UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☑ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~June 30, 2019~~March 31, 2020

☐ 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~~Company

(Exact name of Registrant as specified in its charter)



Delaware		38-0549190
(State of incorporation)		(I.R.S. Employer Identification No.)

One American Road
Dearborn,	Michigan	48126
(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 class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	F	New York Stock Exchange
6.200% Notes due June 1, 2059	FPRB	New York Stock Exchange
6.000% Notes due December 1, 2059	FPRC	New 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 ~~July 19, 2019,~~April 24, 2020, Ford had outstanding ~~3,918,991,225~~3,906,187,867 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit Index begins on page

7574

FORD MOTOR COMPANY

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended ~~June 30, 2019~~March 31, 2020



	Table of Contents	Page
	Part I - Financial Information
Item 1	Financial Statements	1
	Consolidated Statement of Cash Flows	1
	Consolidated Income Statement	12
	Consolidated Statement of Comprehensive Income	12
	Consolidated Balance Sheet	2
	~~Condensed Consolidated Statement of Cash Flows~~	3
	Consolidated Statement of Equity	4
	Notes to the Financial Statements	5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
	~~Overview~~Recent Developments	34
	Results of Operations	36
	Automotive Segment	3938
	Mobility Segment	4844
	Ford Credit Segment	4945
	Corporate Other	5348
	Interest on Debt	53
	~~Special Items~~	5348
	Taxes	5348
	Liquidity and Capital Resources	5449
	Credit Ratings	6358
	Outlook	64
	~~Non-GAAP Financial Measure Reconciliations~~	65
	~~Supplemental Information~~	6859
	Cautionary Note on Forward-Looking Statements	7260
	Non-GAAP Financial Measures That Supplement GAAP Measures	61
	Non-GAAP Financial Measure Reconciliations	63
	Supplemental Information	66
	Critical Accounting Estimates	70
	Accounting Standards Issued But Not Yet Adopted	7370
Item 3	Quantitative and Qualitative Disclosures About Market Risk	7371
Item 4	Controls and Procedures	7371

	Part II - Other Information
Item 1	Legal Proceedings	7472
Item 1A	Risk Factors	73
Item 6	Exhibits	7574
	Signature	7675

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)



	For the periods ended March 31,
	2019			2020
	First Quarter
	(unaudited)
Cash flows from operating activities
Net income/(loss)	$	1,183		$	(1,993	)
Depreciation and tooling amortization	2,429			2,444
Other amortization	(287		)	(302		)
Held-for-sale impairment charges	—			3
Provision for credit and insurance losses	43			598
Pension and other post-retirement employee benefits (“OPEB”) expense/(income)	(18		)	(178		)
Equity investment dividends received in excess of (earnings)/losses	17			118
Foreign currency adjustments	(49		)	338
Net (gain)/loss on changes in investments in affiliates	(3		)	(15		)
Stock compensation	85			38
Provision for deferred income taxes	221			702
Decrease/(Increase) in finance receivables (wholesale and other)	(1,813		)	(1,080		)
Decrease/(Increase) in accounts receivable and other assets	(237		)	39
Decrease/(Increase) in inventory	(1,083		)	(1,177		)
Increase/(Decrease) in accounts payable and accrued and other liabilities	2,944			194
Other	112			(202		)
Net cash provided by/(used in) operating activities	3,544			(473		)

Cash flows from investing activities
Capital spending	(1,633		)	(1,780		)
Acquisitions of finance receivables and operating leases	(12,595		)	(12,184		)
Collections of finance receivables and operating leases	12,336			12,709
Proceeds from sale of business (Note 17)	—			1,340
Purchases of marketable securities and other investments	(3,923		)	(8,244		)
Sales and maturities of marketable securities and other investments	4,441			4,998
Settlements of derivatives	(14		)	131
Other	54			(84		)
Net cash provided by/(used in) investing activities	(1,334		)	(3,114		)

Cash flows from financing activities
Cash payments for dividends and dividend equivalents	(597		)	(596		)
Purchases of common stock	—			—
Net changes in short-term debt	420			(622		)
Proceeds from issuance of long-term debt	15,411			26,691
Principal payments on long-term debt	(13,277		)	(12,948		)
Other	(84		)	(71		)
Net cash provided by/(used in) financing activities	1,873			12,454

Effect of exchange rate changes on cash, cash equivalents, and restricted cash	29			(448		)

Net increase/(decrease) in cash, cash equivalents, and restricted cash	$	4,112		$	8,419

Cash, cash equivalents, and restricted cash at beginning of period (Note 7)	$	16,907		$	17,741
Net increase/(decrease) in cash, cash equivalents, and restricted cash	4,112			8,419
Cash, cash equivalents, and restricted cash at end of period (Note 7)	$	21,019		$	26,160

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENT

(in millions, except per share amounts)


	For the periods ended June 30,								For the periods ended March 31,
	2018		2019		2018		2019		2019		2020
	Second Quarter				First Half				First Quarter
	(unaudited)								(unaudited)
Revenues
Automotive	$	35,905	$	35,758	$	74,917	$	72,997	$	37,239	$	31,340
Ford Credit	3,009		3,089		5,952		6,186		3,097		2,967
Mobility	6		6		10		12		6		13
Total revenues (Note 3)	38,920		38,853		80,879		79,195		40,342		34,320

Costs and expenses
Cost of sales	33,194		33,657		68,947		67,599		33,942		30,522
Selling, administrative, and other expenses	2,778		2,725		5,525		5,568		2,843		2,432
Ford Credit interest, operating, and other expenses	2,362		2,381		4,700		4,736		2,355		2,924
Total costs and expenses	38,334		38,763		79,172		77,903		39,140		35,878
Operating income/(loss)									1,202		(1,558		)

Interest expense on Automotive debt	287		230		562		461		231		214
Interest expense on Other debt	14		14		28		28		14		13

Other income/(loss), net (Note 4)	1,004		272		1,867		900		628		680
Equity in net income of affiliated companies	60		87		284		112
Income before income taxes	1,349		205		3,268		1,815
Equity in net income/(loss) of affiliated companies									25		(41		)
Income/(Loss) before income taxes									1,610		(1,146		)
Provision for/(Benefit from) income taxes	280		55		454		482		427		847
Net income	1,069		150		2,814		1,333
Net income/(loss)									1,183		(1,993		)
Less: Income/(Loss) attributable to noncontrolling interests	3		2		12		39		37		—
Net income attributable to Ford Motor Company	$	1,066	$	148	$	2,802	$	1,294
Net income/(loss) attributable to Ford Motor Company									$	1,146	$	(1,993	)

EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 6)
Basic income	$	0.27	$	0.04	$	0.70	$	0.33
Diluted income	0.27		0.04		0.70		0.32
Basic income/(loss)									$	0.29	$	(0.50	)
Diluted income/(loss)									0.29		(0.50		)

Weighted-average shares used in computation of earnings per share
Basic	3,977		3,984		3,976		3,979
Diluted	3,999		4,013		3,998		4,005
Basic shares									3,973		3,963
Diluted shares									3,997		3,963

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)


	For the periods ended June 30,												For the periods ended March 31,
	2018			2019			2018			2019			2019			2020
	Second Quarter						First Half						First Quarter
	(unaudited)												(unaudited)
Net income	$	1,069		$	150		$	2,814		$	1,333
Other comprehensive income/(loss), net of tax (Note 21)
Net income/(loss)													$	1,183		$	(1,993	)
Other comprehensive income/(loss), net of tax (Note 18)
Foreign currency translation	(595		)	(127		)	(300		)	116			243			(1,453		)
Marketable securities	(8		)	59			(55		)	122			63			14
Derivative instruments	52			117			85			(329		)	(446		)	692
Pension and other postretirement benefits	17			16			25			21			5			14
Total other comprehensive income/(loss), net of tax	(534		)	65			(245		)	(70		)	(135		)	(733		)
Comprehensive income	535			215			2,569			1,263
Comprehensive income/(loss)													1,048			(2,726		)
Less: Comprehensive income/(loss) attributable to noncontrolling interests	4			2			12			39			37			—
Comprehensive income attributable to Ford Motor Company	$	531		$	213		$	2,557		$	1,224
Comprehensive income/(loss) attributable to Ford Motor Company													$	1,011		$	(2,726	)

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)


	December 31, 2018			June 30, 2019			December 31, 2019			March 31, 2020
	(unaudited)						(unaudited)
ASSETS
Cash and cash equivalents (Note 7)	$	16,718		$	22,117		$	17,504		$	25,971
Marketable securities (Note 7)	17,233			15,931			17,147			20,399
Ford Credit finance receivables, net (Note 8)	54,353			53,756
Trade and other receivables, less allowances of $94 and $60	11,195			10,941
Inventories (Note 10)	11,220			12,437
Ford Credit finance receivables, net of allowance for credit losses of $162 and $389 (Note 8)							53,651			54,889
Trade and other receivables, less allowances of $63 and $72							9,237			6,625
Inventories (Note 9)							10,786			11,312
Assets held for sale (Note 17)							2,383			700
Other assets	3,930			3,169			3,339			4,380
Total current assets	114,649			118,351			114,047			124,276

Ford Credit finance receivables, net (Note 8)	55,544			53,875
Net investment in operating leases (Note 11)	29,119			29,798
Ford Credit finance receivables, net of allowance for credit losses of $351 and $842 (Note 8)							53,703			51,141
Net investment in operating leases							29,230			28,514
Net property	36,178			36,581			36,469			35,294
Equity in net assets of affiliated companies	2,709			2,637			2,519			2,275
Deferred income taxes	10,412			10,153			11,863			10,922
Other assets (Note 12 and Note 13)	7,929			10,789
Other assets							10,706			11,728
Total assets	$	256,540		$	262,184		$	258,537		$	264,150

LIABILITIES
Payables	$	21,520		$	22,980		$	20,673		$	18,439
Other liabilities and deferred revenue (Note 14)	20,556			22,503
Automotive debt payable within one year (Note 17)	2,314			2,229
Ford Credit debt payable within one year (Note 17)	51,179			50,492
Other debt payable within one year (Note 17)	—			130
Other liabilities and deferred revenue (Note 12)							22,987			22,674
Automotive debt payable within one year (Note 14)							1,445			1,609
Ford Credit debt payable within one year (Note 14)							52,371			51,303
Other debt payable within one year (Note 14)							130			—
Liabilities held for sale (Note 17)							526			469
Total current liabilities	95,569			98,334			98,132			94,494
Other liabilities and deferred revenue (Note 14)	23,588			24,032
Automotive long-term debt (Note 17)	11,233			11,765
Ford Credit long-term debt (Note 17)	88,887			90,978
Other long-term debt (Note 17)	600			470

Other liabilities and deferred revenue (Note 12)							25,324			25,105
Automotive long-term debt (Note 14)							13,233			28,411
Ford Credit long-term debt (Note 14)							87,658			85,533
Other long-term debt (Note 14)							470			470
Deferred income taxes	597			469			490			439
Total liabilities	220,474			226,048			225,307			234,452

Redeemable noncontrolling interest (Note 20)	100			—

EQUITY
Common Stock, par value $.01 per share (4,011 million shares issued of 6 billion authorized)	40			40
Common Stock, par value $.01 per share (4,023 million shares issued of 6 billion authorized)							40			40
Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized)	1			1			1			1
Capital in excess of par value of stock	22,006			22,111			22,165			22,150
Retained earnings	22,668			22,769			20,320			17,527
Accumulated other comprehensive income/(loss) (Note 21)	(7,366		)	(7,436		)
Accumulated other comprehensive income/(loss) (Note 18)							(7,728		)	(8,461		)
Treasury stock	(1,417		)	(1,388		)	(1,613		)	(1,607		)
Total equity attributable to Ford Motor Company	35,932			36,097			33,185			29,650
Equity attributable to noncontrolling interests	34			39			45			48
Total equity	35,966			36,136			33,230			29,698
Total liabilities and equity	$	256,540		$	262,184		$	258,537		$	264,150

									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 sheet above.
	December 31, 2018		June 30, 2019		December 31, 2019		March 31, 2020
	(unaudited)				(unaudited)
ASSETS
Cash and cash equivalents	$	2,728	$	3,719	$	3,202	$	2,549
Ford Credit finance receivables, net	58,662		58,118		58,478		54,038
Net investment in operating leases	16,332		13,986		14,883		14,410
Other assets	27		8		12		1
LIABILITIES
Other liabilities and deferred revenue	$	24	$	62	$	19	$	110
Debt	53,269		51,791		50,865		48,379

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED STATEMENT OF ~~CASH FLOWS~~EQUITY

(in ~~millions)~~millions, unaudited)

For the periods ended June 30,
2018 2019
First Half
(unaudited)
Cash flows from operating activities
Net cash provided by/(used in) operating activities $ 8,486
$ 10,007

Cash flows from investing activities
Capital spending (3,688 ) (3,553 )
Acquisitions of finance receivables and operating leases (32,273 ) (26,202 )
Collections of finance receivables and operating leases 25,980
24,974
Purchases of marketable securities and other investments (11,725 ) (7,670 )
Sales and maturities of marketable securities and other investments 12,756
8,540
Settlements of derivatives 109
83
Other (181 ) 4
Net cash provided by/(used in) investing activities (9,022 ) (3,824 )

Cash flows from financing activities
Cash payments for dividends and dividend equivalents (1,711 ) (1,196 )
Purchases of common stock (89 ) —
Net changes in short-term debt (1,735 ) 71
Proceeds from issuance of long-term debt 28,135
26,233
Principal payments on long-term debt (25,299 ) (25,767 )
Other (93 ) (149 )
Net cash provided by/(used in) financing activities (792 ) (808 )

Effect of exchange rate changes on cash, cash equivalents, and restricted cash (289 ) 24

Net increase/(decrease) in cash, cash equivalents, and restricted cash $ (1,617 ) $ 5,399

Cash, cash equivalents, and restricted cash at beginning of period (Note 7) $ 18,638
$ 16,907
Net increase/(decrease) in cash, cash equivalents, and restricted cash (1,617 ) 5,399
Cash, cash equivalents, and restricted cash at end of period (Note 7) $ 17,021
$ 22,306



	Equity Attributable to Ford Motor Company
	Capital Stock		Cap. In Excess of Par Value of Stock			Retained Earnings			Accumulated Other Comprehensive Income/(Loss) (Note 18)			Treasury Stock			Total			Equity Attributable to Non-controlling Interests			Total Equity
Balance at December 31, 2018	$	41	$	22,006		$	22,668		$	(7,366	)	$	(1,417	)	$	35,932		$	34		$	35,966
Adoption of accounting standards	—		—			13			—			—			13			—			13
Net income	—		—			1,146			—			—			1,146			37			1,183
Other comprehensive income/(loss), net	—		—			—			(135		)	—			(135		)	—			(135		)
Common stock issued (a)	—		20			—			—			—			20			—			20
Treasury stock/other	—		—			—			—			23			23			(35		)	(12		)
Dividends and dividend equivalents declared ($0.15 per share) (b)	—		—			(601		)	—			—			(601		)	—			(601		)
Balance at March 31, 2019	$	41	$	22,026		$	23,226		$	(7,501	)	$	(1,394	)	$	36,398		$	36		$	36,434

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	—		—			—			—			6			6			3			9
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

__________


(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.

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR COMPANY AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENT OF EQUITY~~

~~(in millions, unaudited)~~

Equity Attributable to Ford Motor Company
Capital Stock
Cap. in
Excess of
Par Value
of Stock
Retained Earnings Accumulated Other Comprehensive Income/(Loss) (Note 21) Treasury Stock Total
Equity
Attributable
to Non-controlling Interests

Total
Equity
Balance at December 31, 2017 $ 41
$ 21,843
$ 21,906
$ (6,959 ) $ (1,253 ) $ 35,578
$ 28
$ 35,606
Net income —
—
1,736
—
—
1,736
9
1,745
Other comprehensive income/(loss), net of tax —
—
—
290
—
290
(1 ) 289
Common stock issued (including share-based compensation impacts) —
(2 ) —
—
—
(2 ) —
(2 )
Treasury stock/other —
—
—
—
(89 ) (89 ) —
(89 )
Cash dividends declared ($0.28 per share of Common and Class B Stock) —
—
(1,113 ) —
—
(1,113 ) —
(1,113 )
Balance at March 31, 2018 $ 41
$ 21,841
$ 22,529
$ (6,669 ) $ (1,342 ) $ 36,400
$ 36
$ 36,436
Net income —
—
1,066
—
—
1,066
3
1,069
Other comprehensive income/(loss), net of tax —
—
—
(535 ) —
(535 ) 1
(534 )
Common stock issued (including share-based compensation impacts) —
112
—
—
—
112
—
112
Treasury stock/other —
—
—
—
—
—
—
—
Dividends and dividend equivalents declared ($0.15 per share of Common and Class B Stock) —
—
(602 ) —
—
(602 ) (12 ) (614 )
Balance at June 30, 2018 $ 41
$ 21,953
$ 22,993
$ (7,204 ) $ (1,342 ) $ 36,441
$ 28
$ 36,469

Equity Attributable to Ford Motor Company
Capital Stock
Cap. in
Excess of
Par Value
of Stock
Retained Earnings Accumulated Other Comprehensive Income/(Loss) (Note 21) Treasury Stock Total
Equity
Attributable
to Non-controlling Interests

Total
Equity
Balance at December 31, 2018 $ 41
$ 22,006
$ 22,668
$ (7,366 ) $ (1,417 ) $ 35,932
$ 34
$ 35,966
Adoption of accounting standards —
—
13
—
—
13
—
13
Net income —
—
1,146
—
—
1,146
37
1,183
Other comprehensive income/(loss), net of tax —
—
—
(135 ) —
(135 ) —
(135 )
Common stock issued (including share-based compensation impacts) —
20
—
—
—
20
—
20
Treasury stock/other —
—
—
—
23
23
(35 ) (12 )
Dividends and dividend equivalents declared ($0.15 per share of Common and Class B Stock) —
—
(601 ) —
—
(601 ) —
(601 )
Balance at March 31, 2019 $ 41
$ 22,026
$ 23,226
$ (7,501 ) $ (1,394 ) $ 36,398
$ 36
$ 36,434
Adoption of accounting standards —
—
—
—
—
—
—
—
Net income —
—
148
—
—
148
2
150
Other comprehensive income/(loss), net of tax —
—
—
65
—
65
—
65
Common stock issued (including share-based compensation impacts) —
85
—
—
—
85
—
85
Treasury stock/other —
—
—
—
6
6
1
7
Dividends and dividend equivalents declared ($0.15 per share of Common and Class B Stock) —
—
(605 ) —
—
(605 ) —
(605 )
Balance at June 30, 2019 $ 41
$ 22,111
$ 22,769
$ (7,436 ) $ (1,388 ) $ 36,097
$ 39
$ 36,136

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents



Footnote		Page
Note 1	Presentation	6
Note 2	New Accounting Standards	7
Note 3	Revenue	98
Note 4	Other Income/(Loss)	109
Note 5	Income Taxes	109
Note 6	Capital Stock and Earnings Per Share	119
Note 7	Cash, Cash Equivalents, and Marketable Securities	1210
Note 8	Ford Credit Finance Receivables and Allowance for Credit Losses	1514
Note 9	~~Ford Credit Allowance for Credit Losses~~Inventories	1820
Note 10	~~Inventories~~	19
~~Note 11~~	~~Net Investment in Operating Leases~~	19
~~Note 12~~	Other Investments	20
Note 1311	Goodwill	20
Note 1412	Other Liabilities and Deferred Revenue	20
Note 1513	Retirement Benefits	21
Note 1614	~~Lease Commitments~~Debt	22
Note 17	~~Debt~~	24
~~Note 18~~15	Derivative Financial Instruments and Hedging Activities	2523
Note 1916	Employee Separation Actions and Exit and Disposal Activities	2725
Note 2017	~~Redeemable Noncontrolling Interest~~Held-for-Sale Operations	2826
Note 2118	Accumulated Other Comprehensive Income/(Loss)	2928
Note 2219	Commitments and Contingencies	3029
Note 2320	Segment Information	32
Note 21	Subsequent Event	33

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.

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, ~~2018~~2019 (“~~2018~~2019 Form 10-K Report”). ~~We reclassified certain prior year amounts~~

Global Pandemic

On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment and mitigation measures. Since then, extraordinary actions have been taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world. These actions include travel bans, quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

Consistent with the actions taken by governmental authorities, in late March 2020, we idled our manufacturing operations in regions around the world, other than China, where manufacturing operations were suspended in January and February, but began resuming operations in March. In addition, nearly all of our non-production employees outside of China are currently working remotely in order to reduce the spread of COVID-19.

To ensure the Company maintains sufficient cash reserves while taking these unprecedented actions in our ~~consolidated~~operations, on March 19, 2020, we announced the suspension of our regular quarterly dividend and fully drew our corporate and supplemental revolving credit facilities for $15.4 billion (see Note 14). To further enhance our liquidity, on April 22, 2020, we issued in the aggregate $8 billion of three-year, five-year, and ten-year public, unsecured debt securities (see Note 21).

The full impact of the COVID-19 pandemic on our full year financial ~~statements~~results will depend on future developments, such as the ultimate duration and scope of the outbreak, its impact on our customers, dealers, and suppliers, the rate at which economic conditions, operations, and demand for our products return to ~~conform~~pre-COVID-19 levels, and the risk of a recession in key markets due to the ~~current~~effects of the pandemic. Although the ultimate impact on Ford cannot be determined at this time, we expect our full year ~~presentation.~~2020 results of operations to be adversely affected.

~~Change in Accounting~~

AsOur first quarter 2020 results include various adjustments to our assets and liabilities made due to the impact of ~~January 1, 2019, we changed our accounting method~~COVID-19, the most significant of which were a valuation allowance of $855 million on certain deferred tax assets (see Note 5), a charge of $486 million to the provision for ~~reporting early termination~~credit losses ~~related to customer defaults~~ on Ford Credit’s ~~operating leases. Previously, we presented the early termination loss reserve on operating leases due~~finance receivables (see Note 8), and approximately $100 million of adjustments to ~~customer default events as part~~net realizable value for certain assets to account for declines in auction values. Our assessments of the ~~allowance for credit losses within~~ ~~Net investment~~effect of COVID-19 on our financial statements, including estimates, are based on a variety of factors and are subject to many uncertainties.

Although the potential magnitude and duration of the business and economic impacts of COVID-19 are uncertain, we believe the phased restart of our manufacturing plants, supply network, and other dependent functions is probable of commencing in ~~operating leases. We now consider~~ the ~~effects~~second quarter of ~~operating lease early terminations when determining depreciation estimates, which are included as part of accumulated depreciation within~~ ~~Net investment in operating leases~~.2020. We believe this, ~~change~~along with our cash on hand at March 31, 2020, funds received in ~~accounting method is preferable as~~April 2020 in connection with our unsecured debt offering, and management's operating plan, will provide sufficient liquidity to fund our operations for at least the ~~characterization~~next twelve months from the issuance of these ~~changes is better reflected as depreciation.~~

We have retrospectively applied this change in accounting method to all prior periods. At December 31, 2018, this reclassification increased accumulated depreciation and decreased allowance for credit losses by $78 million within ~~Net investment in operating leases. This change had no impact on our consolidated income statement, consolidated balance sheet or~~ ~~Net cash provided by/(used in) operating activities~~financial statements. If we experience a significant delay in the ~~consolidated statement~~phased restart of ~~cash flows for the interim periods presented.~~our manufacturing operations, or we are unable to maintain expected levels of production, we may take additional actions, such as further reducing costs or seeking additional financing.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards

Accounting Standards Update (“ASU”) ~~2016-02, Leases~~2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments. On January 1, ~~2019,~~2020, we adopted ~~Accounting Standards Codification 842~~ the new credit loss standardand all of the related amendments, ~~(“new lease standard”) using~~which replaced the ~~modified retrospective method.~~incurred loss impairment method with a method that reflects lifetime expected credit losses. We ~~recognized~~adopted the changes in accounting for credit losses by recognizing the cumulative effect of initially applying the new ~~lease~~credit loss standard as an adjustment to the opening balance of ~~retained earnings.~~Retained earnings. The comparative information has not been restated and continues to be reported under the ~~lease~~ accounting standard in effect for those periods. ~~We do not expect the adoption of the new lease standard to have a material impact to our net income on an ongoing basis.~~

The new lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We elected the practical expedients permitted under the transition guidance of the new standard that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. We did not reassess whether any contracts or land easements entered into prior to adoption are leases or contain leases.

The cumulative effect of the changes made to our consolidated balance sheet at January 1, ~~2019,~~2020, for the adoption of ASU ~~2016-02, Leases~~2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments, was as follows (in millions):


	Balance at December 31, 2018		Adjustments due to ASU 2016-02			Balance at January 1, 2019		Balance at December 31, 2019		Adjustments due to ASU 2016-13			Balance at January 1, 2020
Balance sheet
Assets
Other assets, current	$	3,930	$	(8	)	$	3,922
Other assets, non-current	7,929		1,324			9,253
Ford Credit finance receivables, net, current								$	53,651	$	(69	)	$	53,582
Trade and other receivables, net								9,237		(3		)	9,234
Ford Credit finance receivables, net, non-current								53,703		(183		)	53,520
Equity in net assets of affiliated companies								2,519		(7		)	2,512
Deferred income taxes	10,412		(4		)	10,408		11,863		2			11,865
Liabilities
Other liabilities and deferred revenue, current	20,556		316			20,872
Other liabilities and deferred revenue, non-current	23,588		983			24,571
Deferred income taxes								490		(58		)	432
Equity
Retained earnings	22,668		13			22,681		20,320		(202		)	20,118

We also adopted the following ASUs ~~effective January 1, 2019,~~during 2020, none of which had a material impact to our consolidated financial statements or financial statement disclosures:



ASU		Effective Date
~~2018-17~~2020-01	~~Targeted Improvements to Related Party Guidance for Variable Interest Entities~~Clarifying the Interaction between Equity Securities, Equity Method and Joint Ventures, and Derivatives and Hedging	January 1, ~~2019~~2020
~~2018-16~~2018-18	~~Inclusion of~~Clarifying the ~~Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes~~Interaction between Collaborative Arrangements and Revenue from Contracts with Customers	January 1, ~~2019~~2020
~~2018-13~~2018-15	~~Fair Value Measurement - Changes to the Disclosure Requirements~~Customer’s Accounting for ~~Fair Value Measurement~~Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract	January 1, ~~2019~~
~~2018-08~~	~~Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made~~	~~January 1, 2019~~
~~2018-07~~	~~Stock Compensation - Improvements to Nonemployee Share-Based Payment Accounting~~	~~January 1, 2019~~
~~2018-02~~	~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (a)~~	~~January 1, 2019~~2020

~~__________~~

~~(a) Ford did not elect to reclassify the income tax effects of the Tax Cuts and Jobs Act from~~ ~~Accumulated other comprehensive income/(loss)~~ to ~~Retained earnings~~.

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR COMPANY AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 2. NEW ACCOUNTING STANDARDS~~ ~~(Continued)~~

Accounting Standards Issued But Not Yet Adopted

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

~~ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments~~. In June 2016, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard which replaces the current incurred loss impairment method with a method that reflects expected credit losses. We plan to adopt the new standard and the related amendments on the effective date of January 1, 2020, by recognizing the cumulative effect of initially applying the new standard as an adjustment to the opening balance of ~~Retained earnings. We anticipate adoption will increase the amount of expected credit losses reported in~~ ~~Ford Credit finance receivables, net~~ ~~on our consolidated balance sheet and do not expect a material impact to our consolidated income statement.~~

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. REVENUE

The following table disaggregates our revenue by major source for the periods ended ~~June 30~~March 31 (in millions):

Second Quarter 2018
Automotive Mobility Ford Credit Consolidated
Vehicles, parts, and accessories $ 34,569
$ —
$ —
$ 34,569
Used vehicles 655
—
—
655
Extended service contracts 328
—
—
328
Other revenue 210
6
58
274
Revenues from sales and services 35,762
6
58
35,826

Leasing income 143
—
1,443
1,586
Financing income —
—
1,465
1,465
Insurance income —
—
43
43
Total revenues $ 35,905
$ 6
$ 3,009
$ 38,920

Second Quarter 2019
Automotive Mobility Ford Credit Consolidated
Vehicles, parts, and accessories $ 34,235
$ —
$ —
$ 34,235
Used vehicles 842
—
—
842
Extended service contracts 348
—
—
348
Other revenue 219
6
55
280
Revenues from sales and services 35,644
6
55
35,705

Leasing income 114
—
1,472
1,586
Financing income —
—
1,521
1,521
Insurance income —
—
41
41
Total revenues $ 35,758
$ 6
$ 3,089
$ 38,853

First Half 2018
Automotive Mobility Ford Credit Consolidated
Vehicles, parts, and accessories $ 71,986
$ —
$ —
$ 71,986
Used vehicles 1,583
—
—
1,583
Extended service contracts 657
—
—
657
Other revenue 429
10
113
552
Revenues from sales and services 74,655
10
113
74,778

Leasing income 262
—
2,858
3,120
Financing income —
—
2,897
2,897
Insurance income —
—
84
84
Total revenues $ 74,917
$ 10
$ 5,952
$ 80,879

First Half 2019
Automotive Mobility Ford Credit Consolidated
Vehicles, parts, and accessories $ 69,811
$ —
$ —
$ 69,811
Used vehicles 1,862
—
—
1,862
Extended service contracts 681
—
—
681
Other revenue 432
12
106
550
Revenues from sales and services 72,786
12
106
72,904

Leasing income 211
—
2,949
3,160
Financing income —
—
3,049
3,049
Insurance income —
—
82
82
Total revenues $ 72,997
$ 12
$ 6,186
$ 79,195

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR COMPANY AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 3. REVENUE~~ ~~(Continued)~~



	First Quarter 2019
	Automotive		Mobility		Ford Credit		Consolidated
Vehicles, parts, and accessories	$	35,576	$	—	$	—	$	35,576
Used vehicles	1,020		—		—		1,020
Extended service contracts	333		—		—		333
Other revenue	213		6		51		270
Revenues from sales and services	37,142		6		51		37,199

Leasing income	97		—		1,477		1,574
Financing income	—		—		1,528		1,528
Insurance income	—		—		41		41
Total revenues	$	37,239	$	6	$	3,097	$	40,342

	First Quarter 2020
	Automotive		Mobility		Ford Credit		Consolidated
Vehicles, parts, and accessories	$	29,841	$	—	$	—	$	29,841
Used vehicles	931		—		—		931
Extended service contracts	364		—		—		364
Other revenue	146		13		41		200
Revenues from sales and services	31,282		13		41		31,336

Leasing income	58		—		1,459		1,517
Financing income	—		—		1,425		1,425
Insurance income	—		—		42		42
Total revenues	$	31,340	$	13	$	2,967	$	34,320

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 ~~and returns~~ 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 related to revenue recognized in prior periods of ~~$220~~$481 million and ~~$350~~$885 million in the ~~second~~first quarter of ~~2018~~2019 and ~~2019,~~2020, respectively. 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.

We sell separately-priced service contracts that extend mechanical and maintenance coverages beyond our base warranty agreements to vehicle owners (“extended service contracts”). ~~At December 31, 2017~~ We had a balance of $4.2 billionand ~~December 31, 2018, $3.8~~$4.1 billion ~~and $4 billion, respectively,~~ of unearned revenue associated with outstanding contracts ~~was~~ reported in Other liabilities and deferred ~~revenue.~~ ~~We recognized~~revenue ~~$269 million~~at December 31, 2019 and ~~$285 million of the unearned amounts as revenue during the second quarter of 2018 and 2019,~~March 31, 2020, respectively ~~and $567 million and $590 million in the first half of 2018 and 2019, respectively. At June 30, 2019, the unearned amount was $4 billion~~.We expect to recognize approximately ~~$600 million~~$1 billion of the unearned amount in the remainder of ~~2019,~~2020, $1.1 billion in ~~2020,~~2021, and ~~$2.3~~$2 billion thereafter. We recognized$305 million and $330 million of unearned amounts as revenue during the first quarter of 2019 and 2020, respectively.

Amounts paid to dealers to obtain these contracts are deferred and recorded as Other assets. We had a balance of ~~$247~~$270 million and ~~$258~~$280 million in deferred costs as of December 31, ~~2018~~2019 and ~~June 30, 2019, respectively, and~~March 31, 2020, respectively. We recognized $19 million and $20 million of amortization during the ~~second~~first quarter of ~~2018~~2019 and ~~2019, respectively, and $37 million and $39 million in the first half of 2018 and 2019,~~2020, respectively.

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 ~~June 30~~March 31 were as follows (in millions):


	Second Quarter					First Half					First Quarter
	2018		2019			2018		2019			2019			2020
Net periodic pension and other postretirement employee benefits (OPEB) income/(cost), excluding service cost	$	429	$	111		$	906	$	383
Net periodic pension and OPEB income/(cost), excluding service cost											$	272		$	451
Investment-related interest income	167		207			313		410			203			162
Interest income/(expense) on income taxes	32		(1		)	33		(21		)	(20		)	(23		)
Realized and unrealized gains/(losses) on cash equivalents, marketable securities, and other investments	217		(187		)	212		(120		)	67			(32		)
Gains/(Losses) on changes in investments in affiliates	—		(1		)	58		2			3			15
Gains/(Losses) on extinguishment of debt	—		(53		)	—		(53		)
Royalty income	129		108			272		192			84			89
Other	30		88			73		107			19			18
Total	$	1,004	$	272		$	1,867	$	900		$	628		$	680

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.

~~Item 1. Financial Statements (Continued)~~During the first quarter of 2020, based on all available evidence, we established an $855 million valuation allowance against certain tax credits as it is more likely than not that these deferred tax assets will not be realized. In assessing the realizability of deferred tax assets, we have changed our priorities due to the effects of COVID-19 on our operations. We are currently prioritizing preservation of near-term cash in-lieu of long-term planning actions, which could have resulted in cash outlays to preserve some of our tax credits.

~~FORD MOTOR COMPANY AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

NOTE 6. CAPITAL STOCK AND EARNINGS PER SHARE

Earnings Per Share Attributable to Ford Motor Company Common and Class B Stock

Basic and diluted ~~income~~income/(loss) per share were calculated using the following (in millions):


	Second Quarter				First Half				First Quarter
	2018		2019		2018		2019		2019		2020
Basic and Diluted Income Attributable to Ford Motor Company
Basic income	$	1,066	$	148	$	2,802	$	1,294
Diluted income	1,066		148		2,802		1,294
Basic and Diluted Income/(Loss) Attributable to Ford Motor Company
Basic income/(loss)									$	1,146	$	(1,993	)
Diluted income/(loss)									1,146		(1,993		)

Basic and Diluted Shares
Basic shares (average shares outstanding)	3,977		3,984		3,976		3,979		3,973		3,963
Net dilutive options, unvested restricted stock units, and unvested restricted stock shares(a)	22		29		22		26		24		—
Diluted shares	3,999		4,013		3,998		4,005		3,997		3,963

__________


(a)	Not included in the calculation of diluted earnings per share, due to their antidilutive effect, are 30 million shares for the first quarter of 2020.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

Cash Equivalents

Cash and cash equivalents are highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of change in value due to interest rate, quoted price, or penalty on withdrawal. A debt security is classified as a cash equivalent if it meets these criteria and if it has a remaining time to maturity of three months or less from the date of acquisition. Amounts on deposit and available upon demand, or negotiated to provide for daily liquidity without penalty, are classified as cash and cash equivalents. Time deposits, certificates of deposit, and money market accounts that meet the above criteria are reported at par value on our consolidated balance sheet.

Marketable Securities

Investments in securities with a maturity date greater than three months at the date of purchase, and other securities for which there is more than an insignificant risk of change in value due to interest rate, quoted price, or penalty on withdrawal, are classified as marketable securities.

Realized gains and losses and interest income on all of our marketable securities and unrealized gains and losses on securities not classified as available for sale are recorded in Other income/(loss), net. Unrealized gains and losses on available-for-sale securities are recognized in Unrealized gains and losses on securities, a component of Other comprehensive income/(loss), net of tax. Realized gains and losses and reclassifications of accumulated other comprehensive income into net income are measured using the specific identification method.

On a quarterly basis, we review our available-for-sale securities for credit losses. We compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, we determine if a credit loss allowance is necessary. If a credit loss allowance is necessary, we will record an allowance, limited by the amount that fair value is less than the amortized cost basis, and recognize the corresponding charge in Other income/(loss), net. Factors we consider to make such determination include the severity of the impairment, the reason for the decline in value, interest rate changes, and counterparty long-term ratings.

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 fair values of cash, cash equivalents, and marketable securities measured at fair value on a recurring basis were as follows (in millions):


		December 31, 2018									December 31, 2019
	Fair Value Level	Automotive		Mobility		Ford Credit		Consolidated		Fair Value Level	Automotive		Mobility		Ford Credit		Consolidated
Cash and cash equivalents
U.S. government	1	$	220	$	—	$	139	$	359	1	$	520	$	—	$	—	$	520
U.S. government agencies	2	496		—		25		521		2	125		—		—		125
Non-U.S. government and agencies	2	169		—		114		283		2	601		—		350		951
Corporate debt	2	174		—		884		1,058		2	642		—		604		1,246
Total marketable securities classified as cash equivalents		1,059		—		1,162		2,221			1,888		—		954		2,842
Cash, time deposits, and money market funds		5,999		53		8,445		14,497			6,432		117		8,113		14,662
Total cash and cash equivalents		$	7,058	$	53	$	9,607	$	16,718		$	8,320	$	117	$	9,067	$	17,504

Marketable securities
U.S. government	1	$	3,014	$	—	$	289	$	3,303	1	$	2,930	$	—	$	195	$	3,125
U.S. government agencies	2	1,953		—		65		2,018		2	1,548		—		210		1,758
Non-U.S. government and agencies	2	4,674		—		610		5,284		2	4,217		—		2,408		6,625
Corporate debt	2	5,614		—		198		5,812		2	4,802		—		193		4,995
Equities (a)	1	424		—		—		424		1	81		—		—		81
Other marketable securities	2	246		—		146		392		2	273		—		290		563
Total marketable securities		$	15,925	$	—	$	1,308	$	17,233		$	13,851	$	—	$	3,296	$	17,147

Restricted cash		$	16	$	33	$	140	$	189		$	15	$	21	$	139	$	175

Cash, cash equivalents, and restricted cash in held-for-sale assets											$	—	$	—	$	62	$	62

		June 30, 2019									March 31, 2020
	Fair Value Level	Automotive		Mobility		Ford Credit		Consolidated		Fair Value Level	Automotive		Mobility		Ford Credit		Consolidated
Cash and cash equivalents
U.S. government	1	$	1,245	$	—	$	575	$	1,820	1	$	3,150	$	—	$	825	$	3,975
U.S. government agencies	2	881		—		849		1,730		2	3,024		—		200		3,224
Non-U.S. government and agencies	2	1,199		—		875		2,074		2	795		—		378		1,173
Corporate debt	2	497		—		907		1,404		2	480		—		598		1,078
Total marketable securities classified as cash equivalents		3,822		—		3,206		7,028			7,449		—		2,001		9,450
Cash, time deposits, and money market funds		5,559		118		9,412		15,089			8,799		95		7,627		16,521
Total cash and cash equivalents		$	9,381	$	118	$	12,618	$	22,117		$	16,248	$	95	$	9,628	$	25,971

Marketable securities
U.S. government	1	$	2,420	$	—	$	338	$	2,758	1	$	4,772	$	—	$	294	$	5,066
U.S. government agencies	2	1,654		—		135		1,789		2	3,985		—		160		4,145
Non-U.S. government and agencies	2	4,145		—		1,349		5,494		2	3,787		—		1,520		5,307
Corporate debt	2	4,962		—		200		5,162		2	5,094		—		199		5,293
Equities (a)	1	277		—		—		277		1	41		—		—		41
Other marketable securities	2	226		—		225		451		2	267		—		280		547
Total marketable securities		$	13,684	$	—	$	2,247	$	15,931		$	17,946	$	—	$	2,453	$	20,399

Restricted cash		$	41	$	24	$	124	$	189		$	18	$	21	$	150	$	189

Cash, cash equivalents, and restricted cash in held-for-sale assets											$	—	$	—	$	—	$	—

__________

(a) Net unrealized gains/losses incurred during the reporting periods on ~~equities were a $25 million gain and a $147 million loss~~equity securities still held at December 31, ~~2018~~2019 and ~~June 30, 2019,~~March 31, 2020 were a $44 million loss and a $38 million loss, respectively.

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”) ~~debt~~ securities were as follows (in millions):


	December 31, 2018															December 31, 2019
										Fair Value of Securities with Contractual Maturities															Fair Value of Securities with Contractual Maturities
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Within 1 Year		After 1 Year through 5 Years		After 5 Years		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Within 1 Year		After 1 Year through 5 Years		After 5 Years
Automotive
U.S. government	$	2,933	$	5	$	(10	)	$	2,928	$	1,714	$	1,214	$	—	$	2,839	$	11	$	(1	)	$	2,849	$	1,028	$	1,772	$	49
U.S. government agencies	1,920		—		(18		)	1,902		797		1,087		18		1,445		2		(1		)	1,446		830		589		27
Non-U.S. government and agencies	3,841		4		(37		)	3,808		194		3,614		—		3,925		20		(1		)	3,944		1,546		2,398		—
Corporate debt	4,010		3		(33		)	3,980		1,148		2,830		2		5,029		53		—			5,082		1,837		3,245		—
Other marketable securities	207		—		—			207		1		134		72		230		1		—			231		—		149		82
Total	$	12,911	$	12	$	(98	)	$	12,825	$	3,854	$	8,879	$	92	$	13,468	$	87	$	(3	)	$	13,552	$	5,241	$	8,153	$	158

	June 30, 2019															March 31, 2020
										Fair Value of Securities with Contractual Maturities															Fair Value of Securities with Contractual Maturities
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Within 1 Year		After 1 Year through 5 Years		After 5 Years		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Within 1 Year		After 1 Year through 5 Years		After 5 Years
Automotive
U.S. government	$	2,360	$	13	$	—		$	2,373	$	1,423	$	945	$	5	$	2,598	$	71	$	—		$	2,669	$	574	$	2,033	$	62
U.S. government agencies	1,660		2		(3		)	1,659		963		687		9		1,329		14		—			1,343		444		822		77
Non-U.S. government and agencies	3,736		19		(3		)	3,752		882		2,865		5		3,625		55		(1		)	3,679		1,594		2,085		—
Corporate debt	4,850		45		(1		)	4,894		1,699		3,177		18		5,197		23		(55		)	5,165		1,845		3,293		27
Other marketable securities	186		2		(1		)	187		—		105		82		227		—		(4		)	223		—		153		70
Total	$	12,792	$	81	$	(8	)	$	12,865	$	4,967	$	7,779	$	119	$	12,976	$	163	$	(60	)	$	13,079	$	4,457	$	8,386	$	236

Sales proceeds and gross realized gains/losses from the sale of AFS ~~debt~~ securities for the periods ended ~~June 30~~March 31 were as follows (in millions):


	Second Quarter				First Half				First Quarter
	2018		2019		2018		2019		2019		2020
Automotive
Sales proceeds	$	1,507	$	1,858	$	2,846	$	3,000	$	1,142	$	1,865
Gross realized gains	1		3		1		5		2		7
Gross realized losses	5		5		11		10		5		7

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 ~~debt~~ 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, 2018
	Less than 1 Year					1 Year or Greater					Total					December 31, 2019
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Less than 1 Year					1 Year or Greater					Total
																Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Automotive
U.S. government	$	199	$	(1	)	$	1,637	$	(9	)	$	1,836	$	(10	)	$	183	$	(1	)	$	50	$	—		$	233	$	(1	)
U.S. government agencies	193		(1		)	1,596		(17		)	1,789		(18		)	370		(1		)	344		—			714		(1		)
Non-U.S. government and agencies	341		(1		)	2,445		(36		)	2,786		(37		)	463		—			390		(1		)	853		(1		)
Corporate debt	1,816		(16		)	856		(17		)	2,672		(33		)	29		—			53		—			82		—
Other marketable securities	125		—			—		—			125		—			59		—			17		—			76		—
Total	$	2,674	$	(19	)	$	6,534	$	(79	)	$	9,208	$	(98	)	$	1,104	$	(2	)	$	854	$	(1	)	$	1,958	$	(3	)

	June 30, 2019															March 31, 2020
	Less than 1 Year					1 Year or Greater					Total					Less than 1 Year					1 Year or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Automotive
U.S. government	$	183	$	—		$	249	$	—		$	432	$	—		$	—	$	—		$	—	$	—		$	—	$	—
U.S. government agencies	85		—			959		(3		)	1,044		(3		)	70		—			42		—			112		—
Non-U.S. government and agencies	27		—			1,076		(3		)	1,103		(3		)	377		(1		)	25		—			402		(1		)
Corporate debt	82		—			379		(1		)	461		(1		)	2,023		(54		)	24		(1		)	2,047		(55		)
Other marketable securities	10		—			20		(1		)	30		(1		)	160		(3		)	20		(1		)	180		(4		)
Total	$	387	$	—		$	2,683	$	(8	)	$	3,070	$	(8	)	$	2,630	$	(58	)	$	111	$	(2	)	$	2,741	$	(60	)

We determine credit losses on cash equivalents and marketable securities using the specific identification method. During the first ~~half~~quarter of ~~2018 and 2019,~~2020, we did not recognize any ~~other-than-temporary impairment~~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 statement of cash flows, were as follows (in millions):


	December 31, 2018		June 30, 2019		December 31, 2019		March 31, 2020
Cash and cash equivalents	$	16,718	$	22,117	$	17,504	$	25,971
Restricted cash (a)	189		189		175		189
Cash, cash equivalents, and restricted cash in held-for-sale assets					62		—
Total cash, cash equivalents, and restricted cash	$	16,907	$	22,306	$	17,741	$	26,160

__________


(a)	Included in Other assets in the non-current assets section of our consolidated balance sheet.

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.

~~Finance~~Ford Credit finance receivables, net were as follows (in millions):


	December 31, 2018			June 30, 2019			December 31, 2019			March 31, 2020
Consumer
Retail installment contracts, gross	$	70,874		$	68,737		$	68,905		$	66,116
Finance leases, gross	8,748			8,983			8,566			8,107
Retail financing, gross	79,622			77,720			77,471			74,223
Unearned interest supplements	(3,508		)	(3,512		)	(3,589		)	(3,402		)
Consumer finance receivables	76,114			74,208			73,882			70,821
Non-Consumer
Dealer financing	34,372			33,936			33,985			36,440
Non-Consumer finance receivables	34,372			33,936			33,985			36,440
Total recorded investment	$	110,486		$	108,144		$	107,867		$	107,261

Recorded investment in finance receivables	$	110,486		$	108,144		$	107,867		$	107,261
Allowance for credit losses	(589		)	(513		)	(513		)	(1,231		)
Finance receivables, net	$	109,897		$	107,631		$	107,354		$	106,030

Current portion	$	54,353		$	53,756		$	53,651		$	54,889
Non-current portion	55,544			53,875			53,703			51,141
Finance receivables, net	$	109,897		$	107,631
Total finance receivables, net							$	107,354		$	106,030

Net finance receivables subject to fair value (a)	$	101,471		$	99,010		$	99,168		$	98,332
Fair value (b)	100,877			99,142			99,297			98,513

__________


(a)	Net finance receivables subject to fair value exclude finance leases. Previously, certain consumer financing products in Europe were classified as retail installment contracts. We now classify these products as finance leases. Comparative information has been revised to reflect this change.


(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. Ford Credit offers finance leases to individuals, leasing companies, government entities, daily rental companies, and fleet customers. These financings include primarily lease plans for terms of 24 to 60 months. Financing revenue from finance leases for the ~~second~~first quarter of ~~2018~~2019 and ~~2019~~2020 was $92 million and $95 million, ~~and $97 million,~~ respectively, and ~~for the~~ ~~first half~~ ~~of 2018 and 2019 was $190 million and $189 million, respectively. Financing revenue from finance leases~~ is included in Ford Credit revenues on ~~the~~our consolidated income statement.

~~The amounts contractually due on Ford Credit’s finance lease receivables were as follows (in millions):~~

June 30,
2019
Within one year $ 2,075
After one year and within two years 2,005
After two years and within three years 1,599
After three years and within four years 708
After four years and within five years 120
After five years 2
Total future cash payments 6,509
Less: Present value discount (313 )
Finance lease receivables $ 6,196

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR COMPANY AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 8. FORD CREDIT FINANCE RECEIVABLES~~ ~~(Continued)~~

~~The reconciliation from finance lease receivables to finance leases, gross and finance leases, net is as follows (in millions):~~

June 30,
2019
Finance lease receivables $ 6,196
Unguaranteed residual assets 2,661
Initial direct costs 126
Finance leases, gross 8,983
Unearned interest supplements from Ford and affiliated companies (345 )
Allowance for credit losses (17 )
Finance leases, net $ 8,621

At December 31, ~~2018~~2019 and ~~June 30, 2019,~~March 31, 2020, accrued ~~uncollected~~ interest was ~~$264~~$251 million and ~~$262~~$239 million, respectively, which ~~is reported~~we report in Other assets in the current assets section of our consolidated balance sheet.

Included in the recorded investment in finance receivables at December 31, ~~2018~~2019 and ~~June 30, 2019,~~March 31, 2020, were consumer receivables of ~~$40.7~~$38.3 billion and ~~$39.3~~$37 billion,, respectively, and non-consumer receivables of ~~$25.7~~$26.8 billion and ~~$25.1~~$25.7 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.

~~Aging~~

~~For all~~The value of 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. The recorded investment of consumer receivables greater than 90 days past due and still accruing interest was $20 million~~considered held for sale at December 31, ~~2018.~~2019 was $1.5 billion, primarily made up of $1.2 billion of Forso Nordic AB (“Forso”) finance receivables. At ~~June 30, 2019,~~March 31, 2020, there were ~~no balances greater than 90 days past due that are still accruing interest.~~

~~The aging analysis~~$36 million of ~~Ford Credit’s~~certain wholesale finance receivables ~~balances was~~specifically identified as ~~follows (in millions):~~

December 31,
2018 June 30,
2019
Consumer
31-60 days past due $ 859
$ 662
61-90 days past due 123
103
91-120 days past due 39
31
Greater than 120 days past due 39
39
Total past due 1,060
835
Current 75,054
73,373
Consumer finance receivables 76,114
74,208
Non-Consumer
Total past due 76
70
Current 34,296
33,866
Non-Consumer finance receivables 34,372
33,936
Total recorded investment $ 110,486
$ 108,144

held for sale. These held-for-sale values are reported in
Assets held for sale on our consolidated balance sheet. See Note 17 for more information.

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 aging. 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, 2019 was as follows (in millions):



	Total
Consumer
31 - 60 days past due	$	839
61 - 120 days past due	166
Greater than 120 days past due	35
Total past due	1,040
Current	72,842
Total	$	73,882

The credit quality analysis of consumer receivables at March 31, 2020 was as follows (in millions):



	Amortized Cost Basis by Origination Year
	Prior to 2016		2016		2017		2018		2019		2020		Total
Consumer
31 - 60 days past due	$	79	$	95	$	139	$	185	$	143	$	10	$	651
61 - 120 days past due	13		21		36		43		35		1		149
Greater than 120 days past due	16		7		6		6		2		—		37
Total past due	108		123		181		234		180		11		837
Current	2,181		5,080		11,048		19,267		26,210		6,198		69,984
Total	$	2,289	$	5,203	$	11,229	$	19,501	$	26,390	$	6,209	$	70,821

Non-Consumer Portfolio. 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.The credit quality of dealer financing receivables is evaluated based on an internal dealer risk rating analysis.

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.

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, 2019 was as follows (in millions):

December 31,
2018 June 30,
2019
Dealer Financing
Group I $ 27,032
$ 26,333
Group II 5,635
6,020
Group III 1,576
1,468
Group IV 129
115
Total recorded investment $ 34,372
$ 33,936



	Total
Dealer financing
Group I	$	26,281
Group II	5,407
Group III	2,108
Group IV	189
Total (a)	$	33,985

__________


(a)	Total past due dealer financing receivables at December 31, 2019 were $62 million.

The credit quality analysis of dealer financing receivables at March 31, 2020 was as follows (in millions):



	Amortized Cost Basis by Origination Year														Wholesale Loans
	Dealer Loans
	Prior to 2016		2016		2017		2018		2019		2020		Total				Total
Group I	$	676	$	147	$	154	$	276	$	120	$	122	$	1,495	$	26,774	$	28,269
Group II	31		30		28		14		24		45		172		5,886		6,058
Group III	9		—		4		17		22		17		69		1,943		2,012
Group IV	2		1		—		—		2		4		9		92		101
Total (a)	$	718	$	178	$	186	$	307	$	168	$	188	$	1,745	$	34,695	$	36,440

__________


(a)	Total past due dealer financing receivables at March 31, 2020 were $34 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.

~~Impaired Receivables.~~Troubled Debt Restructuring (“TDR”). ~~Impaired consumer~~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 ~~include accounts~~ that have ~~been rewritten~~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 ~~Troubled Debt Restructurings (“TDRs”)~~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.

Ford Credit has offered several programs to provide relief to customers and dealers during the COVID-19 pandemic. These programs, which were broadly available to customers and dealers, included payment extensions. Ford Credit concluded that these programs did not meet TDR criteria.

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)

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.

Additions to the allowance for credit losses are made by recording charges toFord Credit interest, operating, and other expenses on our consolidated income statement. The uncollectible portion of finance receivables are 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.

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 sheet.

Consumer Portfolio

Receivables in this portfolio include products offered to individuals and businesses that finance the acquisition of Ford and Lincoln vehicles from dealers for personal or commercial use. Retail financing includes retail installment contracts for new and used vehicles and finance leases with retail customers, government entities, daily rental companies, and fleet customers.

For consumer receivables that share similar risk characteristics such as product type, initial credit risk, term, vintage, geography, and other relevant factors, Ford Credit estimates the lifetime expected credit loss allowance based on a collective assessmentusing measurement models and management judgment. The lifetime expected credit losses for the receivables is determined by applying probability of default and loss given default models to monthly expected exposures, then discounting these cash flows to present value using the receivable’s original effective interest rate or the current effective interest rate for a variable rate receivable. Probability of default models are developed from internal risk scoring models taking into account the expected probability of payment and time to default, adjusted for macroeconomic outlook and recent performance. The models consider factors such as risk evaluation at the time of origination, historical trends in credit losses (which include the impact of TDRs), and the composition and recent performance of the present portfolio (including vehicle brand, term, risk evaluation, and new / used vehicles). The loss given default is the percentage of the expected balance due at default that is not recoverable, taking into account the expected collateral value and trends in recoveries (including key metrics such as delinquencies, repossessions, and bankruptcies). Monthly exposures are equal to the receivables’ expected outstanding principal and interest balance.

The loss allowance incorporates forward-looking macroeconomic conditions for baseline, upturn, and downturn scenarios. Three separate credit loss allowances are calculated from these scenarios. They are then probability-weighted to determine the credit loss allowance recognized in the financial statements. Ford Credit uses forecasts from a third party that revert to a long-term historical average after a reasonable and supportable forecasting period, which is specific to the particular macroeconomic variable and which varies by market. Ford Credit updates the forward-looking macroeconomic forecasts quarterly.

If management does not believe these models reflect lifetime expected credit losses for the portfolio, an adjustment is made to reflect management judgment regarding observable changes in recent or expected economic trends and conditions, portfolio composition, and other relevant factors.

On an ongoing basis, Ford Credit reviews its models, including macroeconomic factors, the selection of macroeconomic scenarios, and their weighting, to ensure they reflect the risk of the portfolio.

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)

Non-Consumer Portfolio

Dealer financing includes wholesale loans to dealers to finance vehicle inventory, also known as floorplan financing, as well as ~~all accounts greater than~~ ~~120 days~~ ~~past due. Impaired non-consumer~~loans to dealers to finance working capital, improvements to dealership facilities, to finance purchase of dealership real estate, and to finance other dealer programs.

Dealer financing is evaluated on an individual dealer basis by segmenting dealers by risk characteristics (such as the amount of the loans, the nature of the collateral, financial status of the dealer, and TDR modifications) to determine if an individual dealer requires a specific allowance for credit loss. If required, the allowance is based on the present value of the expected future cash flows of the dealer’s receivables ~~represent accounts with dealers that have weak~~discounted at the loans’ original effective interest rate or ~~poor financial metrics or~~the fair value of the collateral adjusted for estimated costs to sell.

For the remaining dealer financing, ~~that has been modified in TDRs.~~Ford Credit estimates an allowance for credit losses on a collective basis.

Wholesale Loans. Ford Credit estimates the allowance for credit losses for wholesale loans based on historical loss-to-receivable (LTR) ratios, expected future cash flows, and the fair value of collateral. For wholesale loans with similar risk characteristics, the allowance for credit losses is estimated on a collective basis using the LTR model and management judgment. The ~~recorded investment~~LTR model is based on the most recent years of ~~consumer receivables that were impaired at December 31, 2018 and June 30, 2019 was $370 million and~~ ~~$337 million~~history. An LTR is calculated by dividing credit losses (i.e., ~~or 0.5% and~~ ~~0.5%~~charge-offs net of ~~consumer receivables, respectively. The recorded investment of non-consumer receivables that were impaired at December 31, 2018 and June 30, 2019 was $129 million and~~ ~~$115 million, or 0.4% and~~ ~~0.3%~~ ~~of non-consumer receivables, respectively. Impaired~~recoveries) by average net finance receivables, excluding unearned interest supplements and allowance for credit losses. The average LTR is multiplied by the end-of-period balances, representing the lifetime expected credit loss reserve.

Dealer Loans. Ford Credit uses a weighted-average remaining maturity method to estimate the lifetime expected credit loss reserve for dealer loans. The loss model is based on the industry-wide commercial real estate credit losses, adjusted to factor in the historical credit losses for the dealer loans portfolio. The expected credit loss is calculated under different economic scenarios and are ~~evaluated both collectively~~weighted to provide the total lifetime expected credit loss.

After establishing the collective and ~~specifically.~~specific allowance for credit losses, if management believes the allowance does not reflect all losses inherent in the portfolio due to changes in recent economic trends and conditions, or other relevant forward-looking economic factors, an adjustment is made based on management judgment.

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)

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 2019 (a)
	Consumer			Non-Consumer			Total
Allowance for credit losses
Beginning balance	$	566		$	23		$	589
Charge-offs	(137		)	(17		)	(154		)
Recoveries	43			2			45
Provision for credit losses	24			9			33
Other	—			—			—
Ending balance	$	496		$	17		$	513



	First Quarter 2020
	Consumer			Non-Consumer			Total
Allowance for credit losses
Beginning balance	$	496		$	17		$	513
Adoption of ASU 2016-13 (b)	247			5			252
Charge-offs	(145		)	(1		)	(146		)
Recoveries	43			2			45
Provision for credit losses	534			52			586
Other (c)	(18		)	(1		)	(19		)
Ending balance	$	1,157		$	74		$	1,231

__________


(a)	The comparative information has not been restated and continues to be reported under the accounting standard in effect during 2019.


(b)	Cumulative pre-tax adjustments recorded to retained earnings as of January 1, 2020. See Note 2 for additional information.


(c)	Primarily represents amounts related to translation adjustments.

During the first quarter of 2020, the allowance for credit losses increased $718 million reflecting an increase to the reserve of $252 million related to the adoption of ASU 2016-13 and an increase of $486 million primarily attributable to COVID-19, offset by a decrease for translation adjustments. The economic uncertainty, along with government mandated stay-at-home orders, which resulted in extensive temporary closures of businesses and drove a significant increase in unemployment, is expected to increase the probability of default and loss given default rates in the consumer portfolio over the next twelve months, especially in the United States. These economic trends and conditions are also expected to negatively impact the dealers. While we anticipate government relief programs, Ford Credit’s customer payment deferral programs, and dealer support actions to mitigate these impacts, the overall result on credit losses is expected to be adverse.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. ~~FORD CREDIT ALLOWANCE FOR CREDIT LOSSES~~

~~An analysis of the allowance for credit losses related to finance receivables for the periods ended June 30 was as follows (in millions):~~

Second Quarter 2018 First Half 2018
Consumer Non-Consumer Total Consumer Non-Consumer Total
Allowance for credit losses
Beginning balance $ 584
$ 16
$ 600
$ 582
$ 15
$ 597
Charge-offs (123 ) (1 ) (124 ) (254 ) (3 ) (257 )
Recoveries 47
1
48
86
2
88
Provision for credit losses 72
(2 ) 70
164
—
164
Other (7 ) —
(7 ) (5 ) —
(5 )
Ending balance $ 573
$ 14
$ 587
$ 573
$ 14
$ 587

Analysis of ending balance of allowance for credit losses
Collective impairment allowance $ 552
$ 13
$ 565
Specific impairment allowance 21
1
22
Ending balance

573
14
587

Analysis of ending balance of finance receivables
Collectively evaluated for impairment $ 75,203
$ 32,615
$ 107,818
Specifically evaluated for impairment 378
96
474
Recorded investment

75,581
32,711
108,292

Ending balance, net of allowance for credit losses

$ 75,008
$ 32,697
$ 107,705

Second Quarter 2019 First Half 2019
Consumer Non-Consumer Total Consumer Non-Consumer Total
Allowance for credit losses
Beginning balance $ 496
$ 17
$ 513
$ 566
$ 23
$ 589
Charge-offs (117 ) —
(117 ) (254 ) (17 ) (271 )
Recoveries 45
6
51
88
8
96
Provision for credit losses 70
(7 ) 63
94
2
96
Other 2
1
3
2
1
3
Ending balance $ 496
$ 17
$ 513
$ 496
$ 17
$ 513

Analysis of ending balance of allowance for credit losses
Collective impairment allowance $ 477
$ 16
$ 493
Specific impairment allowance 19
1
20
Ending balance 496
17
513

Analysis of ending balance of finance receivables
Collectively evaluated for impairment $ 73,871
$ 33,821
$ 107,692
Specifically evaluated for impairment 337
115
452
Recorded investment 74,208
33,936
108,144

Ending balance, net of allowance for credit losses $ 73,712
$ 33,919
$ 107,631

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR COMPANY AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 10.~~ INVENTORIES

Inventories were as follows (in millions):


	December 31, 2018		June 30, 2019		December 31, 2019		March 31, 2020
Raw materials, work-in-process, and supplies	$	4,536	$	4,619	$	4,402	$	4,598
Finished products	6,684		7,818		6,384		6,714
Total inventories	$	11,220	$	12,437	$	10,786	$	11,312

~~NOTE 11. NET INVESTMENT IN OPERATING LEASES~~

~~Net investment in operating leases~~ consists primarily of lease contracts for vehicles with individuals, daily rental companies, government entities, and fleet customers. Assets subject to operating leases are depreciated using the straight-line method over the term of the lease to reduce the asset to its estimated residual value. Estimated residual values are based on assumptions for used vehicle prices at lease termination and the number of vehicles that are expected to be returned.

~~The net investment in operating leases was as follows (in millions):~~

December 31, 2018 June 30,
2019
Automotive Segment
Vehicles, net of depreciation $ 1,705
$ 2,107
Ford Credit Segment
Vehicles and other equipment, at cost (a) 33,557
33,583
Accumulated depreciation (6,143 ) (5,892 )
Total Ford Credit Segment 27,414
27,691
Total $ 29,119
$ 29,798

~~__________~~

~~(a)~~

Includes Ford Credit’s operating lease assets of $16.3 billion and $14 billion at December 31, 2018 and June 30, 2019, respectively, that have been included in securitization transactions. These net investments in operating leases are available only for payment of the debt or other obligations issued or arising in the securitization transactions; they are not available to pay other obligations or the claims of other creditors.

~~Ford Credit Segment~~

~~Included in~~ ~~Ford Credit revenues~~ ~~are rents on operating leases. The amounts contractually due for minimum rentals on operating leases at December 31, 2018 were as follows (in millions):~~

2019 2020 2021 2022 2023 Total
Minimum rentals on operating leases $ 4,708
$ 2,929
$ 1,083
$ 83
$ 6
$ 8,809

~~The amounts contractually due on operating leases at June 30, 2019 were as follows (in millions):~~

Within one year After one year and within two years After two years and within three years After three years and within four years After four years and within five years Total
Operating lease payments $ 4,746
$ 2,940
$ 1,029
$ 73
$ 5
$ 8,793

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR COMPANY AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

NOTE ~~12.~~10. OTHER INVESTMENTS

We have investments in entities for which we do not have the ability to exercise significant influence and 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 sheet. These investments were ~~$250 million and $727 million~~$1.2 billion at both December 31, ~~2018~~2019 and ~~June 30,~~March 31, ~~2019, respectively. The increase from December 31, 2018 primarily reflects the $500 million investment in Rivian we made during the~~ ~~second quarter~~ ~~of 2019.~~2020. In the first ~~half~~quarter of ~~2019,~~2020, there were no material adjustments to the fair values of these investments held at ~~June 30,2019.~~March 31, 2020.

NOTE ~~13.~~11. GOODWILL

The net carrying amount of goodwill was ~~$264 million and $265~~$278 million at both December 31, ~~2018~~2019 and ~~June 30, 2019, respectively,~~March 31, 2020, and is reported in Other assets in the non-current assets section of our consolidated balance sheet.

NOTE ~~14.~~12. OTHER LIABILITIES AND DEFERRED REVENUE

Other liabilities and deferred revenue were as follows (in millions):


	December 31, 2018		June 30, 2019		December 31, 2019		March 31, 2020
Current
Dealer and dealers’ customer allowances and claims	$	11,369	$	11,989	$	13,113	$	13,257
Deferred revenue	2,095		2,732		2,091		2,111
Employee benefit plans	1,755		2,097		1,857		1,612
Accrued interest	988		1,046		1,128		819
OPEB (a)	339		342		332		326
Pension (a)	204		203		185		183
Operating lease liabilities	—		327		367		361
Other	3,806		3,767		3,914		4,005
Total current other liabilities and deferred revenue	$	20,556	$	22,503	$	22,987	$	22,674
Non-current
Pension (a)	$	9,423	$	9,061	$	9,878	$	9,414
OPEB (a)	5,220		5,224		5,740		5,605
Dealer and dealers’ customer allowances and claims	2,497		2,163		1,921		2,252
Deferred revenue	3,985		4,184		4,191		4,140
Operating lease liabilities	—		1,013		1,047		1,006
Employee benefit plans	1,080		1,125		1,104		1,097
Other	1,383		1,262		1,443		1,591
Total non-current other liabilities and deferred revenue	$	23,588	$	24,032	$	25,324	$	25,105

__________

(a)

Balances at ~~June 30, 2019~~March 31, 2020 reflect pension and OPEB liabilities at December 31, ~~2018,~~2019, updated for service and interest cost, expected return on assets, curtailment and settlement ~~gain~~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 ~~2018.~~2019. Included in Other assets are pension assets of ~~$3.3~~$3.2 billion and ~~$3.6~~$3.4 billion at December 31, ~~2018~~2019 and ~~June 30, 2019,~~March 31, 2020, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~15.~~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 ~~June 30~~March 31 were as follows (in millions):


	Second Quarter																		First Quarter
	Pension Benefits																		Pension Benefits
	U.S. Plans						Non-U.S. Plans						Worldwide OPEB						U.S. Plans						Non-U.S. Plans						Worldwide OPEB
	2018			2019			2018			2019			2018			2019			2019			2020			2019			2020			2019			2020
Service cost	$	136		$	114		$	151		$	127		$	13		$	11		$	114		$	130		$	129		$	131		$	11		$	12
Interest cost	366			409			173			173			49			52			409			323			176			133			53			43
Expected return on assets	(722		)	(649		)	(329		)	(281		)	—			—			(649		)	(699		)	(286		)	(267		)	—			—
Amortization of prior service costs/(credits)	35			21			7			9			(28		)	(17		)	22			1			8			9			(18		)	(4		)
Net remeasurement (gain)/loss	—			(10		)	—			—			—			—			—			—			—			(80		)	—			58
Separation programs/other	3			—			16			232			1			—			1			10			12			24			—			(1		)
Settlements and curtailments	—			(50		)	—			—			—			—			—			—			—			1			—			(2		)
Net periodic benefit cost/(income)	$	(182	)	$	(165	)	$	18		$	260		$	35		$	46		$	(103	)	$	(235	)	$	39		$	(49	)	$	46		$	106

	First Half
	Pension Benefits
	U.S. Plans						Non-U.S. Plans						Worldwide OPEB
	2018			2019			2018			2019			2018			2019
Service cost	$	272		$	228		$	303		$	256		$	27		$	22
Interest cost	733			818			349			349			98			105
Expected return on assets	(1,444		)	(1,298		)	(663		)	(567		)	—			—
Amortization of prior service costs/(credits)	71			43			13			17			(55		)	(35		)
Net remeasurement (gain)/loss	(26		)	(10		)	—			—			—			—
Separation programs/other	14			1			18			244			1			—
Settlements and curtailments	(15		)	(50		)	—			—			—			—
Net periodic benefit cost/(income)	$	(395	)	$	(268	)	$	20		$	299		$	71		$	92

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 statement.

As part of our ongoing global redesign activities, we recognized additional ~~pension~~ expense of ~~$232~~$13 million and ~~$245~~$24 million in the ~~second~~first quarter ~~and first half~~ of 2019 and 2020, respectively, related to separation programs. In addition, in the ~~second~~first quarter, we recognized ~~a settlement,~~settlements and curtailments, which required a plan ~~remeasurement~~remeasurements at current discount rates, asset returns, and economic conditions. This resulted in a remeasurement gain of ~~$10~~$22 million ~~and a settlement gain~~in the first quarter of ~~$50 million.~~2020. Until our global redesign actions are completed, we anticipate further adjustments to our plans in subsequent periods.

Pension Plan Contributions

During ~~2019,~~2020, we expect to contribute ~~about $650~~between $500 million ~~(most~~and $700 million of ~~which are mandatory contributions) from~~ cash ~~and cash equivalents~~ to our ~~worldwide~~global funded pension ~~plans and~~plans. We also expect to make about $350 million of benefit payments to participants in unfunded ~~plans, for a total of about $1 billion.~~plans. In the first ~~half~~quarter of ~~2019,~~2020, we contributed ~~about $400~~$175 million ~~(including $140 million in discretionary contributions in the United States)~~ to our worldwide funded pension plans and made ~~about $150~~$86 million of benefit payments to participants in unfunded plans.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~16. LEASE COMMITMENTS~~

We lease land, dealership facilities, offices, distribution centers, warehouses, and equipment under agreements with contractual periods ranging from less than one year to 40 years. Many of our leases contain one or more options to extend. In certain dealership lease agreements, we are the tenant and we sublease the site to a dealer. In the event the sublease is terminated, we have the option to terminate the head lease. We include options that we are reasonably certain to exercise in our evaluation of the lease term after considering all relevant economic and financial factors.

~~Leases that are economically similar to the purchase of an asset are classified as finance leases. The leased (“right-of-use”) assets in finance lease arrangements are reported in~~ ~~Net property~~ ~~on our consolidated balance sheet. Otherwise, the leases are classified as operating leases and reported in~~ ~~Other assets~~ ~~in the non-current assets section of our consolidated balance sheet.~~

For the majority of our leases commencing after January 1, 2019, we do not separate the non-lease components (e.g., maintenance and operating services) from the lease components to which they relate. Instead, non-lease components are included in the measurement of the lease liabilities. However, we do separate lease and non-lease components for contracts containing a significant service component (e.g., energy performance contracts). We calculate the initial lease liability as the present value of fixed payments not yet paid and variable payments that are based on a market rate or an index (e.g., CPI), measured at commencement. The majority of our leases are discounted using our incremental borrowing rate because the rate implicit in the lease is not readily determinable. All other variable payments are expensed as incurred.

~~Lease right-of-use assets and liabilities at June 30 were as follows (in millions):~~

June 30,
2019
Operating leases
Other assets, non-current $ 1,299

Other liabilities and deferred revenue, current $ 327
Other liabilities and deferred revenue, non-current 1,013
Total operating lease liabilities $ 1,340

Finance leases
Property and equipment, gross $ 234
Accumulated depreciation (39 )
Property and equipment, net $ 195

Automotive debt payable within one year $ 89
Automotive long-term debt 72
Total finance lease liabilities $ 161

~~Minimum non-cancellable operating lease commitments at December 31, 2018 were as follows (in millions):~~

Operating Leases
2019 $ 363
2020 271
2021 193
2022 141
2023 106
Thereafter 437
Total $ 1,511

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR COMPANY AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 16. LEASE COMMITMENTS~~ ~~(Continued)~~

~~The amounts contractually due on our lease liabilities as of June 30, 2019 were as follows (in millions):~~

Operating Leases Finance Leases (a)
Within one year $ 367
$ 94
After one year and within two years 275
27
After two years and within three years 196
20
After three years and within four years 146
15
After four years and within five years 115
9
After five years 421
6
Total 1,520
171
Less: Present value discount 180
10
Total lease liabilities $ 1,340
$ 161

~~__________~~

~~(a) Excludes approximately $400 million in future lease payments for a 20-year finance lease commencing in a future period.~~

~~Supplemental cash flow information related to leases for the period ended June 30 was as follows (in millions):~~

First Half
2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 215
Operating cash flows from finance leases 3
Financing cash flows from finance leases 17
Right-of-use assets obtained in exchange for lease liabilities
Operating leases $ 142
Finance leases 20

~~The components of lease expense for the period ended June 30 were as follows (in millions):~~

Second Quarter
2019 First Half
2019
Operating lease expense $ 110
$ 220
Variable lease expense 12
31
Sublease income (4 ) (8 )
Finance lease expense
Amortization of right-of-use assets 4
7
Interest on lease liabilities 2
3
Total lease expense $ 124
$ 253

~~The weighted average remaining lease term and weighted average discount rate at June 30 were as follows:~~



	June 30, 2019
~~Weighted average remaining lease term (years)~~
~~Operating leases~~	~~6.8~~
~~Finance leases~~	~~3.0~~
~~Weighted average discount rate~~
~~Operating leases~~	~~3.5~~	%
~~Finance leases~~	~~3.5~~	%

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR COMPANY AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 17.~~14. DEBT

The carrying value of Automotive, Ford Credit, and Other debt was as follows (in millions):


							December 31, 2019			March 31, 2020
Automotive	December 31, 2018			June 30, 2019
Debt payable within one year
Short-term	$	614		$	1,143		$	315		$	569
Long-term payable within one year
U.S. Department of Energy Advanced Technology Vehicles Manufacturing (“DOE ATVM”) Incentive Program	591			591			591			591
Other debt	1,125			495			540			450
Unamortized (discount)/premium	(16		)	—			(1		)	(1		)
Total debt payable within one year	2,314			2,229			1,445			1,609
Long-term debt payable after one year
Public unsecured debt securities (a)	9,033			9,783
Public unsecured debt securities							10,583			10,583
Credit facilities (a)							—			15,068
Delayed draw term loan							1,500			1,500
DOE ATVM Incentive Program	1,470			1,175			880			732
Delayed draw term loan (b)	—			500
Other debt	1,026			568			547			800
Adjustments
Unamortized (discount)/premium	(224		)	(167		)	(161		)	(157		)
Unamortized issuance costs	(72		)	(94		)	(116		)	(115		)
Total long-term debt payable after one year	11,233			11,765			13,233			28,411
Total Automotive	$	13,547		$	13,994		$	14,678		$	30,020
Fair value of Automotive debt (c)	$	13,319		$	14,694
Fair value of Automotive debt (b)							$	15,606		$	22,877
Ford Credit
Debt payable within one year
Short-term	$	14,705		$	14,301		$	13,717		$	12,424
Long-term payable within one year
Unsecured debt	14,373			13,387			15,062			17,137
Asset-backed debt	22,130			22,836			23,609			21,736
Adjustments
Unamortized (discount)/premium	2			1			1			2
Unamortized issuance costs	(16		)	(18		)	(17		)	(19		)
Fair value adjustments (d)	(15		)	(15		)
Fair value adjustments (c)							(1		)	23
Total debt payable within one year	51,179			50,492			52,371			51,303
Long-term debt payable after one year
Unsecured debt	52,409			57,379			55,148			51,138
Asset-backed debt	36,844			33,248			32,162			32,973
Adjustments
Unamortized (discount)/premium	—			(1		)	6			4
Unamortized issuance costs	(195		)	(206		)	(197		)	(188		)
Fair value adjustments (d)	(171		)	558
Fair value adjustments (c)							539			1,606
Total long-term debt payable after one year	88,887			90,978			87,658			85,533
Total Ford Credit	$	140,066		$	141,470		$	140,029		$	136,836
Fair value of Ford Credit debt (c)	$	138,809		$	142,775
Fair value of Ford Credit debt (b)							$	141,678		$	128,714
Other
Long-term debt payable within one year	$	—		$	130		$	130		$	—
Long-term debt payable after one year
Unsecured debt	604			474			474			474
Adjustments
Unamortized (discount)/premium	(3		)	(3		)	(3		)	(3		)
Unamortized issuance costs	(1		)	(1		)	(1		)	(1		)
Total long-term debt payable after one year	600			470			470			470
Total Other	$	600		$	600		$	600		$	470
Fair value of Other debt	$	697		$	737		$	720		$	448

__________


(a)	~~Public unsecured debt securities increased by $750 million reflecting~~We drew $15.4 billion under our ~~unsecured debt (retail bond) issuance~~corporate credit facility and supplemental revolving credit facility in the ~~second~~first quarter of ~~2019.~~2020, and received $15.1 billion as of March 31, 2020, and the remaining $300 million on April 8, 2020.


(b)	~~We drew $500 million under our delayed draw term loan facility in the second quarter of 2019.~~

~~(c)~~

The fair value of debt includes $~~458~~315 million and $~~840~~569 million of Automotive ~~segment~~ short-term debt and $~~13.8~~12.8 billion and $~~13.3~~11.3 billion of Ford Credit ~~segment~~ short-term debt at December 31, ~~2018~~2019 and ~~June 30, 2019,~~March 31, 2020, respectively, carried at cost, which approximates fair value. All ~~other~~ debt is categorized within Level 2 of the fair value hierarchy.


~~(d)~~(c)	These adjustments relate to ~~designated~~ fair value hedges. The carrying value of hedged debt was ~~$38~~$39.4 billion and ~~$39.4~~$41.6 billion at December 31, ~~2018~~2019 and ~~June 30, 2019,~~March 31, 2020, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~18.~~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 ~~June 30~~March 31 were as follows (in millions):


	Second Quarter						First Half						First Quarter
Cash flow hedges (a)	2018			2019			2018			2019			2019			2020
Reclassified from AOCI to Cost of sales
Foreign currency exchange contracts	$	(12	)	$	44		$	5		$	98		$	54		$	(70	)
Commodity contracts	—			(6		)	—			(11		)	(5		)	(14		)
Fair value hedges
Interest rate contracts
Net interest settlements and accruals on hedging instruments	(2		)	(12		)	24			(32		)	(20		)	28
Fair value changes on hedging instruments	(90		)	474			(429		)	724			250			1,110
Fair value changes on hedged debt	82			(463		)	411			(716		)	(253		)	(1,093		)
Derivatives not designated as hedging instruments
Foreign currency exchange contracts (b)	416			5			300			(23		)	(28		)	586
Cross-currency interest rate swap contracts	(125		)	141			(183		)	(4		)	(145		)	(151		)
Interest rate contracts	(20		)	(3		)	(37		)	(30		)	(27		)	(74		)
Commodity contracts	8			(12		)	(38		)	(1		)	11			(43		)
Total	$	257		$	168		$	53		$	5		$	(163	)	$	279

__________

(a)

For the ~~second~~first quarter of 2019 and ~~first half of 2018,~~2020, a ~~$60~~$521 million ~~gain~~loss and ~~a $121~~an $897 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax related to foreign currency exchange contracts. For the ~~second~~first quarter ~~and first half~~ of 2019 ~~a $205~~and 2020, an $11 million gain and a ~~$316 million loss, respectively, were reported in~~ ~~Other comprehensive income/(loss), net of tax~~ ~~related to foreign currency contracts. For the second quarter and first half of 2019, a $37 million loss and $26~~$101 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax related to commodity contracts.

(b)

For the ~~second~~first quarter of 2019 and ~~first half of 2018,~~2020, a ~~$306~~$22 million ~~gain~~loss and a ~~$202~~$376 million gain were reported in Cost of sales and a ~~$110~~$6 million ~~gain~~loss and a ~~$98~~$210 million gain were reported in Other income/(loss), net, ~~respectively. For the second quarter and first half of 2019, a $35 million loss and a $57 million loss were reported in~~ ~~Cost of sales~~ ~~and a $40 milliongain and $34 milliongain were reported in~~ ~~Other income/(loss), net,~~ respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~18.~~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 sheet 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 ~~presented gross,~~ were as follows (in millions):


	December 31, 2018						June 30, 2019						December 31, 2019						March 31, 2020
	Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities
Cash flow hedges
Foreign currency exchange contracts	$	15,972	$	391	$	110	$	13,376	$	101	$	151	$	15,349	$	47	$	493	$	13,148	$	606	$	168
Commodity contracts	327		—		20		583		—		36		673		5		29		665		—		108
Fair value hedges
Interest rate contracts	22,989		158		208		25,308		687		13		26,577		702		19		23,663		1,549		—
Derivatives not designated as hedging instruments
Foreign currency exchange contracts	20,695		202		99		23,117		124		189		19,350		58		270		17,509		476		130
Cross-currency interest rate swap contracts	5,235		232		157		7,879		228		163		5,849		134		67		5,938		126		238
Interest rate contracts	76,904		235		274		63,877		255		270		68,914		275		191		72,822		651		561
Commodity contracts	638		3		45		386		1		16		467		9		9		474		1		46
Total derivative financial instruments, gross (a) (b)	$	142,760	$	1,221	$	913	$	134,526	$	1,396	$	838	$	137,179	$	1,230	$	1,078	$	134,219	$	3,409	$	1,251

Current portion			$	681	$	601			$	290	$	617			$	390	$	772			$	1,388	$	759
Non-current portion			540		312				1,106		221				840		306				2,021		492
Total derivative financial instruments, gross			$	1,221	$	913			$	1,396	$	838			$	1,230	$	1,078			$	3,409	$	1,251

__________


(a)	At December 31, ~~2018~~2019 and ~~June 30, 2019,~~March 31, 2020, we held collateral of ~~$19~~$18 million and ~~$24~~$23 million, and we posted collateral of ~~$59~~$78 million and ~~$85~~$86 million, respectively.


(b)	At December 31, ~~2018~~2019 and ~~June 30, 2019,~~March 31, 2020, the fair value of assets and liabilities available for counterparty netting was ~~$434~~$269 million and ~~$387~~$841 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~19.~~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.

Automotive Segment

Global Redesign

As previously announced, we are executing a global redesign of our business. Redesign-related activities, including employee separation costs, payments to dealers and suppliers, and other charges, are recorded in Cost of sales and Selling, administrative, and other expenses. Below are actions we have initiated as part of the redesign.

Brazil. OnIn February ~~15,~~ 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 ~~will cease~~ceased production at the São Bernardo do Campo plant in Brazil during 2019.

Russia. OnIn March ~~27,~~ 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 a 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 ~~the~~ completion of the restructuring actions, in July 2019, Ford sold a 51% controlling interest in the restructured entity to ~~Sollers.~~Sollers, which resulted in deconsolidation of the Ford Sollers subsidiary. Our continued involvement in Ford Sollers is accounted for as an equity method investment.

United Kingdom.On In June 5, 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.

India. In the third quarter of 2019, Ford committed to a plan to sell specific net assets in our India Automotive operations. See Note 17 for more information concerning this plan.

Other Global Redesign Actions. In 2018, we announced our plan to end production at the Ford Aquitaine Industries plant in Bordeaux, France, and 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. Furthermore, we are reducing our global workforce and taking 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
	Second Quarter 2019			First Half 2019			2019			2020
Beginning balance	$	414		$	291		$	291		$	734
Changes in accruals (a)	741			1,008			267			68
Payments	(222		)	(358		)	(136		)	(172		)
Foreign currency translation	(4		)	(12		)	(8		)	(29		)
Ending balance	$	929		$	929		$	414		$	601

__________

(a) Excludes pension costs of ~~$182~~$13 million and ~~$195~~$24 million in the ~~second~~first quarter ~~and first half~~ of 2019 ~~respectively.~~

~~We also recorded $291 million~~ and ~~$542 million in~~ ~~second quarter~~ ~~and~~ ~~first half~~ of 2019, respectively, for accelerated depreciation and other non-cash charges. We estimate that we will incur total charges in 2019 that range between $3 billion and $3.5 billion related to the actions above, primarily attributable to employee separations, accelerated depreciation, and dealer and supplier settlements.

2020, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~20. REDEEMABLE NONCONTROLLING INTEREST~~16.EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES(Continued)

We ~~formed the Ford Sollers joint venture with Sollers in October 2011 to operate in Russia. The value of the redeemable noncontrolling interest, reflecting redemption features embedded~~also recorded $251 million and $14 million in the ~~50% equity interest~~first quarter of 2019 and 2020, respectively, for accelerated depreciation and other non-cash items. We estimate that we will incur total charges in 2020 that range between $700 million and $1.2 billion related to the actions above, primarily attributable to employee separations, accelerated depreciation, and dealer and supplier settlements.

Other Actions

United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) Voluntary Separation Packages. As agreed in the ~~joint venture held by Sollers, reported~~collective bargaining agreement ratified in ~~the mezzanine section of our consolidated balance sheet at December 31, 2018was $100 million. The redeemable noncontrolling interest became exercisable beginning on January 1,~~November 2019, ~~and Sollers exercised its option in March 2019 for a value of $135 million. The $35 million increase in value from December 2018 was reported in~~ ~~Income/(Loss) attributable to noncontrolling interests~~ ~~on our consolidated income statement~~ during the first quarter of ~~2019.~~2020, we offered voluntary separation packages to our UAW hourly workforce who were eligible for normal or early retirement. All separations are expected to occur before the end of the year. The costs associated with this action were $201 million and are recorded in Cost of sales.

NOTE 17. HELD-FOR-SALE OPERATIONS

Automotive Segment

In the third quarter of 2019, we committed to a plan to sell specific net assets in our India Automotive operations. We ~~purchased~~entered into a definitive agreement to form a joint venture with Mahindra & Mahindra Limited (“Mahindra”), with Mahindra owning a 51% controlling stake and Ford owning a 49% stake. Under the ~~noncontrolling interest from Sollers~~terms of the transaction, which is expected to close mid-2020, we will sell certain India Automotive operations to the joint venture. Accordingly, 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 India Automotive operations classified as held for sale were as follows (in millions):



	December 31, 2019			March 31, 2020
Assets
Trade and other receivables, net	$	269		$	186
Inventories	208			261
Other assets, current	147			96
Net property	279			263
Other assets, non-current	10			9
Total assets of held-for-sale operations	913			815
Less: Intercompany asset balances	(228		)	(151		)
Automotive segment total assets of held-for-sale operations (a)	$	685		$	664

Liabilities
Payables	$	461		$	473
Other liabilities and deferred revenue, current	71			68
Automotive debt payable within one year	90			84
Other liabilities and deferred revenue, non-current	28			25
Total liabilities of held-for-sale operations	650			650
Less: Intercompany liability balances	(169		)	(181		)
Automotive segment total liabilities of held-for-sale operations (a)	$	481		$	469

__________


(a)	As of December 31, 2019and March 31, 2020, intercompany items and transactions have been eliminated on the consolidated balance sheet. Upon closing, the buyer will assume the intercompany assets and liabilities. Accordingly, we have presented those balances in the table for informational purposes.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 17. HELD-FOR-SALE OPERATIONS (Continued)

We recognized pre-tax impairment charges of $804 million in 2019 and $3 million in the first quarter of 2020 to adjust the carrying value of the held-for-sale assets to fair value less cost to sell. These charges are reported in ~~second~~Cost of sales. The value is measured on a nonrecurring basis and categorized within Level 3 of the fair value hierarchy. We determined fair value using a market approach, estimated based on expected proceeds to be received, which we conclude is most representative of the value of the assets given the current market conditions, the characteristics of viable market participants, and the pending sales transaction. The transaction is subject to regulatory approvals and satisfaction of other closing conditions that may impact the final proceeds received.

Ford Credit Segment

In the fourth quarter of 2019, Ford Credit committed to a plan to sell its operations in Forso, a wholly owned subsidiary of Ford Credit, which provides retail and ~~derecognized~~dealer financing in Denmark, Finland, Norway, and Sweden. As a result, we classified the ~~redeemable noncontrolling interest balance. See Note 19~~assets and liabilities of these operations as held for ~~more information concerning~~sale and recognized a pre-tax fair value impairment charge of $20 million, reported in Other income/(loss), net, in the ~~restructuring~~fourth quarter of ~~our business~~2019.

The assets and liabilities of the Forso operations classified as held for sale at December 31, 2019 were as follows (in millions):



	December 31, 2019
Assets
Cash and cash equivalents	$	61
Ford Credit finance receivables, net, current	516
Trade and other receivables, net	8
Other assets, current	106
Ford Credit finance receivables, net, non-current	715
Net property	2
Deferred income taxes	9
Other assets, non-current	1
Total assets of held-for-sale operations	1,418
Less: Intercompany asset balances	(2		)
Ford Credit segment total assets of held-for-sale operations (a)	$	1,416

Liabilities
Payables	$	34
Other liabilities and deferred revenue, current	8
Ford Credit long-term debt	1,254
Deferred income taxes	23
Total liabilities of held-for-sale operations	1,319
Less: Intercompany liability balances	(1,274		)
Ford Credit segment total liabilities of held-for-sale operations (a)	$	45

__________


(a)	As of December 31, 2019, intercompany items and transactions have been eliminated on the consolidated balance sheet. Upon closing, the buyer assumed the intercompany assets and liabilities. Accordingly, we have presented those balances in the table for informational purposes.

On February 28, 2020, Ford Credit completed the sale of Forso recognizing a pre-tax loss of $4 million, reported in ~~Russia.~~Other income/(loss), net, and cash proceeds of $1.3 billion.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~21.~~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 ~~June 30~~March 31 were as follows (in millions):


	Second Quarter						First Half						First Quarter
	2018			2019			2018			2019			2019			2020
Foreign currency translation
Beginning balance	$	(3,981	)	$	(4,557	)	$	(4,277	)	$	(4,800	)	$	(4,800	)	$	(4,626	)
Gains/(Losses) on foreign currency translation	(527		)	(139		)	(283		)	132			271			(1,406		)
Less: Tax/(Tax benefit)	69			(12		)	19			16			28			27
Net gains/(losses) on foreign currency translation	(596		)	(127		)	(302		)	116			243			(1,433		)
(Gains)/Losses reclassified from AOCI to net income (a)	—			—			2			—			—			(20		)
Other comprehensive income/(loss), net of tax	(596		)	(127		)	(300		)	116			243			(1,453		)
Ending balance	$	(4,577	)	$	(4,684	)	$	(4,577	)	$	(4,684	)	$	(4,557	)	$	(6,079	)

Marketable securities
Beginning balance	$	(95	)	$	4		$	(48	)	$	(59	)	$	(59	)	$	71
Gains/(Losses) on available for sale securities	(15		)	74			(84		)	154			80			19
Less: Tax/(Tax benefit)	(4		)	17			(21		)	36			19			5
Net gains/(losses) on available for sale securities	(11		)	57			(63		)	118			61			14
(Gains)/Losses reclassified from AOCI to net income	4			2			10			5			3			—
Less: Tax/(Tax benefit)	1			—			2			1			1			—
Net (gains)/losses reclassified from AOCI to net income	3			2			8			4			2			—
Other comprehensive income/(loss), net of tax	(8		)	59			(55		)	122			63			14
Ending balance	$	(103	)	$	63		$	(103	)	$	63		$	4		$	85

Derivative instruments
Beginning balance	$	51		$	(245	)	$	18		$	201		$	201		$	(488	)
Gains/(Losses) on derivative instruments	60			168			121			(342		)	(510		)	796
Less: Tax/(Tax benefit)	14			24			29			(78		)	(102		)	173
Net gains/(losses) on derivative instruments	46			144			92			(264		)	(408		)	623
(Gains)/Losses reclassified from AOCI to net income	12			(38		)	(5		)	(87		)	(49		)	84
Less: Tax/(Tax benefit)	6			(11		)	2			(22		)	(11		)	15
Net (gains)/losses reclassified from AOCI to net income (b)	6			(27		)	(7		)	(65		)	(38		)	69
Other comprehensive income/(loss), net of tax	52			117			85			(329		)	(446		)	692
Ending balance	$	103		$	(128	)	$	103		$	(128	)	$	(245	)	$	204

Pension and other postretirement benefits
Beginning balance	$	(2,644	)	$	(2,703	)	$	(2,652	)	$	(2,708	)	$	(2,708	)	$	(2,685	)
Amortization and recognition of prior service costs/(credits)	14			13			29			25			12			4
Less: Tax/(Tax benefit)	3			3			6			5			2			1
Net prior service costs/(credits) reclassified from AOCI to net income	11			10			23			20			10			3
Translation impact on non-U.S. plans	6			6			2			1			(5		)	11
Other comprehensive income/(loss), net of tax	17			16			25			21			5			14
Ending balance	$	(2,627	)	$	(2,687	)	$	(2,627	)	$	(2,687	)	$	(2,703	)	$	(2,671	)

Total AOCI ending balance at June 30	$	(7,204	)	$	(7,436	)	$	(7,204	)	$	(7,436	)
Total AOCI ending balance at March 31													$	(7,501	)	$	(8,461	)

__________


(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~~gains on cash flow hedges of $82147 million. See Note 1815 for additional information.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~22.~~19. COMMITMENTS AND CONTINGENCIES

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

Guarantees and Indemnifications

~~The maximum potential payments and the carrying value of recorded liabilities related to~~Financial Guarantees. Financial guarantees ~~and limited indemnities were as follows (in millions):~~

December 31,
2018 June 30,
2019
Maximum potential payments $ 1,163
$ 1,043
Carrying value of recorded liabilities related to guarantees and limited indemnities 351
324

~~Guarantees~~ and indemnifications are recorded at fair value at their inception. ~~We regularly review our performance risk under these arrangements,~~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 probability of default is applied to the expected exposure at the time of default less recoveries to determine the expected payments. Factors to consider when estimating the probability of default include the obligor’s financial position, forecasted economic environment, historical loss rates, and ~~in the event it becomes probable we will be required~~other communications. The liability recorded represents Ford’s exposure to ~~perform under a guarantee or indemnity, the amount of probable payment is recorded.~~

~~We guarantee the resale value of vehicles sold in certain arrangements to daily rental companies.~~credit risk. The maximum potential ~~payment~~payments for financial guarantees were $162 million and $427 million at December 31,2019 and March 31, 2020, respectively. The carrying value of ~~$897~~recorded liabilities related to financial guarantees was $33 million ~~as of June 30,~~ and $49 million at December 31,2019 included in the table above, represents the total proceeds we guarantee the rental company will receive on re-sale. Reflecting our present estimate of proceeds the rental companies will receive on resale from third parties, we have recorded $297 million as our best estimate of the amount we will have to pay under the guarantee. and March 31, 2020, respectively.

~~We also guarantee~~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. However, our ability to enforce these rights is sometimes stayed until the guaranteed party is paid in full, and may be limited in the event of insolvency of the third party or other circumstances.

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 $587 million and $678 million at December 31,2019 and March 31, 2020, respectively. The carrying value of recorded liabilities related to non-financial guarantees was $200 million and $253 million at December 31,2019 and March 31, 2020, respectively.

We guarantee the resale value of vehicles sold in certain arrangements to daily rental companies. The maximum potential payment of $673 million as of March 31, 2020 represents the total proceeds we guarantee the rental company will receive on re-sale. Reflecting our present estimate of proceeds the rental companies will receive on resale from third parties, we have recorded $252 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 terms of the contract or by 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.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. 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.

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR COMPANY AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 22. COMMITMENTS AND CONTINGENCIES~~ ~~(Continued)~~

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 ~~$700 million~~.$400 million. In addition, we have a reasonably possible risk of loss for an emission certification matter. At this stage, we cannot estimate the risk of loss or predict the outcome, and cannot provide reasonable assurance that it will not have a material adverse effect on us.

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.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. COMMITMENTS AND CONTINGENCIES (Continued)

Warranty and Field Service Actions

We accrue ~~obligations for~~the estimated cost of both base warranty ~~costs~~coverages and field service actions ~~(i.e., safety recalls, emission recalls, and other product campaigns)~~ at the time of ~~sale~~sale. We establish our estimate of base warranty obligations using a patterned estimation model, ~~that includes~~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 ~~June 30~~March 31 was as follows (in millions):


	First Half						First Quarter
	2018			2019			2019			2020
Beginning balance	$	5,296		$	5,137		$	5,137		$	5,702
Payments made during the period	(1,911		)	(2,192		)	(1,074		)	(1,075		)
Changes in accrual related to warranties issued during the period	1,252			1,424			693			805
Changes in accrual related to pre-existing warranties	337			715			271			521
Foreign currency translation and other	(96		)	23			7			(164		)
Ending balance	$	4,878		$	5,107		$	5,034		$	5,789

~~Revisions~~Changes to our estimated costs are reported as changes in accrual related to pre-existing warranties in the table above.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~23.~~20. SEGMENT INFORMATION

We report segment information consistent with the way our chief operating decision maker 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. Below is a description of our reportable segments and other activities.

Automotive Segment

Our 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. The segment includes the following regional business units: North America, South America, Europe, China ~~Asia Pacific Operations,~~(including Taiwan), and ~~Middle East & Africa.~~

the International Markets Group.

Mobility Segment

Our Mobility segment primarily includes development costs related to our autonomous vehicles and our investment in mobility through Ford Smart Mobility LLC (“FSM”). Autonomous vehicles includes self-driving systems development and vehicle integration, autonomous vehicle research and advanced engineering, autonomous vehicle transportation-as-a-service network development, user experience, and business strategy and business development teams. FSM designs and builds mobility products and subscription services on its own, and collaborates with service providers and technology companies. ~~In 2019, we began recording in the Mobility segment subscription related income previously reported in the Automotive segment. This income is generated from services managed in our Mobility segment.~~

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 ~~portfolio~~ gains and losses from our cash, cash equivalents, ~~and~~ 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. The underlying assets and liabilities associated with these activities remain with the respective Automotive and Mobility segments.

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.

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 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.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE ~~23.~~20. SEGMENT INFORMATION (Continued)

Key financial information for the periods ended or at ~~June 30~~March 31 was as follows (in millions):


	Automotive		Mobility			Ford Credit		Corporate Other			Interest on Debt			Special Items			Adjustments				Total		Automotive			Mobility			Ford Credit		Corporate Other			Interest on Debt			Special Items			Adjustments				Total
Second Quarter 2018
First Quarter 2019
Revenues	$	35,905	$	6		$	3,009	$	—		$	—		$	—		$	—			$	38,920	$	37,239		$	6		$	3,097	$	—		$	—		$	—		$	—			$	40,342
Income/(loss) before income taxes	1,157		(181		)	645		71			(301		)	(42		)	—				1,349		2,009			(288		)	801		(75		)	(245		)	(592		)	—				1,610
Equity in net income/(loss) of affiliated companies	54		—			6		—			—			—			—				60		17			2			6		—			—			—			—				25
Cash, cash equivalents, marketable securities, and restricted cash	25,108		50			11,511		—			—			—			—				36,669		24,034			167			13,700		—			—			—			—				37,901
Total assets	103,306		470			158,604		—			—			—			(4,301		)	(a)	258,079		102,113			949			164,409		—			—			—			(4,190		)	(a)	263,281

Second Quarter 2019
First Quarter 2020
Revenues	$	35,758	$	6		$	3,089	$	—		$	—		$	—		$	—			$	38,853	$	31,340		$	13		$	2,967	$	—		$	—		$	—		$	—			$	34,320
Income/(loss) before income taxes	1,373		(264		)	831		(286		)	(244		)	(1,205		)	—				205		(177		)	(334		)	30		(151		)	(227		)	(287		)	—				(1,146		)
Equity in net income/(loss) of affiliated companies	72		7			8		—			—			—			—				87		(47		)	—			6		—			—			—			—				(41		)
Cash, cash equivalents, marketable securities, and restricted cash	23,106		142			14,989		—			—			—			—				38,237		34,212			116			12,231		—			—			—			—				46,559
Total assets	102,641		1,153			163,141		—			—			—			(4,751		)	(a)	262,184		111,388			941			156,393		—			—			—			(4,572		)	(a)	264,150

	Automotive		Mobility			Ford Credit		Corporate Other			Interest on Debt			Special Items			Adjustments				Total
First Half 2018
Revenues	$	74,917	$	10		$	5,952	$	—		$	—		$	—		$	—			$	80,879
Income/(loss) before income taxes	2,889		(283		)	1,286		(15		)	(590		)	(19		)	—				3,268
Equity in net income/(loss) of affiliated companies	272		—			12		—			—			—			—				284

First Half 2019
Revenues	$	72,997	$	12		$	6,186	$	—		$	—		$	—		$	—			$	79,195
Income/(loss) before income taxes	3,382		(552		)	1,632		(361		)	(489		)	(1,797		)	—				1,815
Equity in net income/(loss) of affiliated companies	89		9			14		—			—			—			—				112

__________


(a)	Includes eliminations of intersegment transactions occurring in the ordinary course of business and deferred tax netting.

NOTE 21. SUBSEQUENT EVENT

In late March 2020, we suspended our manufacturing operations in regions around the world, other than China, and these operations continue to be idle. Our key liquidity objective during these unprecedented and uncertain times is to prioritize actions that preserve or improve our cash balance until we are able to resume and sustain normal production and generate revenue. To further increase our liquidity, on April 22, 2020, we issued $8 billion of unsecured notes, consisting of $3.5 billion of three-year 8.5% unsecured notes, $3.5 billion of 9% five-year unsecured notes, and $1 billion of 9.625% ten-year unsecured notes.

The full impact of the COVID-19 pandemic on our full year financial results will depend on future developments, such as the ultimate duration and scope of the outbreak, its impact on our customers, dealers, and suppliers, the rate at which economic conditions, operations, and demand for our products return to pre-COVID-19 levels, and the potential for recession in key markets due to the effects of the pandemic. Accordingly, the ultimate impact on Ford cannot be determined at this time. Nevertheless, despite the uncertainty of the COVID-19 situation, we expect our full year 2020 results of operations to be adversely affected.

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

~~OVERVIEW~~RECENT DEVELOPMENTS

The impact of the COVID-19 pandemic has created significant volatility in the global economy and led to reduced economic activity. There have been extraordinary actions taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world, including travel bans, quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. The pandemic has resulted, and may continue to result, in significant economic disruption that has and may likely continue to adversely affect our business.

While we are unable to predict the duration or scope of the overall impact the COVID-19 pandemic will have on our business, results of operations, or liquidity, we believe it is important to share the impact to date, how our response to the pandemic is progressing, and how our results and financial condition may change going forward.

Remote Work Arrangements and Suspension of Manufacturing Operations

We released our fourth quarter and full year 2019 results on February 4, 2020. At that time, the impact of COVID-19 was concentrated in China. COVID-19 spread quickly, and the World Health Organization declared it a global pandemic on March 11, 2020. As of March 16, 2020, our non-production personnel began working remotely in virtually all locations globally except China. On March 19, 2020, we suspended our manufacturing operations in North America, followed shortly afterwards with suspension of our manufacturing operations in Europe and other regions. The suspension of manufacturing operations has not only interrupted current vehicle production but also delayed new vehicle launches from our original plan.

The remote work arrangements and suspension of manufacturing operations remain in place. Our remote work arrangements have been designed to allow for continued operation of non-production business-critical functions, including financial reporting systems and internal control. Our controls and procedures have incorporated remote work arrangements using appropriate digital tools.

Liquidity and Guidance Actions

Our Automotive segment revenue is generated primarily by sales of vehicles, parts, and accessories. For the majority of sales, revenue is recognized when products are shipped from our plants.

With our manufacturing operations suspended due to the COVID-19 pandemic, we have been unable to generate any meaningful revenue since late March 2020. Accordingly, on March 19, 2020, we provided notice to our lenders under our credit facilities that we were fully drawing the credit facilities in order to increase our cash balance by $15.4 billion. Further, we announced that we were suspending our $0.6 billion regular quarterly dividend and anti-dilutive share repurchase program, and taking other steps to preserve cash, including lowering operating costs, reducing capital expenditures, and deferring portions of executive salaries. On March 19, 2020, we withdrew all financial guidance for 2020.

To further increase our liquidity, on April 22, 2020, we issued $8.0 billion of unsecured notes, consisting of $3.5 billion of three-year unsecured notes, $3.5 billion of five-year unsecured notes, and $1.0 billion of ten-year unsecured notes.

Rating Agency Actions

On March 23, 2020, Fitch downgraded our credit rating to BBB-, and on March 25, 2020, S&P downgraded our credit rating to BB+. Both Moody’s and S&P now rate us as non-investment grade.

Medical Supplies

At the same time that we are taking action to preserve and protect our business, we have stepped up to contribute in this time of need. We have joined forces with medical equipment makers GE Healthcare and 3M to lend our manufacturing and engineering expertise to quickly expand production of medical equipment and supplies. These actions include producing ventilators, powered air-purifying respirators, and more than eight million face shields, and we recently started production of medical masks and reusable gowns for health care workers. Also, we are working with Thermo Fisher Scientific to quickly expand production of kits to test for COVID-19.

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

Enhanced Safety Standards

We are establishing new protocols to help protect the health and safety of our workforce when our operations restart around the world. The planned actions include a daily, online health self-certification, a no-touch temperature scan upon entering Company premises, a policy requiring the use of face masks in Ford facilities, and measures to provide additional personal protective equipment, such as gloves and face shields or goggles, in instances where employees’ jobs do not allow them to follow social distancing guidelines. We also plan to schedule more time between shifts to minimize potential interaction between employees and allow for additional cleaning between shifts.

Forward Looking Information

The full impact of the COVID-19 pandemic on Ford will depend on future developments, such as the ultimate duration and scope of the outbreak, its impact on our customers, dealers, and suppliers, how quickly normal economic conditions, operations, and the demand for our products can resume, and whether the pandemic leads to recessionary conditions in any of our key markets. Accordingly, the ultimate impact on Ford cannot be determined at this time; however, despite the uncertainty of the COVID-19 situation, we expect our full year 2020 results of operations to be adversely affected.

While the potential magnitude and duration of the business and economic impacts of COVID-19 are uncertain, we believe the phased restart of our manufacturing plants, supply network, and other dependent functions is probable of commencing in the second quarter of 2020. We believe this, together with cash on hand and the company’s operating plan, will provide sufficient liquidity to fund operations for at least the next twelve months. If we experience a significant delay in the phased restart of our manufacturing operations, or we are unable to maintain expected levels of production, we may take additional actions, such as further reducing costs or seeking additional financing.

We cannot provide assurance that the assumptions used to estimate our liquidity requirements will be correct because we have never previously experienced such a sustained suspension of our manufacturing operations. For additional information on the impact and potential impact of COVID-19 on Ford, please see Item 1A. Risk Factors on page 73.

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

RESULTS OF OPERATIONS

In the first quarter of 2020, the net loss attributable to Ford Motor Company was $1,993 million, and Company adjusted EBIT was a loss of $632 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 20 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
	2019			2020
Global Redesign
Europe excl. Russia	$	(115	)	$	(105	)
India	—			(3		)
South America	(201		)	(17		)
Russia	(174		)	20
China	—			—
Separations and Other (not included above)	(24		)	(1		)
Subtotal Global Redesign	$	(514	)	$	(106	)
Other Items
Focus cancellation	$	(67	)	$	—
Other incl. UAW Retirement Buyout and Chariot	(11		)	(203		)
Subtotal Other Items	$	(78	)	$	(203	)
Pension and OPEB Gain/(Loss)
Pension and OPEB remeasurement	$	—		$	22
Pension curtailment	—			—
Subtotal Pension and OPEB Gain/(Loss)	$	—		$	22
Total EBIT Special Items	$	(592	)	$	(287	)

Cash effect of Global Redesign (incl. separations)	$	(136	)	$	(172	)

Tax special items*	$	7		$	(787	)

__________


*	Includes related tax effect on special items and tax special items.

We recorded $287 million of pre-tax special item charges in the first quarter of 2020 with cash effects of $172 million. Our pre-tax special items reflect primarily buyouts accepted under the terms of our UAW contract ratified in the fourth quarter of 2019 and Global Redesign actions. Tax special item charges in the quarter included $855 million for a valuation allowance related to certain deferred tax assets.

In Note 20 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.

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 2020 key metrics for the Company, compared to a year ago.



	First Quarter
	2019			2020			H / (L)
GAAP Financial Measures
Cash Flows from Operating Activities ($B)	$	3.5		$	(0.5	)	$	(4.0	)
Revenue ($M)	40,342			34,320			(15		)%
Net Income/(Loss) ($M)	1,146			(1,993		)	(3,139		)
Net Income/(Loss) Margin (%)	2.8		%	(5.8		)%	(8.6) ppts
EPS (Diluted)	$	0.29		$	(0.50	)	$	(0.79	)

Non-GAAP Financial Measures *
Company Adj. Free Cash Flow ($B)	$	1.9		$	(2.2	)	$	(4.1	)
Company Adj. EBIT ($M)	2,447			(632		)	(3,079		)
Company Adj. EBIT Margin (%)	6.1		%	(1.8		)%	(7.9) ppts
Adjusted EPS (Diluted)	$	0.44		$	(0.23	)	$	(0.67	)
Adjusted ROIC (Trailing Four Quarters)	8.0		%	2.5		%	(5.5) ppts

__________


*	See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.

In the first quarter of 2020, our diluted earnings per share of Common and Class B Stock was a loss of $0.50 and our diluted adjusted earnings per share was a loss of $0.23.

Net income/(loss) margin was negative 5.8% in the first quarter of 2020, down 8.6 percentage points from a year ago. Company adjusted EBIT margin was negative 1.8% in the first quarter of 2020, down 7.9 percentage points from a year ago.

The $3.1 billion year-over-year decline in net income/(loss) and Company adjusted EBIT in the first quarter of 2020 was driven by the impact of COVID-19. We estimate the unfavorable impact to net income/(loss) and Company adjusted EBIT was at least $2 billion. Both net income/(loss) and Company adjusted EBIT were further impacted by higher new model material cost, higher warranty, and adverse exchange, partially offset by lower structural cost and commodities. The impact on net income/(loss) of the valuation allowance against certain deferred tax assets was offset by lower tax expense and lower Global Redesign charges.

The table below shows our first quarter 2020 net income/(loss) attributable to Ford and Company adjusted EBIT by segment.



	First Quarter
	2019			2020			H / (L)
Automotive	$	2,009		$	(177	)	$	(2,186	)
Mobility	(288		)	(334		)	(46		)
Ford Credit	801			30			(771		)
Corporate Other	(75		)	(151		)	(76		)
Company Adjusted EBIT *	2,447			(632		)	(3,079		)
Interest on Debt	(245		)	(227		)	(18		)
Special Items	(592		)	(287		)	(305		)
Taxes / Noncontrolling Interests	(464		)	(847		)	383
Net Income/(Loss)	$	1,146		$	(1,993	)	$	(3,139	)

__________


*	See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.

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

Automotive Segment

The table below shows our first quarter 2020 Automotive segment EBIT by business unit (in millions).



	First Quarter
	2019			2020			H / (L)
North America	$	2,205		$	346		$	(1,859	)
South America	(158		)	(113		)	45
Europe	85			(143		)	(228		)
China (including Taiwan)	(128		)	(241		)	(113		)
International Markets Group	5			(26		)	(31		)
Automotive Segment	$	2,009		$	(177	)	$	(2,186	)

The tables below and on the following pages provide first quarter 2020 key metrics and the change in first quarter 2020 EBIT compared with first quarter 2019 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 Metrics	2019			2020			H / (L)
Market Share (%)	6.0		%	6.0		%	— ppts
Wholesale Units (000)	1,425			1,126			(299		)
Revenue ($M)	$	37,239		$	31,340		$	(5,899	)
EBIT ($M)	2,009			(177		)	(2,186		)
EBIT Margin (%)	5.4		%	(0.6		)%	(6.0) ppts



Change in EBIT by Causal Factor (in millions)
First Quarter 2019 EBIT	$	2,009
Volume / Mix	(1,482		)
Net Pricing	13
Cost	(548		)
Exchange	(190		)
Other	21
First Quarter 2020 EBIT	$	(177	)

In the first quarter of 2020, wholesales in our Automotive segment declined 21 percent year over year, driven by lower industry volume in all regions, primarily in response to the early impacts of COVID-19. First quarter 2020 Automotive revenue was down 16 percent, more than explained by lower wholesales globally.

Our first quarter 2020 Automotive segment EBIT was a loss of $177 million, down $2.2 billion from a year ago, as $346 million of positive EBIT from North America was more than offset by losses in other business units. Our first quarter 2020 Automotive EBIT margin was negative 0.6 percent. The lower EBIT was driven by lower volume, higher new model material cost, higher warranty, and adverse exchange, partially offset by lower structural cost and commodities.

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

North America



	First Quarter
Key Metrics	2019			2020			H / (L)
Market Share (%)	13.6		%	13.6		%	— ppts
Wholesale Units (000)	753			619			(134		)
Revenue ($M)	$	25,389		$	21,809		$	(3,580	)
EBIT ($M)	2,205			346			(1,859		)
EBIT Margin (%)	8.7		%	1.6		%	(7.1) ppts



Change in EBIT by Causal Factor (in millions)
First Quarter 2019 EBIT	$	2,205
Volume / Mix	(1,031		)
Net Pricing	(197		)
Cost	(685		)
Exchange	(53		)
Other	107
First Quarter 2020 EBIT	$	346

In North America, first quarter 2020 wholesales declined 18 percent from a year ago, reflecting primarily COVID-19 related disruption. First quarter 2020 revenue decreased 14 percent year over year, driven by lower volume, partially offset by improved product and series/option mix.

North America’s first quarter 2020 EBIT was down $1.9 billion from a year ago with an EBIT margin of 1.6 percent. The lower EBIT was driven by lower volume and net pricing, higher warranty cost, and new model material cost, partially offset by improved mix.

South America



	First Quarter
Key Metrics	2019			2020			H / (L)
Market Share (%)	7.7		%	6.9		%	(0.8) ppts
Wholesale Units (000)	68			59			(9		)
Revenue ($M)	$	925		$	728		$	(197	)
EBIT ($M)	(158		)	(113		)	45
EBIT Margin (%)	(17.0		)%	(15.5		)%	1.6 ppts



Change in EBIT by Causal Factor (in millions)
First Quarter 2019 EBIT	$	(158	)
Volume / Mix	(2		)
Net Pricing	74
Cost	48
Exchange	(76		)
Other	1
First Quarter 2020 EBIT	$	(113	)

In South America, first quarter 2020 wholesales declined 13 percent from a year ago, primarily reflecting COVID-19 related disruption. First quarter 2020 revenue decreased 21 percent year over year, driven by lower volume and weaker currencies, partially offset by higher net pricing.

South America’s first quarter 2020 EBIT loss improved 29 percent from a year ago with an EBIT margin of negative 15.5 percent. The EBIT improvement reflects progress on restructuring actions (including exiting heavy truck production, discontinuing certain passenger vehicles, and reducing headcount) and cost reductions. The adverse exchange reflects currency weakening of 12 percent in Brazil and 37 percent in Argentina.

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

Europe



	First Quarter
Key Metrics	2019			2020			H / (L)
Market Share (%)	7.6		%	6.9		%	(0.7) ppts
Wholesale Units * (000)	382			288			(94		)
Revenue ($M)	$	7,448		$	6,247		$	(1,201	)
EBIT ($M)	85			(143		)	(228		)
EBIT Margin (%)	1.1		%	(2.3		)%	(3.4) ppts

__________


*	Includes Ford brand vehicles produced and sold by our unconsolidated affiliate in Turkey (about 6,000 units in Q1 2019 and 11,000 units in Q1 2020). Revenue does not include these sales.



Change in EBIT by Causal Factor (in millions)
First Quarter 2019 EBIT	$	85
Volume / Mix	(304		)
Net Pricing	164
Cost	(64		)
Exchange	49
Other	(73		)
First Quarter 2020 EBIT	$	(143	)

In Europe, first quarter 2020 wholesales declined 25 percent from a year ago, driven by COVID-19 related disruption, the Kuga launch, and the discontinuation of low margin products. First quarter 2020 revenue decreased 16 percent year over year, driven by lower volume and weaker currencies.

Europe’s first quarter 2020 EBIT decreased $228 million year over year with an EBIT margin of negative 2.3 percent. The lower EBIT was more than explained by lower volume and higher material cost to support regulatory (CO₂) requirements, partially offset by higher net pricing and lower structural costs as a result of ongoing restructuring actions.

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

China (Including Taiwan)



	First Quarter
Key Metrics	2019			2020			H / (L)
Market Share (%)	2.1		%	2.2		%	0.1 ppts
Wholesale Units * (000)	115			81			(34		)
Revenue ($M)	$	858		$	593		$	(265	)
EBIT ($M)	(128		)	(241		)	(113		)
EBIT Margin (%)	(14.9		)%	(40.7		)%	(25.7) ppts

China Unconsolidated Affiliates
Wholesales (000)	99			72			(27		)
Ford Equity Income/(Loss) ($M)	$	(41	)	$	(91	)	$	(50	)

__________


*	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 2019 EBIT	$	(128	)
Volume / Mix	(54		)
Net Pricing	(15		)
Cost	79
Exchange	(73		)
Other (Including Joint Ventures)	(50		)
First Quarter 2020 EBIT	$	(241	)

In China, compared with a year ago, first quarter 2020 wholesales declined 29 percent and revenue was down 31 percent, driven by COVID-19 related disruption. Our 29 percent decline in wholesales was lower than the industry’s, which was down 37 percent from a year ago. China’s market share of 2.2 percent increased 0.1 percentage points, reflecting recent product launches and a sales recovery slightly ahead of the industry.

China’s first quarter 2020 EBIT was $113 million lower than a year ago with an EBIT margin of negative 40.7 percent. The higher EBIT loss was driven by lower wholesales and adverse exchange, partially offset by structural cost improvements of $65 million.

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

International Markets Group



	First Quarter
Key Metrics	2019			2020			H / (L)
Market Share (%)	1.9		%	1.5		%	(0.4) ppts
Wholesale Units * (000)	107			78			(29		)
Revenue ($M)	$	2,618		$	1,962		$	(656	)
EBIT ($M)	5			(26		)	(31		)
EBIT Margin (%)	0.2		%	(1.3		)%	(1.5) ppts

__________


*	Includes Ford brand vehicles produced and sold by our unconsolidated affiliate in Russia (about 9,000 units in Q1 2019 and 3,000 units in Q1 2020). Revenue after Q2 2019 does not include these sales.



Change in EBIT by Causal Factor (in millions)
First Quarter 2019 EBIT	$	5
Volume / Mix	(92		)
Net Pricing	(14		)
Cost	73
Exchange	(37		)
Other	39
First Quarter 2020 EBIT	$	(26	)

In our International Markets Group, first quarter 2020 wholesales declined 27 percent from a year ago, primarily reflecting COVID-19 related disruption and the expected lower volume at our Russian joint venture. First quarter 2020 revenue decreased 25 percent year over year, driven by lower volume.

Our International Market Group’s first quarter 2020 EBIT was down $31 million from a year ago with an EBIT margin of negative 1.3 percent. The lower EBIT was driven by lower volume and adverse exchange, partially offset by cost improvements.

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

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

Mobility Segment

In our Mobility segment, our first quarter 2020 EBIT loss was $334 million, a $46 million higher loss than a year ago. Our strategic investments in future growth opportunities in mobility services and vehicle and business model development for our autonomous vehicle platform continue, in line with a disciplined approach. We are assessing the impact of COVID-19 on consumer behavior and its impact on mobility services. We are shifting the launch of our autonomous vehicle commercial services, which was previously scheduled to commence in 2021, until 2022.

Volkswagen’s investment in Argo AI remains on track to close by mid-2020.

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 2020 key metrics and the change in first quarter 2020 EBT compared with first quarter 2019 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 Measures	2019			2020			H / (L)
Net Receivables ($B)	$	147		$	138		(6		)%
Loss-to-Receivables * (bps)	55			62			7
Auction Values **	$	18,445		$	18,630		1		%
EBT ($M)	$	801		$	30		$	(771	)
ROE (%)	16		%	0.6		%	(15.4) ppts

Other Balance Sheet Metrics
Debt ($B)	$	143		$	137		(4		)%
Net Liquidity ($B)	31			28			(10		)%
Financial Statement Leverage (to 1)	9.6			10.1			0.5

__________


*	U.S. retail financing only


**	U.S. 36-month off-lease first quarter auction values at Q1 2020 mix



	First Quarter
Non-GAAP Financial Measures	2019		2020		H / (L)
Managed Receivables * ($B)	$	155	$	146	(6	)%
Managed Leverage ** (to 1)	8.8		9.2		0.4

__________


*	See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.


**	See Liquidity and Capital Resources - Ford Credit Segment section for reconciliation to GAAP.



Change in EBT by Causal Factor (in millions)
First Quarter 2019 EBT	$	801
Volume / Mix	(48		)
Financing Margin	32
Credit Loss	(554		)
Lease Residual	(146		)
Exchange	(4		)
Other	(51		)
First Quarter 2020 EBT	$	30

Ford Credit’s consumer credit metrics were healthy in the United States, with the loss-to-receivables ratio at 0.62 percent, 7 basis points higher than a year ago. U.S. auction values were 1 percent higher than a year ago. Ford Credit now expects full year 2020 auction values to be down more than the 5 percent forecasted in February. Ford Credit’s receivables declined year over year, and Ford Credit expects its receivables to continue to decline in subsequent quarters due to the impact of COVID-19 on vehicle sales. In response to COVID-19, Ford Credit is broadly offering its existing customers payment deferrals, due date changes, and lease-end extensions.

Ford Credit’s first quarter 2020 EBT of $30 million was $771 million lower than a year ago, driven by about $600 million for credit loss reserve increases, lower values of off-lease vehicles awaiting sale, and anticipated lease defaults. In total, the impact of COVID-19 deteriorated first quarter 2020 EBT by about $700 million. In addition to the $600 million previously discussed, the remaining $100 million of COVID-19 impact was primarily driven by unfavorable performance in market valuation adjustments to derivatives as a result of interest rate declines.

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” section


•	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 all periods presented. 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 2019 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 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 changes are primarily driven by changes in earnings related to market valuation adjustments to derivatives (primarily related to movements in interest rates) and other miscellaneous items

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

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


•	Cash (as shown in the Funding Structure, 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 sheet. 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 Cash (as shown in the Liquidity table) – Cash held for the benefit of the securitization investors (for example, a reserve fund)


•	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 sheet and are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations of Ford Credit or the claims of Ford Credit’s other creditors

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

Corporate Other

Corporate Other primarily includes corporate governance expenses, 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 2020, Corporate Other had a $151 million loss, compared with a $75 million loss a year ago. The higher loss is more than explained by the nonrecurrence of mark-to-market gains, partially offset by lower corporate governance expenses.

Interest on Debt

Interest on Debt consists of interest expense on Automotive and Other debt. First quarter 2020 interest expense on Automotive and Other debt was $227 million, which is $18 million lower than a year ago, more than explained by lower foreign debt interest expense, partially offset by higher U.S. debt interest expense.

Taxes

Our provision for income taxes for the first quarter 2020 was $847 million, resulting in a negative effective tax rate of 73.9%. During the quarter, we recognized tax expense of $855 million for valuation allowances against certain tax credits recorded as deferred tax assets.

Our first quarter 2020 adjusted effective tax rate, which excludes special items, the valuation allowance adjustment, and the tax impact on special items, was negative 7.0%.

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

LIQUIDITY AND CAPITAL RESOURCES

The COVID-19 pandemic has created significant volatility in the global economy, led to reduced economic activity, and adversely affected our operations. Consistent with actions taken by governmental authorities, in late March we suspended our manufacturing operations in regions around the world, other than China, where manufacturing operations were suspended in January and February, but began resuming operations in March. This action has put pressure on our Automotive liquidity. In response, we have assessed, and will continue to assess, all options available to us to increase our liquidity.

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, 2019			March 31, 2020
Balance Sheet ($B)
Company Cash	$	22.3		$	34.3
Liquidity	35.4			35.1
Debt	(15.3		)	(30.5		)
Cash Net of Debt	7.0			3.8

Pension Funded Status ($B) *
Funded Plans	$	(0.4	)	$	—
Unfunded Plans	(6.4		)	(6.2		)
Total Global Pension	$	(6.8	)	$	(6.2	)

Total Funded Status OPEB	$	(6.1	)	$	(5.9	)

__________

Balances at March 31, 2020 reflect net underfunded status at December 31, 2019, 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 2019.

Liquidity. At March 31, 2020, we had Company cash of $34.3 billion, an increase of $12 billion compared with December 31, 2019. Company cash at March 31, 2020 includes $15.1 billion of the loan proceeds we received in March 2020 under our corporate and supplemental revolving credit facilities, as described in more detail below. At April 24, 2020, we had Company cash of $34.6 billion, including $8 billion from our unsecured debt issuance, which settled on April 22, 2020. At March 31, 2020, about 92% of Company cash was held by consolidated entities domiciled in the United States.

Our key liquidity objective during these unprecedented and uncertain times is to prioritize actions that preserve or improve our cash balance until we are able to resume and sustain normal production and generate revenue. In aggregate, drawing on our corporate credit facilities and issuing unsecured debt securities increased our Company cash balance by $23.4 billion. We believe the phased restart of our manufacturing plants, supply network, and other dependent functions is probable of commencing in the second quarter of 2020. With our current balance of Company cash and the Company’s operating plan to resume production, we believe we have sufficient liquidity to fund our operations for at least the next twelve months. If we experience a significant delay in the phased restart of our manufacturing operations, or we are unable to maintain expected levels of production, we may take additional actions such as reducing costs or seeking additional financing.

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

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

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 Automotive and Other debt, contributions to funded pension plans, shareholder distributions, and other items (including acquisitions and divestitures and other transactions with Ford Credit).

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 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 generally ranging between 30 days to 45 days. As a result, our cash flow tends to improve as wholesale volumes increase, but can deteriorate when wholesale volumes decrease. With a suspension of our manufacturing operations outside of China, our revenue essentially ceased in March, while our production supplier payables, which are on about 45-day terms, continue to come due through early May, resulting in a deterioration of our cash flow as described below. Moreover, even in normal economic conditions, 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.

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



	First Quarter
	2019			2020
Company Excluding Ford Credit
Company Adjusted EBIT* excluding Ford Credit	$	1.6		$	(0.7	)

Capital spending	$	(1.6	)	$	(1.8	)
Depreciation and tooling amortization	1.4			1.4
Net spending	$	(0.3	)	$	(0.4	)

Receivables	$	(0.1	)	$	0.5
Inventory	(1.1		)	(1.1		)
Trade Payables	1.7			(0.5		)
Changes in working capital	$	0.5		$	(1.2	)

Ford Credit distributions	$	0.7		$	0.3
All other and timing differences	(0.6		)	(0.2		)
Company adjusted free cash flow *	$	1.9		$	(2.2	)

Global Redesign (including separations)	$	(0.1	)	$	(0.2	)
Changes in debt	—			15.1
Funded pension contributions	(0.3		)	(0.2		)
Shareholder distributions	(0.6		)	(0.6		)
All other (including acquisitions and divestitures)	0.2			0.1
Change in cash	$	1.1		$	12.0

__________


*	See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.


*	Note: Numbers may not sum due to rounding.

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

As reported on our Consolidated Statement of Cash Flows, our first quarter 2020 Net cash provided by/(used in) operating activities was down $4 billion year over year. Company adjusted free cash flow was $4.1 billion lower than a year ago. The decline in both cash flows was more than explained by the earnings impact of COVID-19 and the decline in production supplier payables from a year ago due to the suspension of manufacturing operations in March.

Capital spending was $1.8 billion in the first quarter of 2020, $0.2 billion higher than a year ago. We expect full year 2020 capital spending to be between $6.3 billion and $6.8 billion, down from our prior expectation of $6.8 billion to $7.3 billion.

First quarter 2020 working capital was $1.2 billion negative, more than explained by higher inventory and lower trade payables, reflecting our suspension of manufacturing operations in March.

First quarter 2020 all other and timing differences were about $0.2 billion negative, reflecting assorted timing differences including differences between accrual-based EBIT and the associated cash flows, interest payments on Automotive and Other debt, and cash taxes.

In the first quarter of 2020, we contributed $175 million to our worldwide funded pension plans. We now expect to contribute between $0.5 billion and $0.7 billion to our funded plans (most of which are mandatory contributions), down from our prior expectation of $0.6 billion to $0.8 billion.

Shareholder distributions were $595 million in the first quarter of 2020, all of which was attributable to our regular quarterly dividend. On March 19, 2020, we announced the suspension of our regular quarterly dividend and share repurchase program.

Available Credit Lines. On March 19, 2020, Ford Credit reallocated $3 billion of commitments under our corporate credit facility back to us, and we submitted borrowing notices to our lenders for $13.4 billion under our corporate credit facility and $2 billion under our supplemental revolving credit facility to offset the temporary working capital impacts of the COVID-19 related suspension of manufacturing operations and to preserve our financial flexibility. On March 24, 2020, we received $15.1 billion, and on April 8, 2020, our subsidiary, Ford Motor Company Brasil Ltda., received the remaining $300 million attributable to the Brazilian real sub-facility under the corporate credit facility. Accordingly, as of April 8, 2020, we had $0.5 billion of available committed Company credit lines excluding Ford Credit available to us, all of which constitutes local credit facilities for our affiliates.

Under our corporate credit facility, $3.35 billion of our loans mature on April 30, 2022 and $10.05 billion of our loans mature on April 30, 2024. Under our supplemental revolving credit facility, all $2 billion matures on April 30, 2022, and under our delayed draw term loan, which we drew in full in 2019, all $1.5 billion matures on December 31, 2022.

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. The terms and conditions of the supplemental revolving credit facility and delayed draw term loan are consistent with our corporate credit facility.

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. As a result of being downgraded by Moody's in September 2019 and S&P in March 2020, on April 23, 2020, the following subsidiaries 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.

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

Debt. As shown in Note 14 of the Notes to the Financial Statements, at March 31, 2020, Company debt excluding Ford Credit was $30.5 billion, including Automotive debt of $30 billion. These balances were $15.2 billion and $15.3 billion higher, respectively, than at December 31, 2019, primarily reflecting the draws on our credit facilities. Our $8 billion unsecured debt issuance in April 2020, described above, is not included in these amounts.

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 until we are able to resume and sustain normal production and generate revenue. 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 Automotive and Other debt.

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

Ford Credit Segment

Ford Credit ended the first quarter with $28 billion in liquidity, which exceeded its target of about $25 billion. Ford Credit’s liquidity target was established to withstand a severe stress funding environment. During the first quarter of 2020, Ford Credit completed $6 billion of public funding. Lower expected originations as a result of COVID-19 are projected to decrease the size of Ford Credit’s balance sheet and reduce Ford Credit’s funding requirements in 2020. Ford Credit expects to increase ABS mix and prudently issue unsecured debt; however, even without any incremental unsecured issuance in 2020, Ford Credit expects to maintain liquidity around its target level for the rest of the year.

Key elements of Ford Credit’s funding strategy include:

Maintain liquidity around $25 billion; continue to renew and expand committed ABS capacity;

Continue to leverage public market issuance;

Assets and committed capacity available to increase ABS mix as needed;

Continue to target managed leverage of 8:1 - 9:1; and

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 continues to meet its financial obligations through economic cycles.

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



	March 31, 2019			December 31, 2019			March 31, 2020
Term Debt (incl. Bank Borrowings)	$	73		$	73		$	72
Term Asset-Backed Securities	60			57			56
Commercial Paper	4			4			3
Ford Interest Advantage / Deposits	6			7			6
Other	10			9			6
Equity	15			14			14
Adjustments for Cash	(13		)	(12		)	(11		)
Total Managed Receivables *	$	155		$	152		$	146

Securitized Funding as Percent of Managed Receivables	38		%	38		%	38		%

__________


*	See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.

Managed receivables were $146 billion at March 31, 2020, and were funded primarily with term debt and term asset-backed securities. Securitized funding as a percent of managed receivables was 38% at the end of the first quarter of 2020. Ford Credit expects this to increase modestly by the end of the year. The calendarization of the funding plan will result in quarterly fluctuations of the securitized funding percentage.

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

Public Term Funding Plan. The following table shows Ford Credit’s issuances for full year 2018 and 2019, planned issuances for full year 2020, and its global public term funding issuances through April 27, 2020, excluding short-term funding programs (in billions):



	2018 Actual		2019 Actual		2020 Forecast	Through Apr 27
Unsecured	$	13	$	17	$ 3 - 8	$	3
Securitizations *	14		14		9 - 14	3
Total public	$	27	$	31	$ 12 - 22	$	6

__________


*	See Definitions and Information Regarding Ford Credit Causal Factors section.


*	Note: Numbers may not sum due to rounding.

For 2020, Ford Credit now projects full year public term funding in the range of $12 billion to $22 billion. This is lower than previously estimated because the impact of COVID-19 has resulted in lower originations, which, in turn, leads to a smaller balance sheet and reduced funding requirements in 2020.

Through April 27, 2020, Ford Credit has completed $6 billion of public term issuances.

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



	March 31, 2019			December 31, 2019			March 31, 2020
Liquidity Sources *
Cash	$	12.8		$	11.7		$	11.3
Committed asset-backed facilities	35.2			36.6			35.9
Other unsecured credit facilities	3.3			3.0			2.8
Ford corporate credit facility allocation	3.0			3.0			—
Total liquidity sources	$	54.3		$	54.3		$	50.0

Utilization of Liquidity *
Securitization cash	$	(3.3	)	$	(3.5	)	$	(2.9	)
Committed asset-backed facilities	(19.8		)	(17.3		)	(18.6		)
Other unsecured credit facilities	(0.6		)	(0.8		)	(0.5		)
Ford corporate credit facility allocation	—			—			—
Total utilization of liquidity	$	(23.7	)	$	(21.6	)	$	(22.0	)

Gross liquidity	$	30.6		$	32.7		$	28.0
Adjustments **	0.4			0.4			0.3
Net liquidity available for use	$	31.0		$	33.1		$	28.3

__________


*	See Definitions and Information Regarding Ford Credit Causal Factors section.


**	Includes asset-backed capacity in excess of eligible receivables and cash related to the Ford Credit Revolving Extended Variable-utilization program (“FordREV”), which can be accessed through future sales of receivables.

Ford Credit’s net liquidity available for use will fluctuate quarterly based on factors including near-term debt maturities, receivable growth, and timing of funding transactions. Ford Credit continues to target liquidity of about $25 billion and expects to remain around its targeted liquidity through 2020 as its balance sheet shrinks as a result of an expected decline in retail and lease originations due to COVID-19.

At March 31, 2020, Ford Credit’s net liquidity available for use was $28.3 billion, $4.8 billion lower than year-end 2019. Ford Credit’s sources of liquidity include cash, committed asset-backed facilities, and unsecured credit facilities. At March 31, 2020, Ford Credit’s liquidity sources including cash totaled $50.0 billion, down $4.3 billion from year-end 2019, primarily reflecting Ford Credit’s reallocation of $3 billion of commitments under the corporate credit facility to us.

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

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 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 2020		2021		2022		2023 and Beyond
Balance Sheet Liquidity Profile
Assets (a)	$	72	$	116	$	139	$	155
Total debt (b)	50		83		102		135
Memo: Unsecured Long-Term Debt Maturities	11		17		13		28

__________


(a)	Includes gross finance receivables less the allowance for credit losses, 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 all the asset-backed debt maturities with the underlying asset maturities. All wholesale securitization transactions and wholesale receivables are shown maturing in the next 12 months, even if the maturities extend beyond first quarter 2021. 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. See Notes 8 and 14 for additional information.

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 (such as from the impact of COVID-19) and the effects of regulatory changes on the financial markets.

Despite Ford Credit’s diverse sources of funding and liquidity, its ability to maintain liquidity may be affected by, among others, the following factors (not necessarily listed in order of importance or probability of occurrence):

Prolonged disruption of the debt and securitization markets;

Global capital market volatility;

Market capacity for Ford- and Ford Credit-sponsored investments;

General demand for the type of securities Ford Credit offers;

Ford Credit’s ability to continue funding through asset-backed financing structures;

Performance of the underlying assets within Ford Credit’s asset-backed financing structures;

Inability to obtain hedging instruments;

Accounting and regulatory changes (including LIBOR); and

Ford Credit’s ability to maintain credit facilities and committed asset-backed facilities.

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

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

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



	March 31, 2019			December 31, 2019			March 31, 2020
Leverage Calculation
Debt *	$	142.9		$	140.0		$	136.8
Adjustments for cash	(12.8		)	(11.7		)	(11.3		)
Adjustments for derivative accounting *	(0.1		)	(0.5		)	(1.6		)
Total adjusted debt	$	130.0		$	127.8		$	123.9

Equity **	$	14.9		$	14.3		$	13.5
Adjustments for derivative accounting *	(0.2		)	—			—
Total adjusted equity	$	14.7		$	14.3		$	13.5

Financial statement leverage (to 1) (GAAP)	9.6			9.8			10.1
Managed leverage (to 1) (Non-GAAP)	8.8			8.9			9.2

__________


*	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.


**	Total shareholder’s interest reported on Ford Credit’s balance sheet.

Ford Credit plans its managed leverage by considering market conditions and the risk characteristics of its business. At March 31, 2020, Ford Credit’s financial statement leverage was 10.1:1, and its managed leverage was 9.2:1. Ford Credit targets managed leverage in the range of 8:1 to 9:1, and expects its managed leverage to return to the targeted range later in 2020.

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, 2020, our total Company pension underfunded status reported on our consolidated balance sheet was $6.2 billion and reflects the net underfunded status at December 31, 2019, 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 2019.

Return on Invested Capital. We analyze total Company performance using an adjusted Return on Invested Capital (“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, 2019			March 31, 2020
Adjusted Net Operating Profit After Cash Tax
Net income/(loss) attributable to Ford	$	3.1		$	(3.1	)
Add: Noncontrolling interest	—			—
Less: Income tax	(0.9		)	0.3
Add: Cash tax	(0.7		)	(0.6		)
Less: Interest on debt	(1.2		)	(1.0		)
Less: Total pension / OPEB income/(cost)	(0.6		)	(2.5		)
Add: Pension / OPEB service costs	(1.1		)	(1.0		)
Net operating profit/(loss) after cash tax	$	3.9		$	(1.6	)
Less: Special items (excl. pension / OPEB) pre-tax	(1.2		)	(3.2		)
Adjusted net operating profit after cash tax	$	5.1		$	1.6

Invested Capital
Equity	$	36.4		$	29.7
Redeemable noncontrolling interest	0.1			—
Debt (excl. Ford Credit)	14.2			30.5
Net pension and OPEB liability	11.1			12.2
Invested capital (end of period)	$	61.9		$	72.4
Average invested capital	$	63.4		$	63.7

ROIC *	6.2		%	(2.5		)%
Adjusted ROIC (Non-GAAP) **	8.0		%	2.5		%

__________


*	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.


**	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.

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 2019 Form 10-K Report:

On March 23, 2020, Fitch downgraded the credit ratings for Ford and Ford Credit (to BBB- from BBB) and maintained a negative outlook.

On March 25, 2020, Moody’s downgraded the credit ratings for Ford and Ford Credit (to Ba2 from Ba1) and placed the ratings under review for downgrade (prior outlook was stable).

On March 25, 2020, S&P downgraded the credit ratings for Ford and Ford Credit (to BB+ from BBB-) and placed the ratings on CreditWatch with negative implications (prior outlook was stable).

On March 27, 2020, DBRS placed all its rated automotive issuers under review with negative implications (prior outlook was negative).

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

NRSRO RATINGS

Ford

Ford Credit

NRSROs

Issuer

Default /

Corporate /

Issuer Rating

Long-Term Senior Unsecured

Outlook / Trend

Long-Term Senior Unsecured

Short-Term

Unsecured

Outlook / Trend

Minimum Long-Term Investment Grade Rating

DBRS

BBB

Under review with negative implications

BBB

R-2M

Under review with negative implications

BBB (low)

Fitch

BBB-

Negative

BBB-

Negative

BBB-

Moody’s

N/A

Ba2

Under review for downgrade

Ba2

Under review for downgrade

Baa3

S&P

BB+

CreditWatch with negative implications

BB+

CreditWatch with negative implications

BBB-

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

OUTLOOK

We provided 2020 Company guidance in our earnings release furnished on Form 8-K dated April 28, 2020 based on our expectations as of April 28, 2020. 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 2019 Form 10-K Report, in Item 1A of this 10-Q Report, and as updated by our subsequent filings with the SEC.



		2020 Guidance
Total Company
Q2 Adjusted EBIT*		Loss > $5 billion
Capital spending		$6.3 - $6.8 billion
Pension contributions		$0.5 - $0.7 billion
Global Redesign EBIT charges		$(0.7) - $(1.2) billion
Global Redesign cash effects		$(0.7) - $(1.2) billion

Ford Credit
Auction values		Down > 5%**
Receivables		Continue to decline
Securitized funding as percent of managed receivables		Increase modestly by year-end
Total public funding issuances		$12 - $22 billion
Liquidity		Around $25 billion
Managed leverage		8:1 - 9:1


*	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.


**	On average compared with full year 2019 at constant mix.

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’s long-term competitiveness depends on the successful execution of global redesign and fitness actions;

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;

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;

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 and Brexit;

Industry sales volume in any of our 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 our 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 that may change in the future;

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 consumer expectations for the safeguarding of 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 2019 Form 10-K Report, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

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

NON-GAAP FINANCIAL MEASURES THAT SUPPLEMENT GAAP MEASURES

We use both generally accepted accounting principles (“GAAP”) and non-GAAP financial measures for operational and financial decision making, and to assess Company and segment business performance. The non-GAAP measures listed below are intended to be considered by users as supplemental information to their equivalent GAAP measures, to aid investors in better understanding our financial results. We believe that these non-GAAP measures provide useful perspective on underlying 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 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. Pre-tax special items 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. 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 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 Per Share (Most Comparable GAAP Measure: Earnings Per Share) – Measure of Company’s diluted net earnings per share adjusted for impact of pre-tax special items (described above), tax special items and restructuring impacts in ~~non-controlling~~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 per share, we do not provide guidance on an earnings 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.

•

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, ~~separation payments,~~global redesign (including separations), and other items that are considered operating cash ~~outflows~~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.

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

•

Adjusted Free Cash Flow Conversion (Most Comparable GAAP Measure: Net Cash Provided By / (Used In) Operating Activities divided by Net Income Attributable to Ford) – Adjusted Free Cash Flow Conversion is Company adjusted free cash flow divided by Company Adjusted EBIT. This non-GAAP measure is useful to management and investors because it allows users to evaluate how much of Ford's Adjusted EBIT is converted into cash flow.

•

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 (“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. When we provide guidance for adjusted ROIC, we do not provide guidance on an unadjusted ROIC basis because it will include potentially significant special items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-end.

•

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, 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.

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

~~RESULTS OF OPERATIONS~~

~~Company~~Non-GAAP Financial Measure Reconciliations

The ~~chart below shows~~following tables show our ~~second quarter 2019 net income attributable to~~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 ~~Company adjusted EBIT by segment.~~Capital Resources.”

Net Income Reconciliation to Adjusted EBIT ($M)



	First Quarter
	2019			2020
Net income/(loss) attributable to Ford (GAAP)	$	1,146		$	(1,993	)
Income/(Loss) attributable to noncontrolling interests	37			—
Net income/(loss)	$	1,183		$	(1,993	)
Less: (Provision for)/Benefit from income taxes	(427		)	(847		)
Income/(Loss) before income taxes	$	1,610		$	(1,146	)
Less: Special items pre-tax	(592		)	(287		)
Income/(Loss) before special items pre-tax	$	2,202		$	(859	)
Less: Interest on debt	(245		)	(227		)
Adjusted EBIT (Non-GAAP)	$	2,447		$	(632	)

Memo:
Revenue ($B)	$	40.3		$	34.3
Net income/(loss) margin (%)	2.8		%	(5.8		)%
Adjusted EBIT margin (%)	6.1		%	(1.8		)%

~~In the second quarter of 2019, net income attributable~~Earnings per Share Reconciliation to Ford was $148 million, down $0.9 billion from a year ago due to $1.2 billion of special item charges, the vast majority of which were associated with the redesigns of Europe and South America. The cash effect of the special item charges was $0.2 billion in the second quarter.Adjusted Earnings per Share

~~Company adjusted EBIT of $1.7 billion in the second quarter of 2019 was driven by our Automotive and Ford Credit segments.~~

~~In our Mobility segment, our strategic investments increased by 46 percent year over year as we continue to build-out our capabilities including mobility services, connectivity, and autonomy.~~

Ford Credit posted a 29 percent increase in EBT from a year ago. Favorable loss metrics reflected healthy consumer credit conditions, and, year to date, auction values for off-lease vehicles performed slightly better than expectations. We now believe full year 2019 auction values will be down by about 3 percent on average year over year, at constant mix. Receivables were flat year over year, and managed receivables remain below Ford Credit’s target of $155 billion.

~~Corporate Other expense of $286 million included a mark-to-market loss of $181 million for our investment in Pivotal Software.~~



	First Quarter
	2019			2020
Diluted After-Tax Results ($M)
Diluted after-tax results (GAAP)	$	1,146		$	(1,993	)
Less: Impact of pre-tax and tax special items	(585		)	(1,074		)
Less: Noncontrolling interests impact of Russia restructuring	(35		)	—
Adjusted net income/(loss) – diluted (Non-GAAP)	$	1,766		$	(919	)

Basic and Diluted Shares (M)
Basic shares (average shares outstanding)	3,973			3,963
Net dilutive options, unvested restricted stock units and restricted stock	24			—
Diluted shares	3,997			3,963

Earnings per share – diluted (GAAP)	$	0.29		$	(0.50	)
Less: Net impact of adjustments	(0.15		)	(0.27		)
Adjusted earnings per share – diluted (Non-GAAP)	$	0.44		$	(0.23	)

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

~~The chart below shows our second quarter and year-to-date 2019 key metrics for the Company, compared~~Effective Tax Rate Reconciliation to ~~a year ago.~~Adjusted Effective Tax Rate

~~In the second quarter of 2019, our diluted earnings per share of Common and Class B stock was $0.04 and our diluted adjusted earnings per share was $0.28.~~



	First Quarter
	2019			2020			Memo: FY 2019
Pre-Tax Results ($M)
Income / (Loss) before income taxes (GAAP)	$	1,610		$	(1,146	)	$	(640	)
Less: Impact of special items	(592		)	(287		)	(5,999		)
Adjusted earnings before taxes (Non-GAAP)	$	2,202		$	(859	)	$	5,359

Taxes ($M)
(Provision for) / Benefit from income taxes (GAAP)	$	(427	)	$	(847	)	$	724
Less: Impact of special items	7			(787		)	1,323
Adjusted (provision for) / benefit from income taxes (Non-GAAP)	$	(434	)	$	(60	)	$	(599	)

Tax Rate (%)
Effective tax rate (GAAP)	26.5		%	(73.9		)%	113.1		%
Adjusted effective tax rate (Non-GAAP)	19.7		%	(7.0		)%	11.2		%

Net ~~income margin was 0.4 percent in the second quarter of 2019, down 2.3 percentage points from a year ago.~~Cash Provided by/(Used in) Operating Activities Reconciliation to Company ~~adjusted EBIT margin was 4.3 percent in the second quarter of 2019, flat compared with a year ago.~~

In the second quarter of 2019, wholesales declined 9 percent year over year, driven by China, lower industry, and launch-related volume impact in North America, as we ramped up Explorer and Police Interceptor. Although wholesales were down, revenue~~was flat, as strong mix and pricing were offset by lower volumes and adverse exchange.~~

Adjusted Free Cash Flow ($M)

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

~~The chart below shows the change in~~ ~~second quarter~~ ~~2019 revenue compared with~~ ~~second quarter~~ ~~2018.~~

In the second quarter of 2019, revenue was $39 billion, the same as a year ago. Pricing was positive in all regions, led by North America’s strength in trucks and utilities. Adverse exchange of $1.3 billion was primarily driven by Europe and South America.

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

~~Automotive Segment~~


•	~~Market Factors~~ ~~(exclude the impact of unconsolidated affiliate wholesales):~~


◦	~~Volume and Mix~~ – primarily measures EBIT variance from changes in wholesale 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 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~~


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

◦

~~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

~~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~~

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

~~The chart below shows our second quarter 2019 Automotive segment EBIT by region.~~

In the second quarter of 2019, our Automotive segment posted its second consecutive quarter of EBIT growth. EBIT grew 19 percent from a year ago (up from 16 percent last quarter), and Automotive EBIT margin expanded by 60 basis points. These results were supported by strong mix in North America, reflecting our franchise strengths, and strong pricing in every region. In North America, EBIT declined 3 percent driven by the changeover of Explorer, Interceptor, and the introduction of Lincoln’s all-new Aviator, as well as higher warranty costs.

In North America, second quarter 2019 EBIT was down from a year ago and EBIT margin contracted by 30 basis points to 7.1 percent. The region continued to deliver strong mix and net pricing, supported by F-Series, as well our decision to exit traditional sedans. This favorability was more than offset by launch-related declines in volume and higher warranty. In the quarter, wholesales for Explorer and Interceptor were down by 72,000 units year over year, which led to the 7 percent overall decline in wholesales in North America.

In the United States, sales of total pickups accelerated in the second quarter of 2019, marking our best overall pickup sales performance since 2004. F-Series continues to do well, maintaining market leadership with the lowest incentive spend of primary competitors and the highest transaction pricing. Ranger, which we launched at the end of 2018, more than doubled its volume from the first quarter of 2019 while also steadily increasing segment share to 14.2 percent.

Europe’s second quarter 2019 EBIT of $53 million was an improvement of $126 million year over year supported by our redesign actions. Favorable market factors, aided by flat structural costs excluding pension, drove the EBIT improvement. This was the first quarterly year-over-year improvement in EBIT for Europe in two years.

In China, second quarter 2019 consolidated revenue increased 48 percent from a year ago, driven by higher Lincoln volumes. EBIT loss narrowed to $155 million, a year-over-year improvement of $328 million, supported by favorable improvements from consolidated operations in volume, mix, and pricing, lower tariffs and structural costs, as well as favorable exchange. Our team has taken action to stabilize sales, with second quarter retail sales up 13 percent sequentially and reductions in inventory to improve dealer health.

~~In addition, China implemented initiatives ranging from enhancing capabilities with in-depth Chinese market experience to strengthening cooperation with joint venture partners.~~

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

~~The charts on the following pages provide~~ ~~second quarter~~ ~~and year-to-date 2019 key metrics and the change in~~ ~~second quarter~~ ~~2019 EBIT compared with~~ ~~second quarter~~ ~~2018 by causal factor for our Automotive segment and its regional business units: North America, South America, Europe, China, Asia Pacific Operations, and Middle East & Africa.~~

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

~~Mobility Segment~~

Our Mobility segment primarily includes development costs related to our autonomous vehicles and our investment in mobility through Ford Smart Mobility LLC (“FSM”). Autonomous vehicles includes self-driving systems development and vehicle integration, autonomous vehicle research and advanced engineering, autonomous vehicle transportation-as-a-service network development, user experience, and business strategy and business development teams. FSM designs and builds mobility products and subscription services on its own, and collaborates with service providers and technology companies. In 2019, we began recording in the Mobility segment subscription related income previously reported in the Automotive segment. This income is generated from services managed in our Mobility segment.

~~The chart below shows the Mobility segment’s second quarter 2019 EBIT compared with a year ago.~~



	First Quarter
	2019			2020
Net cash provided by / (used in) operating activities (GAAP)	$	3,544		$	(473	)

Less: Items not included in Company Adjusted Free Cash Flows
Ford Credit operating cash flows	$	1,118		$	133
Funded pension contributions	(294		)	(175		)
Global Redesign (including separations)	(136		)	(172		)
Ford Credit tax payments / (refunds) under tax sharing agreement	98			475
Other, net	(120		)	(15		)

Add: Items included in Company Adjusted Free Cash Flows
Automotive and Mobility capital spending	$	(1,620	)	$	(1,770	)
Ford Credit distributions	675			275
Settlement of derivatives	(26		)	(28		)

Company adjusted free cash flow (Non-GAAP)	$	1,907		$	(2,242	)

Cash conversion (GAAP) (Trailing four quarters)	488		%	(441		)%
Adjusted free cash flow conversion (Non-GAAP) (Trailing four quarters)	24		%	(41		)%

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

Ford Credit ~~Segment~~Net Receivables Reconciliation to Managed Receivables ($B)

~~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~~.



	March 31, 2019		December 31, 2019		March 31, 2020
Ford Credit finance receivables, net (GAAP) *	$	109.8	$	107.4	$	106.0
Net investment in operating leases (GAAP) *	27.6		27.6		27.0
Consolidating adjustments **	9.5		7.0		4.8
Total net receivables	$	146.9	$	142.0	$	137.8

Held-for-sale receivables (GAAP)	$	—	$	1.5	$	—
Ford Credit unearned interest supplements and residual support	6.8		6.7		6.3
Allowance for credit losses	0.5		0.5		1.2
Other, primarily accumulated supplemental depreciation	1.1		1.0		1.1
Total managed receivables (Non-GAAP)	$	155.3	$	151.7	$	146.4

~~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 vehicle sales and leases, the extent to which Ford Credit purchases retail installment sale and 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 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

◦

As of January 1, 2019, we changed our accounting method for reporting early termination losses related to customer defaults on operating leases. Previously, we presented the early termination loss reserve on operating leases due to customer default events as part of the allowance for credit losses which reduces ~~Net investment in operating leases~~ ~~on the balance sheet. We now consider the effects of operating lease early terminations when determining depreciation estimates, which are included as part of accumulated depreciation within~~ ~~Net investment in operating leases~~ on the balance sheet. We believe this change in accounting method is preferable as the characterization of these changes is better reflected as depreciation. We have reclassified prior period amounts to reflect these changes. For additional information, refer to the “Critical Accounting Estimates - Allowance for Credit Losses” section of Item 7 of Part II of our 2018 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. With the change in accounting method discussed above, accumulated depreciation now reflects early termination losses on operating leases due to customer default events for all periods presented. 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 2018 Form 10-K Report~~

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

~~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 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 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

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


•	~~Cash~~ ~~(as shown on the Funding Structure, Liquidity Sources, and Leverage charts) – Cash, cash equivalents, and marketable securities, excluding amounts related to insurance activities~~


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


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


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


•	~~Securitization Cash~~ ~~(as shown on the Liquidity Sources chart) – Cash held for the benefit of the securitization investors (for example, a reserve fund)~~


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

•

~~Total Debt~~ (as shown on the Leverage chart) – Debt on Ford Credit’s balance sheet. 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

•

~~Total Net Receivables~~ ~~(as shown on the Total Net Receivables Reconciliation To Managed Receivables chart) –~~ 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 sheet 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~~creditors.


**	Primarily includes Automotive segment receivables purchased by Ford Credit which are classified to Trade and other receivables on our consolidated balance sheet. Also includes eliminations of intersegment transactions.

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

~~The charts below provide~~ ~~second quarter~~ ~~and year-to-date 2019 key metrics and the change in~~ ~~second quarter~~ ~~2019 EBT compared with~~ ~~second quarter~~ ~~2018 by causal factor for the Ford Credit segment.~~

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

~~The charts below show U.S. automotive financing trends in Ford Credit’s business.~~


*	Note: Numbers may not sum due to rounding.

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 portfolio gains and losses from our cash, cash equivalents, and marketable securities, and foreign exchange derivatives gains and losses associated with intercompany lending. Corporate governance expenses are primarily administrative, delivering benefit on behalf of the global enterprise, 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. Our second quarter 2019 Corporate Other results were a $286 million loss, which includes the mark-to-market loss on our investment in Pivotal Software.

~~Interest on Debt~~

Interest on Debt consists of interest expense on Automotive and Other debt. Second quarter 2019 interest expense on Automotive and Other debt was $244 million, which is $57 million lower than a year ago, reflecting primarily lower foreign debt interest expense, including our repayment of higher-cost affiliate debt as discussed in the Liquidity and Capital Resources section below.

~~Special Items~~

In Note 23 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.

~~Our pre-tax and tax special items were as follows:~~

~~Taxes~~

Our tax provisions for second quarter and first half of 2019 were $55 million and $482 million, respectively, resulting in effective tax rates of 26.6% and 26.5%, respectively. Our second quarter and first half of 2019 adjusted effective tax rates, which exclude special items, were 19.2% and 19.5%, respectively.

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

~~LIQUIDITY AND CAPITAL RESOURCES~~

~~At June 30, 2019, total balance sheet cash, cash equivalents, marketable securities, and restricted cash (including Ford Credit) was $38.2 billion.~~

~~Company excluding Ford Credit~~

~~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. Based on our planning assumptions, we believe we have sufficient liquidity and capital resources to continue to invest in new products and services, pay our debts and obligations as and when they come due, pay a regular dividend, and provide protection within an uncertain global economic environment.

At June 30, 2019, we had Company cash of $23.2 billion, with 88% held by consolidated entities domiciled in the United States. To be prepared for an economic downturn, we target an ongoing Company cash balance at or above $20 billion. 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.

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

In addition to our Company cash target, we also target to maintain a $10 billion balance available under our corporate credit facility, discussed below, for our Automotive business to protect against exogenous shocks. We assess the appropriate long-term target for total Company liquidity, which includes Company cash and the Automotive portion of the corporate credit facility, to be at or above $30 billion, which is an amount we believe is sufficient to support our business priorities and to protect our business. At June 30, 2019, we had $37.3 billion of Company liquidity, which is up over $3 billion from December 31, 2018, reflecting the addition of our supplemental credit facility (described below in ~~Available Credit Lines). We may reduce our Company cash and liquidity targets over time, based on improved operating performance and changes in our risk profile.~~

~~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), other transactions with Ford Credit, acquisitions and divestitures, changes in Automotive and Other debt, contributions to funded pension plans, and shareholder distributions.

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 sale of vehicles to dealers, which generally occurs shortly after being produced. In addition, our inventories are lean because we build to order, not for inventory. In contrast, our Automotive trade payables are based primarily on industry-standard production supplier payment terms generally ranging between 30 days to 45 days. As a result, our cash flow tends to improve as wholesale volumes increase, but can deteriorate significantly when wholesale volumes drop sharply. 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.

~~The year-over-year improvement in our cash flow in the second quarter and first half of 2019 was driven by favorable working capital.~~

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

~~Changes in Company cash excluding Ford Credit are summarized below:~~

~~Capital spending was $1.9 billion in the~~ ~~second quarter~~ of 2019 and $3.5 billion year to date, 4 percent lower than a year ago. We expect full year 2019 capital spending to be about $7.7 billion. As we redesign our business, the ongoing amount of capital spending to support product development, growth, and infrastructure is expected to be about $7 billion annually through 2022.

~~Second quarter 2019 working capital was about $100 million negative, and year-to-date 2019 working capital was about $300 million positive, reflecting primarily changes in payables.~~

Second quarter and year-to-date 2019 all other and timing differences were both negative, reflecting primarily assorted timing differences, interest payments on Automotive and Other debt, and cash taxes.

~~Shareholder distributions were about $600 million in the~~ ~~second quarter~~ ~~of 2019 and $1.2 billion year-to-date. We expect full year distributions of $2.6 billion.~~

~~Available Credit Lines~~. Total committed Company credit lines excluding Ford Credit at June 30, 2019 were $11.4 billion, consisting of $10.4 billion of our corporate credit facility and $1 billion of local credit facilities. At June 30,2019, the utilized portion of the corporate credit facility was $27 million, representing amounts utilized for letters of credit. At June 30, 2019, the utilized portion of the local credit facilities was $272 million.

Our corporate credit facility was amended in the second quarter of 2019 to extend the maturity dates by one year. Lenders under our corporate credit facility have commitments to us totaling $13.4 billion, with 75% of the commitments maturing on April 30, 2024 and 25% of the commitments maturing on April 30, 2022. We have allocated $3 billion of commitments to Ford Credit on an irrevocable and exclusive basis to support its liquidity. We would guarantee any borrowings by Ford Credit under the corporate credit facility.

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

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. 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. If our senior, unsecured, long-term debt does not maintain at least two investment grade ratings from Fitch, Moody’s, and S&P, the guarantees of certain subsidiaries will be required.

Also in the second quarter of 2019, we closed on a $3.5 billion supplemental credit facility, further strengthening our liquidity and providing additional financial flexibility. Unlike our corporate credit facility, the supplemental facility is intended to be utilized and includes a $2 billion revolving facility maturing on April 30, 2022 and a $1.5 billion delayed draw term loan facility maturing on December 31, 2022. We drew $500 million under the term loan facility in the second quarter of 2019, and we expect to draw the remainder of the term loan by year-end 2019. The terms and conditions of the supplemental credit facility are consistent with our corporate credit facility. As of July 24, 2019, $3 billion was available for use.

~~Debt.~~ As shown in Note 17 of the Notes to the Financial Statements, at June 30, 2019, Company debt excluding Ford Credit was $14.6 billion, including Automotive debt of $14 billion. Both balances were about $450 million higher than at December 31, 2018, and include the $500 million draw under the term loan facility described above and our $750 million unsecured debt (retail bond) issuance in the second quarter of 2019. The impact of this draw and future draws under the term loan facility, as well as the unsecured debt issuance, is leverage neutral after taking into consideration debt reduction actions we took late last year and this year to repay higher-cost affiliate debt.

~~Leverage.~~ We manage Company debt (excluding Ford Credit) levels with a leverage framework to maintain investment grade credit ratings through a normal business cycle. The leverage framework includes a ratio of total company debt (excluding Ford Credit) adjusted to include unamortized discount/premium and issuance costs (excluding Ford Credit), operating lease minimum commitments, and net pension liabilities excluding prepaid assets, divided by Company adjusted EBIT (excluding Ford Credit EBT), and further adjusted to include depreciation and tooling amortization (excluding Ford Credit), operating lease expense, and certain pension costs.

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

~~Ford Credit Segment~~

~~Funding Overview.~~ Ford Credit’s primary funding objective is to be well capitalized, with a strong balance sheet and ample liquidity to support its financing activities and growth under a variety of market conditions, including short-term and long-term market disruptions. Ford Credit’s funding strategy remains focused on diversification, and it plans to continue accessing a variety of markets, channels, and investors.

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 annually stress tests its balance sheet and liquidity to ensure that it continues to meet its financial obligations through economic cycles.

~~Funding Portfolio.~~ ~~The chart below shows the trends in funding for Ford Credit’s managed receivables:~~

Managed receivables were $152 billion at June 30, 2019, about the same as a year ago. Managed receivables were funded primarily with term debt and term asset-backed securities. Securitized funding as a percent of managed receivables was 38%. Ford Credit targets a mix of securitized funding between 35% and 40%. The calendarization of the funding plan will result in quarterly fluctuations of the securitized funding percentage.

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

~~Public Term Funding Plan.~~ The following chart shows Ford Credit’s issuances for full-year 2017 and 2018, planned issuances for full-year 2019, and its global public term funding issuances through July 23, 2019, excluding short-term funding programs:

Ford Credit’s total unsecured public term funding plan is categorized by currency of issuance. Ford Credit plans to continue issuing its eurocurrency-denominated (e.g., euro and sterling) public unsecured debt from the United States. For 2019, Ford Credit now projects full-year public term funding in the range of $27 billion to $31 billion. Through July 23, 2019, Ford Credit has completed $18 billion of public term issuances.

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

~~Liquidity.~~ ~~The following chart shows Ford Credit’s liquidity sources and utilization:~~

~~At June 30, 2019, Ford Credit’s net liquidity available for use was $33.6 billion, $6.3 billion higher than year-end 2018.~~

Ford Credit’s sources of liquidity include cash, committed asset-backed facilities, unsecured credit facilities, and the corporate credit facility allocation. At June 30, 2019, Ford Credit’s liquidity sources including cash totaled $55.7 billion, up $4.1 billion from year-end 2018.

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

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

~~The chart below shows the calculation of Ford Credit’s financial statement leverage and managed leverage:~~

Ford Credit plans its managed leverage by considering prevailing market conditions and the risk characteristics of its business. At June 30, 2019, Ford Credit’s financial statement leverage was 9.5:1, and its managed leverage was 8.6:1. Ford Credit targets managed leverage in the range of 8:1 to 9:1.

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

~~Total Company~~

~~Pension Plans - Underfunded Balances.~~ As of June 30, 2019, our total Company pension underfunded status reported on our balance sheet was $5.7 billion and reflects the net underfunded status at December 31, 2018, updated for service and interest cost, expected return on assets, settlement gain 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 2018.

~~Based on our planning assumptions for asset returns, discount rates, and contributions, we expect our funded status to remain relatively unchanged at year-end 2019 compared to the end of 2018.~~

~~Return on Invested Capital.~~ We analyze total Company performance using an adjusted Return on Invested Capital (“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:

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

~~CREDIT RATINGS~~

~~The following rating actions were taken by these NRSROs since the filing of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.~~

~~On May 17, 2019, Fitch revised the outlook to negative from stable for Ford and Ford Credit and affirmed their ratings.~~

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

~~NRSRO RATINGS~~

~~Ford~~

~~Ford Credit~~

~~NRSROs~~

~~Issuer~~

~~Default /~~

~~Corporate /~~

~~Issuer Rating~~

~~Long-Term Senior Unsecured~~

~~Outlook / Trend~~

~~Long-Term Senior Unsecured~~

~~Short-Term~~

~~Unsecured~~

~~Outlook / Trend~~

~~Minimum Long-Term Investment Grade Rating~~

~~DBRS~~

~~BBB~~

~~Negative~~

~~BBB~~

~~R-2M~~

~~Negative~~

~~BBB (low)~~

~~Fitch~~

~~BBB~~

~~Negative~~

~~BBB~~

~~Negative~~

~~BBB-~~

~~Moody’s~~

~~N/A~~

~~Baa3~~

~~Negative~~

~~Baa3~~

~~P-3~~

~~Negative~~

~~Baa3~~

~~S&P~~

~~BBB~~

~~Negative~~

~~BBB~~

~~A-2~~

~~Negative~~

~~BBB-~~

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

~~OUTLOOK~~

~~Our Company guidance for 2019, which is based on~~ ~~the current economic environment, including commodities, foreign exchange, and tariffs,~~ ~~is below.~~ ~~This guidance replaces in its entirety the guidance provided on page 60 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.~~

In addition, as previously reported, we have identified a total of about $11 billion in potential EBIT charges for our Global Redesign actions, with negative cash effects of about $7 billion. In 2019, we continue to expect to incur $3 billion to $3.5 billion of the EBIT charges, but now expect negative cash effects of about $1.5 billion to $2 billion, reflecting a shift of about $0.5 billion to $1 billion in cash effects to 2020. We expect substantially all of the EBIT charges to be treated as special items.

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

~~NON-GAAP FINANCIAL MEASURE RECONCILIATIONS~~

The following charts show our Non-GAAP financial measure reconciliations for: Adjusted EBIT, Adjusted Earnings Per Share, Adjusted Effective Tax Rate, Adjusted Free Cash Flow, and Ford Credit Managed Receivables. The GAAP reconciliation for Ford Credit Managed Leverage can be found in the Ford Credit Segment section of “Liquidity and Capital Resources.”

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

~~Supplemental Information~~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, 2020
	First Quarter
Cash flows from operating activities	Company excluding Ford Credit			Ford Credit			Eliminations		Consolidated
Net income/(loss)	$	(2,014	)	$	21		$	—	$	(1,993	)
Depreciation and tooling amortization	1,384			1,060			—		2,444
Other amortization	8			(310		)	—		(302		)
Held-for-sale impairment charges	3			—			—		3
Provision for credit and insurance losses	6			592			—		598
Pension and OPEB expense/(income)	(178		)	—			—		(178		)
Equity investment dividends received in excess of (earnings)/losses	124			(6		)	—		118
Foreign currency adjustments	362			(24		)	—		338
Net (gain)/loss on changes in investments in affiliates	(20		)	5			—		(15		)
Stock compensation	37			1			—		38
Provision for deferred income taxes	974			(272		)	—		702
Decrease/(Increase) in finance receivables (wholesale and other)	—			(1,080		)	—		(1,080		)
Decrease/(Increase) in intersegment receivables/payables	488			(488		)	—		—
Decrease/(Increase) in accounts receivable and other assets	16			23			—		39
Decrease/(Increase) in inventory	(1,177		)	—			—		(1,177		)
Increase/(Decrease) in accounts payable and accrued and other liabilities	478			(284		)	—		194
Other	(278		)	76			—		(202		)
Interest supplements and residual value support to Ford Credit	(819		)	819			—		—
Net cash provided by/(used in) operating activities	$	(606	)	$	133		$	—	$	(473	)



Cash flows from investing activities	Company excluding Ford Credit			Ford Credit			Eliminations			Consolidated
Capital spending	$	(1,770	)	$	(10	)	$	—		$	(1,780	)
Acquisitions of finance receivables and operating leases	—			(12,184		)	—			(12,184		)
Collections of finance receivables and operating leases	—			12,709			—			12,709
Proceeds from sale of business	—			1,340			—			1,340
Purchases of marketable and other investments	(7,564		)	(680		)	—			(8,244		)
Sales and maturities of marketable securities and other investments	3,463			1,535			—			4,998
Settlements of derivatives	(28		)	159			—			131
Other	(83		)	(1		)	—			(84		)
Investing activity (to)/from other segments	275			(10		)	(265		)	—
Net cash provided by/(used in) investing activities	$	(5,707	)	$	2,858		$	(265	)	$	(3,114	)



Cash flows from financing activities	Company excluding Ford Credit			Ford Credit			Eliminations		Consolidated
Cash payments for dividends and dividend equivalents	$	(596	)	$	—		$	—	$	(596	)
Purchases of common stock	—			—			—		—
Net changes in short-term debt	282			(904		)	—		(622		)
Proceeds from issuance of long-term debt	15,068			11,623			—		26,691
Principal payments on long-term debt	(296		)	(12,652		)	—		(12,948		)
Other	(50		)	(21		)	—		(71		)
Financing activity to/(from) other segments	10			(275		)	265		—
Net cash provided by/(used in) financing activities	$	14,418		$	(2,229	)	$	265	$	12,454

Effect of exchange rate changes on cash, cash equivalents, and restricted cash	$	(196	)	$	(252	)	$	—	$	(448	)

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 June 30, 2019																For the period ended March 31, 2020
		Second Quarter																First Quarter
		Company excluding Ford Credit																Company excluding Ford Credit
		Automotive		Mobility			Other (a)			Subtotal			Ford Credit		Consolidated			Automotive			Mobility			Other (a)			Subtotal			Ford Credit			Consolidated
Revenues		$	35,758	$	6		$	—		$	35,764		$	3,089	$	38,853		$	31,340		$	13		$	—		$	31,353		$	2,967		$	34,320
Total costs and expenses	Total costs and expenses	34,911		314			1,157			36,382			2,381		38,763		Total costs and expenses	32,106			381			467			32,954			2,924			35,878
Operating income/(loss)																	Operating income/(loss)	(766		)	(368		)	(467		)	(1,601		)	43			(1,558		)
Interest expense on Automotive debt	Interest expense on Automotive debt	—		—			230			230			—		230		Interest expense on Automotive debt	—			—			214			214			—			214
Interest expense on Other debt	Interest expense on Other debt	—		—			14			14			—		14		Interest expense on Other debt	—			—			13			13			—			13
Other income/(loss), net	Other income/(loss), net	454		37			(334		)	157			115		272		Other income/(loss), net	636			34			29			699			(19		)	680
Equity in net income of affiliated companies		72		7			—			79			8		87
Income/(loss) before income taxes		1,373		(264		)	(1,735		)	(626		)	831		205
Equity in net income/(loss) of affiliated companies																	Equity in net income/(loss) of affiliated companies	(47		)	—			—			(47		)	6			(41		)
Income/(Loss) before income taxes																	Income/(Loss) before income taxes	(177		)	(334		)	(665		)	(1,176		)	30			(1,146		)
Provision for/(Benefit from) income taxes	Provision for/(Benefit from) income taxes	243		(64		)	(342		)	(163		)	218		55		Provision for/(Benefit from) income taxes	221			(80		)	697			838			9			847
Net income/(Loss)		1,130		(200		)	(1,393		)	(463		)	613		150
Net income/(loss)																	Net income/(loss)	(398		)	(254		)	(1,362		)	(2,014		)	21			(1,993		)
Less: Income/(Loss) attributable to noncontrolling interests	Less: Income/(Loss) attributable to noncontrolling interests	2		—			—			2			—		2		Less: Income/(Loss) attributable to noncontrolling interests	—			—			—			—			—			—
Net income/(loss) attributable to Ford Motor Company	Net income/(loss) attributable to Ford Motor Company	$	1,128	$	(200	)	$	(1,393	)	$	(465	)	$	613	$	148	Net income/(loss) attributable to Ford Motor Company	$	(398	)	$	(254	)	$	(1,362	)	$	(2,014	)	$	21		$	(1,993	)

For the period ended June 30, 2019
First Half
Company excluding Ford Credit
Automotive Mobility Other (a) Subtotal Ford Credit Consolidated
Revenues $ 72,997
$ 12
$ —
$ 73,009
$ 6,186
$ 79,195
Total costs and expenses 70,584
647
1,936
73,167
4,736
77,903
Interest expense on Automotive debt —
—
461
461
—
461
Interest expense on Other debt —
—
28
28
—
28
Other income/(loss), net 880
74
(222 ) 732
168
900
Equity in net income of affiliated companies 89
9
—
98
14
112
Income/(loss) before income taxes 3,382
(552 ) (2,647 ) 183
1,632
1,815
Provision for/(Benefit from) income taxes 625
(133 ) (426 ) 66
416
482
Net income/(Loss) 2,757
(419 ) (2,221 ) 117
1,216
1,333
Less: Income/(Loss) attributable to noncontrolling interests 39
—
—
39
—
39
Net income/(loss) attributable to Ford Motor Company $ 2,718
$ (419 ) $ (2,221 ) $ 78
$ 1,216
$ 1,294

__________

(a) Other includes Corporate Other, Interest on Debt, and Special ~~Items~~Items.

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

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


	June 30, 2019									March 31, 2020
Assets	Company excluding Ford Credit		Ford Credit		Eliminations			Consolidated		Company excluding Ford Credit		Ford Credit		Eliminations			Consolidated
Cash and cash equivalents	$	9,499	$	12,618	$	—		$	22,117	$	16,343	$	9,628	$	—		$	25,971
Marketable securities	13,684		2,247		—			15,931		17,946		2,453		—			20,399
Ford Credit finance receivables, net	—		53,756		—			53,756		—		54,889		—			54,889
Trade and other receivables, less allowances	3,683		7,258		—			10,941
Trade and other receivables, net										3,128		3,497		—			6,625
Inventories	12,437		—		—			12,437		11,312		—		—			11,312
Assets held for sale										664		36		—			700
Other assets	2,114		1,055		—			3,169		2,689		1,691		—			4,380
Receivable from other segments	312		1,830		(2,142		)	—		21		2,673		(2,694		)	—
Total current assets	41,729		78,764		(2,142		)	118,351		52,103		74,867		(2,694		)	124,276

Ford Credit finance receivables, net	—		53,875		—			53,875		—		51,141		—			51,141
Net investment in operating leases	2,107		27,691		—			29,798		1,509		27,005		—			28,514
Net property	36,381		200		—			36,581		35,082		212		—			35,294
Equity in net assets of affiliated companies	2,515		122		—			2,637		2,159		116		—			2,275
Deferred income taxes	12,247		193		(2,287		)	10,153		12,607		168		(1,853		)	10,922
Other assets	8,495		2,294		—			10,789		8,860		2,868		—			11,728
Receivable from other segments	320		2		(322		)	—		9		16		(25		)	—
Total assets	$	103,794	$	163,141	$	(4,751	)	$	262,184	$	112,329	$	156,393	$	(4,572	)	$	264,150

Liabilities Company excluding Ford Credit Ford Credit Eliminations Consolidated
Payables $ 21,906
$ 1,074
$ —
$ 22,980
Other liabilities and deferred revenue 20,920
1,583
—
22,503
Automotive debt payable within one year 2,229
—
—
2,229
Ford Credit debt payable within one year —
50,492
—
50,492
Other debt payable within one year 130
—
—
130
Payable to other segments 2,142
—
(2,142 ) —
Total current liabilities 47,327
53,149
(2,142 ) 98,334

Other liabilities and deferred revenue 22,913
1,119
—
24,032
Automotive long-term debt 11,765
—
—
11,765
Ford Credit long-term debt —
90,978
—
90,978
Other long-term debt 470
—
—
470
Deferred income taxes 70
2,686
(2,287 ) 469
Payable to other segments 8
314
(322 ) —
Total liabilities $ 82,553
$ 148,246
$ (4,751 ) $ 226,048

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

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

For the period ended June 30, 2019
First Half
Cash flows from operating activities Company excluding Ford Credit Ford Credit Eliminations Consolidated
Net cash provided by/(used in) operating activities $ 3,622
$ 6,385
$ —
$ 10,007

Cash flows from investing activities Company excluding Ford Credit Ford Credit Eliminations Consolidated
Capital spending $ (3,531 ) $ (22 ) $ —
$ (3,553 )
Acquisitions of finance receivables and operating leases —
(26,202 ) —
(26,202 )
Collections of finance receivables and operating leases —
24,974
—
24,974
Purchases of marketable securities and other investments (5,571 ) (2,099 ) —
(7,670 )
Sales and maturities of marketable securities and other investments 7,357
1,183
—
8,540
Settlements of derivatives 60
23
—
83
Other 6
(2 ) —
4
Investing activity (to)/from other segments 1,404
—
(1,404 ) —
Net cash provided by/(used in) investing activities $ (275 ) $ (2,145 ) $ (1,404 ) $ (3,824 )

Cash flows from financing activities Company excluding Ford Credit Ford Credit Eliminations Consolidated
Cash payments for dividends and dividend equivalents $ (1,196 ) $ —
$ —
$ (1,196 )
Purchases of common stock —
—
—
—
Net changes in short-term debt 557
(486 ) —
71
Proceeds from issuance of long-term debt 1,250
24,983
—
26,233
Principal payments on long-term debt (1,469 ) (24,298 ) —
(25,767 )
Other (85 ) (64 ) —
(149 )
Financing activity to/(from) other segments —
(1,404 ) 1,404
—
Net cash provided by/(used in) financing activities $ (943 ) $ (1,269 ) $ 1,404
$ (808 )

Effect of exchange rate changes on cash, cash equivalents, and restricted cash $ —
$ 24
$ —
$ 24



Liabilities	Company excluding Ford Credit		Ford Credit		Eliminations			Consolidated
Payables	$	17,449	$	990	$	—		$	18,439
Other liabilities and deferred revenue	21,225		1,449		—			22,674
Automotive debt payable within one year	1,609		—		—			1,609
Ford Credit debt payable within one year	—		51,303		—			51,303
Other debt payable within one year	—		—		—			—
Liabilities held for sale	469		—		—			469
Payable to other segments	2,694		—		(2,694		)	—
Total current liabilities	43,446		53,742		(2,694		)	94,494

Other liabilities and deferred revenue	23,757		1,348		—			25,105
Automotive long-term debt	28,411		—		—			28,411
Ford Credit long-term debt	—		85,533		—			85,533
Other long-term debt	470		—		—			470
Deferred income taxes	67		2,225		(1,853		)	439
Payable to other segments	25		—		(25		)	—
Total liabilities	$	96,176	$	142,848	$	(4,572	)	$	234,452

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

Selected Other Information.

~~Cost of sales~~ ~~and~~ ~~Selling, administrative, and other expenses~~ ~~for the~~ ~~second quarter~~ ~~of 2019 were $36.4 billion, an increase of about $400 million compared with the~~ ~~second quarter~~ ~~of 2018.~~ ~~Cost of sales~~ ~~and~~ ~~Selling, administrative, and other expenses~~ ~~for the~~ ~~first half~~ ~~of 2019 were $73.2 billion, a decrease of $1.3 billion compared with the~~ ~~first half~~ ~~of 2018. The detail for these changes is shown below (in billions):~~

2019 Lower/(Higher) 2018
Second Quarter First Half
Volume and mix, exchange, and other $ 1.0
$ 3.4
Contribution costs
Material excluding commodities (0.1 ) —
Commodities (0.1 ) (0.2 )
Warranty (0.2 ) (0.4 )
Freight 0.1
—
Structural costs (0.2 ) —
Special items (0.9 ) (1.5 )
Total $ (0.4 ) $ 1.3

Equity. At ~~June 30, 2019,~~March 31, 2020, total equity attributable to Ford was ~~$36.1~~$29.7 billion, ~~an increase~~a decrease of ~~about $200 million~~$3.5 billion compared with December 31, ~~2018.~~2019. The detail for this change is shown below (in billions):


	Increase/ (Decrease)			Increase/ (Decrease)
Net income	$	1.3		$	(2.0	)
Shareholder distributions	(1.2		)	(0.6		)
Other	0.1
Adoption of accounting standards				(0.2		)
Other comprehensive income				(0.7		)
Total	$	0.2		$	(3.5	)

U.S. Sales by Type. The following table shows ~~second~~first quarter ~~2019~~ 2020 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. Sales	U.S. Wholesales	U.S. Sales	U.S. Wholesales
Trucks	324,243	335,109	263,757	265,966
SUVs	215,898	157,608	189,720	194,013
Cars	110,195	96,780	62,853	73,896
Total Vehicles	650,336	589,497	516,330	533,875

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

~~Cautionary Note on Forward-Looking Statements~~CRITICAL ACCOUNTING ESTIMATES

~~Ford’s long-term competitiveness depends on the successful execution of fitness actions;~~

~~Industry sales volume, particularly in the United States, Europe, or China, could decline if there is a financial crisis, recession, or significant geopolitical event;~~

~~Ford’s new and existing products and mobility services are subject to market acceptance;~~

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

~~Ford may face increased price competition resulting from industry excess capacity, currency fluctuations, or other factors;~~

~~Fluctuations in commodity prices, foreign currency exchange rates, and interest rates can have a significant effect on results;~~

~~With a global footprint, Ford’s results could be adversely affected by economic, geopolitical, protectionist trade policies, or other events, including Brexit;~~

~~Ford’s production, as well as Ford’s suppliers’ production, could be disrupted by labor disputes, 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;~~

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

~~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;~~

~~Ford’s vehicles could be affected by defects that result in delays in new model launches, recall campaigns, or increased warranty costs;~~

~~Ford may need to substantially modify its product plans to comply with safety, emissions, fuel economy, and other regulations that may change in the future;~~

~~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’s receipt of government incentives could be subject to reduction, termination, or clawback;~~

~~Operational systems, security systems, and vehicles could be affected by cyber incidents;~~

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

~~Ford Credit could face increased competition from banks, financial institutions, or other third parties seeking to increase their share of financing Ford vehicles; and~~

~~Ford Credit could be subject to new or increased credit regulations, consumer or data 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 asAs a result of ~~new information, future events, or otherwise. For additional discussion, see “Item 1A. Risk Factors”~~the January 1, 2020 adoption of the current expected credit loss (“CECL”) standard (ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments), we are updating the Critical Accounting Estimate disclosure in our ~~2018~~2019 Form 10-K Report as ~~updated by~~follows:

Allowance for Credit Losses

The allowance for credit losses represents Ford Credit’s estimate of the expected lifetime credit losses inherent in finance receivables as of the balance sheet date. The adequacy of the allowance for credit losses is assessed quarterly and the assumptions and models used in establishing the allowance are evaluated regularly. Because credit losses can vary substantially over time, estimating credit losses requires a number of assumptions about matters that are uncertain. Changes in assumptions affect Ford Credit interest, operating, and other expenses on our ~~subsequent Quarterly Reports~~consolidated income statement and the allowance for credit losses contained within Ford Credit finance receivables, net on ~~Form 10-Q~~our consolidated balance sheet. For additional information regarding the allowance for credit losses, see Note 8 of our Notes to the Financial Statements.

Assumptions Used. The allowance for credit losses is based on Ford Credit’s assumptions regarding:


•	Probability of default. The expected probability of payment and time to default which include assumptions about macroeconomic factors and recent performance. Macroeconomic factors used in the models are country specific.


•	Loss given default. The percentage of the expected balance due at default that is not recoverable. The loss given default takes into account the expected collateral value and future recoveries.

Sensitivity Analysis.

Changes in the assumptions used to derive probability of default and ~~Current Reports on Form 8-K.~~loss given default would affect the allowance for credit losses. The effect of the indicated increase / decrease in the assumptions for Ford Credit’s U.S. Ford and Lincoln brand retail financing is as follows (in millions):



Assumption	Basis Point Change	Increase / (Decrease)
Probability of default (lifetime)	+/- 100	$200/$(200)
Loss given default	+/- 100	$20/$(20)

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

ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

The Financial Accounting Standards Board (“FASB”) has issued the following Accounting Standards Updates (“ASU”) which are not expected to have a material impact ~~(with the exception of ASU 2016-13)~~ to our financial statements or financial statement disclosures. For additional information, see Note 2 of the Notes to the Financial Statements.



ASU		Effective Date (a)
~~2018-18~~2020-04	~~Clarifying~~Facilitation of the ~~Interaction between Collaborative Arrangements and Revenue from Contracts with Customers~~Effects of Reference Rate Reform on Financial Reporting	~~January~~April 1, 2020
~~2018-15~~2019-12	~~Customer’s~~Simplifying the Accounting for ~~Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract~~	~~January 1, 2020~~
~~2016-13~~	~~Credit Losses - Measurement of Credit Losses on Financial Instruments~~	~~January 1, 2020 (b)~~
~~2018-14~~	~~Changes to the Disclosure Requirements for Defined Benefits Plans~~Income Taxes	January 1, 2021
2018-12	Targeted Improvements to the Accounting for Long Duration Contracts	January 1, ~~2021~~2022

__________


(a)	Early adoption for each of the standards is permitted.


~~(b)~~	~~The FASB has issued the following update to the Credit Losses standard: ASU 2019-05 (Targeted Transition Relief). We will adopt the new Credit Losses standard effective January 1, 2020.~~

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 ~~June 30, 2019,~~March 31, 2020, was an asset of $689 million, compared with a liability of ~~$100 million, compared with an asset of $363~~$596 million as of December 31, ~~2018.~~2019. The potential decrease in fair value from a 10% adverse change in the underlying exchange rates, in U.S. dollar terms, ~~was $2.2~~would have been $2.3 billion at ~~June 30, 2019,~~March 31, 2020, compared with ~~$2.5~~$2.3 billion at December 31, ~~2018.~~2019.

Commodity Price Risk. The net fair value of commodity forward contracts (including adjustments for credit risk) as of ~~June 30, 2019,~~March 31, 2020, was a liability of ~~$51~~$153 million, compared with a liability of ~~$62~~$24 million at December 31, ~~2018.~~2019. The potential decrease in fair value from a 10% adverse change in the underlying commodity prices ~~in U.S. dollar terms, was $92~~would have been $99 million at ~~June 30, 2019,~~March 31, 2020, compared with ~~$90~~$112 million at December 31, ~~2018.~~2019.

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 ~~June 30, 2019,~~March 31, 2020, all else constant, such an increase in interest rates would increase its pre-tax cash flow by ~~$21~~$3 million over the next 12 months, compared with ~~an increase~~a decrease of ~~$51~~$26 million at December 31, ~~2018~~2019. 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.

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. James P. Hackett, our Chief Executive Officer (“CEO”), and Tim Stone, our Chief Financial Officer (“CFO”), have performed an evaluation of the Company’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of ~~June 30, 2019,~~March 31, 2020, 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. ~~Effective June 1, 2019, Tim Stone succeeded Bob Shanks as~~There were no changes in internal control over financial reporting during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our ~~Chief Financial Officer. Mr. Stone joined Ford on April 15, 2019. Mr. Shanks has elected to retire at the end of 2019.~~internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings.

~~CONSUMER MATTERS~~CLASS ACTIONS

~~We provide warranties~~In re: Takata Airbag Product Liability Litigation; Economic Loss Track Cases Against Ford Motor Company. On July 16, 2018, Ford entered into a settlement agreement related to a consumer economic loss class action pending before the U.S. District Court for the Southern District of Florida. The first case was originally filed on ~~the vehicles we sell. Warranties are offered for specific periods of time and/~~October 27, 2014, against Ford, Takata, and several other automotive manufacturers, and was brought by consumers who own or mileage, and vary depending upon the type of product and the geographic location of its sale. Pursuant to these warranties, we will repair, replace, or adjust all parts on a vehicle that are defective in factory-supplied materials or workmanship during the specified warranty period. We are a defendant in numerous actions in state and federal courts alleging damages based on state and federal consumer protection laws and breach of warranty obligations. Remedies under these statutes may include repurchase, civil penalties, and plaintiff’s attorney fees. In some cases, plaintiffs also include an allegation of fraud.

The cost of these matters is included in our warranty costs. We accrue obligations for warranty costs at the time of sale using a patterned estimation model that includes historical information regarding the nature, frequency, and average cost of claims for each vehicle line by model year. We reevaluate the adequacy of our accruals on a regular basis.

~~As previously reported, we are currently a defendant in a significant number of litigation matters relating to the performance of~~owned vehicles equipped with ~~DPS6 transmissions.~~Takata airbag inflators. Additional cases were subsequently filed in courts throughout the United States and consolidated into a multidistrict case before the Florida court, which also included personal injury claims and claims by automotive recyclers. Ford’s July 16, 2018 settlement relates only to the consumer economic loss matters. In these cases, plaintiffs allege that Ford vehicles equipped with Takata airbags are defective and that Ford did not disclose this defect to consumers. Plaintiffs allege that they suffered several forms of economic damages as a result of purchasing vehicles with defective airbags. The settlement is for $299 million, which is subject to certain discounts, and is subject to court approval. On December 20, 2018, the court overruled all objections and entered a final order approving the settlement. Several objectors then filed notices of appeal of the trial court’s order. On December 10, 2019, plaintiffs filed a motion with the court indicating they reached an agreement with the objectors to resolve the dispute. The agreement does not increase the total cost to Ford of the settlement. On January 23, 2020, the court held a hearing on the motion to approve the agreement, and on January 27, 2020, the court entered an “Indicative Ruling” indicating it would approve the agreement. On March 3, 2020, the U.S. Court of Appeals for the Eleventh Circuit dismissed the appeal, and on March 9, 2020, the trial court entered a final approval order and the settlement became effective.

OTHER MATTERS

~~Transit Connect Customs Ruling~~ Brazilian Tax Matters.~~(as previously reported~~ Two Brazilian states and the Brazilian federal tax authority currently have outstanding substantial tax assessments against Ford Brazil related to state and federal tax incentives Ford Brazil receives for its operations in the Brazilian state of Bahia. All assessments have been appealed to the relevant administrative court of each jurisdiction. Our appeals with the State of São Paulo and the federal tax authority remain at the administrative level. In the State of Minas Gerais, one case that had been pending at the administrative level was dismissed on ~~page 23~~April 1, 2020, while the other two cases remain pending on appeal to the judicial court. To proceed with an appeal within the judicial court system, an appellant may be required to post collateral, which would likely be significant. To date we have not been required to post any collateral.

The state assessments are part of ~~our 2018 Form 10-K Report~~a broader conflict among various states in Brazil. The federal legislature enacted laws designed to encourage the states to end that conflict, and in ~~our Current~~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.

ITEM 1A. Risk Factors.

The following risk factor supplements the risk factors described in Item 1A of the Company’s Annual Report on Form ~~8-K filed~~10-K for the year ended December 31, 2019 and should be read in conjunction with the risk factors described in our 2019 Form 10-K Report:

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. We face various risks related to public health issues, including epidemics, pandemics, and other outbreaks, including the deadly global outbreak of COVID-19. The impact of COVID-19, including changes in consumer behavior, pandemic fears and market downturns, and restrictions on ~~June 12, 2019). On~~business and individual activities, has created significant volatility in the global economy and led to reduced economic activity. There have been extraordinary actions taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world, including travel bans, quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

Consistent with the actions taken by governmental authorities, in late March ~~8, 2013, U.S. Customs~~2020, we idled our manufacturing operations in regions around the world other than China, where manufacturing operations were suspended in January and ~~Border Protection (“CBP”) ruled that Transit Connects imported~~February before beginning to resume operations in March. We believe the phased restart of our manufacturing plants, supply network, and other dependent functions is probable of commencing in the second quarter of 2020. Our automotive operations will generally not realize revenue while our manufacturing operations are suspended, but we will continue to incur operating and non-operating expenses. Any decisions on resumptions will be made in cooperation with local unions, suppliers, dealers, and other stakeholders. A continued significant disruption to our production schedule will have a substantial adverse effect on our financial condition, liquidity, and results of operations.

The economic slowdown attributable to COVID-19 has led to a global decrease in vehicle sales in markets around the world. As described in more detail under “Industry sales volume in any of our key markets can be volatile and could decline if there is a financial crisis, recession, or significant geopolitical event” in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, a sustained decline in vehicle sales would have a substantial adverse effect on our financial condition, results of operations, and cash flow. Moreover, as ~~passenger wagons and later converted into cargo vans are subject to the 25% duty applicable to cargo vehicles, rather than the 2.5% duty applicable to passenger vehicles. As~~ a result of the ~~ruling, CBP is requiring Ford~~restrictions described above and consumers’ reaction to ~~pay~~COVID-19 in general, showroom traffic at our dealers has dropped significantly and many dealers have temporarily ceased normal operations, thereby reducing the ~~25% duty upon importation~~demand for our products and leading dealers to purchase fewer vehicles from us, as well as a reduction in parts and accessories sales. At the same time, despite the decrease in revenue, our production trade payables continue to come due through early May, resulting in a deterioration of ~~Transit Connects that will be converted to cargo vehicles,~~our cash flow. The extent and ~~is seeking the difference in duty rates for prior imports. Our protest~~duration of the ~~ruling within CBP was denied,~~deterioration is uncertain at this time.

The predominant share of Ford Credit’s business consists of financing Ford and ~~we filed~~Lincoln vehicles. Ford’s suspension of manufacturing operations, the significant decline in dealer showroom traffic, and the reduction of operations at many dealers has resulted in a ~~challenge~~significant decline in Ford Credit’s retail financing and lease originations, and a sustained decline in sales could have a significant adverse effect on dealer profitability and creditworthiness. Further, COVID-19 has had a significant negative impact on many businesses and unemployment rates have increased sharply. Ford Credit expects the ~~U.S. Court~~economic uncertainty and higher unemployment to result in higher defaults in its consumer portfolio, and prolonged unemployment is expected to have a negative impact on both new and used vehicle demand.

The global economic slowdown and stay-at-home orders enacted across the United States have disrupted auction activity in many locations, which may adversely impact, or cause delays in realizing, the resale value for off-lease and repossessed vehicles. For more information about the impact of ~~International Trade (“CIT”). On August 9, 2017, the CIT ruled~~higher credit losses and lower residual values on Ford Credit’s business, see “Ford Credit could experience higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles” in Item 1A. Risk Factors in our ~~favor. On October 6, 2017, CBP filed a notice of appeal to the U.S. Court of Appeals~~Annual Report on Form 10-K for the Federal Circuit (the “Federal Circuit”), and on June 7, 2019, a panel of three Federal Circuit judges ruled in favor of CBP. On July 22, 2019, we filed a petition for rehearing and rehearing en banc with the Federal Circuit. If we prevail, we will receive a refund of the contested amounts paid, plus interest. If we do not prevail, CBP would recover the increased duties for prior imports, plus interest, and might assert a claim for penalties.year ended December 31, 2019.

~~Emissions Certification~~ As described in more detail under “~~(as previously reported on page 70 of~~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” in Item 1A. Risk Factors in our ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the ~~quarter~~year ended ~~March~~December 31, ~~2019).~~ 2019, the volatility created by COVID-19 has adversely affected Ford Credit’s access to the debt and securitization markets and its cost of funding.

The ~~Company has become aware~~full impact of ~~a potential concern involving~~the COVID-19 pandemic on our financial condition and results of operations will depend on future developments, such as the ultimate duration and scope of the outbreak, its ~~U.S. emissions certification process. This matter currently focuses~~impact on ~~issues relating~~our customers, dealers, and suppliers, how quickly normal economic conditions, operations, and the demand for our products can resume, and whether the pandemic leads to ~~road load estimations, including analytical modeling and coastdown testing. The potential concern does not involve the use of defeat devices (see page 10~~recessionary conditions in any of our ~~2018~~key markets. For example, fully ramping up our production schedule to prior levels may take several months and will depend, in part, on whether our suppliers and dealers have resumed normal operations. Further, government-sponsored liquidity or stimulus programs in response to the COVID-19 pandemic may not be available to our customers, suppliers, dealers, or us, and if available, may nevertheless be insufficient to address the impacts of COVID-19. Moreover, our supply and distribution chains may be disrupted by supplier or dealer bankruptcies or their permanent discontinuation of operations. Accordingly, the ultimate impact on our financial condition and results of operations cannot be determined at this time. Nevertheless, despite the uncertainty of the COVID-19 situation, we expect our full year 2020 results of operations to be adversely affected.

The COVID-19 pandemic may also exacerbate other risks disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K ~~Report~~ for ~~a definition of defeat devices). We voluntarily disclosed this matter~~the year ended December 31, 2019, including, but not limited to, ~~the U.S. Environmental Protection Agency~~our competitiveness, demand or market acceptance for our products, and the California Air Resources Board on February 18, 2019 and February 21, 2019, respectively. Subsequently, the U.S. Department of Justice opened a criminal investigation into the matter. In addition, we have notified a number of other state and federal agencies. We continue to cooperate fully with all government agencies. At this stage, we cannot predict the outcome, and we cannot provide assurance that it will not have a material adverse effect on us.shifting consumer preferences.

ITEM 6. Exhibits.



Designation	Description	Method of Filing
Exhibit 10.1	Annual Incentive Compensation Plan for 2020.	Filed with this Report.
Exhibit 10.2	Performance-Based Restricted Stock Unit Metrics for 2020.	Filed with this Report.
Exhibit 10.3	Executive Waiver and Release Agreement between Ford Motor Company and Joseph R. Hinrichs dated February 21, 2020.	Filed with this Report.
Exhibit 31.1	Rule 15d-14(a) Certification of CEO.	Filed with this Report.
Exhibit 31.2	Rule 15d-14(a) Certification of CFO.	Filed with this Report.
Exhibit 32.1	Section 1350 Certification of CEO.	Furnished with this Report.
Exhibit 32.2	Section 1350 Certification of CFO.	Furnished with this Report.
Exhibit 101.INS	~~XBRL Instance Document - The instance document does not appear in the~~ Interactive Data ~~File because its XBRL tags are embedded within the~~Files pursuant to Rule 405 of Regulation S-T formatted in Inline ~~XBRL document.~~Extensible Business Reporting Language (“Inline XBRL”).	*
Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document.	*
Exhibit 101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	*
Exhibit 101.LAB	XBRL Taxonomy Extension Label Linkbase Document.	*
Exhibit 101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.	*
Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.	*
Exhibit 104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).	*

__________

* Submitted electronically with this ~~Report in accordance with the provisions of Regulation S-T.~~Report.

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, ~~Vice President and~~ Controller
	(principal accounting officer)

Date:	~~July 24, 2019~~April 28, 2020

7675



	Equity Attributable to Ford Motor Company
	Capital Stock		Cap. in Excess of Par Value of Stock			Retained Earnings			Accumulated Other Comprehensive Income/(Loss) (Note 21)			Treasury Stock			Total			Equity Attributable to Non-controlling Interests			Total Equity
Balance at December 31, 2017	$	41	$	21,843		$	21,906		$	(6,959	)	$	(1,253	)	$	35,578		$	28		$	35,606
Net income	—		—			1,736			—			—			1,736			9			1,745
Other comprehensive income/(loss), net of tax	—		—			—			290			—			290			(1		)	289
Common stock issued (including share-based compensation impacts)	—		(2		)	—			—			—			(2		)	—			(2		)
Treasury stock/other	—		—			—			—			(89		)	(89		)	—			(89		)
Cash dividends declared ($0.28 per share of Common and Class B Stock)	—		—			(1,113		)	—			—			(1,113		)	—			(1,113		)
Balance at March 31, 2018	$	41	$	21,841		$	22,529		$	(6,669	)	$	(1,342	)	$	36,400		$	36		$	36,436
Net income	—		—			1,066			—			—			1,066			3			1,069
Other comprehensive income/(loss), net of tax	—		—			—			(535		)	—			(535		)	1			(534		)
Common stock issued (including share-based compensation impacts)	—		112			—			—			—			112			—			112
Treasury stock/other	—		—			—			—			—			—			—			—
Dividends and dividend equivalents declared ($0.15 per share of Common and Class B Stock)	—		—			(602		)	—			—			(602		)	(12		)	(614		)
Balance at June 30, 2018	$	41	$	21,953		$	22,993		$	(7,204	)	$	(1,342	)	$	36,441		$	28		$	36,469

	Equity Attributable to Ford Motor Company
	Capital Stock		Cap. in Excess of Par Value of Stock			Retained Earnings			Accumulated Other Comprehensive Income/(Loss) (Note 21)			Treasury Stock			Total			Equity Attributable to Non-controlling Interests			Total Equity
Balance at December 31, 2018	$	41	$	22,006		$	22,668		$	(7,366	)	$	(1,417	)	$	35,932		$	34		$	35,966
Adoption of accounting standards	—		—			13			—			—			13			—			13
Net income	—		—			1,146			—			—			1,146			37			1,183
Other comprehensive income/(loss), net of tax	—		—			—			(135		)	—			(135		)	—			(135		)
Common stock issued (including share-based compensation impacts)	—		20			—			—			—			20			—			20
Treasury stock/other	—		—			—			—			23			23			(35		)	(12		)
Dividends and dividend equivalents declared ($0.15 per share of Common and Class B Stock)	—		—			(601		)	—			—			(601		)	—			(601		)
Balance at March 31, 2019	$	41	$	22,026		$	23,226		$	(7,501	)	$	(1,394	)	$	36,398		$	36		$	36,434
Adoption of accounting standards	—		—			—			—			—			—			—			—
Net income	—		—			148			—			—			148			2			150
Other comprehensive income/(loss), net of tax	—		—			—			65			—			65			—			65
Common stock issued (including share-based compensation impacts)	—		85			—			—			—			85			—			85
Treasury stock/other	—		—			—			—			6			6			1			7
Dividends and dividend equivalents declared ($0.15 per share of Common and Class B Stock)	—		—			(605		)	—			—			(605		)	—			(605		)
Balance at June 30, 2019	$	41	$	22,111		$	22,769		$	(7,436	)	$	(1,388	)	$	36,097		$	39		$	36,136



	June 30, 2019
Within one year	$	2,075
After one year and within two years	2,005
After two years and within three years	1,599
After three years and within four years	708
After four years and within five years	120
After five years	2
Total future cash payments	6,509
Less: Present value discount	(313		)
Finance lease receivables	$	6,196



	June 30, 2019
Operating leases
Other assets, non-current	$	1,299

Other liabilities and deferred revenue, current	$	327
Other liabilities and deferred revenue, non-current	1,013
Total operating lease liabilities	$	1,340

Finance leases
Property and equipment, gross	$	234
Accumulated depreciation	(39		)
Property and equipment, net	$	195

Automotive debt payable within one year	$	89
Automotive long-term debt	72
Total finance lease liabilities	$	161



	Operating Leases		Finance Leases (a)
Within one year	$	367	$	94
After one year and within two years	275		27
After two years and within three years	196		20
After three years and within four years	146		15
After four years and within five years	115		9
After five years	421		6
Total	1,520		171
Less: Present value discount	180		10
Total lease liabilities	$	1,340	$	161



	First Half 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	215
Operating cash flows from finance leases	3
Financing cash flows from finance leases	17
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$	142
Finance leases	20



	Second Quarter 2019			First Half 2019
Operating lease expense	$	110		$	220
Variable lease expense	12			31
Sublease income	(4		)	(8		)
Finance lease expense
Amortization of right-of-use assets	4			7
Interest on lease liabilities	2			3
Total lease expense	$	124		$	253



	December 31, 2018		June 30, 2019
Maximum potential payments	$	1,163	$	1,043
Carrying value of recorded liabilities related to guarantees and limited indemnities	351		324



	2019 Lower/(Higher) 2018
	Second Quarter			First Half
Volume and mix, exchange, and other	$	1.0		$	3.4
Contribution costs
Material excluding commodities	(0.1		)	—
Commodities	(0.1		)	(0.2		)
Warranty	(0.2		)	(0.4		)
Freight	0.1			—
Structural costs	(0.2		)	—
Special items	(0.9		)	(1.5		)
Total	$	(0.4	)	$	1.3