENCIES (Continued)

Litigation and Claims

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

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

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

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

For the remaining matters, where our historical experience with similar matters is of more limited value (i.e., “non-pattern matters”), we evaluate the matters primarily based on the individual facts and circumstances. For non-pattern matters, we evaluate whether there is a reasonable possibility of a material loss in excess of any accrual that can be estimated. Our estimate of reasonably possible loss in excess of our accruals for all material matters currently reflects indirect tax and customs matters, for which we estimate the aggregate risk to be a range of up to about $400 million.

As noted, the litigation process is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. Our assessments are based on our knowledge and experience, but the ultimate outcome of any matter could require payment substantially in excess of the amount that we have accrued and/or disclosed.
29

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 20. COMMITMENTS AND CONTINGENCIES (Continued)

Warranty and Field Service Actions

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

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

The estimate of our future warranty and field service action costs, net of estimated supplier recoveries, for the periods ended March 31 was as follows (in millions):
First Quarter
 20202021
Beginning balance$5,702 $8,172 
Payments made during the period(1,075)(1,086)
Changes in accrual related to warranties issued during the period805 1,000 
Changes in accrual related to pre-existing warranties521 (141)
Foreign currency translation and other(164)(40)
Ending balance$5,789 $7,905 

Changes to our estimated costs are reported as changes in accrual related to pre-existing warranties in the table above. Our estimate of reasonably possible costs in excess of our accruals for material field service actions and customer satisfaction actions is a range of up to about $1 billion in the aggregate.
30

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 21. SEGMENT INFORMATION

We report segment information consistent with the way our chief operating decision maker (“CODM”) evaluates the operating results and performance of the Company. Accordingly, we analyze the results of our business through the following segments: Automotive, Mobility, and Ford Credit.

Effective January 1, 2021, consistent with how our CODM assesses performance of the segments and makes decisions about resource allocations, we changed the measurement of our segments as follows: (i) costs and benefits related to enterprise connectivity activities included in the Mobility segment are now reported in the Automotive segment; (ii) certain corporate governance expenses that benefit the global enterprise reported in the Automotive segment are now reported as part of Corporate Other; and (iii) cash and other centrally managed corporate assets reported in the Automotive segment were realigned to Corporate Other.

In addition, we realigned tax-related assets within our segments to reflect our adoption of ASU 2019-12 as of January 1, 2021 (see Note 2).

Prior period amounts were adjusted retrospectively to reflect these changes.

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

Automotive Segment

The Automotive segment primarily includes the sale of Ford and Lincoln vehicles, service parts, and accessories worldwide, together with the associated costs to develop, manufacture, distribute, and service the vehicles, parts, and accessories. This segment includes revenues and costs related to our electrification vehicle programs and enterprise connectivity. The segment includes the following regional business units:  North America, South America, Europe, China (including Taiwan), and the International Markets Group.

Mobility Segment

The Mobility segment primarily includes development costs for Ford’s autonomous vehicles and related businesses, Ford’s equity ownership in Argo AI (a developer of autonomous driving systems), and other mobility businesses and investments (including Spin, a micro-mobility service provider).

Ford Credit Segment

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

Corporate Other

Corporate Other primarily includes corporate governance expenses, 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, marketable securities, and other investments, and foreign exchange derivatives gains and losses associated with intercompany lending. Corporate governance expenses are primarily administrative, delivering benefit on behalf of the global enterprise, and are not allocated to specific Automotive business units or operating segments. These include expenses related to setting and directing global policy, providing oversight and stewardship, and promoting the Company’s interests. Corporate Other assets include: cash, cash equivalents, and marketable securities; tax related assets; other investments; and other assets managed centrally.

Interest on Debt

Interest on Debt is presented as a separate reconciling item and consists of interest expense on Automotive and Other debt. The underlying liability is reported in the Automotive segment and in Corporate Other.
31

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 21. SEGMENT INFORMATION (Continued)

Special Items

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

Key financial information for the periods ended or at March 31 was as follows (in millions):
 AutomotiveMobilityFord CreditCorporate
Other
Interest
on Debt
Special ItemsAdjustmentsTotal
First Quarter 2020     
Revenues$31,342 $11 $2,967 $— $— $— $— $34,320 
Income/(loss) before income taxes
(154)(285)30 (223)(227)(287)(a)— (1,146)
Equity in net income/(loss) of affiliated companies(47)— — — — — (41)
Total assets62,818 378 156,451 47,308 — — (2,805)(b)264,150 
First Quarter 2021     
Revenues$33,554 $11 $2,663 $— $— $— $— $36,228 
Income/(loss) before income taxes3,403 (197)962 648 (c)(473)(401)(a)— 3,942 
Equity in net income/(loss) of affiliated companies174 (59)— (42)(a)— 79 
Total assets65,633 3,612 146,349 46,492 — — (1,267)(b)260,819 
__________
(a)Primarily reflects Global Redesign actions.
(b)Includes eliminations of intersegment transactions occurring in the ordinary course of business and deferred tax netting.
(c)Includes the unrealized gain of $902 million related to the Rivian observable event (see Note 10).
32


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

RECENT DEVELOPMENTS

The automotive industry continues to face a significant shortage of semiconductors, which has presented challenges and production disruptions globally, including at our assembly plants. Our initial outlook was for semiconductor supply chains to remain constrained through the second quarter of 2021, and we would have an opportunity to begin recovering lost volumes in the second half of 2021. However, the industry faced another setback on March 19, 2021, when Renesas Electronics Corporation, a key supplier of semiconductors for the automotive industry, experienced a significant fire at its Naka Factory. Renesas estimates that it will return to full capacity at its Naka Factory in July. Based on the overall recovery rate we are seeing for the industry, we now believe the automotive semiconductor shortage may not be fully resolved until 2022. For additional information regarding the semiconductor shortage, see the Outlook section on page 56.
33

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

RESULTS OF OPERATIONS

In the first quarter of 2021, the net income attributable to Ford Motor Company was $3,262 million, and Company adjusted EBIT was $4,816 million.

Net income/(loss) includes certain items (“special items”) that are excluded from Company adjusted EBIT. These items are discussed in more detail in Note 21 of the Notes to the Financial Statements. We report special items separately to allow investors analyzing our results to identify certain infrequent significant items that they may wish to exclude when considering the trend of ongoing operating results. Our pre-tax and tax special items were as follows (in millions):
First Quarter
20202021
Global Redesign
Europe excl. Russia$(105)$(94)
India(3)— 
South America(17)(322)
Russia20 
China— (1)
Separations and Other (not included above)(1)(2)
Subtotal Global Redesign$(106)$(416)
Other Items
North America hourly buyouts / Other$(203)$(7)
Subtotal Other Items$(203)$(7)
Pension and OPEB Gain/(Loss)
Pension and OPEB remeasurement$22 $61 
Pension settlements and curtailments — (39)
Subtotal Pension and OPEB Gain/(Loss)$22 $22 
Total EBIT Special Items$(287)$(401)
Cash effect of Global Redesign (incl. separations)$(172)$(345)
Provision for/(Benefit from) tax special items (a)$787 $(99)
__________
(a)Includes related tax effect on special items and tax special items.

We recorded $401 million of pre-tax special item charges in the first quarter of 2021, primarily reflecting Global Redesign actions in South America and Europe.

In Note 21 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.
34

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

COMPANY KEY METRICS

The table below shows our first quarter 2021 key metrics for the Company, compared to a year ago.
First Quarter
20202021H / (L)
GAAP Financial Measures
Cash Flows from Operating Activities ($B)$(0.5)$4.5 $5.0 
Revenue ($M)34,320 36,228 %
Net Income/(Loss) ($M)(1,993)3,262 5,255 
Net Income/(Loss) Margin (%)(5.8)%9.0 %14.8 ppts
EPS (Diluted)$(0.50)$0.81 $1.31 
Non-GAAP Financial Measures (a)
Company Adj. Free Cash Flow ($B)$(2.2)$(0.4)$1.8 
Company Adj. EBIT ($M)(632)4,816 5,448 
Company Adj. EBIT Margin (%)(1.8)%13.3 %15.1 ppts
Adjusted EPS (Diluted)$(0.23)$0.89 $1.12 
Adjusted ROIC (Trailing Four Quarters)2.5 %8.2 %5.7 ppts
__________
(a)See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.

In the first quarter of 2021, our diluted earnings per share of Common and Class B Stock was $0.81 and our diluted adjusted earnings per share was $0.89.

Net income/(loss) margin was 9.0% in the first quarter of 2021, up 14.8 percentage points from a year ago. Company adjusted EBIT margin was 13.3% in the first quarter of 2021, up 15.1 percentage points from a year ago.

The year-over-year increases of $5,255 million in net income/(loss) and $5,448 million in Company adjusted EBIT in the first quarter of 2021 were driven by improvements in Automotive EBIT, Ford Credit EBT, and Corporate Other, which includes a $902 million non-cash gain from our investment in Rivian.

The table below shows our first quarter 2021 net income/(loss) attributable to Ford and Company adjusted EBIT by segment.
First Quarter
20202021H / (L)
Automotive$(154)$3,403 $3,557 
Mobility(285)(197)88 
Ford Credit30 962 932 
Corporate Other(223)648 871 
Company Adjusted EBIT (a)(632)4,816 5,448 
Interest on Debt(227)(473)246 
Special Items(287)(401)114 
Taxes / Noncontrolling Interests(847)(680)(167)
Net Income/(Loss)$(1,993)$3,262 $5,255 
__________
(a)See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
35

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

Automotive Segment

The table below shows our first quarter 2021 Automotive segment EBIT by business unit (in millions).
First Quarter
20202021H / (L)
North America$373 $2,949 $2,576 
South America(112)(73)39 
Europe(149)341 490 
China (including Taiwan)(241)(15)226 
International Markets Group(25)201 226 
Automotive Segment$(154)$3,403 $3,557 

The tables below and on the following pages provide first quarter 2021 key metrics and the change in first quarter 2021 EBIT compared with first quarter 2020 by causal factor for our Automotive segment and its regional business units: North America, South America, Europe, China (including Taiwan), and the International Markets Group. For a description of these causal factors, see Definitions and Information Regarding Automotive Causal Factors.
First Quarter
Key Metrics20202021H / (L)
Market Share (%)6.0 %5.3 %(0.6) ppts
Wholesale Units (000)1,126 1,062 (64)
Revenue ($M)$31,342 $33,554 $2,212 
EBIT ($M)(154)3,403 3,557 
EBIT Margin (%)(0.5)%10.1 %10.6 ppts

Change in EBIT by Causal Factor (in millions)
First Quarter 2020 EBIT$(154)
Volume / Mix(778)
Net Pricing2,954 
Cost806 
Exchange205 
Other370 
First Quarter 2021 EBIT$3,403 

In the first quarter of 2021, wholesales declined 6% from a year ago, primarily reflecting the impact of semiconductor supply constraints in North America and Europe and the shift to a new business model in South America, partially offset by improvement in China and IMG. The global semiconductor shortage eliminated about 17% of our planned first quarter 2021 production, or about 200,000 units. First quarter 2021 revenue increased 7%, primarily reflecting higher net pricing, favorable mix, and stronger currencies, partially offset by lower volume.

Our first quarter 2021 Automotive segment EBIT was $3.4 billion, an improvement of $3.6 billion from a year ago, and our first quarter 2021 Automotive EBIT margin was 10.1%. The higher EBIT was driven by higher net pricing (reflecting the strength of our product portfolio and lower incentives in response to reduced dealer stock levels), lower warranty expense, structural cost reductions in areas such as manufacturing and advertising, and higher profits from our Ford Customer Service Division business and our joint ventures, partially offset by lower volumes. We expect some of these improvements, such as lower manufacturing cost and the robust pricing environment, to moderate as the industry returns to full production and dealer stocks rebound.
36

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

North America
First Quarter
Key Metrics20202021H / (L)
Market Share (%)13.6 %12.5 %(1.1) ppts
Wholesale Units (000)619 533 (85)
Revenue ($M)$21,811 $22,993 $1,182 
EBIT ($M)373 2,949 2,576 
EBIT Margin (%)1.7 %12.8 %11.1 ppts

Change in EBIT by Causal Factor (in millions)
First Quarter 2020 EBIT$373 
Volume / Mix(550)
Net Pricing2,550 
Cost418 
Exchange102 
Other56 
First Quarter 2021 EBIT$2,949 

In North America, first quarter 2021 wholesales declined 14% from a year ago, driven by the impact of semiconductor supply constraints. First quarter 2021 revenue increased 5%, primarily reflecting robust customer demand for the new product portfolio, higher industrywide net pricing on lower dealer inventories from the semiconductor supply shortage, and favorable mix.

North America’s first quarter 2021 EBIT improved $2.6 billion from a year ago with an EBIT margin of 12.8%. The EBIT improvement was driven by higher net pricing, favorable mix, lower warranty expense, and improved structural costs.

South America
First Quarter
Key Metrics20202021H / (L)
Market Share (%)6.9 %3.6 %(3.3) ppts
Wholesale Units (000)59 18 (42)
Revenue ($M)$728 $436 $(292)
EBIT ($M)(112)(73)39 
EBIT Margin (%)(15.4)%(16.7)%(1.3) ppts

Change in EBIT by Causal Factor (in millions)
First Quarter 2020 EBIT$(112)
Volume / Mix(73)
Net Pricing73 
Cost13 
Exchange20 
Other
First Quarter 2021 EBIT$(73)

In South America, first quarter 2021 wholesales declined 70% from a year ago, driven by the impact of shifting to a new business model focused on key portfolio strengths, mainly Ranger pickup, Transit van, and key imports. First quarter 2021 revenue decreased 40%, primarily reflecting lower volume and weaker currencies.

South America’s first quarter 2021 EBIT loss improved $39 million from a year ago with an EBIT margin of negative 16.7%. The EBIT improvement was driven by structural cost reductions, pricing to offset inflation, and weaker currencies. This was South America’s sixth consecutive quarter of year-over-year EBIT improvement.
37

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

Europe
First Quarter
Key Metrics20202021H / (L)
Market Share (%)6.9 %7.2 %0.3 ppts
Wholesale Units (000) (a)288 278 (10)
Revenue ($M)$6,247 $7,050 $803 
EBIT ($M)(149)341 490 
EBIT Margin (%)(2.4)%4.8 %7.2 ppts
__________
(a)Includes Ford brand vehicles produced and sold by our unconsolidated affiliate in Turkey (about 11,000 units in Q1 2020 and 17,000 units in Q1 2021). Revenue does not include these sales.

Change in EBIT by Causal Factor (in millions)
First Quarter 2020 EBIT$(149)
Volume / Mix(151)
Net Pricing247 
Cost300 
Exchange(4)
Other98 
First Quarter 2021 EBIT$341 

In Europe, first quarter 2021 wholesales declined 4% from a year ago, driven by the impact of semiconductor supply constraints, partially offset by stronger commercial vehicle sales. First quarter 2021 revenue increased 13% year over year, primarily reflecting stronger currencies, favorable mix, and higher net pricing, partially offset by lower volume.

Europe’s first quarter 2021 EBIT increased $490 million year over year with an EBIT margin of 4.8%. The higher EBIT was driven by cost reductions and higher net pricing, partially offset by lower volume.
38

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

China (Including Taiwan)
First Quarter
Key Metrics20202021H / (L)
Market Share (%)2.2 %2.3 %0.1 ppts
Wholesale Units (000) (a)81 150 69 
Revenue ($M)$593 $825 $232 
EBIT ($M)(241)(15)226 
EBIT Margin (%)(40.6)%(1.8)%38.8 ppts
China Unconsolidated Affiliates
Wholesales (000)72 140 68 
Ford Equity Income/(Loss) ($M)$(91)$49 $140 
__________
(a)Includes Ford brand and JMC brand vehicles produced and sold in China by our unconsolidated affiliates. Revenue does not include these sales.

Change in EBIT by Causal Factor (in millions)
First Quarter 2020 EBIT$(241)
Volume / Mix14 
Net Pricing30 
Cost(7)
Exchange
Other (Including Joint Ventures)186 
First Quarter 2021 EBIT$(15)

In China, first quarter 2021 wholesales increased 85% from a year ago, driven by the non-recurrence of 2020 COVID-related shutdowns, localization of Lincoln, and the strength of commercial vehicles, which now represent 48% of our sales in China. First quarter 2021 revenue increased 39% year over year, primarily reflecting higher component sales to our joint ventures in China and favorable mix.

China’s first quarter 2021 EBIT loss improved $226 million from a year ago with an EBIT margin of negative 1.8%. The EBIT improvement was driven by higher profits at our joint ventures, higher net pricing, and favorable mix. This was China’s fourth consecutive quarter of year-over-year EBIT improvement.
39

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

International Markets Group
First Quarter
Key Metrics20202021H / (L)
Market Share (%)1.5 %1.7 %0.2 ppts
Wholesale Units (000) (a)78 82 
Revenue ($M)$1,962 $2,250 $288 
EBIT ($M)(25)201 226 
EBIT Margin (%)(1.3)%8.9 %10.2 ppts
__________
(a)Includes Ford brand vehicles produced and sold by our unconsolidated affiliate in Russia (about 3,000 units in both Q1 2020 and Q1 2021). Revenue does not include these sales.

Change in EBIT by Causal Factor (in millions)
First Quarter 2020 EBIT$(25)
Volume / Mix(19)
Net Pricing54 
Cost83 
Exchange84 
Other24 
First Quarter 2021 EBIT$201 

In our International Markets Group, first quarter 2021 wholesales increased 5% from a year ago, driven by higher industry volumes and improvement in market share. First quarter 2021 revenue increased 15% year over year, primarily reflecting stronger currencies, increased volume, higher net pricing, and favorable mix.

Our International Markets Group’s first quarter 2021 EBIT was $226 million higher than a year ago with an EBIT margin of 8.9%. The record quarterly EBIT was driven by favorable exchange, cost reductions, and higher net pricing.
40

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

Definitions and Information Regarding Automotive Causal Factors

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

Market Factors (exclude the impact of unconsolidated affiliate wholesale units):
Volume and Mix – primarily measures EBIT variance from changes in wholesale unit volumes (at prior-year average contribution margin per unit) driven by changes in industry volume, market share, and dealer stocks, as well as the EBIT variance resulting from changes in product mix, including mix among vehicle lines and mix of trim levels and options within a vehicle line
Net Pricing – primarily measures EBIT variance driven by changes in wholesale unit prices to dealers and marketing incentive programs such as rebate programs, low-rate financing offers, special lease offers, and stock adjustments on dealer inventory

Cost:
Contribution Costs – primarily measures EBIT variance driven by per-unit changes in cost categories that typically vary with volume, such as material costs (including commodity and component costs), warranty expense, and freight and duty costs
Structural Costs – primarily measures EBIT variance driven by absolute change in cost categories that typically do not have a directly proportionate relationship to production volume. Structural costs include the following cost categories:
Manufacturing, Including Volume-Related consists primarily of costs for hourly and salaried manufacturing personnel, plant overhead (such as utilities and taxes), and new product launch expense. These costs could be affected by volume for operating pattern actions such as overtime, line-speed, and shift schedules
Engineering consists primarily of costs for engineering personnel, prototype materials, testing, and outside engineering services
Spending-Related consists primarily of depreciation and amortization of our manufacturing and engineering assets, but also includes asset retirements and operating leases
Advertising and Sales Promotions includes costs for advertising, marketing programs, brand promotions, customer mailings and promotional events, and auto shows
Administrative and Selling includes primarily costs for salaried personnel and purchased services related to our staff activities and selling functions, as well as associated information technology costs
Pension and OPEB consists primarily of past service pension costs and other postretirement employee benefit costs

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

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

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

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

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

SAAR – seasonally adjusted annual rate
41

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

Mobility Segment

Effective January 1, 2021, we realigned the costs and benefits related to enterprise connectivity activities previously included in the Mobility segment to the Automotive segment. Accordingly, beginning in 2021, the Mobility segment primarily includes development costs for Ford’s autonomous vehicles and related businesses, Ford’s equity ownership in Argo AI (a developer of autonomous driving systems), and other mobility businesses and investments (including Spin, a micro-mobility service provider). 

In our Mobility segment, our first quarter 2021 EBIT loss was $197 million, an $88 million improvement from a year ago. The loss reflects our strategic investments as we continued to expand our capabilities in autonomous vehicles and mobility businesses.
42

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

Ford Credit Segment

Ford Credit files periodic reports with the SEC that contain additional information regarding Ford Credit. The reports are available through Ford Credit’s website located at www.fordcredit.com/investor-center and can also be found on the SEC’s website located at www.sec.gov.

The tables below provide first quarter 2021 key metrics and the change in first quarter 2021 EBT compared with first quarter 2020 by causal factor for the Ford Credit segment. For a description of these causal factors, see Definitions and Information Regarding Ford Credit Causal Factors.
First Quarter
GAAP Financial Measures20202021H / (L)
Net Receivables ($B)$138 $127 (8)%
Loss-to-Receivables (bps) (a)62 22 (40)
Auction Values (b)$19,235 $21,925 14 %
EBT ($M)$30 $962 $932 
ROE (%) (c)— %22 %
22 ppts
Other Balance Sheet Metrics
Debt ($B)$137 $127 (7)%
Net Liquidity ($B)28 34 20 %
Financial Statement Leverage (to 1) (c)8.9 8.3 (0.6)
__________
(a)U.S. retail financing only.
(b)U.S. 36-month off-lease auction values at Q1 2021 mix.
(c)Prior period amounts have been updated as a result of the adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. For additional information, see Note 2 of the Notes to the Financial Statements.
First Quarter
Non-GAAP Financial Measures20202021H / (L)
Managed Receivables ($B) (a)$146 $135 (8)%
Managed Leverage (to 1) (b) (c)8.0 7.3 (0.7)
__________
(a)See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
(b)See Liquidity and Capital Resources - Ford Credit Segment section for reconciliation to GAAP.
(c)Prior period amount has been updated as a result of the adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. For additional information, see Note 2 of the Notes to the Financial Statements.

Change in EBT by Causal Factor (in millions)
First Quarter 2020 EBT$30 
Volume / Mix(48)
Financing Margin(3)
Credit Loss625 
Lease Residual448 
Exchange17 
Other(107)
First Quarter 2021 EBT$962 

Ford Credit’s loss-to-receivables ratio remained at a low level in the first quarter of 2021, at 0.22%, which was 40 basis points lower than a year ago. U.S. auction values in the first quarter of 2021 were 14% higher than a year ago. Full year 2021 auction values are now forecasted to be higher than 2020, consistent with third party estimates.

Ford Credit’s first quarter 2021 EBT of $962 million was $932 million higher than a year ago, primarily reflecting the non-recurrence of the first quarter 2020 increase to the credit loss reserve due to COVID-19 as well as favorable auction performance on off-lease vehicles as a result of lower dealer stocks due to the semiconductor shortage. Unfavorable performance in market valuation adjustments to derivatives due to rising interest rates was a partial offset.
43

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

Definitions and Information Regarding Ford Credit Causal Factors

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

Volume and Mix:
Volume primarily measures changes in net financing margin driven by changes in average managed receivables at prior period financing margin yield (defined below in financing margin) at prior period exchange rates. Volume changes are primarily driven by the volume of new and used vehicles sold and leased, the extent to which Ford Credit purchases retail financing and operating lease contracts, the extent to which Ford Credit provides wholesale financing, the sales price of the vehicles financed, the level of dealer inventories, Ford-sponsored special financing programs available exclusively through Ford Credit, and the availability of cost-effective funding
Mix primarily measures changes in net financing margin driven by period-over-period changes in the composition of Ford Credit’s average managed receivables by product within each region

Financing Margin:
Financing margin variance is the period-to-period change in financing margin yield multiplied by the present period average managed receivables at prior period exchange rates. This calculation is performed at the product and country level and then aggregated. Financing margin yield equals revenue, less interest expense and scheduled depreciation for the period, divided by average managed receivables for the same period
Financing margin changes are driven by changes in revenue and interest expense. Changes in revenue are primarily driven by the level of market interest rates, cost assumptions in pricing, mix of business, and competitive environment. Changes in interest expense are primarily driven by the level of market interest rates, borrowing spreads, and asset-liability management

Credit Loss:
Credit loss is the change in the provision for credit losses at prior period exchange rates. For analysis purposes, management splits the provision for credit losses into net charge-offs and the change in the allowance for credit losses
Net charge-off changes are primarily driven by the number of repossessions, severity per repossession, and recoveries. Changes in the allowance for credit losses are primarily driven by changes in historical trends in credit losses and recoveries, changes in the composition and size of Ford Credit’s present portfolio, changes in trends in historical used vehicle values, and changes in forward looking macroeconomic conditions. For additional information, refer to the “Critical Accounting Estimates - Allowance for Credit Losses” section of Item 7 of Part II of our 2020 Form 10-K Report

Lease Residual:
Lease residual measures changes to residual performance at prior period exchange rates. For analysis purposes, management splits residual performance primarily into residual gains and losses, and the change in accumulated supplemental depreciation
Residual gain and loss changes are primarily driven by the number of vehicles returned to Ford Credit and sold, and the difference between the auction value and the depreciated value (which includes both base and accumulated supplemental depreciation) of the vehicles sold. Changes in accumulated supplemental depreciation are primarily driven by changes in Ford Credit’s estimate of the expected auction value at the end of the lease term and changes in Ford Credit’s estimate of the number of vehicles that will be returned to it and sold. Accumulated depreciation reflects early termination losses on operating leases due to customer default events. For additional information, refer to the “Critical Accounting Estimates - Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 of Part II of our 2020 Form 10-K Report

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

Other:
Primarily includes operating expenses, other revenue, insurance expenses, and other income/(loss) at prior period exchange rates
Changes in operating expenses are primarily driven by salaried personnel costs, facilities costs, and costs associated with the origination and servicing of customer contracts
In general, other income/(loss) changes are primarily driven by changes in earnings related to market valuation adjustments to derivatives (primarily related to movements in interest rates) and other miscellaneous items
44

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

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

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

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

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

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

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

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

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

Total Net Receivables (as shown in the Key Metrics and Ford Credit Net Receivables Reconciliation to Managed Receivables tables) – Includes finance receivables (retail financing and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance sheets and are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations of Ford Credit or the claims of Ford Credit’s other creditors
45

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

Corporate Other

Corporate Other primarily includes corporate governance expenses, interest income (excluding interest earned on our extended service contract portfolio that is included in our Automotive segment) and gains and losses from our cash, cash equivalents, marketable securities, and other investments, and foreign exchange derivatives gains and losses associated with intercompany lending. Corporate governance expenses are primarily administrative, delivering benefit on behalf of the global enterprise, and are not allocated to specific Automotive business units or operating segments. These include expenses related to setting and directing global policy, providing oversight and stewardship, and promoting the Company’s interests. In the first quarter of 2021, Corporate Other had a $648 million profit, compared with a $223 million loss a year ago. The improvement is more than explained by a $902 million gain on our investment in Rivian.

Interest on Debt

Interest on Debt, which consists of interest expense on Company debt excluding Ford Credit, was $473 million in the first quarter of 2021, $246 million higher than a year ago, primarily reflecting higher U.S. debt interest expense.

Taxes

Our Provision for/(Benefit from) income taxes for the first quarter 2021 was $680 million, resulting in an effective tax rate of 17.3%.

Our first quarter 2021 adjusted effective tax rate, which excludes special items, was 17.9%.
46

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

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2021, total balance sheet cash, cash equivalents, marketable securities, and restricted cash (including Ford Credit) was $46.3 billion.

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

Company excluding Ford Credit
December 31,
2020
March 31,
2021
Balance Sheets ($B)
Company Cash$30.8 $31.3 
Liquidity46.9 47.2 
Debt(24.0)(25.9)
Cash Net of Debt6.8 5.5 
Pension Funded Status ($B) (a)
Funded Plans$0.3 $0.9 
Unfunded Plans(7.0)(6.6)
Total Global Pension$(6.7)$(5.7)
Total Funded Status OPEB$(6.6)$(6.5)
__________
(a)Balances at March 31, 2021 reflect net underfunded status at December 31, 2020, updated for service and interest cost, expected return on assets, curtailment and settlement gains and associated interim remeasurement (where applicable), separation expense, actual benefit payments, and cash contributions. For plans without interim remeasurement, the discount rate and rate of expected return assumptions are unchanged from year-end 2020.

Liquidity. One of our key priorities is to maintain a strong balance sheet, while at the same time having resources available to invest in and grow our business. At March 31, 2021, we had Company cash of $31.3 billion, with about 88% of Company cash held by consolidated entities domiciled in the United States, and Company liquidity of $47.2 billion. To be prepared for an economic downturn, we target an ongoing Company cash balance at or above $20 billion plus significant additional liquidity above our Company cash target. We expect to have periods when we will be above or below this amount due to: (i) future cash flow expectations, such as for investments in future opportunities, capital investments, debt maturities, pension contributions, or restructuring requirements, (ii) short-term timing differences, and (iii) changes in the global economic environment.

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

Changes in Company Cash. In managing our business, we classify changes in Company cash into operating and non-operating items. Operating items include: Company adjusted EBIT excluding Ford Credit EBT, capital spending, depreciation and tooling amortization, changes in working capital, Ford Credit distributions, and all other and timing differences. Non-operating items include: Global Redesign (including separation payments), changes in Company debt excluding Ford Credit, contributions to funded pension plans, shareholder distributions, and other items (including acquisitions and divestitures and other transactions with Ford Credit).
47

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

With respect to “Changes in working capital,” in general we carry relatively low Automotive segment trade receivables compared with our trade payables because the majority of our Automotive wholesales are financed (primarily by Ford Credit) immediately upon the sale of vehicles to dealers, which generally occurs shortly after being produced. In contrast, our Automotive trade payables are based primarily on industry-standard production supplier payment terms of generally about 45 days. As a result, our cash flow tends to improve as wholesale volumes increase, but can deteriorate when wholesale volumes sharply decrease. For example, the suspension of production at most of our assembly plants and lower industry volumes due to COVID-19 in early 2020 resulted in an initial deterioration of our cash flow, while the subsequent resumption of manufacturing operations and return to pre-COVID-19 production levels at most of our assembly plants resulted in a subsequent improvement of our cash flow. Even in normal economic conditions, however, these working capital balances generally are subject to seasonal changes that can impact cash flow. For example, we typically experience cash flow timing differences associated with inventories and payables due to our annual summer and December shutdown periods when production, and therefore inventories and wholesale volumes, are usually at their lowest levels, while payables continue to come due and be paid. The net impact of this typically results in cash outflows from changes in our working capital balances during these shutdown periods.

A financial institution offers a supply chain finance (“SCF”) program that enables our suppliers, at their sole discretion, to sell their Ford receivables (i.e., our payment obligations to the suppliers) to the financial institution on a non-recourse basis in order to be paid earlier than our payment terms provide. Our suppliers’ voluntary inclusion of invoices in the SCF program has no bearing on our payment terms, the amounts we pay, or our liquidity. We have no economic interest in a supplier’s decision to participate in the SCF program, and we have no direct financial relationship with the SCF financial institution. Moreover, we do not provide any guarantees in connection with the SCF program. As of March 31, 2021, the outstanding amount of Ford receivables that suppliers elected to sell to the SCF financial institution was $43 million. The reduction in the balance at the end of the first quarter reflects the transition to a new SCF financial institution. The amount settled through the SCF program during the first quarter of 2021 was $341 million.

Changes in Company cash excluding Ford Credit are summarized below (in billions):
First Quarter
20202021
Company Excluding Ford Credit
Company Adjusted EBIT excluding Ford Credit (a)$(0.7)$3.9 
Capital spending$(1.8)$(1.4)
Depreciation and tooling amortization1.4 1.2 
Net spending$(0.4)$(0.1)
Receivables$0.5 $(0.6)
Inventory(1.1)(2.2)
Trade Payables(0.5)1.6 
Changes in working capital$(1.2)$(1.2)
Ford Credit distributions$0.3 $1.0 
Interest on debt and cash taxes(0.4)(0.4)
All other and timing differences0.2 (3.5)
Company adjusted free cash flow (a)$(2.2)$(0.4)
Global Redesign (including separations)$(0.2)$(0.3)
Changes in debt15.1 1.9 
Funded pension contributions(0.2)(0.2)
Shareholder distributions(0.6)— 
All other (including acquisitions and divestitures)0.1 (0.4)
Change in cash$12.0 $0.5 
__________
(a)See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
Note: Numbers may not sum due to rounding.
48

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

Our first quarter 2021 Net cash provided by/(used in) operating activities was positive $4.5 billion, an increase of $5.0 billion from a year ago. The year-over-year increase is more than explained by higher net income. Our Company adjusted free cash flow was negative $0.4 billion, which was $1.8 billion higher than a year ago, driven by higher adjusted EBIT and Ford Credit distributions and lower capital spending, partially offset by adverse timing differences.

Capital spending was $1.4 billion in the first quarter of 2021, $0.4 billion lower than a year ago. We continue to expect full year 2021 capital spending to be between $6.0 billion and $6.5 billion.

First quarter 2021 working capital was $1.2 billion negative, driven by higher inventory due to the semiconductor supply constraints; all other and timing differences were $3.5 billion negative, reflecting assorted differences including differences between accrual-based EBIT and the associated cash flows (e.g., marketing incentive and warranty payments to dealers; pension and OPEB income or expense) and the $902 million non-cash gain from our investment in Rivian. We expect the working capital and timing differences to normalize as the semiconductor supply is restored, dealer stocks rebound, and incentives return to more normal levels. This process will take several quarters and will most likely extend into 2022.

In the first quarter of 2021, we contributed $229 million to our global funded pension plans. We continue to expect to contribute between $600 million and $800 million to our global funded pension plans in 2021.

There were no shareholder distributions in the first quarter of 2021.

We previously announced our plan for the global redesign of our business, pursuant to which we are working to turn around automotive operations, compete like a challenger, and capitalize on our strengths by allocating more capital, more resources, and more talent to our strongest business and vehicle franchises. Beginning with the actions we took in 2018, we expect our global redesign to have a potential cash effect of about $7 billion. The cash effect related to our global redesign activities was $2 billion through March 31, 2021 and is expected to be about $5 billion through December 31, 2021.

Available Credit Lines. Total Company committed credit lines, excluding Ford Credit, at March 31, 2021 were $18.3 billion, consisting of $13.5 billion of our corporate credit facility, $2 billion of our supplemental revolving credit facility, $1.5 billion of our delayed draw term loan facility, and $1.4 billion of local credit facilities. At March 31, 2021, the utilized portion of the corporate credit facility was $27 million, representing amounts utilized for letters of credit, and no portion of the supplemental revolving credit facility was utilized. The $1.5 billion delayed draw term loan facility was drawn in full in 2019 and remains outstanding. In addition, $878 million of committed Company credit lines, excluding Ford Credit, was utilized under local credit facilities for our affiliates as of March 31, 2021.

Lenders under our corporate credit facility have $0.4 billion of commitments maturing on April 30, 2022, $3 billion of commitments maturing on July 27, 2023, and $10.1 billion of commitments maturing on April 30, 2024. Lenders under our supplemental revolving credit facility have $0.2 billion of commitments maturing on April 30, 2022 and $1.8 billion of commitments maturing on July 27, 2023.

The corporate credit facility is unsecured and free of material adverse change conditions to borrowing, restrictive financial covenants (for example, interest or fixed-charge coverage ratio, debt-to-equity ratio, and minimum net worth requirements), and credit rating triggers that could limit our ability to obtain funding or trigger early repayment. The corporate credit facility contains a liquidity covenant that requires us to maintain a minimum of $4 billion in aggregate of domestic cash, cash equivalents, and loaned and marketable securities and/or availability under the facility. Further, the terms of the corporate and supplemental revolving credit facilities prohibit share repurchases (with limited exceptions) while any portion of either facility is outstanding and the payment of dividends on our Common or Class B Stock while more than 50% of the aggregate amount of commitments under the two facilities is utilized. The terms and conditions of the delayed draw term loan (other than the restrictions on share repurchases and dividends) and the supplemental revolving credit facility are consistent with our corporate credit facility.
49

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

Each of the corporate credit facility, supplemental revolving credit facility, delayed draw term loan, and our Loan Arrangement and Reimbursement Agreement with the U.S. Department of Energy (the “DOE”) include a covenant that requires us to provide guarantees from certain of our subsidiaries in the event that our senior, unsecured, long-term debt does not maintain at least two investment grade ratings from Fitch, Moody’s, and S&P. The following subsidiaries have provided unsecured guarantees to the lenders under the credit facilities and to the DOE: Ford Component Sales, LLC; Ford European Holdings LLC; Ford Global Technologies, LLC; Ford Holdings LLC (the parent company of Ford Credit); Ford International Capital LLC; Ford Mexico Holdings LLC; Ford Motor Service Company; Ford Smart Mobility LLC; and Ford Trading Company, LLC.

Debt. As shown in Note 14 of the Notes to the Financial Statements, at March 31, 2021, Company debt excluding Ford Credit was $25.9 billion. This balance is $1.9 billion higher than at December 31, 2020, primarily reflecting our convertible notes issuance in March 2021.

In March 2021, we issued $2.3 billion principal amount of 0% Convertible Senior Notes due March 15, 2026. These notes are convertible, under certain circumstances, into Ford Common Stock at a conversion price of approximately $17.49 per share. Upon conversion, we will pay cash up to the aggregate principal amount of the notes to be converted and cash, shares of Ford Common Stock, or a combination of cash and shares of Ford Common Stock, at our election, for the remainder of our obligation in excess, if any, of the aggregate principal amount of the notes being converted.

Leverage. We manage Company debt (excluding Ford Credit) levels with a leverage framework that targets investment grade credit ratings through a normal business cycle; however, during these uncertain times, we have increased our debt balance and prioritized actions that preserve or improve our cash balance. The leverage framework includes a ratio of total company debt (excluding Ford Credit), underfunded pension liabilities, operating leases, and other adjustments, divided by Company adjusted EBIT (excluding Ford Credit EBT), and further adjusted to exclude depreciation and tooling amortization (excluding Ford Credit).

Ford Credit’s leverage is calculated as a separate business as described in the Liquidity - Ford Credit Segment section of Item 2. Ford Credit is self-funding and its debt, which is used to fund its operations, is separate from our Company debt excluding Ford Credit.
50

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

Ford Credit Segment

Ford Credit ended the first quarter of 2021 with $33.7 billion of liquidity. During the quarter, Ford Credit completed $5 billion of public term funding.

Key elements of Ford Credit’s funding strategy include:

Maintain strong liquidity; continue to renew and expand committed ABS capacity
Prudently access public markets
Flexibility to increase ABS mix as needed; preserving assets and committed capacity
Target managed leverage of 8:1 to 9:1
Maintain self-liquidating balance sheet

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

The following table shows funding for Ford Credit’s managed receivables (in billions):
March 31,
2020
December 31,
2020
March 31,
2021
Term unsecured debt$75.4 $76.6 $69.4 
Term asset-backed securities55.7 54.6 50.2 
Ford Interest Advantage / Deposits5.7 6.5 7.2 
Other (a)5.4 5.7 7.2 
Equity (a)15.5 15.6 15.3 
Adjustments for cash(11.3)(18.5)(14.1)
Total Managed Receivables (b)$146.4 $140.5 $135.2 
Securitized Funding as Percent of Managed Receivables38.1 %38.8 %37.1 %
__________
(a)Prior period amounts have been updated as a result of the adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. For additional information, see Note 2 of the Notes to the Financial Statements.
(b)See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.

Managed receivables were $135.2 billion at March 31, 2021, and were funded primarily with term unsecured debt and term asset-backed securities. Securitized funding as a percent of managed receivables was 37.1% at the end of the first quarter of 2021. The calendarization of the funding plan will result in quarterly fluctuations of the securitized funding percentage.

Public Term Funding Plan. The following table shows Ford Credit’s issuances for full year 2019 and 2020, planned issuances for full year 2021, and its global public term funding issuances through April 27, 2021, excluding short-term funding programs (in billions):
2019
Actual
2020
Actual
2021
Forecast
Through
April 27
Unsecured$17 $14 $ 5 - 9$
Securitizations (a)14 13                        7 - 10
Total public$31 $27 $ 12 - 19$
__________
(a)See Definitions and Information Regarding Ford Credit Causal Factors section.

For 2021, Ford Credit now projects full year public term funding in the range of $12 billion to $19 billion. Through April 27, 2021, Ford Credit has completed $6 billion of public term issuances.
51

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

Liquidity. The following table shows Ford Credit’s liquidity sources and utilization (in billions):
March 31,
2020
December 31,
2020
March 31,
2021
Liquidity Sources (a)
Cash$11.3 $18.5 $14.1 
Committed asset-backed facilities35.9 38.1 38.2 
Other unsecured credit facilities2.8 2.5 2.5 
Total liquidity sources$50.0 $59.1 $54.8 
Utilization of Liquidity (a)
Securitization and restricted cash$(3.1)$(3.9)$(5.4)
Committed asset-backed facilities(18.6)(16.7)(11.9)
Other unsecured credit facilities(0.5)(0.5)(0.6)
Total utilization of liquidity$(22.2)$(21.1)$(17.9)
Gross liquidity$27.8 $38.0 $36.9 
Asset-backed capacity in excess of eligible receivables and other adjustments0.3 (2.6)(3.2)
Net liquidity available for use$28.1 $35.4 $33.7 
__________
(a)See Definitions and Information Regarding Ford Credit Causal Factors section.

Ford Credit’s net liquidity available for use will fluctuate quarterly based on factors including near-term debt maturities, receivable growth and decline, and timing of funding transactions. At March 31, 2021, Ford Credit’s net liquidity available for use was $33.7 billion, $1.7 billion lower than year-end 2020. Ford Credit’s sources of liquidity include cash, committed asset-backed facilities, and unsecured credit facilities. At March 31, 2021, Ford Credit’s liquidity sources including cash totaled $54.8 billion, down $4.3 billion from year-end 2020.

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

The following table shows Ford Credit’s cumulative maturities for assets and total debt for the periods presented and unsecured long-term debt maturities in the individual periods presented (in billions):
April - December
2021
202220232024 and Beyond
Balance Sheet Liquidity Profile
Assets (a)$64 $95 $120 $147 
Total debt (b)46 74 92 126 
Memo: Unsecured long-term debt maturities10 14 11 30 
__________
(a)Includes gross finance receivables less the allowance for credit losses (including certain finance receivables that are reclassified in consolidation to Trade and other receivables), investment in operating leases net of accumulated depreciation, cash and cash equivalents, and marketable securities (excluding amounts related to insurance activities). Amounts shown include the impact of expected prepayments.
(b)Excludes unamortized debt (discount)/premium, unamortized issuance costs, and fair value adjustments.

Maturities of investment in operating leases consist primarily of the portion of rental payments attributable to depreciation over the remaining life of the lease and the expected residual value at lease termination. Maturities of finance receivables and investment in operating leases in the table above include expected prepayments for Ford Credit’s retail installment sale contracts and investment in operating leases. The table above also reflects adjustments to debt maturities to match the asset-backed debt maturities with the underlying asset maturities.
52

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

All wholesale securitization transactions and wholesale receivables are shown maturing in the next 12 months, even if the maturities extend beyond first quarter 2022. The retail securitization transactions under certain committed asset-backed facilities are assumed to amortize immediately rather than amortizing after the expiration of the commitment period. As of March 31, 2021, Ford Credit had $147 billion of assets, $76 billion of which were unencumbered.

Funding and Liquidity Risks. Ford Credit’s funding plan is subject to risks and uncertainties, many of which are beyond its control, including disruption in the capital markets, that could impact both unsecured debt and asset-backed securities issuance and the effects of regulatory changes on the financial markets. Refer to the “Liquidity - Ford Credit Segment - Funding and Liquidity Risks” section of Item 7 of Part II of our 2020 Form 10-K Report for more information.

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

The table below shows the calculation of Ford Credit’s financial statement leverage and managed leverage (in billions):
March 31,
2020
December 31,
2020
March 31,
2021
Leverage Calculation
Debt$136.8 $137.7 $126.8 
Adjustments for cash(11.3)(18.5)(14.1)
Adjustments for derivative accounting (a)(1.6)(1.5)(0.8)
Total adjusted debt$123.9 $117.7 $111.9 
Equity (b) (c)$15.5 $15.6 $15.3 
Adjustments for derivative accounting (a)— 0.1 — 
Total adjusted equity (c)$15.4 $15.7 $15.3 
Financial statement leverage (to 1) (GAAP) (c)8.9 8.8 8.3 
Managed leverage (to 1) (Non-GAAP) (c)8.0 7.5 7.3 
__________
(a)Related primarily to market valuation adjustments to derivatives due to movements in interest rates. Adjustments to debt are related to designated fair value hedges and adjustments to equity are related to retained earnings.
(b)Total shareholder’s interest reported on Ford Credit’s balance sheets.
(c)Prior period amounts have been updated as a result of the adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. For additional information, see Note 2 of the Notes to the Financial Statements.
Note: Numbers may not sum due to rounding.

Ford Credit plans its managed leverage by considering market conditions and the risk characteristics of its business. At March 31, 2021, Ford Credit’s financial statement leverage was 8.3:1, and its managed leverage was 7.3:1. Ford Credit targets managed leverage in the range of 8:1 to 9:1 and expects its managed leverage to return to its target range later in 2021.
53

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

Total Company

Pension Plans - Underfunded Balances. As of March 31, 2021, our total Company pension underfunded status reported on our consolidated balance sheets was $5.7 billion and reflects the net underfunded status at December 31, 2020, updated for: service and interest cost; expected return on assets; curtailments, settlements, and associated interim remeasurement (where applicable); separation expense; actual benefit payments; and cash contributions.  For plans without interim remeasurement, the discount rate and rate of expected return assumptions are unchanged from year-end 2020.

Return on Invested Capital (“ROIC”). We analyze total Company performance using an adjusted ROIC financial metric based on an after-tax, rolling four quarter average. The following table contains the calculation of our ROIC for the periods shown (in billions):
Four Quarters Ending
March 31,
2020
March 31,
2021
Adjusted Net Operating Profit After Cash Tax
Net income/(loss) attributable to Ford$(3.1)$4.0 
Add: Noncontrolling interest— — 
Less: Income tax0.3 — 
Add: Cash tax(0.6)(0.4)
Less: Interest on debt(1.0)(1.9)
Less: Total pension/OPEB income/(cost)(2.5)(0.9)
Add: Pension/OPEB service costs(1.0)(1.1)
Net operating profit/(loss) after cash tax$(1.6)$5.2 
Less: Special items (excl. pension/OPEB) pre-tax(3.2)(0.7)
Adjusted net operating profit after cash tax$1.6 $6.0 
Invested Capital
Equity$29.7 $34.0 
Redeemable noncontrolling interest— — 
Debt (excl. Ford Credit)30.5 25.9 
Net pension and OPEB liability12.2 12.2 
Invested capital (end of period)$72.4 $72.1 
Average invested capital$63.7 $72.9 
ROIC (a)(2.5)%7.2 %
Adjusted ROIC (Non-GAAP) (b)2.5 %8.2 %
__________
(a)Calculated as the sum of net operating profit after cash tax from the last four quarters, divided by the average invested capital over the last four quarters.
(b)Calculated as the sum of adjusted net operating profit after cash tax from the last four quarters, divided by the average invested capital over the last four quarters.
Note: Numbers may not sum due to rounding.
54

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

CREDIT RATINGS

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

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

The following rating actions were taken by these NRSROs since the filing of our 2020 Form 10-K Report:

On March 29, 2021, Moody’s affirmed the credit ratings for Ford and Ford Credit at Ba2 and revised the outlook to stable, from negative.

The following table summarizes certain of the credit ratings and outlook presently assigned by these four NRSROs:
NRSRO RATINGS
FordFord CreditNRSROs
Issuer
Default /
Corporate /
Issuer Rating
Long-Term Senior UnsecuredOutlook / TrendLong-Term Senior UnsecuredShort-Term
Unsecured
Outlook / TrendMinimum Long-Term Investment Grade Rating
DBRSBB (high)BB (high)NegativeBB (high)R-4NegativeBBB (low)
FitchBB+BB+NegativeBB+BNegativeBBB-
Moody’sN/ABa2StableBa2NPStableBaa3
S&PBB+BB+NegativeBB+BNegativeBBB-

55

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

OUTLOOK

We provided 2021 Company guidance in our earnings release furnished on Form 8-K dated April 28, 2021. The guidance is based on our expectations as of April 28, 2021 and assumes no material change in the current economic environment, including foreign exchange and tariffs. Our actual results could differ materially from our guidance due to risks, uncertainties, and other factors, including those set forth in “Risk Factors” in Item 1A of our 2020 Form 10-K Report and as updated by our subsequent filings with the SEC.
2021 Guidance
Total Company
Adjusted EBIT (a)$5.5 - $6.5 billion
Adjusted Free Cash Flow (a)$0.5 - $1.5 billion
Capital spending$6.0 - $6.5 billion
Pension contributions$0.6 - $0.8 billion
Global Redesign EBIT charges (b)$2.2 - $2.7 billion
Global Redesign cash effects (b)$3.0 - $3.5 billion
Ford Credit
EBTImproved compared to 2020
Ford Credit auction values (c)Higher
(a)When we provide guidance for Adjusted EBIT we do not provide guidance for net income/(loss), the most comparable GAAP measure, because, as described in more detail below in “Non-GAAP Measures That Supplement GAAP Measures,” it includes items that are difficult to predict with reasonable certainty prior to year-end, including pension and OPEB remeasurement gains and losses.
(b)We continue to review our global businesses and may take additional restructuring actions in markets where a path to sustained profitability is not feasible when considering the capital allocation required for those markets. Such actions may result in global redesign EBIT charges and cash effects in 2021 that are incremental to those set forth in the table.
(c)On average compared with full year 2020 at constant mix.

In February 2021, we estimated that there was the potential for an adverse impact of 10% to 20% on our volume for the first half of 2021 due to the growing semiconductor shortage. Further, we believed that the risk had the potential to reduce our original full-year guidance, which was to deliver adjusted EBIT of $8 billion to $9 billion, by $1 billion to $2.5 billion, net of recoveries and some production make-up in the second half of the year. Including the impact of the fire at Renesas, we now expect to lose about 50% of our planned production in the second quarter of 2021, an increase from the 17% loss in the first quarter of 2021. The second quarter is expected to be the trough for our performance this year. For the second half of 2021, we expect to lose about 10% of our planned production.

In total, we believe the shortage for the year will result in a loss of about 1.1 million wholesale units, which translates to a headwind to adjusted EBIT of about $2.5 billion, net of recovery actions. The expected volume loss for the year has more than doubled, but we have worked to contain the adjusted EBIT impact to the high-end of the range we outlined in February. Including the effect of the semiconductor shortage, we now expect full-year adjusted EBIT to be in a range of $5.5 billion to $6.5 billion.

We also now expect full-year adjusted free cash flow of $500 million to $1.5 billion, which reflects a $3 billion adverse impact from semiconductors. The impact of the semiconductor shortage on adjusted free cash flow is $500 million worse than the impact on adjusted EBIT due to timing differences and working capital impacts that we expect to recover once our rate of production is fully restored, dealer stocks align with demand, and incentives normalize. In the second quarter of 2021, adjusted free cash flow is expected to be significantly negative, but we expect our cash balance and liquidity to remain healthy throughout 2021.
56

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

Cautionary Note on Forward-Looking Statements

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

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

We cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. For additional discussion, see “Item 1A. Risk Factors” in our 2020 Form 10-K Report, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
57

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

NON-GAAP FINANCIAL MEASURES THAT SUPPLEMENT GAAP MEASURES

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

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

Pre-Tax Special ItemSignificance Guideline
∘ Pension and OPEB remeasurement gains and losses∘ No minimum
∘ Personnel expenses, dealer-related costs, and facility-related charges stemming from our efforts to match production capacity and cost structure to market demand and changing model mix
∘ Generally $100 million or more
∘ Other items that we do not necessarily consider to be indicative of earnings from ongoing operating activities∘ $500 million or more for individual field service actions; generally $100 million or more for other items

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

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

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

Adjusted Effective Tax Rate (Most Comparable GAAP Measure: Effective Tax Rate) – Measure of Company’s tax rate excluding pre-tax special items (described above) and tax special items. The measure provides an ongoing effective rate which investors find useful for historical comparisons and for forecasting. When we provide guidance for adjusted effective tax rate, we do not provide guidance on an effective tax rate basis because the GAAP measure will include potentially significant special items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-end, including pension and OPEB remeasurement gains and losses.
58

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

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

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

Ford Credit Managed Receivables (Most Comparable GAAP Measure: Net Finance Receivables plus Net Investment in Operating Leases) – Measure of Ford Credit’s total net receivables and held-for-sale receivables, excluding unearned interest supplements and residual support, allowance for credit losses, and other (primarily accumulated supplemental depreciation). The measure is useful to management and investors as it closely approximates the customer’s outstanding balance on the receivables, which is the basis for earning revenue.

Ford Credit Managed Leverage (Most Comparable GAAP Measure: Financial Statement Leverage) – Ford Credit’s debt-to-equity ratio adjusted (i) to exclude cash, cash equivalents, and marketable securities (other than amounts related to insurance activities), and (ii) for derivative accounting. The measure is useful to investors because it reflects the way Ford Credit manages its business. Cash, cash equivalents, and marketable securities are deducted because they generally correspond to excess debt beyond the amount required to support operations and on-balance sheet securitization transactions. Derivative accounting adjustments are made to asset, debt, and equity positions to reflect the impact of interest rate instruments used with Ford Credit’s term-debt issuances and securitization transactions. Ford Credit generally repays its debt obligations as they mature, so the interim effects of changes in market interest rates are excluded in the calculation of managed leverage.
59

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

Non-GAAP Financial Measure Reconciliations

The following tables show our Non-GAAP financial measure reconciliations. The GAAP reconciliation for Ford Credit Managed Leverage can be found in the Ford Credit Segment section of “Liquidity and Capital Resources.”

Net Income/(Loss) Reconciliation to Adjusted EBIT ($M)
First Quarter
20202021
Net income/(loss) attributable to Ford (GAAP)$(1,993)$3,262 
Income/(Loss) attributable to noncontrolling interests— — 
Net income/(loss)$(1,993)$3,262 
Less: (Provision for)/Benefit from income taxes(847)(680)
Income/(Loss) before income taxes$(1,146)$3,942 
Less: Special items pre-tax(287)(401)
Income/(Loss) before special items pre-tax$(859)$4,343 
Less: Interest on debt(227)(473)
Adjusted EBIT (Non-GAAP)$(632)$4,816 
Memo:
Revenue ($B)$34.3 $36.2 
Net income/(loss) margin (%)(5.8)%9.0 %
Adjusted EBIT margin (%)(1.8)%13.3 %

Earnings per Share Reconciliation to Adjusted Earnings per Share
First Quarter
20202021
Diluted After-Tax Results ($M)
Diluted after-tax results (GAAP)$(1,993)$3,262 
Less: Impact of pre-tax and tax special items(1,074)(302)
Adjusted net income/(loss) – diluted (Non-GAAP)$(919)$3,564 
Basic and Diluted Shares (M)
Basic shares (average shares outstanding)3,963 3,980 
Net dilutive options, unvested restricted stock units and restricted stock (a)— 36 
Diluted shares3,963 4,016 
Earnings/(Loss) per share – diluted (GAAP)$(0.50)$0.81 
Less: Net impact of adjustments(0.27)(0.08)
Adjusted earnings/(loss) per share – diluted (Non-GAAP)$(0.23)$0.89 
_________
(a)In Q1 2020, there were 30 million shares excluded from the calculation of diluted earnings/(loss) per share, due to their anti-dilutive effect.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Effective Tax Rate Reconciliation to Adjusted Effective Tax Rate
First Quarter
20202021Memo:
FY 2020
Pre-Tax Results ($M)
Income/(Loss) before income taxes (GAAP)$(1,146)$3,942 $(1,116)
Less: Impact of special items(287)(401)(2,246)
Adjusted earnings before taxes (Non-GAAP)$(859)$4,343 $1,130 
Taxes ($M)
(Provision for)/Benefit from income taxes (GAAP)$(847)$(680)$(160)
Less: Impact of special items (a)(787)99 (670)
Adjusted (provision for) / benefit from income taxes (Non-GAAP)$(60)$(779)$510 
Tax Rate (%)
Effective tax rate (GAAP)(73.9)%17.3 %(14.3)%
Adjusted effective tax rate (Non-GAAP)(7.0)%17.9 %(45.1)%
__________
(a)Full Year 2020 includes $(1.3) billion related to the establishment of valuation allowances against primarily U.S. tax credits.

Net Cash Provided by/(Used in) Operating Activities Reconciliation to Company Adjusted Free Cash Flow ($M)
First Quarter
20202021
Net cash provided by / (used in) operating activities (GAAP)$(473)$4,492 
Less: Items not included in Company Adjusted Free Cash Flows
Ford Credit operating cash flows (a)$201 $4,998 
Funded pension contributions(175)(229)
Global Redesign (including separations)(172)(345)
Ford Credit tax payments / (refunds) under tax sharing agreement (a)407 
Other, net(15)77 
Add: Items included in Company Adjusted Free Cash Flows
Automotive and Mobility capital spending$(1,770)$(1,358)
Ford Credit distributions (a)343 1,000 
Settlement of derivatives(28)(25)
Company adjusted free cash flow (Non-GAAP) (a)$(2,174)$(396)
__________
(a)Prior period amounts have been updated as a result of the adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. For additional information, see Note 2 of the Notes to the Financial Statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Ford Credit Net Receivables Reconciliation to Managed Receivables ($B)
March 31,
2020
December 31,
2020
March 31,
2021
Ford Credit finance receivables, net (GAAP) (a)$106.0 $97.7 $93.2 
Net investment in operating leases (GAAP) (a)27.0 26.6 26.6 
Consolidating adjustments (b)4.8 7.4 7.3 
Total net receivables$137.8 $131.7 $127.1 
Ford Credit unearned interest supplements and residual support$6.3 6.5 $6.0 
Allowance for credit losses1.2 1.3 1.2 
Other, primarily accumulated supplemental depreciation1.1 1.0 0.9 
Total managed receivables (Non-GAAP)$146.4 $140.5 $135.2 
__________
(a)Includes finance receivables (retail and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance sheets and are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations of Ford Credit or the claims of Ford Credit’s other creditors.
(b)Primarily includes Automotive segment receivables purchased by Ford Credit which are classified to Trade and other receivables on our consolidated balance sheets. Also includes eliminations of intersegment transactions.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

SUPPLEMENTAL INFORMATION

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

Selected Cash Flow Information. The following tables provide supplemental cash flow information (in millions):
For the period ended March 31, 2021
First Quarter
Cash flows from operating activitiesCompany excluding Ford CreditFord CreditEliminationsConsolidated
Net income$2,417 $845 $— $3,262 
Depreciation and tooling amortization1,525 578 — 2,103 
Other amortization32 (393)— (361)
Provision for credit and insurance losses(1)(35)— (36)
Pension and OPEB expense/(income)(318)— — (318)
Equity investment dividends received in excess of (earnings)/losses73 (5)— 68 
Foreign currency adjustments301 49 — 350 
Net unrealized (gain)/loss on Other Investments(914)— — (914)
Net (gain)/loss on changes in investments in affiliates(165)(1)— (166)
Stock compensation39 — 41 
Provision for deferred income taxes414 13 — 427 
Decrease/(Increase) in finance receivables (wholesale and other)— 2,699 — 2,699 
Decrease/(Increase) in intersegment receivables/payables(772)772 — — 
Decrease/(Increase) in accounts receivable and other assets(624)36 — (588)
Decrease/(Increase) in inventory(2,176)— — (2,176)
Increase/(Decrease) in accounts payable and accrued and other liabilities397 (204)— 193 
Other(125)33 — (92)
Interest supplements and residual value support to Ford Credit(609)609 — — 
Net cash provided by/(used in) operating activities$(506)$4,998 $— $4,492 
Cash flows from investing activitiesCompany excluding Ford CreditFord CreditEliminationsConsolidated
Capital spending$(1,358)$(10)$— $(1,368)
Acquisitions of finance receivables and operating leases — (11,695)— (11,695)
Collections of finance receivables and operating leases— 12,482 — 12,482 
Proceeds from sale of business— — 
Purchases of marketable and other investments(7,879)(3,701)— (11,580)
Sales and maturities of marketable securities and other investments7,088 4,598 — 11,686 
Settlements of derivatives(25)56 — 31 
Other(54)— — (54)
Investing activity (to)/from other segments1,000 — (1,000)— 
Net cash provided by/(used in) investing activities$(1,221)$1,730 $(1,000)$(491)
Cash flows from financing activitiesCompany excluding Ford CreditFord CreditEliminationsConsolidated
Cash payments for dividends and dividend equivalents$(3)$— $— $(3)
Purchases of common stock— — — — 
Net changes in short-term debt(295)568 — 273 
Proceeds from issuance of long-term debt2,300 4,631 — 6,931 
Principal payments on long-term debt(78)(14,814)— (14,892)
Other(91)(11)— (102)
Financing activity to/(from) other segments— (1,000)1,000 — 
Net cash provided by/(used in) financing activities$1,833 $(10,626)$1,000 $(7,793)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash$(26)$(67)$— $(93)
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Selected Income Statement Information. The following table provides supplemental income statement information (in millions):
For the period ended March 31, 2021
First Quarter
Company excluding Ford CreditFord CreditConsolidated
Revenues$33,565 $2,663 $36,228 
Total costs and expenses32,140 1,624 33,764 
Operating income/(loss)1,425 1,039 2,464 
Interest expense on Company debt excluding Ford Credit473 — 473 
Other income/(loss), net1,954 (82)1,872 
Equity in net income/(loss) of affiliated companies74 79 
Income/(Loss) before income taxes2,980 962 3,942 
Provision for/(Benefit from) income taxes563 117 680 
Net income/(loss)2,417 845 3,262 
Less: Income/(Loss) attributable to noncontrolling interests— — — 
Net income/(loss) attributable to Ford Motor Company$2,417 $845 $3,262 

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

Selected Balance Sheet Information. The following tables provide supplemental balance sheet information (in millions):
March 31, 2021
AssetsCompany excluding Ford CreditFord CreditEliminationsConsolidated
Cash and cash equivalents$10,957 $10,869 $— $21,826 
Marketable securities20,333 3,948 — 24,281 
Ford Credit finance receivables, net— 40,664 — 40,664 
Trade and other receivables, net3,973 6,475 — 10,448 
Inventories12,742 — — 12,742 
Assets held for sale321 14 — 335 
Other assets2,303 1,333 — 3,636 
Receivable from other segments158 1,075 (1,233)— 
Total current assets50,787 64,378 (1,233)113,932 
Ford Credit finance receivables, net— 52,570 — 52,570 
Net investment in operating leases1,251 26,560 — 27,811 
Net property36,141 220 — 36,361 
Equity in net assets of affiliated companies4,564 130 — 4,694 
Deferred income taxes11,937 166 — 12,103 
Other assets11,057 2,291 — 13,348 
Receivable from other segments— 34 (34)— 
Total assets$115,737 $146,349 $(1,267)$260,819 
LiabilitiesCompany excluding Ford CreditFord CreditEliminationsConsolidated
Payables$22,365 $1,127 $— $23,492 
Other liabilities and deferred revenue19,661 1,334 — 20,995 
Debt payable within one year1,061 48,410 — 49,471 
Liabilities held for sale291 — — 291 
Payable to other segments1,233 — (1,233)— 
Total current liabilities44,611 50,871 (1,233)94,249 
Other liabilities and deferred revenue27,445 1,262 — 28,707 
Long-term debt24,819 78,382 — 103,201 
Deferred income taxes164 524 — 688 
Payable to other segments34 — (34)— 
Total liabilities$97,073 $131,039 $(1,267)$226,845 

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

Selected Other Information.

Equity. At March 31, 2021, total equity attributable to Ford was $33.8 billion, an increase of $3.1 billion compared with December 31, 2020. The detail for this change is shown below (in billions):
Increase/
(Decrease)
Net income/(loss)$3.3 
Common stock issued(0.1)
Other comprehensive income(0.1)
Total$3.1 

U.S. Sales by Type. The following table shows first quarter 2021 U.S. sales volume and U.S. wholesales segregated by truck, SUV, and car sales. U.S. sales volume reflects transactions with (i) retail and fleet customers (as reported by dealers), (ii) governments, and (iii) Ford management.  U.S. wholesales reflect sales to dealers.
U.S. SalesU.S. Wholesales
Trucks277,233 257,240 
SUVs216,899 186,032 
Cars27,202 16,135 
Total Vehicles 521,334 459,407 

ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

The Financial Accounting Standards Board (“FASB”) has issued the following Accounting Standards Update (“ASU”) which is not expected to have a material impact to our financial statements or financial statement disclosures. For additional information, see Note 2 of the Notes to the Financial Statements.
ASUEffective Date (a)
2018-12Targeted Improvements to the Accounting for Long Duration ContractsJanuary 1, 2023
__________
(a)Early adoption of the standard is permitted.
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

Automotive Segment

Foreign Currency Risk. The net fair value of foreign exchange forward contracts (including adjustments for credit risk) as of March 31, 2021, was a liability of $706 million, compared with a liability of $487 million as of December 31, 2020. The potential decrease in fair value from a 10% adverse change in the underlying exchange rates, in U.S. dollar terms, would have been $2.4 billion at March 31, 2021, compared with $2.5 billion at December 31, 2020.

Commodity Price Risk. The net fair value of commodity forward contracts (including adjustments for credit risk) as of March 31, 2021, was an asset of $195 million, compared with an asset of $105 million at December 31, 2020. The potential decrease in fair value from a 10% adverse change in the underlying commodity prices would have been $164 million at March 31, 2021, compared with $141 million at December 31, 2020.

Ford Credit Segment
  
Interest Rate Risk. To provide a quantitative measure of the sensitivity of its pre-tax cash flow to changes in interest rates, Ford Credit uses interest rate scenarios that assume a hypothetical, instantaneous increase or decrease of one percentage point in all interest rates across all maturities (a “parallel shift”), as well as a base case that assumes that all interest rates remain constant at existing levels. The differences in pre-tax cash flow between these scenarios and the base case over a 12-month period represent an estimate of the sensitivity of Ford Credit’s pre-tax cash flow. Under this model, Ford Credit estimates that at March 31, 2021, all else constant, such an increase in interest rates would increase its pre-tax cash flow by $1 million over the next 12 months, compared with a decrease of $3 million at December 31, 2020. In reality, interest rate changes are rarely instantaneous or parallel and rates could move more or less than the one percentage point assumed in Ford Credit’s analysis. As a result, the actual impact to pre-tax cash flow could be higher or lower than the results detailed above.

Transition from LIBOR to Alternative Reference Rates

We and our affiliates, including Ford Credit, have been working to transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates. We have developed a total company inventory of affected financial instruments and contracts, have been working to transition legacy contracts linked to LIBOR to alternative reference rates, and intend to rely exclusively on alternative reference rates for new contracts after 2021.

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. James D. Farley, Jr., our Chief Executive Officer (“CEO”), and John T. Lawler, our Chief Financial Officer (“CFO”), have performed an evaluation of the Company’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of March 31, 2021, and each has concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by SEC rules and forms, and that such information is accumulated and communicated to the CEO and CFO to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting. There were no changes in internal control over financial reporting during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings.

ENVIRONMENTAL MATTERS

We have no legal proceedings arising under any federal, state, or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment, in which (i) a governmental authority is a party, and (ii) we believe there is the possibility of monetary sanctions (exclusive of interest and costs) in excess of $1 million.

OTHER MATTERS

Brazilian Tax Matters (as previously reported on page 28 of our 2020 Form 10-K Report). One Brazilian state (São Paulo) and the Brazilian federal tax authority currently have outstanding substantial tax assessments against Ford Motor Company Brasil Ltda. (“Ford Brazil”) related to state and federal tax incentives Ford Brazil received for its operations in the Brazilian state of Bahia. The state assessments are part of a broader conflict among various states in Brazil. The federal legislature enacted laws designed to encourage the states to end that conflict, and in 2017 the states reached an agreement on a framework for resolution. Ford Brazil continues to pursue a resolution under the framework and expects the amount of any remaining assessments by the states to be resolved under that framework. The federal assessments are outside the scope of the legislation.

All of the assessments have been appealed to the relevant administrative court of each jurisdiction. In the State of Minas Gerais, one case that had been pending at the administrative level was dismissed on April 1, 2020, and on July 13, 2020, the other two cases that were on appeal to the judicial court were dismissed. Our appeals with the State of São Paulo and the federal tax authority remain at the administrative level. To proceed with an appeal within the judicial court system, an appellant may be required to post collateral. To date, we have not been required to post any collateral. If we are required to post collateral, which could be in excess of $1 billion, we expect it to be in the form of fixed assets, surety bonds, and/or letters of credit, but we may be required to post cash collateral. Although the ultimate resolution of these matters may take many years, we consider our overall risk of loss to be remote.
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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On March 19, 2021, Ford issued $2.3 billion in aggregate principal amount of 0% Convertible Senior Notes due 2026 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The notes are unsecured, senior obligations of Ford.

The principal initial purchasers of the notes were Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, BofA Securities, Inc., Barclays Capital Inc., BNP Paribas Securities Corp., Mizuho Securities USA LLC, Morgan Stanley & Co. LLC, RBC Capital Markets, LLC, Commerz Markets LLC, Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, Lloyds Securities Inc., SG Americas Securities, LLC, and SMBC Nikko Securities America, Inc.

The notes will not bear regular interest, and the principal amount of the notes will not accrete. The notes will mature on March 15, 2026, unless earlier repurchased, redeemed, or converted. Ford may not redeem the notes prior to March 20, 2024. On or after March 20, 2024, Ford may redeem for cash all or any portion of the notes, at its option, if the last reported sale price of Ford’s Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on and including the trading day preceding the date on which Ford provides notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date.

The initial conversion rate for the notes is 57.1886 shares of Ford’s Common Stock per $1,000 principal amount of notes (which is equivalent to an initial conversion price of approximately $17.49 per share). Prior to December 15, 2025, the notes will be convertible at the option of the noteholders only upon the satisfaction of specified conditions and during certain periods as set forth in the indenture for the notes, and as described in more detail in Note 14 of the Notes to the Financial Statements. Thereafter, the notes will be convertible at the option of the noteholders at any time regardless of these conditions. Conversions of the notes will be settled in cash up to the aggregate principal amount of the notes to be converted and cash, shares of Ford’s Common Stock, or a combination thereof, at Ford’s election, for the remainder, if any, of Ford’s conversion obligation in excess of the aggregate principal amount of the notes being converted.

Ford intends to use the net proceeds of $2,266,725,000 after deducting the initial purchasers’ discount and expenses from the offering of the notes for general corporate purposes, including the potential repayment of debt.
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ITEM 6. Exhibits.
DesignationDescriptionMethod of Filing
Annual Incentive Compensation Plan Metrics for 2021.Filed with this Report.
Performance-Based Restricted Stock Unit Metrics for 2021.Filed with this Report.
Agreement between Ford Motor Company and Jon M. Huntsman, Jr. dated April 12, 2021.Filed with this Report.
Rule 15d-14(a) Certification of CEO.Filed with this Report.
Rule 15d-14(a) Certification of CFO.Filed with this Report.
Section 1350 Certification of CEO.Furnished with this Report.
Section 1350 Certification of CFO.Furnished with this Report.
Exhibit 101.INSInteractive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language (“Inline XBRL”).(a)
Exhibit 101.SCHXBRL Taxonomy Extension Schema Document.(a)
Exhibit 101.CALXBRL Taxonomy Extension Calculation Linkbase Document.(a)
Exhibit 101.LABXBRL Taxonomy Extension Label Linkbase Document.(a)
Exhibit 101.PREXBRL Taxonomy Extension Presentation Linkbase Document.(a)
Exhibit 101.DEFXBRL Taxonomy Extension Definition Linkbase Document.(a)
Exhibit 104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).(a)
__________
(a)Submitted electronically with this Report in accordance with the provisions of Regulation S-T.
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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
FORD MOTOR COMPANY
By:/s/ Cathy O’Callaghan
 Cathy O’Callaghan, Controller
 (principal accounting officer)
  
Date:April 28, 2021

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