Ford Motor (F) risk factors, FY2024 10-K

Other

1. 01NON-GAAP FINANCIAL MEASURES THAT SUPPLEMENT GAAP MEASURES
2. 02∘ Gains and losses on investments in equity securities ∘ No minimum
3. 03and Analysis of Financial Condition and Results of Operations (Continued)
4. 04Adjusted EBIT (Non-GAAP) $ 10,415 $ 10,416 $ 10,208
5. 052024 SUPPLEMENTAL INFORMATION
6. 06Selected Other Information
7. 07CRITICAL ACCOUNTING ESTIMATES
8. 08Warranties and Field Service Actions
9. 09Pensions and Other Postretirement Employee Benefits
10. 10The fixed income asset sensitivity shown excludes other fixed income return components (e.g., changes in credit spreads, bond coupon and active management excess returns), and growth asset returns. Other factors that affect net funded status (e.g., contributions) are not reflected
11. 11Expected long-term rate of return on assets +/- 25 (70)/70 (50)/50
12. 12Other Postretirement Employee Benefits
13. 13Impairment of Long-Lived Assets
14. 14During 2024, no triggering events were identified
15. 15Allowance for Credit Losses
16. 16Macroeconomic factors used in Ford Credit’s models are country specific and include variables such as unemployment rates, personal bankruptcy filings, housing prices, and gross domestic product
17. 17Accumulated depreciation on vehicles subject to operating leases reduces the value of the leased vehicles in Ford Credit’s operating lease portfolio from their original acquisition value to their expected residual value at the end of the lease term
18. 18See Note 12 of the Notes to the Financial Statements for more information regarding accumulated depreciation on vehicles subject to operating leases
19. 19Return volumes +/- 100 5/(5)
20. 20We are exposed to a variety of market and other risks, including the effects of changes in foreign currency exchange rates, commodity prices, and interest rates, as well as risks to availability of funding sources, hazard events, and specific asset risks
21. 21We are exposed to a variety of other risks, such as loss or damage to property, liability claims, and employee injury. We protect against these risks through the purchase of commercial insurance that is designed to protect us above our self-insured retentions against events that could generate significant losses
22. 22COMPANY EXCLUDING FORD CREDIT MARKET RISK
23. 23Foreign currency risk, commodity risk, and interest rate risk are measured and quantified using a model to evaluate the sensitivity of market value to instantaneous, parallel shifts in rates and/or prices
24. 24Item 7A. Quantitative and Qualitative Disclosures About Market Risk (Continued)
25. 25In addition, our purchasing organization (with guidance from the GRMC, as appropriate) negotiates contracts for the continuous supply of raw materials. In some cases, these contracts stipulate minimum purchase amounts and specific prices, and, therefore, play a role in managing commodity price risk
26. 26Interest Rate Risk. Generally, Ford Credit’s assets and the related debt have different re-pricing periods, and consequently, respond differently to changes in interest rates
27. 27Debt consists primarily of short- and long-term unsecured and securitized debt. Ford Credit’s term debt instruments are principally fixed-rate and require fixed and equal interest payments over the life of the instrument and a single principal payment at maturity
28. 28ITEM 8. Financial Statements and Supplementary Data
29. 29ITEM 9A. Controls and Procedures
30. 30The effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 has been audited by PricewaterhouseCoopers LLP (PCAOB ID 238), an independent registered public accounting firm, as stated in its report included herein
31. 31ITEM 9B. Other Information
32. 32ITEM 10. Directors, Executive Officers of Ford, and Corporate Governance
33. 33ITEM 11. Executive Compensation
34. 34of Certain Beneficial Owners and Management and Related Stockholder Matters
35. 35ITEM 13. Certain Relationships and Related Transactions, and Director Independence
36. 36ITEM 14. Principal Accounting Fees and Services
37. 37(a) 1. Financial Statements – Ford Motor Company and Subsidiaries
38. 38Schedule II Valuation and Qualifying Accounts for the years ended 2022, 2023, and 2024
39. 39(c)Submitted electronically with this Report in accordance with the provisions of Regulation S-T
40. 40Mark Kosman (principal accounting officer)
41. 41Opinions on the Financial Statements and Internal Control over Financial Reporting
42. 42Definition and Limitations of Internal Control over Financial Reporting
43. 43Ford Credit Consumer Finance Receivables Allowance for Credit Losses
44. 44Warranty and Field Service Actions Accrual (United States)
45. 45Total liabilities and equity $ 273,310 $ 285,196
46. 46Other comprehensive income/(loss), net of tax
47. 47(a)Includes impacts of share-based compensation
48. 48Certain Transactions with Ford Credit
49. 49Trade, Notes, and Other Receivables
50. 50Supplier Finance Programs
51. 51Net Intangible Assets and Goodwill
52. 52Regulatory Compliance Credits
53. 53Held-and-Used Long-Lived Asset Impairment
54. 54Held-for-Sale Asset Impairment
55. 55NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
56. 56Finance and Lease Incentives
57. 57Supplier Price Adjustments
58. 58Ford may also indirectly benefit from incentives and grants awarded to companies with which we are affiliated but are not included in our consolidated financial statements
59. 59Adoption of New Accounting Standards
60. 60Accounting Standards Issued But Not Yet Adopted
61. 61(a)Includes extended service contract revenue
62. 62Company Excluding Ford Credit
63. 63We have elected to recognize the cost for freight and shipping when control over vehicles, parts, or accessories has transferred to the customer as an expense in Cost of sales
64. 64NOTE 4. REVENUE (Continued)
65. 65NOTE 5. OTHER INCOME/(LOSS)
66. 66NOTE 6. SHARE-BASED COMPENSATION
67. 67Restricted Stock Units and Restricted Stock Shares
68. 68As of December 31, 2024, there was approximately $450 million in unrecognized compensation cost related to non-vested RSUs. This expense will be recognized over a weighted average period of 1.9 years
69. 69Grant date stock price 16.85 13.08 12.74
70. 70NOTE 6. SHARE-BASED COMPENSATION (Continued)
71. 71Valuation of Deferred Tax Assets and Liabilities
72. 72NOTE 7. INCOME TAXES (Continued)
73. 73Components of Income Taxes
74. 74In 2022, we reversed $405 million of previously established U.S. valuation allowances, primarily as a result of planning actions
75. 75Components of Deferred Tax Assets and Liabilities
76. 76Net deferred tax assets/(liabilities) $ 15,980 $ 15,301
77. 77Examinations by tax authorities have been completed through 2008 in Germany; 2014 in the United States; 2015 in Mexico; 2018 in Canada, Spain, and the United Kingdom; and 2019 in China and India
78. 78NOTE 8. CAPITAL STOCK AND EARNINGS/(LOSS) PER SHARE
79. 79Earnings/(Loss) Per Share Attributable to Ford Motor Company Common and Class B Stock
80. 80NOTE 9. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES
81. 81NOTE 9. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)
82. 82$ 15,051 $ 41 $ (118) $ 14,974 $ 3,810 $ 11,051 $ 113
83. 83Total $ 6,022 $ (35) $ 3,020 $ (83) $ 9,042 $ (118)
84. 84Cash, Cash Equivalents, and Restricted Cash
85. 85Ford Credit manages finance receivables as “consumer” and “non-consumer” portfolios. The receivables are generally secured by the vehicles, inventory, or other property being financed
86. 86Finance Receivables Classification
87. 87NOTE 10. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)
88. 88(b)The fair value of finance receivables is categorized within Level 3 of the fair value hierarchy
89. 89At December 31, 2023 and 2024, accrued interest was $294 million and $335 million, respectively, which we report in Other assets in the current assets section of our consolidated balance sheets
90. 90Gross charge-offs $ 47 $ 40 $ 75 $ 85 $ 117 $ 37 $ 401
91. 91(a)Total past due dealer financing receivables at December 31, 2023 were $33 million
92. 92(a)Total past due dealer financing receivables at December 31, 2024 were $8 million
93. 93The allowance for credit losses represents an estimate of the lifetime expected credit losses inherent in finance receivables as of the balance sheet date. The adequacy of the allowance for credit losses is assessed quarterly
94. 94For the remaining dealer financing, Ford Credit estimates an allowance for credit losses on a collective basis
95. 95(a)Primarily represents amounts related to foreign currency translation adjustments
96. 96NOTE 12. NET INVESTMENT IN OPERATING LEASES
97. 97Operating lease depreciation expense $ 2,240 $ 2,309 $ 2,482
98. 98We use the equity method of accounting for our investments in entities over which we do not have control, but over whose operating and financial policies we are able to exercise significant influence
99. 99(a)In 2023, Jiangling Motors Corporation, Limited recorded restructuring charges, our share of which was $12 million. These charges are included in Equity in net income/(loss) of affiliated companies
100. 100We recorded $452 million, $381 million, and $418 million of dividends from these affiliated companies for the years ended December 31, 2022, 2023, and 2024, respectively
101. 101In the ordinary course of business, we buy/sell various products and services including vehicles, parts, and components to/from our equity method investees. In addition, we receive royalty income
102. 102NOTE 15. OTHER LIABILITIES AND DEFERRED REVENUE
103. 103NOTE 16. RETIREMENT BENEFITS
104. 104Defined Benefit Plans – Expense and Status
105. 105Average rate of increase in compensation 3.70 3.42 3.65 4.05 3.54 3.98
106. 106Net periodic benefit cost/(income) $ 1,191 $ (439) $ (1,130) $ 966 $ 1,544 $ 542 $ 739 $ (738) $ 148
107. 107NOTE 16. RETIREMENT BENEFITS (Continued)
108. 108Our policy for funded pension plans is to contribute annually, at a minimum, amounts required by applicable laws and regulations. We may make contributions beyond those legally required
109. 109Expected Future Benefit Payments
110. 110Pension Plan Asset Information
111. 111Alternative investments execute diverse strategies that provide exposure to a broad range of hedge fund strategies, equity investments in private companies, and investments in private property funds
112. 112At year-end 2024, Ford securities comprised less than 1% of our plan assets
113. 113Mortgage/other asset-backed
114. 114(a)Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy
115. 115NOTE 17. LEASE COMMITMENTS
116. 116NOTE 17. LEASE COMMITMENTS (Continued)
117. 117Total finance lease liabilities $ 638 $ 805
118. 118Finance leases 95 165 286
119. 119Total lease expense $ 592 $ 767 $ 918
120. 120NOTE 18. DEBT AND COMMITMENTS
121. 121NOTE 18. DEBT AND COMMITMENTS (Continued)
122. 122(b)Includes interest on long-term debt payable within one year and after one year
123. 123Public Unsecured Debt Securities
124. 124U.K. Export Finance Program
125. 125Company Excluding Ford Credit Facilities
126. 126Interest expense on securitization debt was $1.3 billion, $2.5 billion, and 2.8 billion in 2022, 2023, and 2024, respectively
127. 127Committed Credit Facilities
128. 128NOTE 19. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
129. 129Derivative Financial Instruments and Hedge Accounting. Derivative assets are reported in Other assets and derivative liabilities are reported in Payables and Other liabilities and deferred revenue
130. 130Cash Flow Hedges. We have designated certain forward contracts as cash flow hedges of forecasted transactions with exposure to foreign currency exchange and commodity price risks
131. 131When a fair value hedge is de-designated, or when the derivative is terminated before maturity, the fair value adjustment to the hedged debt continues to be reported as part of the carrying value of the debt and is recognized in Ford Credit interest, operating, and other expenses over its remaining life
132. 132NOTE 19. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)
133. 133Income Effect of Derivative Financial Instruments
134. 134(b)For 2022, 2023, and 2024, a $102 million loss, a $37 million loss, and a $5 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax
135. 135Balance Sheet Effect of Derivative Financial Instruments
136. 136(a)At December 31, 2023 and 2024, we held collateral of $40 million and $27 million, respectively, and we posted collateral of $185 million and $127 million, respectively
137. 137NOTE 20. EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES
138. 138In addition, we are continuing to reduce our global workforce and take other restructuring actions, including the separation of salaried workers as announced during 2023 and 2024 and separation packages offered to certain members of our hourly workforce during 2024
139. 139(a) Excludes pension costs of $268 million and $218 million in 2023 and 2024, respectively
140. 140NOTE 22. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
141. 141Net prior service (costs)/credits arising during the period
142. 142NOTE 23. VARIABLE INTEREST ENTITIES
143. 143VIEs of Which We are Not the Primary Beneficiary
144. 144VIEs of Which We are the Primary Beneficiary
145. 145Guarantees and Indemnifications
146. 146For 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
147. 147Warranty and Field Service Actions
148. 148We 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
149. 149Ending balance $ 11,504 $ 14,032
150. 150NOTE 25. SEGMENT INFORMATION
151. 151CODM Evaluation of the Business
152. 152Segment Revenue, Cost, and Asset Principles for Ford Blue, Ford Model e, and Ford Pro
153. 153NOTE 25. SEGMENT INFORMATION (Continued)
154. 154Reconciliation of Segment EBIT/EBT
155. 155(b)Intersegment revenues only reflect finished vehicle transactions between Ford Blue, Ford Model e, and Ford Pro where there is an intersegment markup and are recognized at the time of the intersegment transaction
156. 156(d)Primarily reflects losses on our Rivian investment and the impairment of our Argo AI equity method investment
157. 157(f)Primarily reflects mark-to-market adjustments for our global pension and OPEB plans, restructuring actions in Europe and China, and an accrual for the Transit Connect customs matter
158. 158We report revenue on a “where-sold” basis, which reflects the revenue within the country in which the ultimate sale or financing is made to our external customer