UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

☑ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 20202021

or

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

Ford Motor CompanyCompany
(Exact name of Registrant as specified in its charter)
Delaware38-0549190
(State of incorporation)(I.R.S. Employer Identification No.)
Delaware38-0549190
(State of incorporation)(I.R.S. Employer Identification No.)
One American Road
Dearborn,Michigan48126
(Address of principal executive offices)(Zip code)

313-322-3000313-322-3000
(Registrant’s telephone number, including area code)

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


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

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

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

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

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

As of April 24, 2020,23, 2021, Ford had outstanding 3,906,187,8673,920,792,383 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit Index begins on page
70
74





FORD MOTOR COMPANY
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended March 31, 2020
2021
Table of ContentsPage
Part I - Financial Information
Item 1Financial Statements
1
Consolidated StatementStatements of Cash Flows
1
Consolidated Income StatementStatements
2
Consolidated StatementStatements of Comprehensive Income
2
Consolidated Balance SheetSheets
3
Consolidated StatementStatements of Equity
4
Notes to the Financial Statements
5
Item 2Management’s Discussion and Analysis of Financial Condition and Results of Operations
3433
Recent Developments
3433
Results of Operations
3634
Automotive Segment
3836
Mobility Segment
4442
Ford Credit Segment
4543
Corporate Other
4846
Interest on Debt
4846
Taxes
4846
Liquidity and Capital Resources
4947
Credit Ratings
5855
Outlook
5956
Cautionary Note on Forward-Looking Statements
6057
Non-GAAP Financial Measures That Supplement GAAP Measures
6158
Non-GAAP Financial Measure Reconciliations
6360
Supplemental Information
6663
Critical Accounting Estimates
70
Accounting Standards Issued But Not Yet Adopted
7066
Item 3Quantitative and Qualitative Disclosures About Market Risk
7167
Item 4Controls and Procedures
7167
Part II - Other Information
Item 1Legal Proceedings
7268
Item 1A2Risk FactorsUnregistered Sales of Equity Securities and Use of Proceeds
7369
Item 6Exhibits
7470
Signature
7571


i


PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTSTATEMENTS OF CASH FLOWS
(in millions)
For the periods ended March 31,
 20202021
First Quarter
(unaudited)
Cash flows from operating activities  
Net income/(loss)$(1,993)$3,262 
Depreciation and tooling amortization2,444 2,103 
Other amortization(302)(361)
Provision for credit and insurance losses598 (36)
Pension and other post-retirement employee benefits (“OPEB”) expense/(income) (Note 13)(178)(318)
Equity investment dividends received in excess of (earnings)/losses118 68 
Foreign currency adjustments338 350 
Net unrealized (gain)/loss on Other Investments (Note 10)8 (914)
Net (gain)/loss on changes in investments in affiliates (Note 4)(15)(166)
Stock compensation38 41 
Provision for deferred income taxes702 427 
Decrease/(Increase) in finance receivables (wholesale and other)(1,080)2,699 
Decrease/(Increase) in accounts receivable and other assets39 (588)
Decrease/(Increase) in inventory(1,177)(2,176)
Increase/(Decrease) in accounts payable and accrued and other liabilities194 193 
Other(207)(92)
Net cash provided by/(used in) operating activities(473)4,492 
Cash flows from investing activities
Capital spending(1,780)(1,368)
Acquisitions of finance receivables and operating leases(12,184)(11,695)
Collections of finance receivables and operating leases12,709 12,482 
Proceeds from sale of business (Note 17)1,340 7 
Purchases of marketable securities and other investments(8,244)(11,580)
Sales and maturities of marketable securities and other investments4,998 11,686 
Settlements of derivatives131 31 
Other(84)(54)
Net cash provided by/(used in) investing activities(3,114)(491)
Cash flows from financing activities  
Cash payments for dividends and dividend equivalents(596)(3)
Purchases of common stock0 0 
Net changes in short-term debt(622)273 
Proceeds from issuance of long-term debt26,691 6,931 
Principal payments on long-term debt(12,948)(14,892)
Other(71)(102)
Net cash provided by/(used in) financing activities12,454 (7,793)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(448)(93)
Net increase/(decrease) in cash, cash equivalents, and restricted cash$8,419 $(3,885)
Cash, cash equivalents, and restricted cash at beginning of period (Note 7)$17,741 $25,935 
Net increase/(decrease) in cash, cash equivalents, and restricted cash8,419 (3,885)
Cash, cash equivalents, and restricted cash at end of period (Note 7)$26,160 $22,050 
 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 amortization2,429
 2,444
Other amortization(287) (302)
Held-for-sale impairment charges—
 3
Provision for credit and insurance losses43
 598
Pension and other post-retirement employee benefits (“OPEB”) expense/(income)(18) (178)
Equity investment dividends received in excess of (earnings)/losses17
 118
Foreign currency adjustments(49) 338
Net (gain)/loss on changes in investments in affiliates(3) (15)
Stock compensation85
 38
Provision for deferred income taxes221
 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 liabilities2,944
 194
Other112
 (202)
Net cash provided by/(used in) operating activities3,544
 (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 leases12,336
 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 investments4,441
 4,998
Settlements of derivatives(14) 131
Other54
 (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 debt420
 (622)
Proceeds from issuance of long-term debt15,411
 26,691
Principal payments on long-term debt(13,277) (12,948)
Other(84) (71)
Net cash provided by/(used in) financing activities1,873
 12,454
    
Effect of exchange rate changes on cash, cash equivalents, and restricted cash29
 (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 cash4,112
 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.
1
Item 1. Financial Statements (continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTSTATEMENTS
(in millions, except per share amounts)
For the periods ended March 31,
 20202021
 First Quarter
(unaudited)
Revenues
Automotive$31,342 $33,554 
Ford Credit2,967 2,663 
Mobility11 11 
Total revenues (Note 3)34,320 36,228 
Costs and expenses
Cost of sales30,522 29,297 
Selling, administrative, and other expenses2,432 2,843 
Ford Credit interest, operating, and other expenses2,924 1,624 
Total costs and expenses35,878 33,764 
Operating income/(loss)(1,558)2,464 
Interest expense on Company debt excluding Ford Credit227 473 
Other income/(loss), net (Note 4 and Note 10)680 1,872 
Equity in net income/(loss) of affiliated companies(41)79 
Income/(Loss) before income taxes(1,146)3,942 
Provision for/(Benefit from) income taxes847 680 
Net income/(loss)(1,993)3,262 
Less: Income/(Loss) attributable to noncontrolling interests0 0 
Net income/(loss) attributable to Ford Motor Company$(1,993)$3,262 
EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 6)
Basic income/(loss)$(0.50)$0.82 
Diluted income/(loss)(0.50)0.81 
Weighted-average shares used in computation of earnings/(loss) per share
Basic shares3,9633,980
Diluted shares3,9634,016
 For the periods ended March 31,
 2019 2020
 First Quarter
 (unaudited)
Revenues   
Automotive$37,239
 $31,340
Ford Credit3,097
 2,967
Mobility6
 13
Total revenues (Note 3)40,342
 34,320
    
Costs and expenses   
Cost of sales33,942
 30,522
Selling, administrative, and other expenses2,843
 2,432
Ford Credit interest, operating, and other expenses2,355
 2,924
Total costs and expenses39,140
 35,878
Operating income/(loss)1,202
 (1,558)
    
Interest expense on Automotive debt231
 214
Interest expense on Other debt14
 13
    
Other income/(loss), net (Note 4)628
 680
Equity in net income/(loss) of affiliated companies25
 (41)
Income/(Loss) before income taxes1,610
 (1,146)
Provision for/(Benefit from) income taxes427

847
Net income/(loss)1,183
 (1,993)
Less: Income/(Loss) attributable to noncontrolling interests37

—
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/(loss)$0.29
 $(0.50)
Diluted income/(loss)0.29
 (0.50)
    
Weighted-average shares used in computation of earnings per share   
Basic shares3,973
3,963
Diluted shares3,997 3,963

CONSOLIDATED STATEMENTSTATEMENTS OF COMPREHENSIVE INCOME
(in millions)
 For the periods ended March 31,
 20202021
 First Quarter
(unaudited)
Net income/(loss)$(1,993)$3,262 
Other comprehensive income/(loss), net of tax (Note 18)
Foreign currency translation(1,453)289 
Marketable securities14 (65)
Derivative instruments692 (301)
Pension and other postretirement benefits14 1 
Total other comprehensive income/(loss), net of tax(733)(76)
Comprehensive income/(loss)(2,726)3,186 
Less: Comprehensive income/(loss) attributable to noncontrolling interests0 0 
Comprehensive income/(loss) attributable to Ford Motor Company$(2,726)$3,186 
 For the periods ended March 31,
 2019 2020
 First Quarter
 (unaudited)
Net income/(loss)$1,183
 $(1,993)
Other comprehensive income/(loss), net of tax (Note 18)   
Foreign currency translation243
 (1,453)
Marketable securities63
 14
Derivative instruments(446) 692
Pension and other postretirement benefits5
 14
Total other comprehensive income/(loss), net of tax(135) (733)
Comprehensive income/(loss)1,048
 (2,726)
Less: Comprehensive income/(loss) attributable to noncontrolling interests37
 —
Comprehensive income/(loss) attributable to Ford Motor Company$1,011
 $(2,726)

The accompanying notes are part of the consolidated financial statements.
2
Item 1. Financial Statements (continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETSHEETS
(in millions)
 December 31,
2020		March 31,
2021
 (unaudited)
ASSETS  
Cash and cash equivalents (Note 7)$25,243 $21,826 
Marketable securities (Note 7)24,718 24,281 
Ford Credit finance receivables, net of allowance for credit losses of $394 and $374 (Note 8)42,401 40,664 
Trade and other receivables, less allowances of $84 and $569,993 10,448 
Inventories (Note 9)10,808 12,742 
Assets held for sale (Note 17)47 335 
Other assets3,534 3,636 
Total current assets116,744 113,932 
Ford Credit finance receivables, net of allowance for credit losses of $911 and $849 (Note 8)55,277 52,570 
Net investment in operating leases27,951 27,811 
Net property37,083 36,361 
Equity in net assets of affiliated companies4,901 4,694 
Deferred income taxes12,423 12,103 
Other assets12,882 13,348 
Total assets$267,261 $260,819 
LIABILITIES  
Payables$22,204 $23,492 
Other liabilities and deferred revenue (Note 12 and Note 20)23,645 20,995 
Debt payable within one year (Note 14)
Company excluding Ford Credit1,374 1,061 
Ford Credit49,969 48,410 
Liabilities held for sale (Note 17)0 291 
Total current liabilities97,192 94,249 
Other liabilities and deferred revenue (Note 12 and Note 20)28,379 28,707 
Long-term debt (Note 14)
Company excluding Ford Credit22,633 24,819 
Ford Credit87,708 78,382 
Deferred income taxes538 688 
Total liabilities236,450 226,845 
EQUITY  
Common Stock, par value $0.01 per share (4,038 million shares issued of 6 billion authorized)40 40 
Class B Stock, par value $0.01 per share (71 million shares issued of 530 million authorized)1 1 
Capital in excess of par value of stock22,290 22,240 
Retained earnings18,243 21,502 
Accumulated other comprehensive income/(loss) (Note 18)(8,294)(8,370)
Treasury stock(1,590)(1,585)
Total equity attributable to Ford Motor Company30,690 33,828 
Equity attributable to noncontrolling interests121 146 
Total equity30,811 33,974 
Total liabilities and equity$267,261 $260,819 
 December 31,
2019		 March 31,
2020
 (unaudited)
ASSETS   
Cash and cash equivalents (Note 7)$17,504
 $25,971
Marketable securities (Note 7)17,147
 20,399
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 $729,237
 6,625
Inventories (Note 9)10,786
 11,312
Assets held for sale (Note 17)2,383
 700
Other assets3,339
 4,380
Total current assets114,047
 124,276
    
Ford Credit finance receivables, net of allowance for credit losses of $351 and $842 (Note 8)53,703
 51,141
Net investment in operating leases29,230
 28,514
Net property36,469
 35,294
Equity in net assets of affiliated companies2,519
 2,275
Deferred income taxes11,863
 10,922
Other assets10,706
 11,728
Total assets$258,537
 $264,150
    
LIABILITIES   
Payables$20,673
 $18,439
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 liabilities98,132
 94,494
    
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 taxes490
 439
Total liabilities225,307
 234,452
    
EQUITY   
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
Capital in excess of par value of stock22,165
 22,150
Retained earnings20,320
 17,527
Accumulated other comprehensive income/(loss) (Note 18)(7,728) (8,461)
Treasury stock(1,613) (1,607)
Total equity attributable to Ford Motor Company33,185
 29,650
Equity attributable to noncontrolling interests45
 48
Total equity33,230
 29,698
Total liabilities and equity$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 sheets above.
December 31,
2020		March 31,
2021
(unaudited)
ASSETS  
Cash and cash equivalents$2,822 $4,794 
Ford Credit finance receivables, net51,472 48,902 
Net investment in operating leases12,794 10,026 
Other assets0 2 
LIABILITIES
Other liabilities and deferred revenue$56 $30 
Debt46,770 43,387 
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,
2019		 March 31,
2020
 (unaudited)
ASSETS   
Cash and cash equivalents$3,202
 $2,549
Ford Credit finance receivables, net58,478
 54,038
Net investment in operating leases14,883
 14,410
Other assets12
 1
LIABILITIES   
Other liabilities and deferred revenue$19
 $110
Debt50,865
 48,379

The accompanying notes are part of the consolidated financial statements.
3
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTSTATEMENTS OF EQUITY
(in millions, unaudited)
Equity Attributable to Ford Motor Company 
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
                Capital StockCap. In Excess of Par Value of StockRetained EarningsAccumulated Other Comprehensive Income/(Loss) (Note 18)Treasury StockTotalEquity Attributable to Non-controlling InterestsTotal
Equity
Balance at December 31, 2019$41
 $22,165
 $20,320
 $(7,728) $(1,613) $33,185
 $45
 $33,230
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)Adoption of accounting standards— — (202)— — (202)— (202)
Net income/(loss)—
 —
 (1,993) —
 —
 (1,993) —
 (1,993)Net income/(loss)0 0 (1,993)0 0 (1,993)0 (1,993)
Other comprehensive income/(loss), net—
 —
 —
 (733) —
 (733) —
 (733)Other comprehensive income/(loss), net0 0 0 (733)0 (733)0 (733)
Common stock issued (a)—
 (15) —
 —
 —
 (15) —
 (15)Common stock issued (a)0 (15)0 0 0 (15)0 (15)
Treasury stock/other —
 —
 —
 —
 6
 6
 3
 9
Treasury stock/other 0 0 0 0 6 6 3 9 
Dividends and dividend equivalents declared ($0.15 per share) (b)—
 —
 (598) —
 —
 (598) —
 (598)Dividends and dividend equivalents declared ($0.15 per share) (b)0 0 (598)0 0 (598)0 (598)
Balance at March 31, 2020$41
 $22,150
 $17,527
 $(8,461) $(1,607) $29,650
 $48
 $29,698
Balance at March 31, 2020$41 $22,150 $17,527 $(8,461)$(1,607)$29,650 $48 $29,698 
Balance at December 31, 2020Balance at December 31, 2020$41 $22,290 $18,243 $(8,294)$(1,590)$30,690 $121 $30,811 
Net income/(loss)Net income/(loss)0 0 3,262 0 0 3,262 0 3,262 
Other comprehensive income/(loss), netOther comprehensive income/(loss), net0 0 0 (76)0 (76)0 (76)
Common stock issued (a)Common stock issued (a)0 (50)0 0 0 (50)0 (50)
Treasury stock/other Treasury stock/other 0 0 0 0 5 5 25 30 
Dividends and dividend equivalents declared (b)Dividends and dividend equivalents declared (b)0 0 (3)0 0 (3)0 (3)
Balance at March 31, 2021Balance at March 31, 2021$41 $22,240 $21,502 $(8,370)$(1,585)$33,828 $146 $33,974 
__________
(a)Includes impacts of share-based compensation.
(b)Dividends and dividend equivalents declared for Common and Class B Stock.
(a)Includes impacts of share-based compensation.
(b)Dividends and dividend equivalents declared for Common and Class B Stock.

The accompanying notes are part of the consolidated financial statements.
4
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

Table of Contents
FootnotePage
Note 1Presentation
6
Note 2New Accounting Standards
76
Note 3Revenue
87
Note 4Other Income/(Loss)
98
Note 5Income Taxes
98
Note 6Capital Stock and EarningsEarnings/(Loss) Per Share
98
Note 7Cash, Cash Equivalents, and Marketable Securities
109
Note 8Ford Credit Finance Receivables and Allowance for Credit Losses
1412
Note 9Inventories
2016
Note 10Other Investments
2016
Note 11Goodwill
2016
Note 12Other Liabilities and Deferred Revenue
2017
Note 13Retirement Benefits
2118
Note 14Debt
2219
Note 15Derivative Financial Instruments and Hedging Activities
2321
Note 16Employee Separation Actions and Exit and Disposal Activities
2523
Note 17Held-for-Sale Operations and Changes in Investments in Affiliates
2625
Note 18Accumulated Other Comprehensive Income/(Loss)
2827
Note 19Variable Interest Entities
28
Note 20Commitments and Contingencies
2928
Note 2021Segment Information
3231
Note 21Subsequent Event
33
5
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.  PRESENTATION

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

In the opinion of management, these unaudited financial statements reflect a fair statement of our results of operations and financial condition for the periods, and at the dates, presented.  The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.  Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 20192020 (“20192020 Form 10-K Report”).

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 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 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 risk of a recession in key markets due to the effects of the pandemic. Although the ultimate impact on Ford cannot be determined at this time, we expect our full year 2020 results of operations to be adversely affected.

Our first quarter 2020 results include various adjustments to our assets and liabilities made due to the impact of 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 credit losses on Ford Credit’s finance receivables (see Note 8), and approximately $100 million of adjustments to net realizable value for certain assets to account for declines in auction values. Our assessments of the 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 the second quarter of 2020. We believe this, along with our cash on hand at March 31, 2020, funds received in 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 next twelve months from the issuance of these financial statements. 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.
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”) 2016-13, Credit Losses2019-12, Income Taxes - Measurement of Credit Losses on Financial InstrumentsSimplifying the Accounting for Income Taxes. OnEffective January 1, 2020,2021, we adopted the amendments in this ASU to simplify the accounting for income taxes. The amendments clarified that an entity may elect, but is not required, to reflect an allocation of consolidated current and deferred tax expense for non-taxable legal entities that are treated as disregarded by taxing authorities in their separately issued financial statements.

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

ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Effective January 1, 2021, we adopted the new credit loss standard,and all of which simplified guidance on the related amendments, which replaced the incurred loss impairment method with a method that reflects lifetime expected credit losses. We adopted the changes inissuer’s accounting for credit losses by recognizing the cumulative effect of initially applying the new credit loss standard as an adjustmentconvertible debt instruments and amended certain guidance related to the opening balancecomputation of Retained earnings. The comparative information has not been restated per share for convertible instruments and continues to be reported undercontracts in an entity’s own equity. There was no impact on the accounting standard in effect for those periods.date of adoption. During the first quarter of 2021, we issued convertible notes (see Note 14).

The cumulative effect of the changes made to our consolidated balance sheet at January 1, 2020, for the adoption of ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments, was as follows (in millions):
  Balance at December 31, 2019 Adjustments due to ASU 2016-13 
Balance at
January 1, 2020
Assets      
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 11,863
 2
 11,865
Liabilities      
Deferred income taxes 490
 (58) 432
Equity      
Retained earnings 20,320
 (202) 20,118


We also adopted the following ASUs during 2020, none of which had a material impact to our consolidated financial statements or financial statement disclosures:
ASUEffective Date
2020-01Clarifying the Interaction between Equity Securities, Equity Method and Joint Ventures, and Derivatives and HedgingJanuary 1, 2020
2018-18Clarifying the Interaction between Collaborative Arrangements and Revenue from Contracts with CustomersJanuary 1, 2020
2018-15Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service ContractJanuary 1, 2020

Accounting Standards Issued But Not Yet Adopted

The Company considers the applicability and impact of all ASUs.  ASUs were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements.
6
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. REVENUE


The following table disaggregatestables disaggregate our revenue by major source for the periods ended March 31 (in millions):
First Quarter 2019First Quarter 2020
Automotive Mobility Ford Credit ConsolidatedCompany excluding
Ford Credit		Ford CreditConsolidated
Vehicles, parts, and accessories$35,576
 $—
 $—
 $35,576
Vehicles, parts, and accessories$29,841 $0 $29,841 
Used vehicles1,020
 —
 —
 1,020
Used vehicles931 0 931 
Extended service contracts333
 —
 —
 333
Other revenue213
 6
 51
 270
Services and other revenue (a)Services and other revenue (a)523 41 564 
Revenues from sales and services37,142
 6
 51
 37,199
Revenues from sales and services31,295 41 31,336 
       
Leasing income97
 —
 1,477
 1,574
Leasing income58 1,459 1,517 
Financing income—
 —
 1,528
 1,528
Financing income0 1,425 1,425 
Insurance income—
 —
 41
 41
Insurance income0 42 42 
Total revenues$37,239
 $6
 $3,097
 $40,342
Total revenues$31,353 $2,967 $34,320 
       
First Quarter 2020
Automotive Mobility Ford Credit Consolidated
First Quarter 2021
Company excluding
Ford Credit		Ford CreditConsolidated
Vehicles, parts, and accessories$29,841
 $—
 $—
 $29,841
Vehicles, parts, and accessories$32,135 $0 $32,135 
Used vehicles931
 —
 —
 931
Used vehicles745 0 745 
Extended service contracts364
 —
 —
 364
Other revenue146
 13
 41
 200
Services and other revenue (a)Services and other revenue (a)608 16 624 
Revenues from sales and services31,282
 13
 41
 31,336
Revenues from sales and services33,488 16 33,504 
       
Leasing income58
 —
 1,459
 1,517
Leasing income77 1,380 1,457 
Financing income—
 —
 1,425
 1,425
Financing income0 1,243 1,243 
Insurance income—
 —
 42
 42
Insurance income0 24 24 
Total revenues$31,340
 $13
 $2,967
 $34,320
Total revenues$33,565 $2,663 $36,228 

__________
(a)Includes extended service contract revenue.

The amount of consideration we receive and revenue we recognize on our vehicles, parts, and accessories varies with changes in return rights and marketing incentives we offer to our customers and their customers. Estimates of marketing incentives are based on expected retail and fleet sales volumes, mix of products to be sold, and incentive programs to be offered. Customer acceptance of products and programs, as well as other market conditions, will impact these estimates. As a result of changes in our estimate of marketing incentives, we recorded a decrease in revenue of $885 million in the first quarter of 2020 and an increase in revenue of $359 million in the first quarter of 2021 related to revenue recognized in prior periods of $481 million and $885 million in the first quarter of 2019 and 2020, respectively.periods. The change in estimate for the first quarter of 2020 includes additional marketing incentives offered to customers in connection with market conditions affected by the COVID-19 pandemic.pandemic; conversely, the change in estimate for the first quarter of 2021 reflects lower than expected marketing incentives due to reduced dealer stock levels, which includes the effects of the semiconductor supply shortage.

We sell separately-priced service contracts that extend mechanical and maintenance coverages beyond our base warranty agreements to vehicle owners (“extended service contracts”). We had a balance of $4.2 billionand $4.1$4.3 billion of unearned revenue associated with outstanding contracts reported in Other liabilities and deferred revenue at December 31, 20192020 and March 31, 2020,2021, respectively. We expect to recognize approximately $1 billion of the unearned amount in the remainder of 2020, $1.12021, $1.2 billion in 2021,2022, and $2$2.1 billion thereafter. We recognized$305 $330 million and $330$342 million of unearned amounts as revenue duringin the first quarter of 20192020 and 2020,2021, respectively.

Amounts paid to dealers to obtain these contracts are deferred and recorded as Other assets. We had a balance of $270$283 million and $280$302 million in deferred costs as of December 31, 20192020 and March 31, 2020,2021, respectively. We recognized $19 million and $20 million of amortization during the first quarter of 20192020 and 2020, respectively.2021.

7
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. OTHER INCOME/(LOSS)

The amounts included in Other income/(loss), net for the periods ended March 31 were as follows (in millions):
First Quarter
 20202021
Net periodic pension and OPEB income/(cost), excluding service cost$451 $612 
Investment-related interest income162 72 
Interest income/(expense) on income taxes(23)(3)
Realized and unrealized gains/(losses) on cash equivalents, marketable securities, and other investments (a)(32)899 
Gains/(Losses) on changes in investments in affiliates15 166 
Royalty income89 171 
Other18 (45)
Total$680 $1,872 
 First Quarter
 2019 2020
Net periodic pension and OPEB income/(cost), excluding service cost$272
 $451
Investment-related interest income203
 162
Interest income/(expense) on income taxes(20) (23)
Realized and unrealized gains/(losses) on cash equivalents, marketable securities, and other investments67
 (32)
Gains/(Losses) on changes in investments in affiliates3
 15
Royalty income84
 89
Other19
 18
Total$628
 $680
__________
(a)See Note 10 for additional information relating to our investment in Rivian.


NOTE 5. INCOME TAXES

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

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.

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


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

Basic and diluted income/earnings/(loss) per share were calculated using the following (in millions):
 First Quarter
 2019 2020
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)3,973
 3,963
Net dilutive options, unvested restricted stock units, and unvested restricted stock shares (a)24
 —
Diluted shares3,997
 3,963

First Quarter
 20202021
Net income/(loss) attributable to Ford Motor Company$(1,993)$3,262 
Basic and Diluted Shares
Basic shares (average shares outstanding)3,963 3,980 
Net dilutive options, unvested restricted stock units, and unvested restricted stock shares (a)0 36 
Diluted shares3,963 4,016 
__________
(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.
(a)In the first quarter of 2020, there were 30 million shares excluded from the calculation of diluted earnings/(loss) per share, due to their anti-dilutive effect.
8
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

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, 2019
 Fair Value Level Automotive Mobility Ford Credit Consolidated
Cash and cash equivalents         
U.S. government1 $520
 $—
 $—
 $520
U.S. government agencies2 125
 —
 —
 125
Non-U.S. government and agencies2 601
 —
 350
 951
Corporate debt2 642
 —
 604
 1,246
Total marketable securities classified as cash equivalents  1,888
 —
 954
 2,842
Cash, time deposits, and money market funds  6,432
 117
 8,113
 14,662
Total cash and cash equivalents  $8,320
 $117
 $9,067
 $17,504
          
Marketable securities         
U.S. government1 $2,930
 $—
 $195
 $3,125
U.S. government agencies2 1,548
 —
 210
 1,758
Non-U.S. government and agencies2 4,217
 —
 2,408
 6,625
Corporate debt2 4,802
 —
 193
 4,995
Equities (a)1 81
 —
 —
 81
Other marketable securities2 273
 —
 290
 563
Total marketable securities  $13,851
 $—
 $3,296
 $17,147
          
Restricted cash  $15
 $21
 $139
 $175
          
Cash, cash equivalents, and restricted cash in held-for-sale assets  $—
 $—
 $62
 $62
          
   March 31, 2020
 Fair Value Level Automotive Mobility Ford Credit Consolidated
Cash and cash equivalents         
U.S. government1 $3,150
 $—
 $825
 $3,975
U.S. government agencies2 3,024
 —
 200
 3,224
Non-U.S. government and agencies2 795
 —
 378
 1,173
Corporate debt2 480
 —
 598
 1,078
Total marketable securities classified as cash equivalents  7,449
 —
 2,001
 9,450
Cash, time deposits, and money market funds  8,799
 95
 7,627
 16,521
Total cash and cash equivalents  $16,248
 $95
 $9,628
 $25,971
          
Marketable securities         
U.S. government1 $4,772
 $—
 $294
 $5,066
U.S. government agencies2 3,985
 —
 160
 4,145
Non-U.S. government and agencies2 3,787
 —
 1,520
 5,307
Corporate debt2 5,094
 —
 199
 5,293
Equities (a)1 41
 —
 —
 41
Other marketable securities2 267
 —
 280
 547
Total marketable securities  $17,946
 $—
 $2,453
 $20,399
          
Restricted cash  $18
 $21
 $150
 $189
          
Cash, cash equivalents, and restricted cash in held-for-sale assets  $—
 $—
 $—
 $—

December 31, 2020
 Fair Value LevelCompany excluding Ford CreditFord CreditConsolidated
Cash and cash equivalents  
U.S. government1$2,940 $3,255 $6,195 
U.S. government agencies2850 640 1,490 
Non-U.S. government and agencies2600 717 1,317 
Corporate debt2605 970 1,575 
Total marketable securities classified as cash equivalents4,995 5,582 10,577 
Cash, time deposits, and money market funds5,899 8,767 14,666 
Total cash and cash equivalents$10,894 $14,349 $25,243 
Marketable securities
U.S. government1$4,709 $1,082 $5,791 
U.S. government agencies23,259 485 3,744 
Non-U.S. government and agencies24,448 2,693 7,141 
Corporate debt27,095 308 7,403 
Equities (a)1113 0 113 
Other marketable securities2234 292 526 
Total marketable securities$19,858 $4,860 $24,718 
Restricted cash$45 $647 $692 
Cash, cash equivalents, and restricted cash in
   held-for-sale assets
$0 $0 $0 
March 31, 2021
Fair Value LevelCompany excluding Ford CreditFord CreditConsolidated
Cash and cash equivalents  
U.S. government1$1,733 $16 $1,749 
U.S. government agencies2129 50 179 
Non-U.S. government and agencies21,197 1,345 2,542 
Corporate debt2453 945 1,398 
Total marketable securities classified as cash equivalents3,512 2,356 5,868 
Cash, time deposits, and money market funds7,445 8,513 15,958 
Total cash and cash equivalents$10,957 $10,869 $21,826 
Marketable securities
U.S. government1$4,955 $537 $5,492 
U.S. government agencies23,176 600 3,776 
Non-U.S. government and agencies24,462 2,195 6,657 
Corporate debt27,388 342 7,730 
Equities (a)1100 0 100 
Other marketable securities2252 274 526 
Total marketable securities$20,333 $3,948 $24,281 
Restricted cash$46 $162 $208 
Cash, cash equivalents, and restricted cash in
   held-for-sale assets
$16 $0 $16 
__________
(a)Net unrealized gains/losses incurred during the reporting periods on equity securities still held at December 31, 20192020 and March 31, 20202021 were a $44$24 million gain and a $13 million loss, and a $38 million loss, respectively.
9
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

The cash equivalents and marketable securities accounted for as available-for-sale (“AFS”) securities were as follows (in millions):
December 31, 2020
Fair Value of Securities with
Contractual Maturities
 Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueWithin 1 YearAfter 1 Year through
5 Years		After 5 Years
Company excluding Ford Credit  
U.S. government$2,894 $44 $0 $2,938 $1,649 $1,286 $3 
U.S. government agencies2,588 15 0 2,603 772 1,629 202 
Non-U.S. government and agencies2,926 31 0 2,957 1,330 1,617 10 
Corporate debt7,482 102 (1)7,583 3,566 3,987 30 
Other marketable securities212 3 0 215 1 147 67 
Total$16,102 $195 $(1)$16,296 $7,318 $8,666 $312 
 
March 31, 2021
Fair Value of Securities with
Contractual Maturities
Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueWithin 1 YearAfter 1 Year through
5 Years		After 5 Years
Company excluding Ford Credit
U.S. government$3,590 $33 $0 $3,623 $1,600 $2,023 $0 
U.S. government agencies2,399 7 (11)2,395 418 1,805 172 
Non-U.S. government and agencies2,517 21 (7)2,531 1,172 1,336 23 
Corporate debt7,689 68 (6)7,751 3,895 3,846 10 
Other marketable securities232 2 0 234 1 167 66 
Total$16,427 $131 $(24)$16,534 $7,086 $9,177 $271 
 December 31, 2019
         
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
Automotive             
U.S. government$2,839
 $11
 $(1) $2,849
 $1,028
 $1,772
 $49
U.S. government agencies1,445
 2
 (1) 1,446
 830
 589
 27
Non-U.S. government and agencies3,925
 20
 (1) 3,944
 1,546
 2,398
 —
Corporate debt5,029
 53
 —
 5,082
 1,837
 3,245
 —
Other marketable securities230
 1
 —
 231
 —
 149
 82
Total$13,468
 $87
 $(3) $13,552
 $5,241
 $8,153
 $158
        
      
 March 31, 2020
         
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
Automotive             
U.S. government$2,598
 $71
 $—
 $2,669
 $574
 $2,033
 $62
U.S. government agencies1,329
 14
 —
 1,343
 444
 822
 77
Non-U.S. government and agencies3,625
 55
 (1) 3,679
 1,594
 2,085
 —
Corporate debt5,197
 23
 (55) 5,165
 1,845
 3,293
 27
Other marketable securities227
 —
 (4) 223
 —
 153
 70
Total$12,976
 $163
 $(60) $13,079
 $4,457
 $8,386
 $236


Sales proceeds and gross realized gains/losses from the sale of AFS securities for the periods ended March 31 were as follows (in millions):
First Quarter
20202021
Company excluding Ford Credit
Sales proceeds$1,865 $2,880 
Gross realized gains7 13 
Gross realized losses7 2 
 First Quarter
 2019 2020
Automotive   
Sales proceeds$1,142
 $1,865
Gross realized gains2
 7
Gross realized losses5
 7
10

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES (Continued)

The present fair values and gross unrealized losses for cash equivalents and marketable securities accounted for as AFS securities that were in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position, were as follows (in millions):
December 31, 2020
Less than 1 Year1 Year or GreaterTotal
 Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Company excluding Ford Credit  
U.S. government$181 $0 $0 $0 $181 $0 
U.S. government agencies83 0 0 0 83 0 
Non-U.S. government and agencies164 0 10 0 174 0 
Corporate debt1,538 (1)9 0 1,547 (1)
Other marketable securities23 0 13 0 36 0 
Total$1,989 $(1)$32 $0 $2,021 $(1)
 
March 31, 2021
Less than 1 Year1 Year or GreaterTotal
Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Company excluding Ford Credit
U.S. government$641 $0 $0 $0 $641 $0 
U.S. government agencies1,126 (11)0 0 1,126 (11)
Non-U.S. government and agencies703 (7)0 0 703 (7)
Corporate debt1,199 (6)9 0 1,208 (6)
Other marketable securities94 0 8 0 102 0 
Total$3,763 $(24)$17 $0 $3,780 $(24)
 December 31, 2019
 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$183
 $(1) $50
 $—
 $233
 $(1)
U.S. government agencies370
 (1) 344
 —
 714
 (1)
Non-U.S. government and agencies463
 —
 390
 (1) 853
 (1)
Corporate debt29
 —
 53
 —
 82
 —
Other marketable securities59
 —
 17
 —
 76
 —
Total$1,104
 $(2) $854
 $(1) $1,958
 $(3)
  
          
 March 31, 2020
 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$—
 $—
 $—
 $—
 $—
 $—
U.S. government agencies70
 —
 42
 —
 112
 —
Non-U.S. government and agencies377
 (1) 25
 —
 402
 (1)
Corporate debt2,023
 (54) 24
 (1) 2,047
 (55)
Other marketable securities160
 (3) 20
 (1) 180
 (4)
Total$2,630
 $(58) $111
 $(2) $2,741
 $(60)


We determine credit losses on cash equivalents and marketableAFS debt securities using the specific identification method. During the first quarter of 2020,2021, we did not recognize any credit loss. The unrealized losses on securities are due to changes in interest rates and market liquidity.

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash, as reported in the consolidated statementstatements of cash flows, were as follows (in millions):
December 31,
2019		 March 31,
2020		December 31,
2020		March 31,
2021
Cash and cash equivalents$17,504
 $25,971
Cash and cash equivalents$25,243 $21,826 
Restricted cash (a)175
 189
Restricted cash (a)692 208 
Cash, cash equivalents, and restricted cash in held-for-sale assets62
 —
Cash, cash equivalents, and restricted cash in held-for-sale assets0 16 
Total cash, cash equivalents, and restricted cash$17,741
 $26,160
Total cash, cash equivalents, and restricted cash$25,935 $22,050 
__________
(a)
Included in Other assets in the non-current assets section of our consolidated balance sheet.
(a)Included in Other assets in the non-current assets section of our consolidated balance sheets.
11
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

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

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

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

Ford Credit finance receivables, net were as follows (in millions):
December 31,
2019		 March 31,
2020		 December 31,
2020		March 31,
2021
Consumer   Consumer  
Retail installment contracts, gross$68,905
 $66,116
Retail installment contracts, gross$73,631 $71,981 
Finance leases, gross8,566
 8,107
Finance leases, gross8,431 8,192 
Retail financing, gross77,471
 74,223
Retail financing, gross82,062 80,173 
Unearned interest supplements(3,589) (3,402)Unearned interest supplements(3,987)(3,696)
Consumer finance receivables73,882
 70,821
Consumer finance receivables78,075 76,477 
Non-Consumer 
  
Non-Consumer  
Dealer financing33,985
 36,440
Dealer financing20,908 17,980 
Non-Consumer finance receivables33,985
 36,440
Non-Consumer finance receivables20,908 17,980 
Total recorded investment$107,867
 $107,261
Total recorded investment$98,983 $94,457 
   
Recorded investment in finance receivables$107,867
 $107,261
Recorded investment in finance receivables$98,983 $94,457 
Allowance for credit losses(513) (1,231)Allowance for credit losses(1,305)(1,223)
Finance receivables, net$107,354
 $106,030
Total finance receivables, netTotal finance receivables, net$97,678 $93,234 
   
Current portion$53,651
 $54,889
Current portion$42,401 $40,664 
Non-current portion53,703
 51,141
Non-current portion55,277 52,570 
Total finance receivables, net$107,354
 $106,030
Total finance receivables, net$97,678 $93,234 
   
Net finance receivables subject to fair value (a)$99,168
 $98,332
Net finance receivables subject to fair value (a)$89,651 $85,436 
Fair value (b)99,297
 98,513
Fair value (b)91,238 86,808 
__________
(a)Net finance receivables subject to fair value exclude finance leases.
(b)The fair value of finance receivables is categorized within Level 3 of the fair value hierarchy.
(a)Net finance receivables subject to fair value exclude finance leases.
(b)The fair value of finance receivables is categorized within Level 3 of the fair value hierarchy.

Ford Credit’s finance leases are comprised of sales-type and direct financing leases. Financing revenue from finance leases for the first quarter of 20192020 and 20202021 was $92$95 million and $95$90 million, respectively, and is included in Ford Credit revenues on our consolidated income statement.statements.

At December 31, 20192020 and March 31, 2020,2021, accrued interest was $251$181 million and $239$164 million, respectively, which we report in Other assets in the current assets section of our consolidated balance sheet.sheets.

Included in the recorded investment in finance receivables at December 31, 20192020 and March 31, 2020,2021, were consumer receivables of $38.3$43.7 billion and $37$41.2 billion, respectively, and non-consumer receivables of $26.8$16.4 billion and $25.7$15.3 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. The receivables are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations or the claims of Ford Credit’s other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions.

12
The value of finance receivables considered held for sale at December 31, 2019 was $1.5 billion, primarily made up of $1.2 billion of Forso Nordic AB (“Forso”) finance receivables. At March 31, 2020, there were $36 million of certain wholesale finance receivables specifically identified as 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.Ford Credit’s aging analysis. Consumer receivables credit quality ratings are as follows:

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

 – 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, 20192020 was as follows (in millions):
Amortized Cost Basis by Origination Year
Prior to 201620162017201820192020TotalPercent
Consumer
31 - 60 days past due$45 $62 $103 $162 $166 $143 $681 0.9 %
61 - 120 days past due7 12 24 44 45 31 163 0.2 
Greater than 120 days past due11 6 7 8 7 2 41 0 
Total past due63 80 134 214 218 176 885 1.1 
Current782 2,518 6,648 13,704 20,822 32,716 77,190 98.9 
Total$845 $2,598 $6,782 $13,918 $21,040 $32,892 $78,075 100.0 %
  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, 20202021 was as follows (in millions):
Amortized Cost Basis by Origination Year
Prior to 201720172018201920202021TotalPercent
Consumer
31 - 60 days past due$57 $64 $106 $117 $117 $5 $466 0.6 %
61 - 120 days past due9 14 25 31 30 1 110 0.1 
Greater than 120 days past due16 7 7 7 3 0 40 0.1 
Total past due82 85 138 155 150 6 616 0.8 
Current2,452 5,450 11,743 18,729 30,560 6,927 75,861 99.2 
Total$2,534 $5,535 $11,881 $18,884 $30,710 $6,933 $76,477 100.0 %
  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. The credit quality of dealer financing receivables is evaluated based on Ford Credit’s internal dealer risk rating analysis. Ford Credit uses a proprietary model to assign each dealer a risk rating. This model uses historical dealer performance data to identify key factors about a dealer that are considered most significant in predicting a dealer’s ability to meet its financial obligations. Ford Credit also considers numerous other financial and qualitative factors of the dealer’s operations, including capitalization and leverage, liquidity and cash flow, profitability, and credit history with Ford Credit and other creditors.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.
•Group I – strong to superior financial metrics;
•Group II – fair to favorable financial metrics;
•Group III – marginal to weak financial metrics; and
•Group IV – poor financial metrics, including dealers classified as uncollectible.
13
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. FORD CREDIT FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

The credit quality analysis of dealer financing receivables at December 31, 20192020 was as follows (in millions):
Amortized Cost Basis by Origination YearWholesale Loans
 TotalDealer Loans
Dealer financing  
Prior to 201620162017201820192020TotalWholesale LoansTotalPercent
Group I $26,281
Group I$503 $129 $110 $188 $70 $248 $1,248 $14,408 68.9 %
Group II 5,407
Group II38 20 11 35 3 87 194 4,874 23.3 
Group III 2,108
Group III9 0 3 19 3 35 69 1,464 1,533 7.3 
Group IV 189
Group IV2 0 0 0 2 6 10 83 93 0.5 
Total (a) $33,985
Total (a)$552 $149 $124 $242 $78 $376 $1,521 $19,387 $20,908 100.0 %
__________
(a)Total past due dealer financing receivables at December 31, 2019 were $62 million.
(a)Total past due dealer financing receivables at December 31, 2020 were $99 million.

The credit quality analysis of dealer financing receivables at March 31, 20202021 was as follows (in millions):
 Amortized Cost Basis by Origination Year Wholesale Loans  Amortized Cost Basis by Origination YearWholesale Loans
 Dealer Loans  Dealer Loans
 Prior to 2016 2016 2017 2018 2019 2020 Total TotalPrior to 201720172018201920202021TotalTotalPercent
Group I $676
 $147
 $154
 $276
 $120
 $122
 $1,495
 $26,774
 $28,269
Group I$582 $108 $178 $55 $146 $124 $1,193 $10,737 $11,930 66.4 %
Group II 31
 30
 28
 14
 24
 45
 172
 5,886
 6,058
Group II31 11 40 3 23 63 171 4,358 4,529 25.2 
Group III 9
 —
 4
 17
 22
 17
 69
 1,943
 2,012
Group III17 0 9 2 13 24 65 1,380 1,445 8.0 
Group IV 2
 1
 —
 —
 2
 4
 9
 92
 101
Group IV0 0 1 1 3 3 8 68 76 0.4 
Total (a) $718
 $178
 $186
 $307
 $168
 $188
 $1,745
 $34,695
 $36,440
Total (a)$630 $119 $228 $61 $185 $214 $1,437 $16,543 $17,980 100.0 %
__________
(a)Total past due dealer financing receivables at March 31, 2020 were $34 million.
(a)Total past due dealer financing receivables at March 31, 2021 were $70 million.

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

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

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.

AdditionsAdjustments to the allowance for credit losses are made by recording charges to Ford Credit interest, operating, and other expenses on our consolidated income statement.statements. The uncollectible portion of a finance receivables arereceivable is charged to the allowance for credit losses at the earlier of when an account is deemed to be uncollectible or when an account is 120 days delinquent, taking into consideration the financial condition of the customer or borrower, the value of the collateral, recourse to guarantors, and other factors.
14
Item 1. Financial Statements (Continued)

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

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

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 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 discounted at the loans’ original effective interest rate or the fair value of the collateral adjusted for estimated costs to sell.

For the remaining dealer financing, 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 LTR model is based on the most recent years of history. An LTR is calculated by dividing credit losses (i.e., charge-offs net of 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 weighted to provide the total lifetime expected credit loss. 

After establishing the collective and 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 2020
 ConsumerNon-ConsumerTotal
Allowance for credit losses
Beginning balance$496 $17 $513 
Adoption of ASU 2016-13 (a)247 5 252 
Charge-offs(145)(1)(146)
Recoveries43 2 45 
Provision for credit losses534 52 586 
Other (b)(18)(1)(19)
Ending balance$1,157 $74 $1,231 
 First Quarter 2019 (a)
 Consumer Non-Consumer Total
Allowance for credit losses     
Beginning balance$566
 $23
 $589
Charge-offs(137) (17) (154)
Recoveries43
 2
 45
Provision for credit losses24
 9
 33
Other—
 —
 —
Ending balance$496
 $17
 $513

First Quarter 2020First Quarter 2021
Consumer Non-Consumer Total ConsumerNon-ConsumerTotal
Allowance for credit losses     Allowance for credit losses
Beginning balance$496
 $17
 $513
Beginning balance$1,245 $60 $1,305 
Adoption of ASU 2016-13 (b)247
 5
 252
Charge-offs(145) (1) (146)Charge-offs(97)0 (97)
Recoveries43
 2
 45
Recoveries53 3 56 
Provision for credit losses534
 52
 586
Provision for credit losses(30)(10)(40)
Other (c)(18) (1) (19)
Other (b)Other (b)(1)0 (1)
Ending balance$1,157
 $74
 $1,231
Ending balance$1,170 $53 $1,223 
__________
(a)The comparative information has not been restated and continues to be reported under the accounting standard in effect during 2019.
(b)
(a)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, Credit Losses - Measurement of Credit Losses on Financial Instruments, were recorded in retained earnings as of January 1, 2020.
(b)Primarily represents amounts related to translation adjustments.

The allowance for credit losses considers economic conditions attributable to the COVID-19 pandemic. The allowance reflects economic uncertainty and an increaseexpectation 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,continued higher unemployment which resulted in extensive temporary closures of businesses and drove a significant increase in unemployment, is expected to increaseincreases the probability of default and loss given default rates used in Ford Credit’s estimate of the lifetime expected credit losses for its consumer portfolio, over the next twelve months, especially in the United States. These

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

15
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. INVENTORIES

Inventories were as follows (in millions):
 December 31,
2020		March 31,
2021
Raw materials, work-in-process, and supplies$4,676 $5,184 
Finished products6,132 7,558 
Total inventories$10,808 $12,742 
 December 31,
2019		 March 31,
2020
Raw materials, work-in-process, and supplies$4,402
 $4,598
Finished products6,384
 6,714
Total inventories$10,786
 $11,312


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

NOTE 10. OTHER INVESTMENTS

We have investments in entities not accounted for under the equity method for which 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.sheets. These investments were $1.2$1.7 billion and $2.8 billion at both December 31, 20192020 and March 31, 2021, respectively. The increase from December 31, 2020 primarily reflects an observable event of $902 million (measured using an option pricing model) for our investment in Rivian, reported in Other income/(loss), net 2020. In the first quarter of 2020, there were no materialon our consolidated income statements. The cumulative net unrealized gain from adjustments related to the fair values of these investmentsOther Investments held at March 31, 2020.2021 is $1.2 billion.

NOTE 11. GOODWILL

The net carrying amount of goodwill was $278$258 million and $566 million at both December 31, 20192020 and March 31, 2020,2021, respectively, and is reported in Other assets in the non-current assets section of our consolidated balance sheet.sheets. The increase from December 31, 2020 reflects the acquisition of Getrag Ford Transmissions GmbH in March 2021 (see Note 17).

16
Item 1. Financial Statements (Continued)

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

Other liabilities and deferred revenue were as follows (in millions):
December 31,
2019		 March 31,
2020		 December 31,
2020		March 31,
2021
Current   Current
Dealer and dealers’ customer allowances and claims$13,113
 $13,257
Dealer and dealers’ customer allowances and claims$12,702 $10,882 
Deferred revenue2,091
 2,111
Deferred revenue2,161 2,062 
Employee benefit plans1,857
 1,612
Employee benefit plans1,752 1,604 
Accrued interest1,128
 819
Accrued interest1,215 1,130 
OPEB (a)332
 326
OPEB (a)339 340 
Pension (a)185
 183
Pension (a)193 192 
Operating lease liabilities367
 361
Operating lease liabilities323 329 
Other3,914
 4,005
Other4,960 4,456 
Total current other liabilities and deferred revenue$22,987
 $22,674
Total current other liabilities and deferred revenue$23,645 $20,995 
Non-current 
  
Non-current  
Pension (a)$9,878
 $9,414
Pension (a)$10,738 $10,253 
OPEB (a)5,740
 5,605
OPEB (a)6,236 6,182 
Dealer and dealers’ customer allowances and claims1,921
 2,252
Dealer and dealers’ customer allowances and claims3,072 3,272 
Deferred revenue4,191
 4,140
Deferred revenue4,559 4,550 
Operating lease liabilities1,047
 1,006
Operating lease liabilities991 965 
Employee benefit plans1,104
 1,097
Employee benefit plans1,074 1,066 
Other1,443
 1,591
Other1,709 2,419 
Total non-current other liabilities and deferred revenue$25,324
 $25,105
Total non-current other liabilities and deferred revenue$28,379 $28,707 
__________
(a)
Balances at March 31, 2020 reflect pension and OPEB liabilities 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. Included in Other assets are pension assets of $3.2 billion and $3.4 billion at December 31, 2019 and March 31, 2020, respectively.
(a)Balances at March 31, 2021 reflect pension and OPEB liabilities at December 31, 2020, updated for: service and interest cost; expected return on assets; curtailments, settlements, and associated interim remeasurement (where applicable); separation expense; actual benefit payments; and cash contributions. For plans without interim remeasurement, the discount rate and rate of expected return assumptions are unchanged from year-end 2020. Included in Other assets are pension assets of $4.3 billion and $4.8 billion at December 31, 2020 and March 31, 2021, respectively.
17
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 13. RETIREMENT BENEFITS

Defined Benefit Plans - Expense

The pre-tax net periodic benefit cost/(income) for our defined benefit pension and OPEB plans for the periods ended March 31 were as follows (in millions):
First Quarter
 Pension Benefits  
 U.S. PlansNon-U.S. PlansWorldwide OPEB
 202020212020202120202021
Service cost$130 $138 $131 $144 $12 $12 
Interest cost323 223 133 99 43 32 
Expected return on assets(699)(702)(267)(285)0 0 
Amortization of prior service costs/(credits)1 1 9 5 (4)(3)
Net remeasurement (gain)/loss0 423 (80)(484)58 0 
Separation programs/other10 2 24 37 (1)0 
Settlements and curtailments0 39 1 1 (2)0 
Net periodic benefit cost/(income)$(235)$124 $(49)$(483)$106 $41 
 First Quarter
 Pension Benefits    
 U.S. Plans Non-U.S. Plans Worldwide OPEB
 2019 2020 2019 2020 2019 2020
Service cost$114
 $130
 $129
 $131
 $11
 $12
Interest cost409
 323
 176
 133
 53
 43
Expected return on assets(649) (699) (286) (267) —
 —
Amortization of prior service costs/(credits)22
 1
 8
 9
 (18) (4)
Net remeasurement (gain)/loss—
 —
 —
 (80) —
 58
Separation programs/other1
 10
 12
 24
 —
 (1)
Settlements and curtailments—
 —
 —
 1
 —
 (2)
Net periodic benefit cost/(income)$(103) $(235) $39
 $(49) $46
 $106


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.statements.

As part of our ongoing global redesign activities, we recognized additional expense of $13 million and $24 million inIn the first quarter of 20192020 and 2020,2021, we recognized $24 million and $38 million, respectively, of expenses related to separationongoing global redesign programs.  In addition, in the first quarter, we recognized settlements and curtailments, which required plan remeasurements at current discount rates, asset returns, and economic conditions.  This resulted in remeasurement gain of $22 million in the first quarter of 2020. Until our global redesign actions are completed, we anticipate further adjustments to our plans in subsequent periods.

Pension Plan Contributions

During 2020,2021, we expect to contribute between $500$600 million and $700$800 million of cash to our global funded pension plans. We also expect to make about $350$380 million of benefit payments to participants in unfunded plans. In the first quarter of 2020,2021, we contributed $175$229 million to our worldwide funded pension plans and made $86$96 million of benefit payments to participants in unfunded plans.
18
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 14. DEBT
The carrying value of Automotive,Company debt excluding Ford Credit and OtherFord Credit debt was as follows (in millions):
December 31,
2020		March 31,
2021
December 31,
2019		 March 31,
2020
Automotive   
Company excluding Ford CreditCompany excluding Ford Credit  
Debt payable within one year   Debt payable within one year
Short-term$315
 $569
Short-term$613 $185 
Long-term payable within one year 
  
Long-term payable within one year  
Public unsecured debt securitiesPublic unsecured debt securities180 266 
U.S. Department of Energy Advanced Technology Vehicles Manufacturing (“DOE ATVM”) Incentive Program591
 591
U.S. Department of Energy Advanced Technology Vehicles Manufacturing (“DOE ATVM”) Incentive Program148 148 
Other debt540
 450
Other debt434 463 
Unamortized (discount)/premium(1) (1)Unamortized (discount)/premium(1)(1)
Total debt payable within one year1,445
 1,609
Total debt payable within one year1,374 1,061 
Long-term debt payable after one year 
  
Long-term debt payable after one year  
Public unsecured debt securities10,583
 10,583
Public unsecured debt securities18,877 18,792 
Credit facilities (a)—
 15,068
Convertible notesConvertible notes0 2,300 
Delayed draw term loan1,500
 1,500
Delayed draw term loan1,500 1,500 
DOE ATVM Incentive Program880
 732
DOE ATVM Incentive Program1,064 1,027 
U.K. Export Finance ProgramU.K. Export Finance Program854 861 
Other debt547
 800
Other debt768 790 
Unamortized (discount)/premium(161) (157)Unamortized (discount)/premium(242)(234)
Unamortized issuance costs(116) (115)Unamortized issuance costs(188)(217)
Total long-term debt payable after one year13,233
 28,411
Total long-term debt payable after one year22,633 24,819 
Total Automotive$14,678
 $30,020
Fair value of Automotive debt (b)$15,606
 $22,877
Total Company excluding Ford CreditTotal Company excluding Ford Credit$24,007 $25,880 
Fair value of Company debt excluding Ford Credit (a)Fair value of Company debt excluding Ford Credit (a)$27,794 $29,653 
Ford Credit 
  
Ford Credit  
Debt payable within one year 
  
Debt payable within one year
Short-term$13,717
 $12,424
Short-term$11,429 $11,976 
Long-term payable within one year 
  
Long-term payable within one year  
Unsecured debt15,062
 17,137
Unsecured debt17,185 16,222 
Asset-backed debt23,609
 21,736
Asset-backed debt21,345 20,207 
Unamortized (discount)/premium1
 2
Unamortized (discount)/premium2 3 
Unamortized issuance costs(17) (19)Unamortized issuance costs(17)(19)
Fair value adjustments (c)(1) 23
Fair value adjustments (b)Fair value adjustments (b)25 21 
Total debt payable within one year52,371
 51,303
Total debt payable within one year49,969 48,410 
Long-term debt payable after one year   Long-term debt payable after one year
Unsecured debt55,148
 51,138
Unsecured debt54,197 48,880 
Asset-backed debt32,162
 32,973
Asset-backed debt32,276 28,867 
Unamortized (discount)/premium6
 4
Unamortized (discount)/premium28 33 
Unamortized issuance costs(197) (188)Unamortized issuance costs(235)(224)
Fair value adjustments (c)539
 1,606
Fair value adjustments (b)Fair value adjustments (b)1,442 826 
Total long-term debt payable after one year87,658
 85,533
Total long-term debt payable after one year87,708 78,382 
Total Ford Credit$140,029
 $136,836
Total Ford Credit$137,677 $126,792 
Fair value of Ford Credit debt (b)$141,678
 $128,714
Other   
Long-term debt payable within one year$130
 $—
Long-term debt payable after one year   
Unsecured debt474
 474
Unamortized (discount)/premium(3) (3)
Unamortized issuance costs(1) (1)
Total long-term debt payable after one year470
 470
Total Other$600
 $470
Fair value of Other debt$720
 $448
Fair value of Ford Credit debt (a)Fair value of Ford Credit debt (a)$139,796 $128,979 
__________
(a)We drew $15.4 billion under our corporate credit facility and supplemental revolving credit facility in the first quarter of 2020, and received $15.1 billion as of March 31, 2020, and the remaining $300 million on April 8, 2020.
(b)
The fair value of debt includes $315 million and $569 million of Automotive short-term debt and $12.8 billion and $11.3 billion of Ford Credit short-term debt at December 31, 2019 and March 31, 2020, respectively, carried at cost, which approximates fair value. All debt is categorized within Level 2 of the fair value hierarchy.
(c)These adjustments relate to fair value hedges. The carrying value of hedged debt was $39.4 billion and $41.6 billion at December 31, 2019 and March 31, 2020, respectively.
(a)At December 31, 2020 and March 31, 2021, the fair value of debt includes $529 million and $72 million ofCompany excluding Ford Credit short-term debt and $10.4 billion and $10.8 billion of Ford Credit short-term debt, respectively, carried at cost which approximates fair value. All other debt is categorized within Level 2 of the fair value hierarchy.
(b)These adjustments are related to hedging activity and include discontinued hedging relationship adjustments of $299 million and $273 million at December 31, 2020 and March 31, 2021, respectively. The carrying value of hedged debt was $45.5 billion and $40.7 billion at December 31, 2020 and March 31, 2021, respectively.
19
Item 1. Financial Statements (Continued)

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

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

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

•During any fiscal quarter commencing after the fiscal quarter ending on September 30, 2021 (and only during such fiscal quarter), if the last reported sale price of our Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the notes on each applicable trading day;
•During the 5 business day period after any 5 consecutive trading day period in which the trading price per $1,000 principal amount of the notes for each day of that 5 consecutive trading day period was less than 98% of the product of the last reported sale price of our Common Stock and the conversion rate of the notes on such trading day;
•If we call any or all of the notes for redemption; or
•Upon the occurrence of specific corporate events such as a change in control or certain beneficial distributions to common stockholders (as set forth in the indenture governing the notes).

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

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

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

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

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

The notes did not have an impact on our first quarter 2021 diluted EPS as the average market price of our Common Stock during the quarter did not exceed the conversion price of the notes.
20
Item 1. Financial Statements (Continued)

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

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

Income Effect of Derivative Financial Instruments

The gains/(losses), by hedge designation, reported in income for the periods ended March 31 were as follows (in millions):
First Quarter
First Quarter
Cash flow hedges (a)2019 2020
Cash flow hedgesCash flow hedges20202021
Reclassified from AOCI to Cost of sales   Reclassified from AOCI to Cost of sales
Foreign currency exchange contracts$54
 $(70)
Commodity contracts(5) (14)
Foreign currency exchange contracts (a)Foreign currency exchange contracts (a)$(70)$(15)
Commodity contracts (b)Commodity contracts (b)(14)8 
Fair value hedges   Fair value hedges
Interest rate contracts   Interest rate contracts
Net interest settlements and accruals on hedging instruments(20) 28
Net interest settlements and accruals on hedging instruments28 101 
Fair value changes on hedging instruments250
 1,110
Fair value changes on hedging instruments1,110 (641)
Fair value changes on hedged debt(253) (1,093)Fair value changes on hedged debt(1,093)590 
Cross-currency interest rate swap contractsCross-currency interest rate swap contracts
Net interest settlements and accruals on hedging instrumentsNet interest settlements and accruals on hedging instruments0 (3)
Fair value changes on hedging instrumentsFair value changes on hedging instruments0 (50)
Fair value changes on hedged debtFair value changes on hedged debt0 44 
Derivatives not designated as hedging instruments   Derivatives not designated as hedging instruments
Foreign currency exchange contracts (b)(28) 586
Foreign currency exchange contracts (c)Foreign currency exchange contracts (c)586 233 
Cross-currency interest rate swap contracts(145) (151)Cross-currency interest rate swap contracts(151)(245)
Interest rate contracts(27) (74)Interest rate contracts(74)(31)
Commodity contracts11
 (43)Commodity contracts(43)55 
Total$(163) $279
Total$279 $46 
__________
(a)
For the first quarter of 2019 and 2020, a $521 million loss and an $897 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax related to foreign currency exchange contracts. For the first quarter of 2019 and 2020, an $11 million gain and a $101 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax related to commodity contracts.
(b)
For the first quarter of 2019 and 2020, a $22 million loss and a $376 million gain were reported in Cost of sales and a $6 million loss and a $210 million gain were reported in Other income/(loss), net, respectively.
(a)For the first quarter of 2020 and 2021, an $897 million gain and a $461 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax.
(b)For the first quarter of 2020 and 2021, a $101 million loss and an $80 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax.
(c)For the first quarter of 2020 and 2021, a $376 million gain and a $181 million gain were reported in Cost of sales, respectively, and a $210 million gain and a $52 million gain were reported in Other income/(loss), net, respectively.
21
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 15. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

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

The fair value of our derivative instruments and the associated notional amounts were as follows (in millions):
 December 31, 2019 March 31, 2020
 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$15,349
 $47
 $493
 $13,148
 $606
 $168
Commodity contracts673
 5
 29
 665
 —
 108
Fair value hedges 
  
  
      
Interest rate contracts26,577
 702
 19
 23,663
 1,549
 —
Derivatives not designated as hedging instruments           
Foreign currency exchange contracts19,350
 58
 270
 17,509
 476
 130
Cross-currency interest rate swap contracts5,849
 134
 67
 5,938
 126
 238
Interest rate contracts68,914
 275
 191
 72,822
 651
 561
Commodity contracts467
 9
 9
 474
 1
 46
Total derivative financial instruments, gross (a) (b)$137,179
 $1,230
 $1,078
 $134,219
 $3,409
 $1,251
            
Current portion  $390
 $772
   $1,388
 $759
Non-current portion  840
 306
   2,021
 492
Total derivative financial instruments, gross  $1,230
 $1,078
   $3,409
 $1,251

December 31, 2020March 31, 2021
NotionalFair Value of
Assets		Fair Value of
Liabilities		NotionalFair Value of
Assets		Fair Value of
Liabilities
Cash flow hedges   
Foreign currency exchange contracts$15,860 $47 $383 $14,192 $2 $677 
Commodity contracts703 40 5 750 103 1 
Fair value hedges   
Interest rate contracts26,924 1,331 4 25,646 934 204 
Cross-currency interest rate swap contracts885 46 0 885 2 0 
Derivatives not designated as hedging instruments
Foreign currency exchange contracts25,956 172 399 24,341 258 274 
Cross-currency interest rate swap contracts6,849 557 1 6,822 275 25 
Interest rate contracts70,318 663 439 61,608 425 314 
Commodity contracts599 74 4 696 97 4 
Total derivative financial instruments, gross (a) (b)$148,094 $2,930 $1,235 $134,940 $2,096 $1,499 
Current portion$974 $859 $956 $816 
Non-current portion1,956 376 1,140 683 
Total derivative financial instruments, gross$2,930 $1,235 $2,096 $1,499 
__________
(a)At December 31, 2019 and March 31, 2020, we held collateral of $18 million and $23 million, and we posted collateral of $78 million and $86 million, respectively.
(b)
At December 31, 2019 and March 31, 2020, the fair value of assets and liabilities available for counterparty netting was $269 million and $841 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.
(a)At December 31, 2020 and March 31, 2021, we held collateral of $9 million and $3 million and we posted collateral of $96 million and $87 million, respectively.
(b)At December 31, 2020 and March 31, 2021, the fair value of assets and liabilities available for counterparty netting was $505 million and $664 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.
22
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 16. EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES

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

Automotive SegmentCompany Excluding Ford Credit

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,facility and other asset-related charges (e.g., impairment, accelerated depreciation), dealer and supplier payments, other statutory and contractual obligations, and other expenses, are recorded in Cost of sales and Selling, administrative, and other expenses. Below are actions we have initiated as part of the redesign.

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

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

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

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

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

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

India. In the third quarter of 2019, Ford committed to a plan to sell specific net assets in our India Automotive operations. See Note 17 for more information concerning this plan.On December 31, 2020, Ford and Mahindra & Mahindra Limited mutually determined that we will not complete the joint venture.
23
Item 1. Financial Statements (Continued)

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

Other Global Redesign Actions. In 2018, we announced our plan to end production at the Ford Aquitaine Industries plant in Bordeaux, France,France. We ceased production and the facility was closed in July 2019. In March 2019, we announced our plan to phase-out the production of the C-Max at the Saarlouis Body and Assembly Plant in Germany. Furthermore,We ceased production of the C-Max in June 2019. In March 2021, we announced our plan to phase-out the production of the Mondeo at the Valencia Plant in Spain. In addition, we are reducingcontinuing to reduce our global workforce and takingtake 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 QuarterFirst Quarter
2019 202020202021
Beginning balance$291
 $734
Beginning balance$734 $1,732 
Changes in accruals (a)267
 68
Changes in accruals (a)68 193 
Payments(136) (172)Payments(172)(291)
Foreign currency translation(8) (29)Foreign currency translation(29)(135)
Ending balance$414
 $601
Ending balance$601 $1,499 
__________
(a)Excludes pension costs of $13$24 million and $24$38 million in the first quarter of 20192020 and 2020,2021, respectively.
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 16.EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES(Continued)

We also recorded $251$14 million and $14$302 million in the first quarter of 20192020 and 2020,2021, respectively, for accelerated depreciation and other non-cash items.

We estimate that we will incur total charges in 20202021 that range between $700 million$2.2 billion and $1.2$2.7 billion related to the actions above, primarily attributable to employee separations, accelerated depreciation, and dealer and supplier settlements. We continue to review our global businesses and may take additional restructuring actions in markets where a path to sustained profitability is not feasible when considering the capital allocation required for those markets.

Other Actions

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

24
Item 1. Financial Statements (Continued)

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


Company Excluding Ford Credit
Automotive Segment

Ford Lio Ho Motor Co., Ltd. (“FLH”). In the thirdfirst quarter of 2019,2021, we committed toconcluded the terms of a plan to sell specific net assetssale of our controlling interest in our India Automotive operations. We entered intoFLH, a definitive agreement to form aconsolidated joint venture with MahindraTaiwan investors, and its wholly owned subsidiary FLH Marketing & MahindraService Limited (“Mahindra”FMSL”), with Mahindra owning a 51% controlling stake. FLH and Ford owning a 49% stake. Under the terms of the transaction, which is expected to close mid-2020, we willFMSL import, manufacture, and sell certain India Automotive operations to the joint venture. Accordingly, weFord-branded vehicles in Taiwan. We have reported the assets and liabilities of these operations as held for sale and ceased depreciation and amortization of those assets.

The assets and liabilities of our India AutomotiveFord Taiwan 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
Inventories208
 261
Other assets, current147
 96
Net property279
 263
Other assets, non-current10
 9
Total assets of held-for-sale operations913
 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, current71
 68
Automotive debt payable within one year90
 84
Other liabilities and deferred revenue, non-current28
 25
Total liabilities of held-for-sale operations650
 650
Less: Intercompany liability balances(169) (181)
Automotive segment total liabilities of held-for-sale operations (a)$481
 $469
__________
March 31,
2021
Assets
Cash and cash equivalents$16 
Trade and other receivables, net12 
Inventories141 
Other assets, current21 
Net property124 
Other assets, non-current2 
Total Company excluding Ford Credit assets of held-for-sale operations316 
Less: Intercompany asset balances(1)
Total assets of held-for-sale operations (a)$315 
(a)Liabilities
AsPayables$124 
Other liabilities and deferred revenue, current49 
Company excluding Ford Credit debt payable within one year114 
Other liabilities and deferred revenue, non-current35 
Total Company excluding Ford Credit liabilities of December 31, 2019held-for-sale operations322 
and 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 thoseLess: Intercompany liability balances in the table for informational purposes.(31)
Total liabilities of held-for-sale operations (a)$291 
__________
(a)As of March 31, 2021, intercompany items and transactions have been eliminated on the consolidated balance sheets. Upon closing, the buyer will assume the intercompany assets and liabilities. Accordingly, we have presented those balances in the table for informational purposes.

Held-for-sale assets are measured at the lower of carrying amount and fair value less cost to sell. We determined fair value using a market approach, estimated based on the negotiated value of the assets, and determined the assets held for sale were 0t impaired.

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

Getrag Ford Transmissions GmbH (“GFT”). Prior to March 2021, Ford and Magna International Inc. (“Magna”) equally owned and operated the GFT joint venture for the purpose of developing, manufacturing, and selling transmissions. We accounted for our investment in GFT as an equity method investment. During the first quarter of 2021, GFT recorded restructuring charges, of which our share was $40 million. These charges are included in Equity in net income/(loss) of affiliated companies.
25
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 17. HELD-FOR-SALE OPERATIONS AND CHANGES IN INVESTMENTS IN AFFILIATES (Continued)

On March 1, 2021, we acquired Magna’s shares in a restructured GFT for $254 million. The restructured GFT includes the Halewood, UK and Cologne, Germany transmission plants, but excludes the Bordeaux, France transmission plant and China interests acquired by Magna. We 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 Cost of sales.concluded with Magna that these businesses would be better served under separate ownership. 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 dealer financing in Denmark, Finland, Norway, and Sweden.Sanand, India transmission plant will continue under joint Ford/Magna ownership. As a result of the transaction, we classifiedconsolidated the assets and liabilities of these operations as held for salerestructured GFT, remeasured our prior investment in GFT at its $254 million fair value, and recognized a pre-tax fair value impairment chargegain of $20$155 million reported in Other income/(loss), net,. We estimated the fair value of GFT in negotiations with Magna based on the income approach. The significant assumptions used in the fourthvaluation included GFT’s cash flows that reflect the approved business plan, discounted at a rate typically used for a company like GFT. See Note 11 for information about goodwill recognized as part of this transaction.

Ford Credit

In the first quarter of 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, current516
Trade and other receivables, net8
Other assets, current106
Ford Credit finance receivables, net, non-current715
Net property2
Deferred income taxes9
Other assets, non-current1
Total assets of held-for-sale operations1,418
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, current8
Ford Credit long-term debt1,254
Deferred income taxes23
Total liabilities of held-for-sale operations1,319
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 its wholly-owned subsidiary Forso Nordic AB, recognizing a pre-tax loss of $4 million, reported in Other income/(loss)(loss), net, and cash proceeds of $1.3 billion.

26
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

The changes in the balances for each component of accumulated other comprehensive income/(loss) attributable to Ford Motor Company for the periods ended March 31 were as follows (in millions):
First QuarterFirst Quarter
2019 202020202021
Foreign currency translation   Foreign currency translation
Beginning balance$(4,800) $(4,626)Beginning balance$(4,626)$(5,526)
Gains/(Losses) on foreign currency translation271
 (1,406)Gains/(Losses) on foreign currency translation(1,406)394 
Less: Tax/(Tax benefit)28
 27
Less: Tax/(Tax benefit)27 97 
Net gains/(losses) on foreign currency translation243
 (1,433)Net gains/(losses) on foreign currency translation(1,433)297 
(Gains)/Losses reclassified from AOCI to net income (a)—
 (20)(Gains)/Losses reclassified from AOCI to net income (a)(20)(8)
Other comprehensive income/(loss), net of tax243
 (1,453)Other comprehensive income/(loss), net of tax(1,453)289 
Ending balance$(4,557) $(6,079)Ending balance$(6,079)$(5,237)
   
Marketable securities   Marketable securities
Beginning balance$(59) $71
Beginning balance$71 $156 
Gains/(Losses) on available for sale securities80
 19
Gains/(Losses) on available for sale securities19 (76)
Less: Tax/(Tax benefit)19
 5
Less: Tax/(Tax benefit)5 (19)
Net gains/(losses) on available for sale securities61
 14
Net gains/(losses) on available for sale securities14 (57)
(Gains)/Losses reclassified from AOCI to net income3
 —
(Gains)/Losses reclassified from AOCI to net income0 (11)
Less: Tax/(Tax benefit)1
 —
Less: Tax/(Tax benefit)0 (3)
Net (gains)/losses reclassified from AOCI to net income2
 —
Net (gains)/losses reclassified from AOCI to net income0 (8)
Other comprehensive income/(loss), net of tax63
 14
Other comprehensive income/(loss), net of tax14 (65)
Ending balance$4
 $85
Ending balance$85 $91 
   
Derivative instruments   Derivative instruments
Beginning balance$201
 $(488)Beginning balance$(488)$(266)
Gains/(Losses) on derivative instruments(510) 796
Gains/(Losses) on derivative instruments796 (381)
Less: Tax/(Tax benefit)(102) 173
Less: Tax/(Tax benefit)173 (74)
Net gains/(losses) on derivative instruments(408) 623
Net gains/(losses) on derivative instruments623 (307)
(Gains)/Losses reclassified from AOCI to net income(49) 84
(Gains)/Losses reclassified from AOCI to net income84 7 
Less: Tax/(Tax benefit)(11) 15
Less: Tax/(Tax benefit)15 1 
Net (gains)/losses reclassified from AOCI to net income (b)(38) 69
Net (gains)/losses reclassified from AOCI to net income (b)69 6 
Other comprehensive income/(loss), net of tax(446) 692
Other comprehensive income/(loss), net of tax692 (301)
Ending balance$(245) $204
Ending balance$204 $(567)
   
Pension and other postretirement benefits   Pension and other postretirement benefits
Beginning balance$(2,708) $(2,685)Beginning balance$(2,685)$(2,658)
Amortization and recognition of prior service costs/(credits)12
 4
Amortization and recognition of prior service costs/(credits)4 3 
Less: Tax/(Tax benefit)2
 1
Less: Tax/(Tax benefit)1 1 
Net prior service costs/(credits) reclassified from AOCI to net income10
 3
Net prior service costs/(credits) reclassified from AOCI to net income3 2 
Translation impact on non-U.S. plans(5) 11
Translation impact on non-U.S. plans11 (1)
Other comprehensive income/(loss), net of tax5
 14
Other comprehensive income/(loss), net of tax14 1 
Ending balance$(2,703) $(2,671)Ending balance$(2,671)$(2,657)
   
Total AOCI ending balance at March 31$(7,501) $(8,461)Total AOCI ending balance at March 31$(8,461)$(8,370)
__________
(a)
Reclassified to Other income/(loss), net.
(b)
Reclassified to Cost of sales. During the next twelve months we expect to reclassify existing net gains on cash flow hedges of $147 million. See Note 15 for additional information.
(a)Reclassified to Other income/(loss), net.
(b)Reclassified to Cost of sales. During the next twelve months we expect to reclassify existing net losses on cash flow hedges of $366 million (see Note 15).
27
Item 1. Financial Statements (Continued)

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

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

NOTE 19.20. COMMITMENTS AND CONTINGENCIES

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

Guarantees and Indemnifications

Financial Guarantees. Financial guarantees and indemnifications are recorded at fair value at their inception. Subsequent to initial recognition, the guarantee liability is adjusted at each reporting period to reflect the current estimate of expected payments resulting from possible default events over the remaining life of the guarantee.The 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 other communications. The liability recorded represents Ford’s exposure to credit risk. The maximum potential payments for financial guarantees were $162$346 million and $427$351 million at December 31,2019 2020 and March 31, 2020,2021, respectively. The carrying value of recorded liabilities related to financial guarantees was $33$46 million and $49$29 million at December 31,2019 2020 and March 31, 2020,2021, respectively.

Our financial guarantees consist of debt and lease obligations of certain joint ventures, as well as certain financial obligations of outside third parties, including suppliers, to support our business and economic growth. Expiration dates vary through 2033, and guarantees will terminate on payment and/or cancellation of the underlying obligation. A payment by us would be triggered by failure of the joint venture or other third party to fulfill its obligation covered by the guarantee. In some circumstances, we are entitled to recover from a third party amounts paid by us under the guarantee. 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$245 million and $678$394 million at December 31,2019 2020 and March 31, 2020,2021, respectively. The carrying value of recorded liabilities related to non-financial guarantees was $200$48 million and $253$86 million at December 31,2019 2020 and March 31, 2020,2021, respectively.

We guaranteeIncluded in the $394 million of maximum potential payments at March 31, 2021 are guarantees for the resale value of vehicles sold in certain arrangements to daily rental companies. The maximum potential payment of $673$388 million as of March 31, 20202021 represents the total proceeds we guarantee the rental company will receive on re-sale.resale.  Reflecting our present estimate of proceeds the rental companies will receive on resale from third parties, we have recorded $252$85 million as our best estimate of the amount we will have to pay under the guarantee.

In the ordinary course of business, we execute contracts involving indemnifications standard in the industry and indemnifications specific to a transaction, such as the sale of a business. These indemnifications might include and are not limited to claims relating to any of the following: environmental, tax, and shareholder matters; intellectual property rights; power generation contracts; governmental regulations and employment-related matters; dealer, supplier, and other commercial contractual relationships; and financial matters, such as securitizations. Performance under these indemnities generally would be triggered by a breach of terms of the contract claim brought by a counterparty, including a joint venture or byalliance partner, or a third-party claim. While some of these indemnifications are limited in nature, many of them do not limit potential payment. Therefore, we are unable to estimate a maximum amount of future payments that could result from claims made under these unlimited indemnities.
28
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 19.20. COMMITMENTS AND CONTINGENCIES (Continued)

Litigation and Claims

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

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

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

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

For the remaining matters, where our historical experience with similar matters is of more limited value (i.e., “non-pattern matters”), we evaluate the matters primarily based on the individual facts and circumstances. For non-pattern matters, we evaluate whether there is a reasonable possibility of a material loss in excess of any accrual that can be estimated. Our estimate of reasonably possible loss in excess of our accruals for all material matters currently reflects indirect tax and customs matters, for which we estimate the aggregate risk to be a range of up to about $400$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.
29
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 19.20. COMMITMENTS AND CONTINGENCIES (Continued)

Warranty and Field Service Actions

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

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

The estimate of our future warranty and field service action costs, net of estimated supplier recoveries, for the periods ended March 31 was as follows (in millions):
First Quarter
 20202021
Beginning balance$5,702 $8,172 
Payments made during the period(1,075)(1,086)
Changes in accrual related to warranties issued during the period805 1,000 
Changes in accrual related to pre-existing warranties521 (141)
Foreign currency translation and other(164)(40)
Ending balance$5,789 $7,905 
 First Quarter
 2019 2020
Beginning balance$5,137
 $5,702
Payments made during the period(1,074) (1,075)
Changes in accrual related to warranties issued during the period693
 805
Changes in accrual related to pre-existing warranties271
 521
Foreign currency translation and other7
 (164)
Ending balance$5,034
 $5,789


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

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 20.21. SEGMENT INFORMATION

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

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

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

Prior period amounts were adjusted retrospectively to reflect these changes.

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

Automotive Segment

OurThe 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.programs and enterprise connectivity. The segment includes the following regional business units:  North America, South America, Europe, China (including Taiwan), and
the International Markets Group.

Mobility Segment

OurThe Mobility segment primarily includes development costs related to ourfor Ford’s autonomous vehicles and our investmentrelated businesses, Ford’s equity ownership in Argo AI (a developer of autonomous driving systems), and other mobility through Ford Smart Mobility LLC (“FSM”). Autonomous vehicles includes self-driving systems developmentbusinesses 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 withinvestments (including Spin, a micro-mobility service providers and technology companies. provider).

Ford Credit Segment

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

Corporate Other

Corporate Other primarily includes corporate governance expenses, interest income (excluding interest earned on our extended service contract portfolio that is included in our Automotive segment) and gains and losses from our cash, cash equivalents, marketable securities, and other investments, and foreign exchange derivatives gains and losses associated with intercompany lending. Corporate governance expenses are primarily administrative, delivering benefit on behalf of the global enterprise, and are not allocated to specific Automotive business units or operating segments. These include expenses related to setting and directing global policy, providing oversight and stewardship, and promoting the Company’s interests. The underlyingCorporate Other assets include: cash, cash equivalents, and liabilities associated with these activities remain with the respective Automotivemarketable securities; tax related assets; other investments; and Mobility segments.other assets managed centrally.

Interest on Debt

Interest on Debt is presented as a separate reconciling item and consists of interest expense on Automotive and Other debt. The underlying liability is reported in the Automotive segment and in Corporate Other.
31
Item 1. Financial Statements (Continued)

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

Special Items

Special Items are presented as a separate reconciling item. They consist of (i) pension and OPEB remeasurement gains and losses, (ii) significant personnel expenses, dealer-related costs, and facility-related charges stemming from our efforts to match production capacity and cost structure to market demand and changing model mix, and (iii) other items that we do not necessarily consider to be indicative of earnings from ongoing operating activities. Our management ordinarily excludes these items from its review of the results of the operating segments for purposes of measuring segment profitability and allocating resources. We also report these special items separately to help investors track amounts related to these activities and to allow investors analyzing our results to identify certain infrequent significant items that they may wish to exclude when considering the trend of ongoing operating results.
Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. SEGMENT INFORMATION (Continued)

Key financial information for the periods ended or at March 31 was as follows (in millions):
 AutomotiveMobilityFord CreditCorporate
Other		Interest
on Debt		Special ItemsAdjustmentsTotal
First Quarter 2020     
Revenues$31,342 $11 $2,967 $0 $0 $0 $0 $34,320 
Income/(loss) before income taxes(154)(285)30 (223)(227)(287)(a)0 (1,146)
Equity in net income/(loss) of affiliated companies(47)0 6 0 0 0 0 (41)
Total assets62,818 378 156,451 47,308 0 0 (2,805)(b)264,150 
First Quarter 2021     
Revenues$33,554 $11 $2,663 $0 $0 $0 $0 $36,228 
Income/(loss) before income taxes3,403 (197)962 648 (c)(473)(401)(a)0 3,942 
Equity in net income/(loss) of affiliated companies174 (59)5 1 0 (42)(a)0 79 
Total assets65,633 3,612 146,349 46,492 0 0 (1,267)(b)260,819 
 Automotive Mobility Ford Credit 
Corporate
Other
 
Interest
on Debt
 Special Items Adjustments Total
First Quarter 2019 
  
  
        
  
Revenues$37,239
 $6
 $3,097
 $—
 $—
 $—
 $—
 $40,342
Income/(loss) before income taxes2,009
 (288) 801
 (75) (245) (592) —
 1,610
Equity in net income/(loss) of affiliated companies17
 2
 6
 —
 —
 —
 —
 25
Cash, cash equivalents, marketable securities, and restricted cash24,034
 167
 13,700
 —
 —
 —
 —
 37,901
Total assets102,113
 949
 164,409
 —
 —
 —
 (4,190)(a)263,281
                
First Quarter 2020 
  
  
        
  
Revenues$31,340
 $13
 $2,967
 $—
 $—
 $—
 $—
 $34,320
Income/(loss) before income taxes(177) (334) 30
 (151) (227) (287) —
 (1,146)
Equity in net income/(loss) of affiliated companies(47) —
 6
 —
 —
 —
 —
 (41)
Cash, cash equivalents, marketable securities, and restricted cash34,212
 116
 12,231
 —
 —
 —
 —
 46,559
Total assets111,388
 941
 156,393
 —
 —
 —
 (4,572)(a)264,150
__________
(a)Primarily reflects Global Redesign actions.
(b)Includes eliminations of intersegment transactions occurring in the ordinary course of business and deferred tax netting.
(c)Includes the unrealized gain of $902 million related to the Rivian observable event (see Note 10).
32

__________
(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.

RECENT DEVELOPMENTS

The impactautomotive industry continues to face a significant shortage of semiconductors, which has presented challenges and production disruptions globally, including at our assembly plants. Our initial outlook was for semiconductor supply chains to remain constrained through the COVID-19 pandemic has created significant volatilitysecond quarter of 2021, and we would have an opportunity to begin recovering lost volumes 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 combatsecond half of 2021. However, 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,industry faced another setback on March 19, 2020, we provided notice2021, when Renesas Electronics Corporation, a key supplier of semiconductors for the automotive industry, experienced a significant fire at its Naka Factory. Renesas estimates that it will return to our lenders under our credit facilities that we were fully drawingfull capacity at its Naka Factory in July. Based on 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 nowoverall recovery rate us as non-investment grade.

Medical Supplies

At the same time that we are taking action to preserve and protect our business,seeing for the industry, 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.now believe the automotive semiconductor shortage may not be fully resolved until 2022. For additional information regarding the semiconductor shortage, see the Outlook section on page 56.
33
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


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 2020,2021, the net lossincome attributable to Ford Motor Company was $1,993$3,262 million, and Company adjusted EBIT was a loss of $632$4,816 million.

Net income/(loss) includes certain items (“special items”) that are excluded from Company adjusted EBIT. These items are discussed in more detail in Note 2021 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 QuarterFirst Quarter
2019 202020202021
Global Redesign   Global Redesign
Europe excl. Russia$(115) $(105)Europe excl. Russia$(105)$(94)
India—
 (3)India(3)— 
South America(201) (17)South America(17)(322)
Russia(174) 20
Russia20 3 
China—
 —
China— (1)
Separations and Other (not included above)(24) (1)Separations and Other (not included above)(1)(2)
Subtotal Global Redesign$(514) $(106)Subtotal Global Redesign$(106)$(416)
Other Items   Other Items
Focus cancellation$(67) $—
Other incl. UAW Retirement Buyout and Chariot(11) (203)
North America hourly buyouts / OtherNorth America hourly buyouts / Other$(203)$(7)
Subtotal Other Items$(78) $(203)Subtotal Other Items$(203)$(7)
Pension and OPEB Gain/(Loss)   Pension and OPEB Gain/(Loss)
Pension and OPEB remeasurement$—
 $22
Pension and OPEB remeasurement$22 $61 
Pension curtailment—
 —
Pension settlements and curtailmentsPension settlements and curtailments— (39)
Subtotal Pension and OPEB Gain/(Loss)$—
 $22
Subtotal Pension and OPEB Gain/(Loss)$22 $22 
Total EBIT Special Items$(592) $(287)Total EBIT Special Items$(287)$(401)
   
Cash effect of Global Redesign (incl. separations)$(136) $(172)Cash effect of Global Redesign (incl. separations)$(172)$(345)
   
Tax special items*$7
 $(787)
Provision for/(Benefit from) tax special items (a)Provision for/(Benefit from) tax special items (a)$787 $(99)
__________
*Includes related tax effect on special items and tax special items.
(a)Includes related tax effect on special items and tax special items.

We recorded $287$401 million of pre-tax special item charges in the first quarter of 2020 with cash effects of $172 million. Our pre-tax special items reflect2021, primarily buyouts accepted under the terms of our UAW contract ratified in the fourth quarter of 2019 andreflecting Global Redesign actions. Tax special item chargesactions in the quarter included $855 million for a valuation allowance related to certain deferred tax assets.South America and Europe.

In Note 2021 of the Notes to the Financial Statements, special items are reflected as a separate reconciling item, as opposed to being allocated among the Automotive, Mobility, and Ford Credit segments. This reflects the fact that management excludes these items from its review of operating segment results for purposes of measuring segment profitability and allocating resources.
34
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


COMPANY KEY METRICS

The table below shows our first quarter 2020 2021 key metrics for the Company, compared to a year ago.
First Quarter
20202021H / (L)
GAAP Financial Measures
Cash Flows from Operating Activities ($B)$(0.5)$4.5 $5.0 
Revenue ($M)34,320 36,228 6 %
Net Income/(Loss) ($M)(1,993)3,262 5,255 
Net Income/(Loss) Margin (%)(5.8)%9.0 %14.8 ppts
EPS (Diluted)$(0.50)$0.81 $1.31 
Non-GAAP Financial Measures (a)
Company Adj. Free Cash Flow ($B)$(2.2)$(0.4)$1.8 
Company Adj. EBIT ($M)(632)4,816 5,448 
Company Adj. EBIT Margin (%)(1.8)%13.3 %15.1 ppts
Adjusted EPS (Diluted)$(0.23)$0.89 $1.12 
Adjusted ROIC (Trailing Four Quarters)2.5 %8.2 %5.7 ppts
__________
(a)See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
 First Quarter
 2019 2020 H / (L)
GAAP Financial Measures     
Cash Flows from Operating Activities ($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 2020,2021, our diluted earnings per share of Common and Class B Stock was a loss of $0.50$0.81 and our diluted adjusted earnings per share was a loss of $0.23.$0.89.

Net income/(loss) margin was negative 5.8%9.0% in the first quarter of 2020, down 8.62021, up 14.8 percentage points from a year ago. Company adjusted EBIT margin was negative 1.8%13.3% in the first quarter of 2020, down 7.92021, up 15.1 percentage points from a year ago.

The $3.1 billion year-over-year declineincreases of $5,255 million in net income/(loss) and $5,448 million in Company adjusted EBIT in the first quarter of 2020 was2021 were driven by the impact of COVID-19. We estimate the unfavorable impact to net income/(loss)improvements in Automotive EBIT, Ford Credit EBT, 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.Corporate Other, which includes a $902 million non-cash gain from our investment in Rivian.

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

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


Automotive Segment

The table below shows our first quarter 20202021 Automotive segment EBIT by business unit (in millions).
First Quarter
20202021H / (L)
North America$373 $2,949 $2,576 
South America(112)(73)39 
Europe(149)341 490 
China (including Taiwan)(241)(15)226 
International Markets Group(25)201 226 
Automotive Segment$(154)$3,403 $3,557 
  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 2021 key metrics and the change in first quarter 2020 2021 EBIT compared with first quarter 2019 2020 by causal factor for our Automotive segment and its regional business units: North America, South America, Europe, China (including Taiwan), and the International Markets Group. For a description of these causal factors, see Definitions and Information Regarding Automotive Causal Factors.
First Quarter
Key Metrics20202021H / (L)
Market Share (%)6.0 %5.3 %(0.6) ppts
Wholesale Units (000)1,126 1,062 (64)
Revenue ($M)$31,342 $33,554 $2,212 
EBIT ($M)(154)3,403 3,557 
EBIT Margin (%)(0.5)%10.1 %10.6 ppts
 First Quarter
Key Metrics2019 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 2020 EBIT$(154)
Volume / Mix(778)
Net Pricing2,954 
Cost806 
Exchange205 
Other370 
First Quarter 2021 EBIT$3,403
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 2020,2021, wholesales declined 6% from a year ago, primarily reflecting the impact of semiconductor supply constraints in North America and Europe and the shift to a new business model in South America, partially offset by improvement in China and IMG. The global semiconductor shortage eliminated about 17% of our Automotive segment declined 21 percent year over year, drivenplanned first quarter 2021 production, or about 200,000 units. First quarter 2021 revenue increased 7%, primarily reflecting higher net pricing, favorable mix, and stronger currencies, partially offset by lower 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.volume.

Our first quarter 20202021 Automotive segment EBIT was a loss$3.4 billion, an improvement of $177 million, down $2.2$3.6 billion from a year ago, as $346 million of positive EBIT from North America was more than offset by losses in other business units. Ourand our first quarter 20202021 Automotive EBIT margin was negative 0.6 percent.10.1%. The lowerhigher EBIT was driven by higher net pricing (reflecting the strength of our product portfolio and lower volume,incentives in response to reduced dealer stock levels), lower warranty expense, structural cost reductions in areas such as manufacturing and advertising, and higher new model material cost, higher warranty,profits from our Ford Customer Service Division business and adverse exchange,our joint ventures, partially offset by lower structuralvolumes. We expect some of these improvements, such as lower manufacturing cost and commodities.the robust pricing environment, to moderate as the industry returns to full production and dealer stocks rebound.
36
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


North America
First Quarter
Key Metrics20202021H / (L)
Market Share (%)13.6 %12.5 %(1.1) ppts
Wholesale Units (000)619 533 (85)
Revenue ($M)$21,811 $22,993 $1,182 
EBIT ($M)373 2,949 2,576 
EBIT Margin (%)1.7 %12.8 %11.1 ppts
 First Quarter
Key Metrics2019 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 2020 EBIT$373 
Volume / Mix(550)
Net Pricing2,550 
Cost418 
Exchange102 
Other56 
First Quarter 2021 EBIT$2,949
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 20202021 wholesales declined 18 percent14% from a year ago, reflecting primarily COVID-19 related disruption.driven by the impact of semiconductor supply constraints. First quarter 20202021 revenue decreased 14 percent year over year, driven byincreased 5%, primarily reflecting robust customer demand for the new product portfolio, higher industrywide net pricing on lower volume, partially offset by improved productdealer inventories from the semiconductor supply shortage, and series/optionfavorable mix.

North America’s first quarter 20202021 EBIT was down $1.9improved $2.6 billion from a year ago with an EBIT margin of 1.6 percent.12.8%. The lower EBIT improvement was driven by lower volume andhigher net pricing, higherfavorable mix, lower warranty cost,expense, and new model material cost, partially offset by improved mix.structural costs.

South America
First Quarter
Key Metrics20202021H / (L)
Market Share (%)6.9 %3.6 %(3.3) ppts
Wholesale Units (000)59 18 (42)
Revenue ($M)$728 $436 $(292)
EBIT ($M)(112)(73)39 
EBIT Margin (%)(15.4)%(16.7)%(1.3) ppts
 First Quarter
Key Metrics2019 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 2020 EBIT$(112)
Volume / Mix(73)
Net Pricing73 
Cost13 
Exchange20 
Other6 
First Quarter 2021 EBIT$(73)
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 20202021 wholesales declined 13 percent70% from a year ago, primarily reflecting COVID-19 related disruption.driven by the impact of shifting to a new business model focused on key portfolio strengths, mainly Ranger pickup, Transit van, and key imports. First quarter 20202021 revenue decreased 21 percent year over year, driven by40%, primarily reflecting lower volume and weaker currencies, partially offset by higher net pricing.currencies.

South America’s first quarter 20202021 EBIT loss improved 29 percent$39 million from a year ago with an EBIT margin of negative 15.5 percent.16.7%. The EBIT improvement reflects progress on restructuring actions (including exiting heavy truck production, discontinuing certain passenger vehicles,was driven by structural cost reductions, pricing to offset inflation, and reducing headcount) and cost reductions. The adverse exchange reflects currency weakeningweaker currencies. This was South America’s sixth consecutive quarter of 12 percent in Brazil and 37 percent in Argentina.year-over-year EBIT improvement.

37
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


Europe
First QuarterFirst Quarter
Key Metrics2019 2020 H / (L)Key Metrics20202021H / (L)
Market Share (%)7.6% 6.9 % (0.7) ppts
Market Share (%)6.9 %7.2 %0.3 ppts
Wholesale Units * (000)382
 288
 (94)
Wholesale Units (000) (a)Wholesale Units (000) (a)288 278 (10)
Revenue ($M)$7,448
 $6,247
 $(1,201)Revenue ($M)$6,247 $7,050 $803 
EBIT ($M)85
 (143) (228)EBIT ($M)(149)341 490 
EBIT Margin (%)1.1% (2.3)% (3.4) ppts
EBIT Margin (%)(2.4)%4.8 %7.2 ppts
__________
(a)Includes Ford brand vehicles produced and sold by our unconsolidated affiliate in Turkey (about 11,000 units in Q1 2020 and 17,000 units in Q1 2021). Revenue does not include these sales.

*Change in EBIT by Causal Factor (in millions)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.
First Quarter 2020 EBIT$(149)
Volume / Mix(151)
Net Pricing247 
Cost300 
Exchange(4)
Other98 
First Quarter 2021 EBIT$341
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 20202021 wholesales declined 25 percent4% from a year ago, driven by COVID-19 related disruption, the Kuga launch, and the discontinuationimpact of low margin products.semiconductor supply constraints, partially offset by stronger commercial vehicle sales. First quarter 20202021 revenue decreased 16 percentincreased 13% year over year, drivenprimarily reflecting stronger currencies, favorable mix, and higher net pricing, partially offset by lower volume and weaker currencies.

volume.

Europe’s first quarter 20202021 EBIT decreased $228increased $490 million year over year with an EBIT margin of negative 2.3 percent.4.8%. The lowerhigher EBIT was more than explaineddriven by lower volumecost reductions and higher material cost to support regulatory (CO2) requirements,net pricing, partially offset by higher net pricing and lower structural costs as a result of ongoing restructuring actions.volume.
38
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


China (Including Taiwan)
First Quarter
Key Metrics20202021H / (L)
Market Share (%)2.2 %2.3 %0.1 ppts
Wholesale Units (000) (a)81 150 69 
Revenue ($M)$593 $825 $232 
EBIT ($M)(241)(15)226 
EBIT Margin (%)(40.6)%(1.8)%38.8 ppts
China Unconsolidated Affiliates
Wholesales (000)72 140 68 
Ford Equity Income/(Loss) ($M)$(91)$49 $140 
 First Quarter
Key Metrics2019 2020 H / (L)
Market Share (%)2.1 % 2.2 % 0.1 ppts
Wholesale Units * (000)115
 81
 (34)
Revenue ($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)
__________
__________(a)Includes Ford brand and JMC brand vehicles produced and sold in China by our unconsolidated affiliates. Revenue does not include these sales.

*Change in EBIT by Causal Factor (in millions)Includes Ford brand and JMC brand vehicles produced and sold in China by our unconsolidated affiliates. Revenue does not include these sales.
First Quarter 2020 EBIT$(241)
Volume / Mix14 
Net Pricing30 
Cost(7)
Exchange3 
Other (Including Joint Ventures)186 
First Quarter 2021 EBIT$(15)
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 withfirst quarter 2021 wholesales increased 85% from 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 declinethe non-recurrence of 2020 COVID-related shutdowns, localization of Lincoln, and the strength of commercial vehicles, which now represent 48% of our sales in wholesales was lower than the industry’s, which was down 37 percent from aChina. First quarter 2021 revenue increased 39% year ago. China’s market share of 2.2 percent increased 0.1 percentage points,over year, primarily reflecting recent product launcheshigher component sales to our joint ventures in China and a sales recovery slightly ahead of the industry.favorable mix.

China’s first quarter 20202021 EBIT was $113loss improved $226 million lower thanfrom a year ago with an EBIT margin of negative 40.7 percent.1.8%. The higher EBIT lossimprovement was driven by lower wholesaleshigher profits at our joint ventures, higher net pricing, and adverse exchange, partially offset by structural cost improvementsfavorable mix. This was China’s fourth consecutive quarter of $65 million.year-over-year EBIT improvement.

39
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


International Markets Group
First QuarterFirst Quarter
Key Metrics2019 2020 H / (L)Key Metrics20202021H / (L)
Market Share (%)1.9% 1.5 % (0.4) ppts
Market Share (%)1.5 %1.7 %0.2 ppts
Wholesale Units * (000)107
 78
 (29)
Wholesale Units (000) (a)Wholesale Units (000) (a)78 82 4 
Revenue ($M)$2,618
 $1,962
 $(656)Revenue ($M)$1,962 $2,250 $288 
EBIT ($M)5
 (26) (31)EBIT ($M)(25)201 226 
EBIT Margin (%)0.2% (1.3)% (1.5) ppts
EBIT Margin (%)(1.3)%8.9 %10.2 ppts
__________
(a)Includes Ford brand vehicles produced and sold by our unconsolidated affiliate in Russia (about 3,000 units in both Q1 2020 and Q1 2021). Revenue does not include these sales.

*Change in EBIT by Causal Factor (in millions)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.
First Quarter 2020 EBIT$(25)
Volume / Mix(19)
Net Pricing54 
Cost83 
Exchange84 
Other24 
First Quarter 2021 EBIT$201
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 20202021 wholesales declined 27 percentincreased 5% from a year ago, primarily reflecting COVID-19 related disruptiondriven by higher industry volumes and the expected lower volume at our Russian joint venture.improvement in market share. First quarter 20202021 revenue decreased 25 percentincreased 15% year over year, driven by lower volume.primarily reflecting stronger currencies, increased volume, higher net pricing, and favorable mix.

Our International MarketMarkets Group’s first quarter 20202021 EBIT was down $31$226 million fromhigher than a year ago with an EBIT margin of negative 1.3 percent.8.9%. The lowerrecord quarterly EBIT was driven by lower volumefavorable exchange, cost reductions, and adverse exchange, partially offset by cost improvements.higher net pricing.

40
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


Definitions and Information Regarding Automotive Causal Factors

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

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

•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

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

•
SAAR – seasonally adjusted annual rate
•SAAR – seasonally adjusted annual rate
41
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


Mobility Segment

OurEffective January 1, 2021, we realigned the costs and benefits related to enterprise connectivity activities previously included in the Mobility segment to the Automotive segment. Accordingly, beginning in 2021, the Mobility segment primarily includes development costs related to ourfor Ford’s autonomous vehicles and our investmentrelated businesses, Ford’s equity ownership in Argo AI (a developer of autonomous driving systems), and other mobility through Ford Smart Mobility LLC (“FSM”)businesses and investments (including Spin, a micro-mobility service provider). 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 our Mobility segment, our first quarter 20202021 EBIT loss was $334$197 million, a $46an $88 million higher loss thanimprovement from a year ago. OurThe loss reflects our strategic investments as we continued to expand our capabilities in future growth opportunities inautonomous vehicles and 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.businesses.

42
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 20202021 key metrics and the change in first quarter 20202021 EBT compared with first quarter 20192020 by causal factor for the Ford Credit segment. For a description of these causal factors, see Definitions and Information Regarding Ford Credit Causal Factors.
First Quarter
GAAP Financial Measures20202021H / (L)
Net Receivables ($B)$138 $127 (8)%
Loss-to-Receivables (bps) (a)62 22 (40)
Auction Values (b)$19,235 $21,925 14 %
EBT ($M)$30 $962 $932 
ROE (%) (c)— %22 %22 ppts
Other Balance Sheet Metrics
Debt ($B)$137 $127 (7)%
Net Liquidity ($B)28 34 20 %
Financial Statement Leverage (to 1) (c)8.9 8.3 (0.6)
 First Quarter
GAAP Financial Measures2019 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
__________
__________(a)U.S. retail financing only.
(b)U.S. 36-month off-lease auction values at Q1 2021 mix.
(c)Prior period amounts have been updated as a result of the adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. For additional information, see Note 2 of the Notes to the Financial Statements.
First Quarter
Non-GAAP Financial Measures20202021H / (L)
Managed Receivables ($B) (a)$146 $135 (8)%
Managed Leverage (to 1) (b) (c)8.0 7.3 (0.7)
__________
(a)See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
(b)See Liquidity and Capital Resources - Ford Credit Segment section for reconciliation to GAAP.
(c)Prior period amount has been updated as a result of the adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. For additional information, see Note 2 of the Notes to the Financial Statements.

*Change in EBT by Causal Factor (in millions)U.S. retail financing only
**First Quarter 2020 EBTU.S. 36-month off-lease first quarter auction values at Q1 2020 mix
 First Quarter
Non-GAAP Financial Measures2019 2020 H / (L)
Managed Receivables * ($B)$155
 $146
 (6)%
Managed Leverage ** (to 1)8.8
 9.2
 0.4
__________$30 
*Volume / Mix
See (48)Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
**Financing Margin
See(3)
Credit Loss625 
Lease Residual448 
Exchange17 
Other(107)
First Quarter 2021 EBT$962 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 healthyloss-to-receivables ratio remained at a low level in the United States, with the loss-to-receivables ratiofirst quarter of 2021, at 0.62 percent, 70.22%, which was 40 basis points higherlower than a year ago. U.S. auction values in the first quarter of 2021 were 1 percent14% higher than a year ago. Ford Credit now expects fullFull year 20202021 auction values are now forecasted to be down morehigher 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.2020, consistent with third party estimates.

Ford Credit’s first quarter 20202021 EBT of $30$962 million was $771$932 million lowerhigher than a year ago, driven by about $600 million forprimarily reflecting the non-recurrence of the first quarter 2020 increase to the credit loss reserve increases, lower values ofdue to COVID-19 as well as favorable auction performance on off-lease vehicles awaiting sale, and anticipated lease defaults. In total, the impactas a result of COVID-19 deteriorated first quarter 2020 EBT by about $700 million. In additionlower dealer stocks due to the $600 million previously discussed, the remaining $100 million of COVID-19 impact was primarily driven by unfavorablesemiconductor shortage. Unfavorable performance in market valuation adjustments to derivatives asdue to rising interest rates was a result of interest rate declines.partial offset.

43
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


Definitions and Information Regarding Ford Credit Causal Factors

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

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

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

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

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

•Exchange:
◦Reflects changes in EBT driven by the effects of converting functional currency income to U.S. dollars
◦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
•Other:
◦Primarily includes operating expenses, other revenue, insurance expenses, and other income/(loss) at prior period exchange rates
◦Changes in operating expenses are primarily driven by salaried personnel costs, facilities costs, and costs associated with the origination and servicing of customer contracts
◦In general, other income/(loss) changes are primarily driven by changes in earnings related to market valuation adjustments to derivatives (primarily related to movements in interest rates) and other miscellaneous items
44
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


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

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

•
Earnings Before Taxes (EBT) – Reflects Ford Credit’s income before income taxes
•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
•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)
•Securitization and Restricted Cash (as shown in the Liquidity table) – Securitization cash is held for the benefit of the securitization investors (for example, a reserve fund). Restricted cash is primarily held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements

•
Securitizations (as shown in the Public Term Funding Plan table) – Public securitization transactions, Rule 144A offerings sponsored by Ford Credit, and widely distributed offerings by Ford Credit Canada
•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
•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
•Total Net Receivables (as shown in the Key Metrics and Ford Credit Net Receivables Reconciliation to Managed Receivables tables) – Includes finance receivables (retail financing and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance sheets and are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations of Ford Credit or the claims of Ford Credit’s other creditors
45
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


Corporate Other

Corporate Other primarily includes corporate governance expenses, interest income (excluding interest earned on our extended service contract portfolio that is included in our Automotive segment) and gains and losses from our cash, cash equivalents, marketable securities, and other investments, and foreign exchange derivatives gains and losses associated with intercompany lending. Corporate governance expenses are primarily administrative, delivering benefit on behalf of the global enterprise, and are not allocated to specific Automotive business units or operating segments. These include expenses related to setting and directing global policy, providing oversight and stewardship, and promoting the Company’s interests. In the first quarter of 2020,2021, Corporate Other had a $151$648 million loss,profit, compared with a $75$223 million loss a year ago. The higher lossimprovement is more than explained by the nonrecurrence of mark-to-market gains, partially offset by lower corporate governance expenses.a $902 million gain on our investment in Rivian.

Interest on Debt

Interest on Debt, which consists of interest expense on Automotive and Other debt. FirstCompany debt excluding Ford Credit, was $473 million in the first quarter 2020 interest expense on Automotive and Other debt was $227of 2021, $246 million which is $18 million lowerhigher than a year ago, more than explained by lower foreign debt interest expense, partially offset byprimarily reflecting higher U.S. debt interest expense.

Taxes

Our provision forProvision for/(Benefit from) income taxes for the first quarter 20202021 was $847$680 million, resulting in a negativean effective tax rate of 73.9%17.3%. 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 20202021 adjusted effective tax rate, which excludes special items, the valuation allowance adjustment, and the tax impact on special items, was negative 7.0%17.9%.

46
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,At March 31, 2021, total balance sheet cash, cash equivalents, marketable securities, 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.restricted cash (including Ford Credit) was $46.3 billion.

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

Company excluding Ford Credit
December 31,
2020		March 31,
2021
Balance Sheets ($B)
Company Cash$30.8 $31.3 
Liquidity46.9 47.2 
Debt(24.0)(25.9)
Cash Net of Debt6.8 5.5 
Pension Funded Status ($B) (a)
Funded Plans$0.3 $0.9 
Unfunded Plans(7.0)(6.6)
Total Global Pension$(6.7)$(5.7)
Total Funded Status OPEB$(6.6)$(6.5)
 December 31, 2019 
March 31,
2020
Balance Sheet ($B)
   
Company Cash$22.3
 $34.3
Liquidity35.4
 35.1
Debt(15.3) (30.5)
Cash Net of Debt7.0
 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)
__________
__________(a)Balances at March 31, 2021 reflect net underfunded status at December 31, 2020, updated for service and interest cost, expected return on assets, curtailment and settlement gains and associated interim remeasurement (where applicable), separation expense, actual benefit payments, and cash contributions. For plans without interim remeasurement, the discount rate and rate of expected return assumptions are unchanged from year-end 2020.
*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. One of our key priorities is to maintain a strong balance sheet, while at the same time having resources available to invest in and grow our business. At March 31, 2020,2021, we had Company cash of $34.3$31.3 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%88% of Company cash was held by consolidated entities domiciled in the United States.

Our keyStates, and Company liquidity objective during these unprecedented and uncertain times is to prioritize actions that preserve or improve ourof $47.2 billion. To be prepared for an economic downturn, we target an ongoing Company 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 increasedat or above $20 billion plus significant additional liquidity above our Company cash balance by $23.4 billion.target. We believe the phased restart of our manufacturing plants, supply network,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 other dependent functions is probable of commencing(iii) changes 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.global economic environment.

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

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 OtherCompany debt excluding Ford Credit, contributions to funded pension plans, shareholder distributions, and other items (including acquisitions and divestitures and other transactions with Ford Credit).
47
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

With respect to “Changes in working capital,” in general we carry relatively low Automotive segment trade receivables compared with our trade payables because the majority of our Automotive wholesales are financed (primarily by Ford Credit) immediately upon the sale of vehicles to dealers, which generally occurs shortly after being produced. In contrast, our Automotive trade payables are based primarily on industry-standard production supplier payment terms of generally ranging between 30 days toabout 45 days. As a result, our cash flow tends to improve as wholesale volumes increase, but can deteriorate when wholesale volumes sharply decrease. With aFor example, the suspension of production at most of our manufacturing operations outside of China, our revenue essentially ceasedassembly plants and lower industry volumes due to COVID-19 in March, while our production supplier payables, which are on about 45-day terms, continue to come due through early May, resulting2020 resulted in aan initial deterioration of our cash flow, as described below. Moreover, evenwhile the subsequent resumption of manufacturing operations and return to pre-COVID-19 production levels at most of our assembly plants resulted in a subsequent improvement of our cash flow. Even in normal economic conditions, however, these working capital balances generally are subject to seasonal changes that can impact cash flow. For example, we typically experience cash flow timing differences associated with inventories and payables due to our annual summer and December shutdown periods when production, and therefore inventories and wholesale volumes, are usually at their lowest levels, while payables continue to come due and be paid. The net impact of this typically results in cash outflows from changes in our working capital balances during these shutdown periods.

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

Changes in Company cash excluding Ford Credit are summarized below (in billions):
First Quarter
20202021
Company Excluding Ford Credit
Company Adjusted EBIT excluding Ford Credit (a)$(0.7)$3.9 
Capital spending$(1.8)$(1.4)
Depreciation and tooling amortization1.4 1.2 
Net spending$(0.4)$(0.1)
Receivables$0.5 $(0.6)
Inventory(1.1)(2.2)
Trade Payables(0.5)1.6 
Changes in working capital$(1.2)$(1.2)
Ford Credit distributions$0.3 $1.0 
Interest on debt and cash taxes(0.4)(0.4)
All other and timing differences0.2 (3.5)
Company adjusted free cash flow (a)$(2.2)$(0.4)
Global Redesign (including separations)$(0.2)$(0.3)
Changes in debt15.1 1.9 
Funded pension contributions(0.2)(0.2)
Shareholder distributions(0.6)— 
All other (including acquisitions and divestitures)0.1 (0.4)
Change in cash$12.0 $0.5 
 First Quarter
 2019 2020
Company Excluding Ford Credit   
Company Adjusted EBIT* excluding Ford Credit$1.6
 $(0.7)
    
Capital spending$(1.6) $(1.8)
Depreciation and tooling amortization1.4
 1.4
Net spending$(0.3) $(0.4)
    
Receivables$(0.1) $0.5
Inventory(1.1) (1.1)
Trade Payables1.7
 (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
__________
__________(a)See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
*
See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
*Note: Numbers may not sum due to rounding.
Note: Numbers may not sum due to rounding.
48
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


As reported on our Consolidated Statement of Cash Flows, ourOur first quarter 20202021 Net cash provided by/(used in) operating activities was down $4positive $4.5 billion, an increase of $5.0 billion from a year over year.ago. The year-over-year increase is more than explained by higher net income. Our Company adjusted free cash flow was $4.1negative $0.4 billion, which was $1.8 billion higher than a year ago, driven by higher adjusted EBIT and Ford Credit distributions and lower capital spending, partially offset by adverse timing differences.

Capital spending was $1.4 billion in the first quarter of 2021, $0.4 billion lower than a year ago. 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 dueWe continue 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 20202021 capital spending to be between $6.3$6.0 billion and $6.8 billion, down from our prior expectation of $6.8 billion to $7.3$6.5 billion.

First quarter 20202021 working capital was $1.2 billion negative, more than explaineddriven by higher inventory and lower trade payables, reflecting our suspension of manufacturing operations in March.

First quarter 2020due to the semiconductor supply constraints; all other and timing differences were about $0.2$3.5 billion negative, reflecting assorted timing differences including differences between accrual-based EBIT and the associated cash flows interest(e.g., marketing incentive and warranty payments on Automotiveto dealers; pension and Other debt,OPEB income or expense) and cash taxes.the $902 million non-cash gain from our investment in Rivian. We expect the working capital and timing differences to normalize as the semiconductor supply is restored, dealer stocks rebound, and incentives return to more normal levels. This process will take several quarters and will most likely extend into 2022.

In the first quarter of 2020,2021, we contributed $175$229 million to our worldwideglobal funded pension plans. We nowcontinue to expect to contribute between $0.5 billion$600 million and $0.7 billion$800 million to our global funded pension plans (most of which are mandatory contributions), down from our prior expectation of $0.6 billion to $0.8 billion.

in 2021.
Shareholder
There were no shareholder distributions were $595 million in the first quarter of 2020, all2021.

We previously announced our plan for the global redesign of our business, pursuant to which was attributablewe are working to turn around automotive operations, compete like a challenger, and capitalize on our strengths by allocating more capital, more resources, and more talent to our regular quarterly dividend. Onstrongest business and vehicle franchises. Beginning with the actions we took in 2018, we expect our global redesign to have a potential cash effect of about $7 billion. The cash effect related to our global redesign activities was $2 billion through March 19, 2020, we announced the suspension of our regular quarterly dividend31, 2021 and share repurchase program.is expected to be about $5 billion through December 31, 2021.

Available Credit Lines. On March 19, 2020,Total Company committed credit lines, excluding Ford Credit, reallocated $3at March 31, 2021 were $18.3 billion, consisting of commitments under$13.5 billion of 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 underof our supplemental revolving credit facility, to offset$1.5 billion of our delayed draw term loan facility, and $1.4 billion of local credit facilities. At March 31, 2021, the temporary working capital impactsutilized portion 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, asfacility was $27 million, representing amounts utilized for letters of April 8, 2020, we had $0.5credit, and no portion of the supplemental revolving credit facility was utilized. The $1.5 billion delayed draw term loan facility was drawn in full in 2019 and remains outstanding. In addition, $878 million of available committed Company credit lines, excluding Ford Credit, available to us, all of which constituteswas utilized under local credit facilities for our affiliates.affiliates as of March 31, 2021.

UnderLenders under our corporate credit facility $3.35have $0.4 billion of commitments maturing on April 30, 2022, $3 billion of commitments maturing on July 27, 2023, and $10.1 billion of commitments maturing on April 30, 2024. Lenders under our loans maturesupplemental revolving credit facility have $0.2 billion of commitments maturing on April 30, 2022 and $10.05$1.8 billion of our loans maturecommitments maturing 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.July 27, 2023.

The corporate credit facility is unsecured and free of material adverse change conditions to borrowing, restrictive financial covenants (for example, interest or fixed-charge coverage ratio, debt-to-equity ratio, and minimum net worth requirements), and credit rating triggers that could limit our ability to obtain funding or trigger early repayment. The corporate credit facility contains a liquidity covenant that requires us to maintain a minimum of $4 billion in aggregate of domestic cash, cash equivalents, and loaned and marketable securities and/or availability under the facility. Further, the terms of the corporate and supplemental revolving credit facilities prohibit share repurchases (with limited exceptions) while any portion of either facility is outstanding and the payment of dividends on our Common or Class B Stock while more than 50% of the aggregate amount of commitments under the two facilities is utilized. The terms and conditions of the delayed draw term loan (other than the restrictions on share repurchases and dividends) and the supplemental revolving credit facility and delayed draw term loan are consistent with our corporate credit facility.
49
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Each of the corporate credit facility, supplemental revolving credit facility, delayed draw term loan, and our Loan Arrangement and Reimbursement Agreement with the U.S. Department of Energy (the “DOE”) include a covenant that requires us to provide guarantees from certain of our subsidiaries in the event that our senior, unsecured, long-term debt does not maintain at least two investment grade ratings from Fitch, Moody’s, and S&P. As a result of being downgraded by Moody's in September 2019 and S&P in March 2020, on April 23, 2020, theThe following subsidiaries have provided unsecured guarantees to the lenders under the credit facilities and to the DOE: Ford Component Sales, LLC; Ford European Holdings LLC; Ford Global Technologies, LLC; Ford Holdings LLC (the parent company of Ford Credit); Ford International Capital LLC; Ford Mexico Holdings LLC; Ford Motor Service Company; Ford Smart Mobility LLC; and Ford Trading Company, LLC.
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, 2020,2021, Company debt excluding Ford Credit was $30.5$25.9 billion. This balance is $1.9 billion including Automotive debt of $30 billion. These balances were $15.2 billion and $15.3 billion higher respectively, than at December 31, 2019,2020, primarily reflecting the draws on our credit facilities. Our $8 billion unsecured debtconvertible notes issuance in April 2020, described above, is not includedMarch 2021.

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

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

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

50
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


Ford Credit Segment

Ford Credit ended the first quarter of 2021 with $28$33.7 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.liquidity. During the first quarter, of 2020, Ford Credit completed $6$5 billion of public term 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;strong liquidity; continue to renew and expand committed ABS capacity;capacity
Continue to leverage•Prudently access public market issuance;markets
Assets and committed capacity available•Flexibility to increase ABS mix as needed; preserving assets and committed capacity
Continue to target•Target managed leverage of 8:1 -to 9:1; and1
•Maintain self-liquidating balance sheet.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 continuescan continue to meet its financial obligations through economic cycles.

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

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

Managed receivables were $146$135.2 billion at March 31, 2020,2021, and were funded primarily with term unsecured debt and term asset-backed securities. Securitized funding as a percent of managed receivables was 38%37.1% at the end of the first quarter of 2020. Ford Credit expects this to increase modestly by the end of the year.2021. 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 20182019 and 2019,2020, planned issuances for full year 2020,2021, and its global public term funding issuances through April 27, 2020,2021, excluding short-term funding programs (in billions):
2019
Actual		2020
Actual		2021
Forecast		Through
April 27
Unsecured$17 $14 $ 5 - 9$1 
Securitizations (a)14 13                        7 - 105 
Total public$31 $27 $ 12 - 19$6 
  
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
__________
__________(a)See Definitions and Information Regarding Ford Credit Causal Factors section.
*
See

Definitions and Information Regarding Ford Credit Causal Factors section.
*Note: Numbers may not sum due to rounding.

For 2020,2021, Ford Credit now projects full year public term funding in the range of $12 billion to $22$19 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, 2020,2021, Ford Credit has completed $6 billion of public term issuances.
51
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Liquidity. The following table shows Ford Credit’s liquidity sources and utilization (in billions):
March 31,
2020		December 31,
2020		March 31,
2021
Liquidity Sources (a)
Cash$11.3 $18.5 $14.1 
Committed asset-backed facilities35.9 38.1 38.2 
Other unsecured credit facilities2.8 2.5 2.5 
Total liquidity sources$50.0 $59.1 $54.8 
Utilization of Liquidity (a)
Securitization and restricted cash$(3.1)$(3.9)$(5.4)
Committed asset-backed facilities(18.6)(16.7)(11.9)
Other unsecured credit facilities(0.5)(0.5)(0.6)
Total utilization of liquidity$(22.2)$(21.1)$(17.9)
Gross liquidity$27.8 $38.0 $36.9 
Asset-backed capacity in excess of eligible receivables and other adjustments0.3 (2.6)(3.2)
Net liquidity available for use$28.1 $35.4 $33.7 
  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
__________
__________(a)See Definitions and Information Regarding Ford Credit Causal Factors section.
*
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 decline, 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, 2020,2021, Ford Credit’s net liquidity available for use was $28.3$33.7 billion, $4.8$1.7 billion lower than year-end 2019.2020. Ford Credit’s sources of liquidity include cash, committed asset-backed facilities, and unsecured credit facilities. At March 31, 2020,2021, Ford Credit’s liquidity sources including cash totaled $50.0$54.8 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.2020.
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 Ford Credit with additional liquidity after all of its assets have been funded and is in addition to its liquidity stress test.

The following table shows Ford Credit’s cumulative maturities for assets and total debt for the periods presented and unsecured long-term debt maturities in the individual periods presented (in billions):
 
April - December
2020
 2021 2022 2023 and BeyondApril - December
2021		202220232024 and Beyond
Balance Sheet Liquidity Profile        Balance Sheet Liquidity Profile
Assets (a) $72
 $116
 $139
 $155
Assets (a)$64 $95 $120 $147 
Total debt (b) 50
 83
 102
 135
Total debt (b)46 74 92 126 
Memo: Unsecured Long-Term Debt Maturities 11
 17
 13
 28
Memo: Unsecured long-term debt maturitiesMemo: Unsecured long-term debt maturities10 14 11 30 
__________
(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.
(a)Includes gross finance receivables less the allowance for credit losses (including certain finance receivables that are reclassified in consolidation to Trade and other receivables), investment in operating leases net of accumulated depreciation, cash and cash equivalents, and marketable securities (excluding amounts related to insurance activities). Amounts shown include the impact of expected prepayments.
(b)Excludes unamortized debt (discount)/premium, unamortized issuance costs, and fair value adjustments.

Maturities of investment in operating leases consist primarily of the portion of rental payments attributable to
depreciation over the remaining life of the lease and the expected residual value at lease termination. Maturities of finance receivables and investment in operating leases in the table above include expected prepayments for Ford Credit’s retail installment sale contracts and investment in operating leases. The table above also reflects adjustments to debt maturities to match all the asset-backed debt maturities with the underlying asset maturities.
52
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

All wholesale securitization transactions and wholesale receivables are shown maturing in the next 12 months, even if the maturities extend beyond first quarter 2021.2022. The retail securitization transactions under certain committed asset-backed facilities are assumed to amortize immediately rather than amortizing after the expiration of the commitment period. See Notes 8 and 14 for additional information.As of March 31, 2021, Ford Credit had $147 billion of assets, $76 billion of which were unencumbered.

Funding and Liquidity Risks. Ford Credit’s funding plan is subject to risks and uncertainties, many of which are beyond its control, including disruption in the capital markets, (such as from thethat could impact of COVID-19)both unsecured debt and asset-backed securities issuance and the effects of regulatory changes on the financial markets.

Despite Ford Credit’s diverse sources of funding and liquidity, its ability Refer 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“Liquidity - Ford Credit offers;Segment - Funding and Liquidity Risks” section of Item 7 of Part II of our 2020 Form 10-K Report for more information.
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,
2020		December 31,
2020		March 31,
2021
Leverage Calculation
Debt$136.8 $137.7 $126.8 
Adjustments for cash(11.3)(18.5)(14.1)
Adjustments for derivative accounting (a)(1.6)(1.5)(0.8)
Total adjusted debt$123.9 $117.7 $111.9 
Equity (b) (c)$15.5 $15.6 $15.3 
Adjustments for derivative accounting (a)— 0.1 — 
Total adjusted equity (c)$15.4 $15.7 $15.3 
Financial statement leverage (to 1) (GAAP) (c)8.9 8.8 8.3 
Managed leverage (to 1) (Non-GAAP) (c)8.0 7.5 7.3 
  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
__________
__________(a)Related primarily to market valuation adjustments to derivatives due to movements in interest rates. Adjustments to debt are related to designated fair value hedges and adjustments to equity are related to retained earnings.
*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.
(b)Total shareholder’s interest reported on Ford Credit’s balance sheets.
(c)Prior period amounts have been updated as a result of the adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. For additional information, see Note 2 of the Notes to the Financial Statements.
Note: Numbers may not sum due to rounding.

Ford Credit plans its managed leverage by considering market conditions and the risk characteristics of its business. At March 31, 2020,2021, Ford Credit’s financial statement leverage was 10.1:8.3:1, and its managed leverage was 9.2:7.3:1. Ford Credit targets managed leverage in the range of 8:1 to 9:1 and expects its managed leverage to return to the targetedits target range later in 2020.2021.

53
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


Total Company

Pension Plans - Underfunded Balances. As of March 31, 2020,2021, our total Company pension underfunded status reported on our consolidated balance sheetsheets was $6.2$5.7 billion and reflects the net underfunded status at December 31, 2019,2020, updated forfor: service and interest cost,cost; expected return on assets, curtailment and settlement gains,assets; curtailments, settlements, and associated interim remeasurement (where applicable),; separation expense,expense; actual benefit payments,payments; and cash contributions.  For plans without interim remeasurement, the discount rate and rate of expected return assumptions are unchanged from year-end 2019.2020.

Return on Invested Capital.Capital (“ROIC”). We analyze total Company performance using an adjusted Return on Invested Capital (“ROIC”)ROIC financial metric based on an after-tax, rolling four quarter average. The following table contains the calculation of our ROIC for the periods shown (in billions):
Four Quarters Ending
March 31,
2020		March 31,
2021
Adjusted Net Operating Profit After Cash Tax
Net income/(loss) attributable to Ford$(3.1)$4.0 
Add: Noncontrolling interest— — 
Less: Income tax0.3 — 
Add: Cash tax(0.6)(0.4)
Less: Interest on debt(1.0)(1.9)
Less: Total pension/OPEB income/(cost)(2.5)(0.9)
Add: Pension/OPEB service costs(1.0)(1.1)
Net operating profit/(loss) after cash tax$(1.6)$5.2 
Less: Special items (excl. pension/OPEB) pre-tax(3.2)(0.7)
Adjusted net operating profit after cash tax$1.6 $6.0 
Invested Capital
Equity$29.7 $34.0 
Redeemable noncontrolling interest— — 
Debt (excl. Ford Credit)30.5 25.9 
Net pension and OPEB liability12.2 12.2 
Invested capital (end of period)$72.4 $72.1 
Average invested capital$63.7 $72.9 
ROIC (a)(2.5)%7.2 %
Adjusted ROIC (Non-GAAP) (b)2.5 %8.2 %
 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 interest0.1
 —
Debt (excl. Ford Credit)14.2
 30.5
Net pension and OPEB liability11.1
 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 %
__________
__________(a)Calculated as the sum of net operating profit after cash tax from the last four quarters, divided by the average invested capital over the last four quarters.
*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.
(b)Calculated as the sum of adjusted net operating profit after cash tax from the last four quarters, divided by the average invested capital over the last four quarters.
Note: Numbers may not sum due to rounding.
54
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


CREDIT RATINGS

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

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

The following rating actions were taken by these NRSROs since the filing of our 20192020 Form 10-K Report:

•On March 23, 2020, Fitch downgraded29, 2021, Moody’s affirmed the credit ratings for Ford and Ford Credit (to BBB-at Ba2 and revised the outlook to stable, from BBB) and maintained a negative outlook.negative.
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
FordFord CreditNRSROs
Issuer

Default /

Corporate /

Issuer Rating
Long-Term Senior UnsecuredOutlook / TrendLong-Term Senior Unsecured
Short-Term

Unsecured
Outlook / TrendMinimum Long-Term Investment Grade Rating
DBRSBBBBB (high)BBBBB (high)Under review with negative implicationsNegativeBBBBB (high)R-2MR-4Under review with negative implicationsNegativeBBB (low)
FitchBBB-BB+BBB-BB+NegativeBBB-BB+F3BNegativeBBB-
Moody’sN/ABa2Under review for downgradeStableBa2NPUnder review for downgradeStableBaa3
S&PBB+BB+CreditWatch with negative implicationsNegativeBB+BCreditWatch with negative implicationsNegativeBBB-

55
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


OUTLOOK

We provided 20202021 Company guidance in our earnings release furnished on Form 8-K dated April 28, 20202021. The guidance is based on our expectations as of April 28, 2020.2021 and assumes no material change in the current economic environment, including foreign exchange and tariffs. Our actual results could differ materially from our guidance due to risks, uncertainties, and other factors, including those set forth in “Risk Factors” in Item 1A of our 20192020 Form 10-K Report, in Item 1A of this 10-Q Report and as updated by our subsequent filings with the SEC.

2021 Guidance
Total Company
Adjusted EBIT (a)$5.5 - $6.5 billion
Adjusted Free Cash Flow (a)$0.5 - $1.5 billion
Capital spending$6.0 - $6.5 billion
Pension contributions$0.6 - $0.8 billion
Global Redesign EBIT charges (b)$2.2 - $2.7 billion
Global Redesign cash effects (b)$3.0 - $3.5 billion
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 valuesDown > 5%**
ReceivablesContinue to decline
Securitized funding as percent of managed receivablesIncrease modestly by year-end
Total public funding issuances$12 - $22 billion
LiquidityAround $25 billion
Managed leverage8:1 - 9:1
*EBTWhen 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.
Improved compared to 2020
**Ford Credit auction values (c)On average compared with full year 2019 at constant mix.Higher

(a)When we provide guidance for Adjusted EBIT we do not provide guidance for net income/(loss), the most comparable GAAP measure, because, as described in more detail below in “Non-GAAP Measures That Supplement GAAP Measures,” it includes items that are difficult to predict with reasonable certainty prior to year-end, including pension and OPEB remeasurement gains and losses.
(b)We continue to review our global businesses and may take additional restructuring actions in markets where a path to sustained profitability is not feasible when considering the capital allocation required for those markets. Such actions may result in global redesign EBIT charges and cash effects in 2021 that are incremental to those set forth in the table.
(c)On average compared with full year 2020 at constant mix.

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

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

We also now expect full-year adjusted free cash flow of $500 million to $1.5 billion, which reflects a $3 billion adverse impact from semiconductors. The impact of the semiconductor shortage on adjusted free cash flow is $500 million worse than the impact on adjusted EBIT due to timing differences and working capital impacts that we expect to recover once our rate of production is fully restored, dealer stocks align with demand, and incentives normalize. In the second quarter of 2021, adjusted free cash flow is expected to be significantly negative, but we expect our cash balance and liquidity to remain healthy throughout 2021.
56
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


Cautionary Note on Forward-Looking Statements

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

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

We cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. For additional discussion, see “Item 1A. Risk Factors” in our 20192020 Form 10-K Report, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

57
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


NON-GAAP FINANCIAL MEASURES THAT SUPPLEMENT GAAP MEASURES

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

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

•Pre-Tax Special Item
Company Adjusted EBIT (Most Comparable GAAP Measure: Net Income Attributable to Ford)Significance Guideline
– 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∘ Pension and OPEB remeasurement gains and losses (ii) significant personnel∘ No minimum
∘ Personnel expenses, dealer-related costs, and facility-related charges stemming from our efforts to match production capacity and cost structure to market demand and changing model mix and (iii) other∘ Generally $100 million or more
∘ Other items that we do not necessarily consider to be indicative of earnings from ongoing operating activities.  When we provide guidanceactivities∘ $500 million or more for adjusted EBIT, we do not provide guidance on a net income basis because the GAAP measure will include potentially significant specialindividual field service actions; generally $100 million or more for other 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.
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.

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

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

•
Company Adjusted Free Cash Flow (Most Comparable GAAP Measure: Net Cash Provided By / (Used In) Operating Activities) – Measure of Company’s operating cash flow excluding Ford Credit’s operating cash flows. The measure contains elements management considers operating activities, including Automotive and Mobility capital spending, Ford Credit distributions to its parent, and settlement of derivatives. The measure excludes cash outflows for funded pension contributions, global redesign (including separations), and other items that are considered operating cash flows under U.S. GAAP. This measure is useful to management and investors because it is consistent with management’s assessment of the Company’s operating cash flow performance. When we provide guidance for Company adjusted free cash flow, we do not provide guidance for net cash provided by/(used in) operating activities because the GAAP measure will include items that are difficult to quantify or predict with reasonable certainty, including cash flows related to the Company's exposures to foreign currency exchange rates and certain commodity prices (separate from any related hedges), Ford Credit's operating cash flows, and cash flows related to special items, including separation payments, each of which individually or in the aggregate could have a significant impact to our net cash provided by/(used in) our operating activities.
•Adjusted Effective Tax Rate (Most Comparable GAAP Measure: Effective Tax Rate) – Measure of Company’s tax rate excluding pre-tax special items (described above) and tax special items. The measure provides an ongoing effective rate which investors find useful for historical comparisons and for forecasting. When we provide guidance for adjusted effective tax rate, we do not provide guidance on an effective tax rate basis because the GAAP measure will include potentially significant special items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-end, including pension and OPEB remeasurement gains and losses.
58
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

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

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

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

•
Ford Credit Managed 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.
•
Ford Credit Managed Leverage (Most Comparable GAAP Measure: Financial Statement Leverage) – Ford Credit’s debt-to-equity ratio adjusted (i) to exclude cash, cash equivalents, and marketable securities (other than amounts related to insurance activities), and (ii) for derivative accounting. The measure is useful to investors because it reflects the way Ford Credit manages its business. Cash, cash equivalents, and marketable securities are deducted because they generally correspond to excess debt beyond the amount required to support operations and on-balance sheet securitization transactions. Derivative accounting adjustments are made to asset, debt, and equity positions to reflect the impact of interest rate instruments used with Ford Credit’s term-debt issuances and securitization transactions. Ford Credit generally repays its debt obligations as they mature, so the interim effects of changes in market interest rates are excluded in the calculation of managed leverage.
59
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


Non-GAAP Financial Measure Reconciliations

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

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

Earnings per Share Reconciliation to Adjusted Earnings per Share
First Quarter
20202021
Diluted After-Tax Results ($M)
Diluted after-tax results (GAAP)$(1,993)$3,262 
Less: Impact of pre-tax and tax special items(1,074)(302)
Adjusted net income/(loss) – diluted (Non-GAAP)$(919)$3,564 
Basic and Diluted Shares (M)
Basic shares (average shares outstanding)3,963 3,980 
Net dilutive options, unvested restricted stock units and restricted stock (a)— 36 
Diluted shares3,963 4,016 
Earnings/(Loss) per share – diluted (GAAP)$(0.50)$0.81 
Less: Net impact of adjustments(0.27)(0.08)
Adjusted earnings/(loss) per share – diluted (Non-GAAP)$(0.23)$0.89 
_________
(a)In Q1 2020, there were 30 million shares excluded from the calculation of diluted earnings/(loss) per share, due to their anti-dilutive effect.
60
  First Quarter
 2019 2020
Diluted After-Tax Results ($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)


Effective Tax Rate Reconciliation to Adjusted Effective Tax Rate
First Quarter
20202021Memo:
FY 2020
Pre-Tax Results ($M)
Income/(Loss) before income taxes (GAAP)$(1,146)$3,942 $(1,116)
Less: Impact of special items(287)(401)(2,246)
Adjusted earnings before taxes (Non-GAAP)$(859)$4,343 $1,130 
Taxes ($M)
(Provision for)/Benefit from income taxes (GAAP)$(847)$(680)$(160)
Less: Impact of special items (a)(787)99 (670)
Adjusted (provision for) / benefit from income taxes (Non-GAAP)$(60)$(779)$510 
Tax Rate (%)
Effective tax rate (GAAP)(73.9)%17.3 %(14.3)%
Adjusted effective tax rate (Non-GAAP)(7.0)%17.9 %(45.1)%
  First Quarter  
  2019 2020 
Memo:
FY 2019
Pre-Tax Results ($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%
__________
(a)Full Year 2020 includes $(1.3) billion related to the establishment of valuation allowances against primarily U.S. tax credits.

Net Cash Provided by/(Used in) Operating Activities Reconciliation to Company Adjusted Free Cash Flow ($M)
First Quarter
20202021
Net cash provided by / (used in) operating activities (GAAP)$(473)$4,492 
Less: Items not included in Company Adjusted Free Cash Flows
Ford Credit operating cash flows (a)$201 $4,998 
Funded pension contributions(175)(229)
Global Redesign (including separations)(172)(345)
Ford Credit tax payments / (refunds) under tax sharing agreement (a)407 4 
Other, net(15)77 
Add: Items included in Company Adjusted Free Cash Flows
Automotive and Mobility capital spending$(1,770)$(1,358)
Ford Credit distributions (a)343 1,000 
Settlement of derivatives(28)(25)
Company adjusted free cash flow (Non-GAAP) (a)$(2,174)$(396)
__________
(a)Prior period amounts have been updated as a result of the adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. For additional information, see Note 2 of the Notes to the Financial Statements.
61
  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 Net Receivables Reconciliation to Managed Receivables ($B)

March 31,
2020		December 31,
2020		March 31,
2021
 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
Ford Credit finance receivables, net (GAAP) (a)Ford Credit finance receivables, net (GAAP) (a)$106.0 $97.7 $93.2 
Net investment in operating leases (GAAP) (a)Net investment in operating leases (GAAP) (a)27.0 26.6 26.6 
Consolidating adjustments (b)Consolidating adjustments (b)4.8 7.4 7.3 
Total net receivables $146.9
 $142.0
 $137.8
Total net receivables$137.8 $131.7 $127.1 
      
Held-for-sale receivables (GAAP) $—
 $1.5
 $—
Ford Credit unearned interest supplements and residual support 6.8
 6.7
 6.3
Ford Credit unearned interest supplements and residual support$6.3 6.5 $6.0 
Allowance for credit losses 0.5
 0.5
 1.2
Allowance for credit losses1.2 1.3 1.2 
Other, primarily accumulated supplemental depreciation 1.1
 1.0
 1.1
Other, primarily accumulated supplemental depreciation1.1 1.0 0.9 
Total managed receivables (Non-GAAP) $155.3
 $151.7
 $146.4
Total managed receivables (Non-GAAP)$146.4 $140.5 $135.2 
__________
*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.
**
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.
*Note: Numbers may not sum due to rounding.
(a)Includes finance receivables (retail and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance sheets and are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations of Ford Credit or the claims of Ford Credit’s other creditors.
(b)Primarily includes Automotive segment receivables purchased by Ford Credit which are classified to Trade and other receivables on our consolidated balance sheets. Also includes eliminations of intersegment transactions.
62
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)


SUPPLEMENTAL INFORMATION

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

Selected Cash Flow Information. The following tables provide supplemental cash flow information (in millions):
For the period ended March 31, 2021
First Quarter
Cash flows from operating activitiesCompany excluding Ford CreditFord CreditEliminationsConsolidated
Net income$2,417 $845 $— $3,262 
Depreciation and tooling amortization1,525 578 — 2,103 
Other amortization32 (393)— (361)
Provision for credit and insurance losses(1)(35)— (36)
Pension and OPEB expense/(income)(318)— — (318)
Equity investment dividends received in excess of (earnings)/losses73 (5)— 68 
Foreign currency adjustments301 49 — 350 
Net unrealized (gain)/loss on Other Investments(914)— — (914)
Net (gain)/loss on changes in investments in affiliates(165)(1)— (166)
Stock compensation39 2 — 41 
Provision for deferred income taxes414 13 — 427 
Decrease/(Increase) in finance receivables (wholesale and other)— 2,699 — 2,699 
Decrease/(Increase) in intersegment receivables/payables(772)772 — — 
Decrease/(Increase) in accounts receivable and other assets(624)36 — (588)
Decrease/(Increase) in inventory(2,176)— — (2,176)
Increase/(Decrease) in accounts payable and accrued and other liabilities397 (204)— 193 
Other(125)33 — (92)
Interest supplements and residual value support to Ford Credit(609)609 — — 
Net cash provided by/(used in) operating activities$(506)$4,998 $— $4,492 
Cash flows from investing activitiesCompany excluding Ford CreditFord CreditEliminationsConsolidated
Capital spending$(1,358)$(10)$— $(1,368)
Acquisitions of finance receivables and operating leases— (11,695)— (11,695)
Collections of finance receivables and operating leases— 12,482 — 12,482 
Proceeds from sale of business7 — — 7 
Purchases of marketable and other investments(7,879)(3,701)— (11,580)
Sales and maturities of marketable securities and other investments7,088 4,598 — 11,686 
Settlements of derivatives(25)56 — 31 
Other(54)— — (54)
Investing activity (to)/from other segments1,000 — (1,000)— 
Net cash provided by/(used in) investing activities$(1,221)$1,730 $(1,000)$(491)
Cash flows from financing activitiesCompany excluding Ford CreditFord CreditEliminationsConsolidated
Cash payments for dividends and dividend equivalents$(3)$— $— $(3)
Purchases of common stock— — — — 
Net changes in short-term debt(295)568 — 273 
Proceeds from issuance of long-term debt2,300 4,631 — 6,931 
Principal payments on long-term debt(78)(14,814)— (14,892)
Other(91)(11)— (102)
Financing activity to/(from) other segments— (1,000)1,000 — 
Net cash provided by/(used in) financing activities$1,833 $(10,626)$1,000 $(7,793)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash$(26)$(67)$— $(93)
63
  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)/losses124
 (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/payables488
 (488) —
 —
Decrease/(Increase) in accounts receivable and other assets16
 23
 —
 39
Decrease/(Increase) in inventory (1,177) —
 —
 (1,177)
Increase/(Decrease) in accounts payable and accrued and other liabilities478
 (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 investments3,463
 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 March 31, 2021
First Quarter
Company excluding Ford CreditFord CreditConsolidated
Revenues$33,565 $2,663 $36,228 
Total costs and expenses32,140 1,624 33,764 
Operating income/(loss)1,425 1,039 2,464 
Interest expense on Company debt excluding Ford Credit473 — 473 
Other income/(loss), net1,954 (82)1,872 
Equity in net income/(loss) of affiliated companies74 5 79 
Income/(Loss) before income taxes2,980 962 3,942 
Provision for/(Benefit from) income taxes563 117 680 
Net income/(loss)2,417 845 3,262 
Less: Income/(Loss) attributable to noncontrolling interests— — — 
Net income/(loss) attributable to Ford Motor Company$2,417 $845 $3,262 

64
  For the period ended March 31, 2020
  First Quarter
  Company excluding Ford Credit    
  Automotive Mobility Other (a) Subtotal Ford Credit Consolidated
Revenues $31,340
 $13
 $—
 $31,353
 $2,967
 $34,320
Total costs and expenses32,106
 381
 467
 32,954
 2,924
 35,878
Operating income/(loss)(766) (368) (467) (1,601) 43
 (1,558)
Interest expense on Automotive debt—
 —
 214
 214
 —
 214
Interest expense on Other debt—
 —
 13
 13
 —
 13
Other income/(loss), net636
 34
 29
 699
 (19) 680
Equity in net income/(loss) of affiliated companies(47) —
 —
 (47) 6
 (41)
Income/(Loss) before income taxes(177) (334) (665) (1,176) 30
 (1,146)
Provision for/(Benefit from) income taxes221
 (80) 697
 838
 9
 847
Net income/(loss)(398) (254) (1,362) (2,014) 21
 (1,993)
Less: Income/(Loss) attributable to noncontrolling interests—
 —
 —
 —
 —
 —
Net income/(loss) attributable to Ford Motor Company$(398) $(254) $(1,362) $(2,014) $21
 $(1,993)
__________
(a) Other includes Corporate Other, Interest on Debt, and Special 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):
March 31, 2021
AssetsCompany excluding Ford CreditFord CreditEliminationsConsolidated
Cash and cash equivalents$10,957 $10,869 $— $21,826 
Marketable securities20,333 3,948 — 24,281 
Ford Credit finance receivables, net— 40,664 — 40,664 
Trade and other receivables, net3,973 6,475 — 10,448 
Inventories12,742 — — 12,742 
Assets held for sale321 14 — 335 
Other assets2,303 1,333 — 3,636 
Receivable from other segments158 1,075 (1,233)— 
Total current assets50,787 64,378 (1,233)113,932 
Ford Credit finance receivables, net— 52,570 — 52,570 
Net investment in operating leases1,251 26,560 — 27,811 
Net property36,141 220 — 36,361 
Equity in net assets of affiliated companies4,564 130 — 4,694 
Deferred income taxes11,937 166 — 12,103 
Other assets11,057 2,291 — 13,348 
Receivable from other segments— 34 (34)— 
Total assets$115,737 $146,349 $(1,267)$260,819 
LiabilitiesCompany excluding Ford CreditFord CreditEliminationsConsolidated
Payables$22,365 $1,127 $— $23,492 
Other liabilities and deferred revenue19,661 1,334 — 20,995 
Debt payable within one year1,061 48,410 — 49,471 
Liabilities held for sale291 — — 291 
Payable to other segments1,233 — (1,233)— 
Total current liabilities44,611 50,871 (1,233)94,249 
Other liabilities and deferred revenue27,445 1,262 — 28,707 
Long-term debt24,819 78,382 — 103,201 
Deferred income taxes164 524 — 688 
Payable to other segments34 — (34)— 
Total liabilities$97,073 $131,039 $(1,267)$226,845 

65
  March 31, 2020
Assets Company excluding Ford Credit Ford Credit Eliminations Consolidated
Cash and cash equivalents $16,343
 $9,628
 $—
 $25,971
Marketable securities 17,946
 2,453
 —
 20,399
Ford Credit finance receivables, net —
 54,889
 —
 54,889
Trade and other receivables, net 3,128
 3,497
 —
 6,625
Inventories 11,312
 —
 —
 11,312
Assets held for sale 664
 36
 —
 700
Other assets 2,689
 1,691
 —
 4,380
Receivable from other segments 21
 2,673
 (2,694) —
   Total current assets 52,103
 74,867
 (2,694) 124,276
         
Ford Credit finance receivables, net —
 51,141
 —
 51,141
Net investment in operating leases 1,509
 27,005
 —
 28,514
Net property 35,082
 212
 —
 35,294
Equity in net assets of affiliated companies 2,159
 116
 —
 2,275
Deferred income taxes 12,607
 168
 (1,853) 10,922
Other assets 8,860
 2,868
 —
 11,728
Receivable from other segments 9
 16
 (25) —
   Total assets $112,329
 $156,393
 $(4,572) $264,150
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.

Equity. At March 31, 2020,2021, total equity attributable to Ford was $29.7$33.8 billion, a decreasean increase of $3.5$3.1 billion compared with December 31, 2019.2020. The detail for this change is shown below (in billions):
Increase/
(Decrease)
Net income/(loss)$3.3 
Common stock issued(0.1)
Other comprehensive income(0.1)
Total$3.1 
 
Increase/
(Decrease)
Net income$(2.0)
Shareholder distributions(0.6)
Adoption of accounting standards(0.2)
Other comprehensive income(0.7)
Total$(3.5)

U.S. Sales by Type. The following table shows first quarter 20202021 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
Trucks263,757
 265,966
SUVs189,720
 194,013
Cars62,853
 73,896
Total Vehicles516,330
 533,875

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


CRITICAL ACCOUNTING ESTIMATES

U.S. SalesU.S. Wholesales
Trucks277,233 257,240 
SUVs216,899 186,032 
Cars27,202 16,135 
Total Vehicles521,334 459,407 
As a result of 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 2019 Form 10-K Report as 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 consolidated income statement and the allowance for credit losses contained within Ford Credit finance receivables, net on 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 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):
AssumptionBasis Point ChangeIncrease / (Decrease)
Probability of default (lifetime)+/- 100$200/$(200)
Loss given default+/- 100$20/$(20)

ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

The Financial Accounting Standards Board (“FASB”) has issued the following Accounting Standards UpdatesUpdate (“ASU”) which areis not expected to have a material impact to our financial statements or financial statement disclosures. For additional information, see Note 2 of the Notes to the Financial Statements.
ASUEffective Date (a)
2020-042018-12Facilitation of the Effects of Reference Rate Reform on Financial ReportingApril 1, 2020
2019-12Simplifying the Accounting for Income TaxesJanuary 1, 2021
2018-12Targeted Improvements to the Accounting for Long Duration ContractsJanuary 1, 20222023
__________
(a)Early adoption for each of the standards is permitted.

(a)Early adoption of the standard is permitted.
66

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

Automotive Segment

Foreign Currency Risk. The net fair value of foreign exchange forward contracts (including adjustments for credit risk) as of March 31, 2020,2021, was an asseta liability of $689$706 million, compared with a liability of $596$487 million as of December 31, 2019.2020. The potential decrease in fair value from a 10% adverse change in the underlying exchange rates, in U.S. dollar terms, would have been $2.3$2.4 billion at March 31, 2020,2021, compared with $2.3$2.5 billion at December 31, 2019.2020.

Commodity Price Risk. The net fair value of commodity forward contracts (including adjustments for credit risk) as of March 31, 2020,2021, was a liabilityan asset of $153$195 million, compared with a liabilityan asset of $24$105 million at December 31, 2019.2020. The potential decrease in fair value from a 10% adverse change in the underlying commodity prices would have been $99$164 million at March 31, 2020,2021, compared with $112$141 million at December 31, 2019.2020.

Ford Credit Segment
  
Interest Rate Risk. To provide a quantitative measure of the sensitivity of its pre-tax cash flow to changes in interest rates, Ford Credit uses interest rate scenarios that assume a hypothetical, instantaneous increase or decrease of one percentage point in all interest rates across all maturities (a “parallel shift”), as well as a base case that assumes that all interest rates remain constant at existing levels. The differences in pre-tax cash flow between these scenarios and the base case over a 12-month period represent an estimate of the sensitivity of Ford Credit’s pre-tax cash flow. Under this model, Ford Credit estimates that at March 31, 2020,2021, all else constant, such an increase in interest rates would increase its pre-tax cash flow by $3$1 million over the next 12 months, compared with a decrease of $26$3 million at December 31, 20192020. In reality, interest rate changes are rarely instantaneous or parallel and rates could move more or less than the one percentage point assumed in Ford Credit’s analysis. As a result, the actual impact to pre-tax cash flow could be higher or lower than the results detailed above.

Transition from LIBOR to Alternative Reference Rates

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

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. James P. Hackett,D. Farley, Jr., our Chief Executive Officer (“CEO”), and Tim Stone,John T. Lawler, our Chief Financial Officer (“CFO”), have performed an evaluation of the Company’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of March 31, 2020,2021, and each has concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by SEC rules and forms, and that such information is accumulated and communicated to the CEO and CFO to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting. There were no changes in internal control over financial reporting during the quarter ended March 31, 20202021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings.

CLASS ACTIONS

ENVIRONMENTAL MATTERS
In re: Takata Airbag Product Liability Litigation; Economic Loss Track Cases Against Ford Motor Company.
  On July 16, 2018, Ford entered
We have no legal proceedings arising under any federal, state, or local provisions that have been enacted or adopted regulating the discharge of materials into a settlement agreement related to a consumer economic loss class action pending before the U.S. District Courtenvironment or primarily for the Southern Districtpurpose of Florida.  The first case was originally filed on October 27, 2014, against Ford, Takata,protecting the environment, in which (i) a governmental authority is a party, and several other automotive manufacturers,(ii) we believe there is the possibility of monetary sanctions (exclusive of interest and was brought by consumers who own or owned vehicles equipped with Takata airbag inflators.  Additional cases were subsequently filedcosts) 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 formsexcess 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.$1 million.

OTHER MATTERS

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

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

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

The following risk factor supplements the risk factors described in Item 1Aprincipal initial purchasers of the Company’s Annual Reportnotes were Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, BofA Securities, Inc., Barclays Capital Inc., BNP Paribas Securities Corp., Mizuho Securities USA LLC, Morgan Stanley & Co. LLC, RBC Capital Markets, LLC, Commerz Markets LLC, Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, Lloyds Securities Inc., SG Americas Securities, LLC, and SMBC Nikko Securities America, Inc.

The notes will not bear regular interest, and the principal amount of the notes will not accrete. The notes will mature on Form 10-KMarch 15, 2026, unless earlier repurchased, redeemed, or converted. Ford may not redeem the notes prior to March 20, 2024. On or after March 20, 2024, Ford may redeem for cash all or any portion of the notes, at its option, if the last reported sale price of Ford’s Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on and including the trading day preceding the date on which Ford provides notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date.

The initial conversion rate for the year endednotes is 57.1886 shares of Ford’s Common Stock per $1,000 principal amount of notes (which is equivalent to an initial conversion price of approximately $17.49 per share). Prior to December 31, 201915, 2025, the notes will be convertible at the option of the noteholders only upon the satisfaction of specified conditions 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 suchduring certain periods 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 business and individual activities, has created significant volatilityset forth in the global economyindenture for the notes, 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 2020, we idled our manufacturing operations in regions around the world other than China, where manufacturing operations were suspended in January and 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. Asas described in more detail under “Industry sales volume in Note 14 of the Notes to the Financial Statements. Thereafter, the notes will be convertible at the option of the noteholders at any time regardless of these conditions. Conversions of the notes will be settled in cash up to the aggregate principal amount of the notes to be converted and cash, shares of Ford’s Common Stock, or a combination thereof, at Ford’s election, for the remainder, if any, of our key markets can be volatile and could decline if there is a financial crisis, recession, or significant geopolitical event”Ford’s conversion obligation 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 a resultexcess of the restrictions described above and consumers’ reaction to COVID-19 in general, showroom traffic at our dealers has dropped significantly and many dealers have temporarily ceased normal operations, thereby reducing the 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 our cash flow. The extent and durationaggregate principal amount of the deterioration is uncertain at this time.notes being converted.


The predominant shareFord intends to use the net proceeds of Ford Credit’s business consists of financing Ford$2,266,725,000 after deducting the initial purchasers’ discount and Lincoln vehicles. Ford’s suspension of manufacturing operations,expenses from the significant decline in dealer showroom traffic, and the reduction of operations at many dealers has resulted in a 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 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 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 Annual Report on Form 10-K for the year ended December 31, 2019.

As described in more detail under “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 Annual Report on Form 10-K for the year ended December 31, 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 full impactoffering of the COVID-19 pandemic on our financial condition and resultsnotes for general corporate purposes, including the potential repayment of operations 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. 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.debt.

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The COVID-19 pandemic may also exacerbate other risks disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, including, but not limited to, our competitiveness, demand or market acceptance for our products, and shifting consumer preferences.

ITEM 6. Exhibits.
DesignationDescriptionMethod of Filing
Annual Incentive Compensation Plan Metrics for 2020.2021.Filed with this Report.
Performance-Based Restricted Stock Unit Metrics for 2020.2021.Filed with this Report.
Executive Waiver and Release Agreement between Ford Motor Company and Joseph R. HinrichsJon M. Huntsman, Jr. dated February 21, 2020.April 12, 2021.Filed with this Report.
Rule 15d-14(a) Certification of CEO.Filed with this Report.
Rule 15d-14(a) Certification of CFO.Filed with this Report.
Section 1350 Certification of CEO.Furnished with this Report.
Section 1350 Certification of CFO.Furnished with this Report.
Exhibit 101.INSInteractive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language (“Inline XBRL”).*(a)
Exhibit 101.SCHXBRL Taxonomy Extension Schema Document.*(a)
Exhibit 101.CALXBRL Taxonomy Extension Calculation Linkbase Document.*(a)
Exhibit 101.LABXBRL Taxonomy Extension Label Linkbase Document.*(a)
Exhibit 101.PREXBRL Taxonomy Extension Presentation Linkbase Document.*(a)
Exhibit 101.DEFXBRL Taxonomy Extension Definition Linkbase Document.*(a)
Exhibit 104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).*(a)
__________
* (a)Submitted electronically with this Report.Report in accordance with the provisions of Regulation S-T.
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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
FORD MOTOR COMPANY

By:/s/ Cathy O’Callaghan
Cathy O’Callaghan, Controller
(principal accounting officer)
Date:April 28, 20202021


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