ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Key Trends and Economic Factors Affecting Ford and the Automotive Industry
Trade Policy. To the extent governments in various regions implement or intensify restrictions or barriers to trade, such as tariff or non-tariff barriers, export controls, currency manipulation, or policies that otherwise favor domestic companies, there can be a significant negative impact on manufacturers based in other markets.
Tariffs implemented to date in the United States and elsewhere have caused significant disruption, increased costs (both directly and indirectly), and uncertainty in the automotive industry, including for Ford, other OEMs, suppliers, and dealers, as well as customers. Moreover, tariffs implemented or increased in the United States and elsewhere in the future may exacerbate these impacts. Further, instability in the supply chain exacerbated by tariffs and other industry concerns, such as China’s restriction on the export of rare earth minerals and various components, has resulted in production disruptions and increased costs and heightens the risk of future production disruptions and additional cost increases. Tariffs have affected and will continue to affect all OEMs, to various degrees.
In 2025, Ford’s gross costs related to tariffs implemented or revised in 2025 was about $3 billion, including the impact of tariff relief, and the net EBIT impact was about $2 billion after offsets. This relief is subject to periodic approval by the U.S. Department of Commerce and may be revised based on factors such as U.S. production and import content levels. As of December 31, 2025, we recognized a receivable of $974 million reflecting tariffs paid but for which we had not yet received refunds. Although we have started to receive refunds, the timing for our receipt of refunds is uncertain and is subject to changes in trade policy. Tariffs, particularly on auto parts for U.S. assembly, if sustained for an extended period of time, will have a significant adverse effect on U.S. production and the overall automotive industry.
For additional information regarding the impact and potential impact of trade policy and tariffs on our business, see the Outlook section on page 74 of this Report and Item 1A. Risk Factors.
Production and Supply Chain. Market volatility and shifting global supply chains have continued to create some production constraints, though conditions have improved from the immediate post-COVID period. As we adjust to shifting market conditions and balance our production mix, continued uncertainty with regard to current and future levels of tariffs, as discussed above, could have a significant impact on our supply chain and, in turn, our production. We continue to reevaluate our supply base and sourcing decisions and may in the future incur charges to improve flexibility and cost competitiveness.
In September 2025 and November 2025, fires at a Novelis Inc. plant in New York disrupted operations at the facility. Novelis is a major aluminum supplier to Ford, and since the initial fire occurred, we have been working closely with Novelis to address the situation and exploring potential alternative sources of aluminum. We have also sought mitigating actions to minimize potential disruptions to our operations. Although the ultimate impact on Ford is uncertain, we experienced lower production in the fourth quarter of 2025 driven by the Novelis fires, which we expect to recover partially in 2026. For more information regarding the impact and potential impact of the Novelis fires on our business, see the Outlook section on page 74 of this Report.
See Item 1A. Risk Factors for additional discussion of the risks related to disruptions to Ford’s and Ford’s suppliers’ production and operations.
Electric Vehicle Market. Although we are investing in our EV strategy, we anticipate that the EV market will continue to evolve. To date, we have observed lower-than-anticipated industrywide EV adoption rates due to changes in consumer sentiment, competitive dynamics, legal and policy changes, and significant developments in vehicle pricing dynamics, among other factors that we continue to monitor. The trend may be further exacerbated as policy changes in the United States have reduced or eliminated supply- and demand-side EV incentives, which may further slow the adoption of EVs. Moreover, potentially significant reductions in the stringency of federal emissions and fuel economy standards and federal legislation that eliminated the authority of California and other states to implement and enforce their most stringent emissions standards and zero-emission vehicle sales requirements, and other actions that may be forthcoming, may add to the disruption of the market for EVs in the United States, our largest market. These developments, which may continue to affect the pace of EV adoption, could extend the period of underutilization of EV production capacity across the industry.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
This environment has led us, and may in the future lead us, to adjust our investments, spending, production, and product and future technology launches to better match the pace of EV adoption. As a result of the lower-than-anticipated adoption rates, near-term pricing pressures, and other factors, we have recorded and may continue to incur charges related to payments to our EV-related suppliers (battery, raw material, or otherwise), inventory adjustments, impairments, or other matters.
For example, in 2024, we announced the cancellation of an all-electric three-row SUV program. The impact of that cancellation also resulted in changes to future technology and product launches. Through December 31, 2025, we incurred expenses of $2.4 billion related to these actions, all of which we reported as special items. Although we do not expect to incur significant additional expenses, cash payments related to these actions will continue through 2026.
In December 2025, we announced our decision to rationalize our EV manufacturing capacity and product roadmap, including cancelling three previously planned EVs and ending production of the current generation F-150 Lightning EV. As a result of the challenges facing the EV market and the decisions we made in response to those challenges, we recorded the following charges as special items: an $8.4 billion pre-tax non-cash impairment charge, including goodwill, for our Model e long-lived assets; $1.1 billion of non-cash asset write-downs related to the EV program cancellations described above; and $1.2 billion of other charges to be paid in cash (primarily related to contractual commitments related to those programs). We may incur additional expenses and cash expenditures of up to about $4 billion related to these actions and will recognize those charges in the quarter they are incurred as a special item.
In addition, in December 2025, Ford, SK On Co., Ltd., and SK Battery America, Inc., and BlueOval SK, LLC (“BOSK”) entered into a Joint Venture Disposition Agreement (“JVDA”), pursuant to which our membership interest in BOSK will be redeemed, and a Ford subsidiary will receive BOSK’s two Kentucky plants and related assets, and will assume the related liabilities. The value of the liabilities assumed is expected to exceed the value of the assets received; accordingly, we do not expect to recover the carrying amount of our investment in BOSK. Therefore, in the fourth quarter of 2025, we recorded a $3.2 billion pre-tax non-cash impairment charge as a special item.
Upon closing of the transactions contemplated by the JVDA (expected in the first half of 2026), we expect to recognize additional special item charges of about $3 billion, which includes about $500 million of cash expenditures. For additional information about BOSK and the JVDA, see Note 23 of the Notes to the Financial Statements.
In total, in the fourth quarter of 2025, we recorded about $13.8 billion of charges related to our updated EV strategy and the expected disposition of our BOSK investment.
These regulatory and market dynamics may continue to occur, which could have a substantial adverse impact on our results of operations and/or business, including our investments in supply, production capacity, and equity method investments.
Further, the pace of EV adoption and slower-than-anticipated development of the EV market may impact our strategy to comply with regulatory emissions and fuel economy standards and zero-emission vehicle requirements. Although recent actions taken and expected to be taken in the United States and elsewhere may eliminate or reduce the stringency of such standards, if consumers do not purchase our EVs and other highly fuel-efficient vehicles in sufficient numbers, it may be difficult for Ford to meet applicable environmental standards in certain markets and may force us to take various product-led actions (e.g., curtailing the production and sale of certain internal combustion vehicles) that could have substantial adverse effects on our sales volume and operations and/or purchase compliance credits from third parties.
For additional discussion of the impact of changes in the EV market to our business, and the risks related thereto, see the “Governmental Standards” discussion in “Item 1. Business” and “Item 1A. Risk Factors” above.
Currency Exchange Rate Volatility. Although a few global central banks have raised interest rates recently, most remain in the process of lowering policy rates that had been elevated in order to address inflation concerns. As these policy rates shift, central banks need to carefully balance the risk that inflation remains elevated against the heightened financial and economic risks associated with high interest rates. This is notable for many emerging markets, which may also face increased exposure to commodity prices and political instability, contributing to unpredictable movements in the value of their exchange rates. In addition to direct impacts on the financial flows of global automotive companies, currency movements can also impact pricing of vehicles exported to overseas markets. In most markets, exchange rates are market-determined, and all are impacted by many different macroeconomic and policy factors, and thus likely to remain volatile. However, in some markets, exchange rates are heavily influenced or controlled by governments.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Pricing Pressure. Despite vehicle pricing remaining elevated over the last year due to strong demand, lingering supply shortages, tariffs, and inflationary costs, we have already observed some declines in new and used vehicle prices, especially in the EV segment, but it is unclear whether industry prices will decline fully to pre-COVID-19 pandemic levels as costs remain elevated. Intense competition and excess capacity are likely to put downward pressure on inflation-adjusted prices, including increased marketing incentives, for similarly contented vehicles and contribute to a challenging pricing environment for the automotive industry in most major markets.
Commodity and Energy Prices. Prices for commodities remain volatile. Spot prices for various commodities have recently diverged, as weakening global EV demand mitigates price increases for battery-related commodities, while base metals such as steel and aluminum face tariff-related impacts, and precious metals (e.g., palladium) also remain at elevated price levels due to geopolitical uncertainty and other factors. Overall, the net impact on us and our suppliers has been higher material costs. To help ensure supply of raw materials for critical components, we, like others in the industry, have entered into multi-year sourcing agreements and may enter into additional agreements. In the long term, the outcome of de-carbonization and electrification of the vehicle fleet may depress oil demand, but geopolitical dynamics and the global energy transition will also contribute to ongoing volatility of oil and other energy prices.
Inflation and Interest Rates. We continue to see lingering impacts on our business due to inflation, including ongoing geopolitical volatility, driving up labor costs, freight premiums, and other operating costs above historical rates. Although headline inflation in the United States and Europe appears to have peaked, core inflation (excluding food and energy prices) remains elevated and is a source of continued cost pressure on businesses and households. Interest rates have increased significantly and are only now beginning to decline, as central banks in developed countries attempted to subdue inflation while government deficits and debt remain at high levels in many global markets. Accordingly, the eventual implications of higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital for our business. At Ford Credit, rising interest rates may impact its ability to source funding and offer financing at competitive rates, which could reduce its financing margin.
Vehicle Profitability. Our financial results depend on the profitability of the vehicles we sell, which may vary significantly by vehicle line. In general, larger vehicles tend to command higher prices and be more profitable than smaller vehicles. For example, in Ford Blue, our larger, more profitable vehicles had an average contribution margin that was 153% of our total average contribution margin across all vehicles, whereas our smaller vehicles had significantly lower contribution margins. In addition, government regulations in certain markets aimed at reducing emissions and increasing fuel efficiency (e.g., ZEV mandates and low emission zones), and other factors that accelerate the transition to electrified vehicles, may increase the cost of vehicles by more than the perceived benefit to consumers and dampen margins.
Revenue
Company excluding Ford Credit revenue is generated primarily by sales of vehicles, parts, accessories, and services from our Ford Blue, Ford Model e, and Ford Pro segments. Revenue is recorded when control is transferred to our customers (generally, our dealers and distributors). For the majority of sales, this occurs when products are shipped from our manufacturing facilities. However, we defer a portion of the consideration received when there is a separate future or stand-ready performance obligation, such as extended service contracts or ongoing vehicle connectivity. Revenue related to extended service contracts is recognized over the term of the agreement in proportion to the costs we expect to incur in satisfying the contract obligations; revenue related to other future or stand-ready performance obligations is generally recognized on a straight-line basis over the period in which services are expected to be performed. Vehicles sold to daily rental car companies with an obligation to repurchase at an agreed upon amount, exercisable at the option of the customer, are accounted for as operating leases. We also earn income from other operating lease assets, primarily vehicles, and record the income on a straight-line basis over the term of the lease agreement. Proceeds from the sale of vehicles at auction are recognized in revenue upon transfer of control of the vehicle to the buyer.
Most of the vehicles sold by us to our dealers and distributors are financed at wholesale by Ford Credit. Upon Ford Credit originating the wholesale receivable related to a dealer’s purchase of a vehicle, Ford Credit pays cash to the relevant Ford entity in payment of the dealer’s obligation for the purchase price of the vehicle. The dealer then pays the wholesale finance receivable to Ford Credit when it sells the vehicle to a retail customer.
Our Ford Credit segment revenue is generated primarily from interest on finance receivables and revenue from operating leases. Revenue from interest on finance receivables is recognized over the term of the receivable using the interest method and includes the amortization of certain deferred origination costs. Revenue from operating leases is recognized on a straight-line basis over the term of the lease.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Transactions between Ford Credit and our other segments occur in the ordinary course of business. For example, we offer special retail financing and lease incentives to dealers’ customers who choose to finance or lease our vehicles from Ford Credit. The cost for these incentives is included in our estimate of variable consideration at the date the related vehicle sales to our dealers are recorded. In order to compensate Ford Credit for the lower interest or lease payments offered to the retail customer, we pay the discounted value of the incentive directly to Ford Credit when it originates the retail finance or lease contract with the dealer’s customer. Ford Credit recognizes the incentive amount over the life of retail finance contracts as an element of financing revenue and over the life of lease contracts as a reduction to depreciation. See Note 1 of the Notes to the Financial Statements for a more detailed discussion of transactions between Ford Credit and our other segments.
Costs and Expenses
Our income statement classifies our Company excluding Ford Credit total costs and expenses into two categories: (i) cost of sales, and (ii) selling, administrative, and other expenses. We include within cost of sales those costs related to the development, production, and distribution of our vehicles, parts, accessories, and services. Specifically, we include in cost of sales each of the following: material costs (including commodity and component costs); freight and duty (including tariff) costs; warranty, including product recall costs; labor and other costs related to the development and production of our vehicles and connectivity, parts, accessories, and services; depreciation and amortization; regulatory compliance expenses; and other associated costs. We include within selling, administrative, and other expenses labor and other costs not directly related to the development and production of our vehicles, parts, accessories, and services, including such expenses as advertising and sales promotion costs.
Certain of our costs, such as material costs, generally vary directly with changes in volume and mix of production. In our industry, production volume often varies significantly from quarter to quarter and year to year. Quarterly production volumes experience seasonal shifts throughout the year (including peak retail sales seasons and the impact on production of model changeover and new product launches). Annual production volumes are heavily impacted by external economic factors, including the pace of economic growth and factors such as the availability of consumer credit and cost of fuel.
As a result, we analyze the profit impact of certain cost changes, holding constant present-year volume and mix and currency exchange, in order to evaluate our cost trends absent the impact of varying production and currency exchange levels. We analyze these cost changes in the following categories:
• Contribution Costs – these costs typically vary with production volume. These costs include material (including commodity and component), warranty, and freight and duty (including tariff) costs.
• Structural Costs – these costs typically do not have a directly proportionate relationship to production volume. These costs include manufacturing; vehicle and software engineering; spending-related (primarily depreciation and amortization for our manufacturing and engineering assets); advertising and sales promotion; administrative, information technology, and selling; and pension and OPEB costs.
While contribution costs generally vary directly in proportion to production volume, elements within our structural costs category are impacted to differing degrees by changes in production volume. We also have varying degrees of discretion when it comes to controlling the different elements within our structural costs. For example, depreciation and amortization expense largely is associated with prior capital spending decisions. On the other hand, while labor costs do not vary directly with production volume, manufacturing labor costs may be impacted by changes in volume, for example when we increase overtime, add a production shift, or add personnel to support volume increases. Other structural costs, such as advertising or engineering costs, do not necessarily have a directly proportionate relationship to production volume. Our structural costs generally are within our discretion, although to varying degrees, and can be adjusted over time in response to external factors.
We consider certain structural costs to be a direct investment in future growth and revenue. For example, structural costs are necessary to grow our business and improve profitability, invest in new products, technologies, and services, respond to increasing industry sales volume, and grow our market share.
Cost of sales and Selling, administrative, and other expenses for full year 2025 were $185.3 billion. Company excluding Ford Credit’s total material and commodity costs make up the largest portion of these costs and expenses, followed by structural costs. Although material costs are our largest absolute cost, our margins can be affected significantly by changes in any category of costs.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
RESULTS OF OPERATIONS - 2025
The net loss attributable to Ford Motor Company was $8,182 million in 2025. Company adjusted EBIT was $6,780 million.
Net income/(loss) includes certain items (“special items”) that are excluded from Company adjusted EBIT. These items are discussed in more detail under “Non-GAAP Financial Measures That Supplement GAAP Measures” on page 77 and in Note 25 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 analyzing ongoing operating results. Our pre-tax and tax special items were as follows (in millions):
Restructuring (by Geography)
Europe
North America Hourly Buyouts
China
Subtotal Restructuring
Other Items
Model e asset impairment and EV program cancellations
BOSK JV disposition
All-electric three-row SUV program cancellation and resulting actions
Fuel injector field service action
Ford share of equity method investment's asset impairment/other
Ford share of BOSK's asset write-down/other
Legal matter
Gain on investment in equity security
Extended Oakville Assembly Plant changeover
Other
Subtotal Other Items
Pension and OPEB Gain/(Loss)
Pension and OPEB remeasurement
Pension settlements, curtailments, and separations costs
Subtotal Pension and OPEB Gain/(Loss)
Total EBIT Special Items
Provision for/(Benefit from) tax special items (a)
(a) Includes related tax effect on special items and tax special items.
We recorded $17,356 million of pre-tax special item charges in 2025, primarily reflecting a Model e asset impairment, asset write-downs and other charges due to EV program cancellations, and an impairment of our investment in BOSK related to the BOSK JV disposition. For additional information, see Notes 13, 14, and 23 of the Notes to the Financial Statements. Charges related to the all-electric three-row SUV program cancellation and resulting actions, ongoing restructuring actions in Europe, a field service action for fuel injectors, and pension and OPEB remeasurement were also recorded as special items in 2025.
We recorded a $4.8 billion benefit from tax special items in 2025, primarily reflecting the impact of the special items above and a net benefit of $1.5 billion associated with the release of valuation allowances resulting from improvements in our South American and South Asian operations, offset partially by non-cash charges to deferred tax assets of $0.5 billion associated with resolving transfer pricing matters in certain non-U.S. operations and $0.4 billion to recognize the impact of tax legislation enacted in Germany.
In Note 25 of the Notes to the Financial Statements, special items are reflected as a separate reconciling item, as opposed to being allocated among our segments. This reflects the fact that management excludes these items from its review of operating segment results for purposes of measuring segment profitability and allocating resources.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
COMPANY KEY METRICS
The table below shows our full year 2025 key metrics for the Company compared to a year ago.
GAAP Financial Measures
Cash Flows from Operating Activities ($B)
Revenue ($M)
Net Income/(Loss) ($M)
Net Income/(Loss) Margin (%)
(7.6) ppts
EPS (Diluted)
Non-GAAP Financial Measures (a)
Company Adj. Free Cash Flow ($B)
Company Adj. EBIT ($M)
Company Adj. EBIT Margin (%)
(1.9) ppts
Adjusted EPS (Diluted)
Adjusted ROIC (Trailing Four Quarters)
(4.2) ppts
(a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
In 2025, our diluted earnings per share of Common and Class B Stock was a loss of $2.06 and our diluted adjusted earnings per share was $1.09.
Net income/(loss) margin was negative 4.4% in 2025, down from 3.2% a year ago. Company adjusted EBIT margin was 3.6% in 2025, down from 5.5% a year ago.
The table below shows our full year 2025 net income/(loss) attributable to Ford and Company adjusted EBIT by segment (in millions).
Ford Blue
Ford Model e
Ford Pro
Ford Credit
Corporate Other
Company Adjusted EBIT (a)
Interest on Debt
Special Items
Taxes / Noncontrolling Interests
Net Income/(Loss)
(a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
The year-over-year decrease of $14,061 million in net income/(loss) in 2025 was primarily driven by higher special items and lower Ford Blue and Ford Pro EBIT, offset partially by lower taxes. The higher year-over-year special items primarily reflect the Model e asset impairment and EV program cancellations as well as the BOSK JV disposition. The year-over-year decrease of $3,428 million in Company adjusted EBIT primarily reflects lower Ford Blue and Ford Pro EBIT, including the impact of new and revised tariffs, offset partially by higher Ford Credit EBT and improved Model e EBIT.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
The tables below and on the following pages provide full year 2025 key metrics and the change in full year 2025 EBIT compared with full year 2024 by causal factor for each of our Ford Blue, Ford Model e, and Ford Pro segments. For a description of these causal factors, see Definitions and Information Regarding Ford Blue, Ford Model e, and Ford Pro Causal Factors .
Ford Blue Segment
Key Metrics
Wholesale Units (000) (a)
Revenue ($M)
EBIT ($M)
EBIT Margin (%)
(2.2) ppts
(a) Includes Ford and Lincoln brand and JMC brand vehicles produced and sold in China by our unconsolidated affiliates (about 438,000 units in 2024 and 375,000 units in 2025).
Change in EBIT by Causal Factor (in millions)
2024 Full Year EBIT
Volume / Mix
Net Pricing
Cost
Exchange
Other
2025 Full Year EBIT
In 2025, Ford Blue’s wholesales decreased 5% from a year ago, primarily driven by lower wholesales in North America including a planned reduction in dealer stocks resulting in lower wholesales across multiple nameplates and lower F-150 wholesales driven by a disruption in aluminum supply. Lower sales at our joint ventures in China also contributed to the decrease. Full year 2025 revenue decreased 1%, reflecting lower wholesales offset partially by favorable net pricing and mix.
Ford Blue’s 2025 full year EBIT was $3,024 million, a decrease of $2,245 million from a year ago, with an EBIT margin of 3.0%. The lower EBIT was primarily driven by lower volume, including the impact of the disruption in aluminum supply, higher tariff-related costs, and adverse exchange. Favorable net pricing and lower material and warranty costs were partial offsets.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford Model e Segment
Key Metrics
Wholesale Units (000)
Revenue ($M)
EBIT ($M)
EBIT Margin (%)
60.3 ppts
Change in EBIT by Causal Factor (in millions)
2024 Full Year EBIT
Volume / Mix
Net Pricing
Cost
Exchange
Other
2025 Full Year EBIT
In 2025, Ford Model e’s wholesales increased 69% from a year ago, primarily reflecting higher wholesales in Europe, including a full year of production of the Explorer and Capri and the introduction of the Puma Gen-E. Full year 2025 revenue increased 73%, driven by the higher wholesales.
Ford Model e’s 2025 full year EBIT loss was $4,806 million, a $299 million improvement from a year ago, with an EBIT margin of negative 72.1%. The improved EBIT was primarily driven by higher volume and lower costs. The lower costs include lower material cost, which more than offset increased tariff-related costs and volume-related manufacturing costs.
Ford Pro Segment
Key Metrics
Wholesale Units (000) (a)
Revenue ($M)
EBIT ($M)
EBIT Margin (%)
(3.1) ppts
(a) Includes Ford brand vehicles produced and sold by our unconsolidated affiliate Ford Otosan in Türkiye (about 91,000 units in 2024 and 98,000 units in 2025).
Change in EBIT by Causal Factor (in millions)
2024 Full Year EBIT
Volume / Mix
Net Pricing
Cost
Exchange
Other
2025 Full Year EBIT
In 2025, Ford Pro’s wholesales decreased 1% from a year ago, primarily reflecting lower industry volume in Europe and the impact of a disruption in aluminum supply, offset partially by higher daily rental volume in North America. Full year 2025 revenue decreased 1%, driven by moderated pricing across fleets (including daily rental), offset partially by favorable exchange.
Ford Pro’s 2025 full year EBIT was $6,843 million, a decrease of $2,164 million from a year ago, with an EBIT margin of 10.3%. The lower EBIT was primarily driven by unfavorable fleet pricing (including daily rental), unfavorable mix, and higher tariff-related costs. Excluding tariffs, cost improved year-over-year, driven by lower material and warranty costs.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Definitions and Information Regarding Ford Blue, Ford Model e, and Ford Pro Causal Factors
In general, we measure year-over-year change in Ford Blue, Ford Model e, and Ford Pro segment EBIT using the causal factors listed below, with net pricing and cost variances calculated at present-year volume and mix and exchange:
• Market Factors (exclude the impact of unconsolidated affiliate wholesale units):
◦ Volume and Mix – primarily measures EBIT variance from changes in wholesale unit volumes (at prior-year average contribution margin per unit) driven by changes in industry volume, market share, and dealer stocks, as well as the EBIT variance resulting from changes in product mix, including mix among vehicle lines and mix of trim levels and options within a vehicle line
◦ Net Pricing – primarily measures EBIT variance driven by changes in wholesale unit prices to dealers and marketing incentive programs such as rebate programs, low-rate financing offers, special lease offers, and stock adjustments on dealer inventory
• Cost:
◦ Contribution Costs – primarily measures EBIT variance driven by per-unit changes in cost categories that typically vary with volume, such as material costs (including commodity and component costs), warranty expense, and freight and duty (including tariff) 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 and Connectivity – consists primarily of costs for vehicle and software engineering personnel, prototype materials, testing, and outside engineering and software 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, Information Technology, and Selling – includes primarily costs for salaried personnel and purchased services related to our staff activities, information technology, and selling functions
• 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, compensation-related changes, and regulatory compliance expenses
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 or others, 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 or others. 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. Excludes transactions between Ford Blue, Ford Model e, and Ford Pro segments
• Industry Volume and Market Share – based, in part, on estimated vehicle registrations; includes medium and heavy duty trucks
• SAAR – seasonally adjusted annual rate
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford Credit Segment
The tables below provide full year 2025 key metrics and the change in full year 2025 EBT compared with full year 2024 by causal factor for the Ford Credit segment. For a description of these causal factors, see Definitions and Information Regarding Ford Credit Causal Factors .
GAAP Financial Measures
Total Net Receivables ($B)
Loss-to-Receivables (bps) (a)
Auction Values (b)
EBT ($M)
ROE (%)
5.8 ppts
Other Balance Sheet Metrics
Debt ($B)
Net Liquidity ($B)
Financial Statement Leverage (to 1)
(a) U.S. retail financing only.
(b) U.S. portfolio off-lease auction values at full year 2025 mix.
Change in EBT by Causal Factor (in millions)
2024 Full Year EBT
Volume / Mix
Financing Margin
Credit Loss
Lease Residual
Exchange
Other
2025 Full Year EBT
Ford Credit’s total net receivables at December 31, 2025 of $146.3 billion were 2% higher than a year ago, explained primarily by a larger operating lease portfolio and exchange, offset partially by lower non-consumer financing. The 2025 U.S. retail loss-to-receivables ratio of 59 basis points increased from a year ago, reflecting increased loss severity and higher repossessions. Ford Credit’s U.S. auction values for off-lease vehicles increased 3% from a year ago, reflecting industrywide low used vehicle supply and high demand.
Ford Credit’s 2025 EBT of $2.6 billion was $0.9 billion higher than a year ago, explained primarily by higher financing margin, higher receivables, and a favorable derivative market valuation adjustment (included in Other). Higher credit losses and charges related to an industrywide review by the U.K. Financial Conduct Authority into the historical use of dealer commissions (also included in Other) were partial offsets.
Item 7. 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 net receivables excluding the allowance for credit losses 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 net receivables excluding the allowance for credit losses by product within each region
• Financing Margin:
◦ Financing margin variance is the period-over-period change in financing margin yield multiplied by the present period average net receivables excluding the allowance for credit losses 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 net receivables excluding the allowance for credit losses for the same period
◦ Financing margin changes are driven by changes in revenue and interest expense. Changes in revenue are primarily driven by the level of market interest rates, cost assumptions in pricing, mix of business, and competitive environment. Changes in interest expense are primarily driven by the level of market interest rates, borrowing spreads, and asset-liability management
• Credit Loss:
◦ Credit loss is the change in the provision for credit losses at prior period exchange rates. For analysis purposes, management splits the provision for credit losses into net charge-offs and the change in the allowance for credit losses
◦ Net charge-off changes are primarily driven by the number of repossessions, severity per repossession, and recoveries. Changes in the allowance for credit losses are primarily driven by changes in historical trends in credit losses and recoveries, changes in the composition and size of Ford Credit’s present portfolio, changes in trends in historical used vehicle values, and changes in forward looking macroeconomic conditions. For additional information, refer to the “Critical Accounting Estimates - Allowance for Credit Losses” section of Item 7
• 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. Depreciation on vehicles subject to operating leases includes 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
• Exchange:
◦ Reflects changes in EBT driven by the effects of converting functional currency income to U.S. dollars
• Other:
◦ Primarily includes operating expenses, other revenue, insurance expenses, and other income/(loss) at prior period exchange rates
◦ Changes in operating expenses are primarily driven by salaried personnel costs, facilities costs, and costs associated with the origination and servicing of customer contracts
◦ In general, other income/(loss) changes are primarily driven by changes in earnings related to market valuation adjustments to derivatives (primarily related to movements in interest rates) and other miscellaneous items
Item 7. 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 and Liquidity tables) – Cash, cash equivalents, marketable securities, and restricted cash, excluding amounts related to insurance activities
• Debt (as shown in the Key Metrics and Leverage tables) – Debt on Ford Credit’s balance sheets. Includes debt issued in securitizations and payable only out of collections on the underlying securitized assets and related enhancements. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions
• Earnings Before Taxes (“EBT” ) – Reflects Ford Credit’s income before income taxes
• Loss-to-Receivables (“LTR”) Ratio – LTR ratio is calculated using net charge-offs divided by average finance receivables, excluding unearned interest supplements and the allowance for credit losses
• Return on Equity (“ROE” ) (as shown in the Key Metrics table) – Reflects return on equity calculated by annualizing net income for the period and dividing by monthly average equity for the period
• Securitization and Restricted Cash (as shown in the Liquidity table) – Securitization cash is held for the benefit of the securitization investors (for example, a reserve fund). Restricted cash primarily includes cash held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements
• Securitizations (as shown in the Public Term Funding Plan table) – Public securitization transactions, Rule 144A offerings sponsored by Ford Credit, and widely distributed offerings by Ford Credit Canada
• Term Asset-Backed Securities (as shown in the Funding Structure table) – Obligations issued in securitization transactions that are payable only out of collections on the underlying securitized assets and related enhancements
• Total Net Receivables (as shown in the Key Metrics table) – 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
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Corporate Other
Corporate Other primarily includes corporate governance expenses, past service pension and OPEB income and expense, interest income (excluding Ford Credit interest income and interest earned on our extended service contract portfolio) and gains and losses from our cash, cash equivalents, and marketable securities, 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, that are not allocated to operating segments. These include expenses related to setting and directing global policy, providing oversight and stewardship, and promoting the Company’s interests. For full year 2025, Corporate Other had a $838 million EBIT loss, compared with a $617 million EBIT loss in 2024. The lower EBIT was driven by higher corporate governance expenses offset partially by higher Company excluding Ford Credit interest income.
Interest on Debt
Interest on Debt consists of interest expense on Company debt excluding Ford Credit. Our full year 2025 interest expense on Company debt excluding Ford Credit was $1,254 million, compared with $1,115 million in 2024.
Taxes
Our Provision for/(Benefit from) income taxes for full year 2025 was a benefit of $3,668 million, resulting in an effective tax rate of 31.0%. This rate was impacted by a net benefit of $1,538 million associated with the release of valuation allowances resulting from improvements in our South American and South Asian operations, offset partially by a non-cash charge of $424 million to deferred tax assets to recognize the impact of tax legislation enacted in Germany, and a non-cash charge of $471 million to deferred tax assets associated with resolving transfer pricing matters in certain non-U.S. operations. The foregoing were treated as special items.
Our full year 2025 adjusted effective tax rate, which excludes special items, was 20.0%.
On July 4, 2025, P.L. 119-21 (otherwise known as the “One Big Beautiful Bill Act”) was signed into law. We have analyzed the provisions within the act and determined there was no material impact on our 2025 consolidated financial statements.
We regularly review our organizational structure and income tax elections for affiliates in non-U.S. and U.S. tax jurisdictions, which may result in changes in affiliates that are included in or excluded from our U.S. tax return. Any future changes to our structure, as well as any changes in income tax laws in the countries that we operate, could cause increases or decreases to our deferred tax balances and related valuation allowances.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
RESULTS OF OPERATIONS - 2024
The net income attributable to Ford Motor Company was $5,879 million in 2024. Company adjusted EBIT was $10,208 million.
Net income/(loss) includes certain items (“special items”) that are excluded from Company adjusted EBIT. These items are discussed in more detail under “Non-GAAP Financial Measures That Supplement GAAP Measures” on page 77 and in Note 25 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):
Restructuring (by Geography)
Europe
North America Hourly Buyouts
China
Other (a)
Subtotal Restructuring
Other Items
All-electric three-row SUV program cancellation and resulting actions
Transit Connect customs matter
Extended Oakville Assembly Plant changeover
EV program dispute
Other (including gains/(losses) on investments)
Subtotal Other Items
Pension and OPEB Gain/(Loss)
Pension and OPEB remeasurement
Pension settlements, curtailments, and separations costs
Subtotal Pension and OPEB Gain/(Loss)
Total EBIT Special Items
Provision for/(Benefit from) tax special items (b)
(a) 2023 includes $28 million related to restructuring charges in India and $41 million in North America.
(b) Includes related tax effect on special items and tax special items.
We recorded $1,860 million of pre-tax special item charges in 2024, primarily reflecting a write-down of certain product specific assets and other expenses related to the cancellation of a previously planned all-electric three-row SUV program, continued ongoing restructuring actions in Europe, and buyouts for hourly employees in North America. Pension and OPEB remeasurement was a partial offset.
In Note 25 of the Notes to the Financial Statements, special items are reflected as a separate reconciling item, as opposed to being allocated among our segments. This reflects the fact that management excludes these items from its review of operating segment results for purposes of measuring segment profitability and allocating resources.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
COMPANY KEY METRICS
The table below shows our full year 2024 key metrics for the Company compared with full year 2023.
GAAP Financial Measures
Cash Flows from Operating Activities ($B)
Revenue ($M)
Net Income/(Loss) ($M)
Net Income/(Loss) Margin (%)
0.7 ppts
EPS (Diluted)
Non-GAAP Financial Measures (a)
Company Adj. Free Cash Flow ($B)
Company Adj. EBIT ($M)
Company Adj. EBIT Margin (%)
(0.4) ppts
Adjusted EPS (Diluted)
Adjusted ROIC (Trailing Four Quarters)
(1.0) ppts
(a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
In 2024, our diluted earnings per share of Common and Class B Stock was $1.46 and our diluted adjusted earnings per share was $1.84.
Net income/(loss) margin was 3.2% in 2024, up from 2.5% in 2023. Company adjusted EBIT margin was 5.5% in 2024, down from 5.9% in 2023.
The table below shows our full year 2024 net income/(loss) attributable to Ford and Company adjusted EBIT by segment (in millions).
Ford Blue
Ford Model e
Ford Pro
Ford Credit
Corporate Other
Company Adjusted EBIT (a)
Interest on Debt
Special Items
Taxes / Noncontrolling Interests
Net Income/(Loss)
(a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
The year-over-year increase of $1,532 million in net income/(loss) in 2024 was primarily driven by lower special items and higher Ford Pro EBIT, offset partially by lower Ford Blue EBIT and higher taxes. The lower year-over-year special items primarily reflect the non-recurrence of a pension and OPEB remeasurement loss in 2023, a pension remeasurement gain in 2024, and lower year-over-year restructuring related charges, offset partially by expenses related to the three-row SUV EV program cancellation. The year-over-year decrease of $208 million in Company adjusted EBIT primarily reflects lower Ford Blue and Model e EBIT, offset partially by higher Ford Pro EBIT and Ford Credit EBT.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
The tables below and on the following pages provide full year 2024 key metrics and the change in full year 2024 EBIT compared with full year 2023 by causal factor for each of our Ford Blue, Ford Model e, and Ford Pro segments. For a description of these causal factors, see Definitions and Information Regarding Ford Blue, Ford Model e, and Ford Pro Causal Factors.
Ford Blue Segment
Key Metrics
Wholesale Units (000) (a)
Revenue ($M)
EBIT ($M)
EBIT Margin (%)
(2.1) ppts
(a) Includes Ford and Lincoln brand and JMC brand vehicles produced and sold in China by our unconsolidated affiliates (about 455,000 units in 2023 and 438,000 units in 2024).
Change in EBIT by Causal Factor (in millions)
2023 Full Year EBIT
Volume / Mix
Net Pricing
Cost
Exchange
Other
2024 Full Year EBIT
In 2024, Ford Blue’s wholesales decreased 2% from 2023, driven primarily by the end of production of the Fiesta in Europe and the Edge in North America, offset partially by higher Ranger and Bronco wholesales. Full year 2024 revenue was flat year over year, primarily reflecting favorable currency-related pricing in South America and higher outside component sales revenue, offset by unfavorable exchange resulting from a stronger U.S. dollar.
Ford Blue’s 2024 full year EBIT was $5,269 million, a decrease of $2,184 million from 2023, with an EBIT margin of 5.2%. The lower EBIT was driven primarily by unfavorable exchange, adverse mix (primarily supplier-related constraints and fewer F-150s due to the new model launch) and lower wholesales, and higher cost (including higher material cost for new products and higher warranty costs). Higher currency-related pricing in South America was a partial offset.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford Model e Segment
Key Metrics
Wholesale Units (000)
Revenue ($M)
EBIT ($M)
EBIT Margin (%)
(51.3) ppts
Change in EBIT by Causal Factor (in millions)
2023 Full Year EBIT
Volume / Mix
Net Pricing
Cost
Exchange
Other
2024 Full Year EBIT
In 2024, Ford Model e’s wholesales decreased 9% from 2023, reflecting lower Mustang Mach-E and F-150 Lightning wholesales due to competitive market conditions, offset partially by the introduction of the Explorer BEV and Capri in Europe. Full year 2024 revenue decreased 35%, driven primarily by lower net pricing and lower wholesales.
Ford Model e’s 2024 full year EBIT loss was $5,105 million, a $327 million higher loss than in 2023, with an EBIT margin of negative 132.3%. The lower EBIT was primarily driven by lower net pricing due to industrywide competitive pressures, offset partially by lower costs (including battery-related raw material costs as well as other material costs and lower engineering and warranty expense).
Ford Pro Segment
Key Metrics
Wholesale Units (000) (a)
Revenue ($M)
EBIT ($M)
EBIT Margin (%)
1.0 ppts
(a) Includes Ford brand vehicles produced and sold by our unconsolidated affiliate Ford Otosan in Türkiye (about 90,000 units in 2023 and 91,000 units in 2024).
Change in EBIT by Causal Factor (in millions)
2023 Full Year EBIT
Volume / Mix
Net Pricing
Cost
Exchange
Other
2024 Full Year EBIT
In 2024, Ford Pro’s wholesales increased 9% from 2023, primarily reflecting higher sales of Super Duty and the Transit family of vehicles, offset partially by the end of production of the Edge in North America for fleet customers (including daily rental). Full year 2024 revenue increased 15%, driven by higher wholesales, favorable mix, and higher net pricing.
Ford Pro’s 2024 full year EBIT was $9,007 million, an increase of $1,790 million from 2023, with an EBIT margin of 13.5%. The EBIT improvement was driven by favorable market factors. Higher cost was a partial offset, including material costs (primarily new product-related and the impact of inflation at our Ford Otosan joint venture in Türkiye), higher warranty costs, and higher growth-related structural costs.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford Credit Segment
The tables below provide full year 2024 key metrics and the change in full year 2024 EBT compared with full year 2023 by causal factor for the Ford Credit segment.
GAAP Financial Measures
Total Net Receivables ($B)
Loss-to-Receivables (bps) (a)
Auction Values (b)
EBT ($M)
ROE (%)
(1.5) ppts
Other Balance Sheet Metrics
Debt ($B)
Net Liquidity ($B)
Financial Statement Leverage (to 1)
(a) U.S. retail financing only.
(b) U.S. portfolio off-lease auction values at full year 2025 mix.
Change in EBT by Causal Factor (in millions)
2023 Full Year EBT
Volume / Mix
Financing Margin
Credit Loss
Lease Residual
Exchange
Other
2024 Full Year EBT
Total net receivables at December 31, 2024 were $10.4 billion higher than at December 31, 2023, reflecting higher consumer and non-consumer financing and a larger lease portfolio. Ford Credit’s U.S. auction values for off-lease vehicles were down 4% from the prior year.
Ford Credit’s 2024 EBT of $1,654 million was $323 million higher than in 2023, explained primarily by higher financing margin and favorable volume and mix, offset partially by higher operating lease depreciation, reflecting higher return rates and lower expected auction values, and higher retail credit losses.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Corporate Other
For full year 2024, Corporate Other had a $617 million EBIT loss, compared with an $807 million EBIT loss in 2023. The EBIT improvement was driven by lower corporate governance expenses and higher Company excluding Ford Credit interest income.
Interest on Debt
Our full year 2024 interest expense on Company debt excluding Ford Credit was $1,115 million, compared with $1,302 million in 2023.
Taxes
Our Provision for/(Benefit from) income taxes for full year 2024 was a provision of $1,339 million, resulting in an effective tax rate of 18.5%.
Our full year 2024 adjusted effective tax rate, which excludes special items, was 18.3%.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2025, total cash, cash equivalents, marketable securities, and restricted cash, including Ford Credit and entities held for sale, was $38.9 billion.
We consider our key balance sheet metrics to be: (i) Company cash, which includes cash equivalents, marketable securities, and restricted cash (including cash held for sale), excluding Ford Credit’s cash, cash equivalents, marketable securities, and restricted cash; and (ii) Company liquidity, which includes Company cash, less restricted cash, and total available committed credit lines, excluding Ford Credit’s total available committed credit lines.
Company excluding Ford Credit
December 31, 2024
December 31, 2025
Balance Sheets ($B)
Company Cash
Liquidity
Debt (excluding finance leases)
Cash Net of Debt (excluding finance leases)
Pension Funded Status ($B)
Funded Plans
Unfunded Plans
Total Global Pension
Total Funded Status OPEB
Liquidity . Our key priority is to maintain a strong balance sheet to withstand potential stress scenarios, while having resources available to invest in and grow our business. At December 31, 2025, we had Company cash of $28.7 billion and liquidity of $49.8 billion. At December 31, 2025, about 86% of Company cash was held by consolidated entities domiciled in the United States.
To be prepared for an economic downturn and other stress scenarios, we target an ongoing Company cash balance at or above $20 billion plus significant additional liquidity above our Company cash target. We expect to have periods when we will be above or below this amount due to: (i) future cash flow expectations, such as for investments in future business opportunities, capital investments, debt maturities, pension contributions, or restructuring requirements, (ii) short-term timing differences, and (iii) changes in the global economic or operating 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 is adjusted based on market conditions and liquidity needs. We monitor our Company cash levels and average maturity on a daily basis.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Material Cash Requirements. Our material cash requirements may include:
• Capital expenditures (for additional information, see the “Changes in Company Cash” section below) and other payments for engineering, software, product development, and implementation of our plans for electrified products
• Purchases of raw materials and components to support the manufacturing and sale of vehicles (including electrified vehicles), parts, accessories, and payment of tariffs (for additional information, see the description of our “purchase obligations” below)
• Purchases of regulatory compliance credits
• Marketing incentive payments to dealers
• Payments for warranty and field service actions (for additional information, see Note 24 of the Notes to the Financial Statements)
• Debt repayments including finance lease payments (for additional information, see Note 18 of the Notes to the Financial Statements)
• Discretionary and mandatory payments to our global pension plans (for additional information, see the “Liquidity and Capital Resources - Total Company” section below and Note 16 of the Notes to the Financial Statements)
• Employee wages, benefits, and incentives
• Operating lease payments (for additional information, see Note 17 of the Notes to the Financial Statements)
• Cash effects related to the restructuring of our business
• Strategic acquisitions and investments to grow our business, including electrification
Subject to approval by our Board of Directors, shareholder distributions in the form of dividend payments and/or a share repurchase program (including share repurchases to offset the anti-dilutive effect of increased share-based compensation) may require the expenditure of a material amount of cash. We generally target shareholder distributions of 40% to 50% of adjusted free cash flow. Moreover, we may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, e.g., legal contingencies, uncertain tax positions, and other matters.
We are party to many contractual obligations involving commitments to make payments to third parties, and, as noted above, such commitments require a material amount of cash. Most of these are debt obligations incurred by our Ford Credit segment. In addition, as part of our normal business practices, we enter into contracts with suppliers for purchases of certain raw materials, components, and services to facilitate adequate supply of these materials and services. These arrangements, including multi-year offtake commitments, may contain fixed or minimum quantity purchase requirements. We define “purchase obligations” (as used below) as off-balance sheet agreements to purchase goods or services that are enforceable and legally binding on the Company and that specify all significant terms; however, as we purchase raw materials and components beyond the minimum amounts required by the “purchase obligations,” our material cash requirements for these items are higher than what is disclosed below. For additional information on the timing of these payments and the impact on our working capital, see the “Changes in Company Cash” section below. As of December 31, 2025, our purchase obligations include $2.3 billion due in 2026, $3.1 billion due in 2027-2028, $2.2 billion due in 2029-2030, and $1.2 billion due thereafter. This includes regulatory compliance credit purchase commitments but excludes offtake agreements for certain battery raw materials. For additional information on regulatory compliance credit purchases, see page 9 in the “Government Standards” section in “Item 1. Business.” For additional information on our offtake agreements, see the discussion below on page 64.
We plan to utilize our liquidity (as described above) and our cash flows from business operations to fund our material cash requirements.
Item 7. 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; interest on debt; cash taxes; and all other and timing differences (including timing differences between accrual-based EBIT and associated cash flows). Non-operating items include: restructuring costs; changes in Company debt excluding Ford Credit and finance lease payments; contributions to funded pension plans; shareholder distributions; and other items (including gains and losses on investments in equity securities, acquisitions and divestitures, equity investments, and other transactions with Ford Credit).
With respect to “Changes in working capital,” in general, the Company excluding Ford Credit carries relatively low trade receivables compared with our trade payables because the majority of our 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 trade payables are based primarily on industry-standard production supplier payment terms of about 45 days. As a result, our cash flow deteriorates if wholesale volumes (and the corresponding revenue) decrease while trade payables continue to become due. Conversely, our cash flow improves if wholesale volumes (and the corresponding revenue) increase while new trade payables are generally not due for about 45 days. For example, the suspension of production at most of our assembly plants and lower industry volumes due to COVID-19 in early 2020 resulted in an initial deterioration of our cash flow, while the subsequent resumption of manufacturing operations and return to pre-COVID-19 production levels at most of our assembly plants resulted in a subsequent improvement of our cash flow. Disruptions to our production due to supplier shortages or otherwise may have similar cash flow timing impacts. 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 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.
In response to, or in anticipation of, supplier disruptions, we may stockpile certain components or raw materials to help prevent disruption in our production of vehicles. Such actions could have a short-term adverse impact on our cash and increase our inventory. Moreover, in order to secure critical materials to manufacture electrified products, we have entered into and we may, in the future, enter into offtake agreements with raw material suppliers and make investments in certain raw material and battery suppliers. Such investments could have an additional adverse impact on our cash in the near-term.
The terms of the offtake agreements we have entered into, and those we may enter into in the future, vary by transaction, though they generally obligate us to purchase a certain percentage or minimum amount of output produced by the counterparty over an agreed upon period of time. The purchase price mechanisms included in our offtake agreements are typically based on the market price of the material at the time of delivery. The terms also may include conditions to our obligation to purchase the materials, such as quality or minimum output. Subject to satisfaction of those conditions, we will be obligated to purchase the materials or otherwise compensate the supplier in the amount determined by the contract. As of December 31, 2025, our estimated expenditures for the maximum quantity that we are committed to purchase under these offtake agreements through 2035, subject to certain conditions, total approximately $4.7 billion based on our present forecast; however, our forecast could fluctuate from period to period based on market prices, which may result in significant increases or decreases in our estimate. The actual price paid for these materials will be recorded on our balance sheet at the time of purchase. In the event that we do not expect to consume all of the materials we are obligated to purchase pursuant to the terms of these agreements, we may sell the excess materials back to the supplier or another party. The resale price may or may not be the same as the original purchase price, depending on then-current market conditions and negotiated terms. As a result, we have recorded, and may in the future record, accruals related to either the resale when the purchase price mechanism under our agreements is higher than the expected resale price of the excess materials or when we are required to otherwise compensate the supplier. Accruals recorded to date for such items have been immaterial.
As market conditions dictate, we have entered, and may in the future enter, into additional offtake agreements with raw material suppliers or renegotiate existing agreements.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Unlike our standard arrangements with suppliers, under multi-year offtake agreements, the risks associated with lower-than-expected EV production volumes or changes in battery technology that reduce the need for certain raw materials are borne by Ford rather than our suppliers. Accordingly, in the event we do not purchase the materials pursuant to the terms of these agreements, and we are unable to restructure an agreement or an alternate purchaser is unable to be found, Ford retains a financial obligation for those materials. For additional discussion of the risks related to our offtake agreements and other long-term purchase contracts, see “Item 1A. Risk Factors.”
Financial institutions participate in 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 institutions 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 do not provide any guarantees in connection with it. As of December 31, 2025, the outstanding amount of Ford receivables that suppliers elected to sell to the SCF financial institutions was $148 million. The amount settled through the SCF program during 2025 was $1.3 billion.
Changes in Company cash excluding Ford Credit are summarized below (in billions):
December 31, 2023
December 31, 2024
December 31, 2025
Company excluding Ford Credit
Company adjusted EBIT excluding Ford Credit (a)
Capital spending
Depreciation and tooling amortization
Net spending
Receivables
Inventory
Trade payables
Changes in working capital
Ford Credit distributions
Interest on debt and cash taxes
All other and timing differences
Company adjusted free cash flow (a)
Restructuring
Changes in debt excluding finance lease payments
Finance lease payments
Funded pension contributions
Shareholder distributions
All other
Change in cash
(a) See Non-GAAP Financial Measure Reconciliations section for reconciliation to GAAP.
Note: Numbers may not sum due to rounding.
Our full year 2025 Net cash provided by/(used in) operating activities was positive $21.3 billion, an increase of $5.9 billion from a year ago (see page 80 for additional information). The year-over-year increase primarily reflects higher Ford Credit operating cash flows, offset partially by lower net income. Company adjusted free cash flow was $3.5 billion, $3.2 billion lower than a year ago. The year-over-year decrease was primarily driven by lower Company adjusted EBIT excluding Ford Credit and timing differences, offset partially by higher Ford Credit distributions and improved working capital.
Capital spending was $8.7 billion in 2025, $0.1 billion higher than a year ago, and is expected to be in the range of $9.5 billion to $10.5 billion in 2026.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
The full year 2025 working capital impact was negative $0.8 billion, driven by an increase in receivables (including tariff receivables), offset partially by lower inventory. All other and timing differences were positive $3.6 billion. Timing differences include differences between accrual-based EBIT and the associated cash flows (e.g., marketing incentive and warranty payments to dealers, JV equity income, compensation payments, and pension and OPEB income or expense). Cash outflows related to our warranty accruals are expected to occur over several years.
Shareholder distributions were $3.0 billion in 2025, all of which was attributable to our regular and supplemental dividends. On February 2, 2026, we declared a regular dividend of $0.15 per share.
Available Credit Lines . Total Company committed credit lines, excluding Ford Credit, at December 31, 2025 were $23.7 billion, consisting of $13.5 billion of our corporate credit facility, $2.0 billion of our supplemental revolving credit facility, $2.5 billion of our 364-day revolving credit facility, $3.0 billion of our delayed draw term loan facility, and $2.7 billion of local credit facilities. At December 31, 2025, $2.4 billion of committed Company credit lines, excluding Ford Credit, was utilized under local credit facilities for our affiliates, and the full amount under each of our corporate, supplemental, 364-day, and delayed draw term loan credit facilities was available.
Lenders under our corporate credit facility have $3.4 billion of commitments maturing on April 17, 2028 and $10.1 billion of commitments maturing on April 17, 2030. Lenders under our supplemental revolving credit facility have $2.0 billion of commitments maturing on April 17, 2028. Lenders under our 364-day revolving credit facility have $2.5 billion of commitments maturing on April 16, 2026. Lenders under our delayed draw term loan facility have $3.0 billion of commitments available through July 28, 2026. Any unused commitments shall automatically terminate after July 28, 2026, and any loans drawn under the facility will mature on December 31, 2028.
The corporate, supplemental, and 364-day credit agreements include certain sustainability-linked targets, pursuant to which the applicable margin and facility fees may be adjusted if Ford achieves, or fails to achieve, the specified targets related to global manufacturing facility greenhouse gas emissions, carbon-free electricity consumption, and Ford Europe CO 2 tailpipe emissions. For the most recent performance period, Ford outperformed the global manufacturing facility greenhouse gas emissions and carbon-free electricity consumption metrics, and it was on target for the Ford Europe CO 2 tailpipe emissions metric.
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 corporate credit facility, supplemental revolving credit facility, and 364-day revolving credit facility. If our senior, unsecured, long-term debt does not maintain at least two investment grade ratings from Fitch, Moody’s, and S&P, the guarantees of certain subsidiaries will be required. The terms and conditions of the supplemental and 364-day revolving credit facilities and the delayed draw term loan facility are consistent with our corporate credit facility. Ford Credit has been designated as a subsidiary borrower under the corporate credit facility and the 364-day revolving credit facility.
Debt. As shown in Note 18 of the Notes to the Financial Statements, at December 31, 2025, Company debt excluding Ford Credit was $21.9 billion (including $0.9 billion of finance leases). This balance is $1.3 billion higher than at December 31, 2024.
Leverage. We manage Company debt (excluding Ford Credit) levels with a leverage framework that targets investment grade credit ratings through a normal business cycle. 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 separately as described in the “Liquidity and Capital Resources - Ford Credit Segment” section of Item 7. Ford Credit is self-funding and its debt, which is used to fund its operations, is separate from our Company debt excluding Ford Credit.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford Credit Segment
Ford Credit remains well capitalized with a strong balance sheet and funding diversified across platforms and markets. Ford Credit continues to have robust access to capital markets and ended 2025 with $24.6 billion of liquidity.
Key elements of Ford Credit’s funding strategy include:
• Maintain strong liquidity and funding diversity
• Prudently access public markets
• Continue to leverage retail deposits in Europe
• Flexibility to increase asset-backed securities mix as needed; preserving assets and committed capacity
• Target financial statement leverage of 9:1 to 10:1
• Maintain self-liquidating balance sheet
Ford Credit’s liquidity profile continues to be diverse, robust, and focused on maintaining liquidity levels that meet its business and funding requirements. Ford Credit regularly stress tests its balance sheet and liquidity to ensure that it can continue to meet its financial obligations through economic cycles.
Funding Sources. Ford Credit’s funding sources include primarily unsecured debt and securitization transactions (including other structured financings). Ford Credit issues both short-term and long-term debt that is held by both institutional and retail investors, with long-term debt having an original maturity of more than 12 months. Ford Credit sponsors a number of securitization programs that can be structured to provide both short-term and long-term funding through institutional investors and other financial institutions in the United States and international capital markets.
Ford Credit obtains unsecured funding from the sale of demand notes under its Ford Interest Advantage program and through the retail deposit programs at FCE and Ford Bank. At December 31, 2025, the principal amount outstanding of Ford Interest Advantage notes, which may be redeemed at any time at the option of the holders thereof without restriction, and FCE and Ford Bank deposits was $18.5 billion. Ford Credit maintains multiple sources of readily available liquidity to fund the payment of its unsecured short-term debt obligations.
The following table shows funding for Ford Credit’s net receivables (in billions):
December 31, 2023
December 31, 2024
December 31, 2025
Funding Structure
Term unsecured debt
Term asset-backed securities
Retail Deposits / Ford Interest Advantage
Other
Equity
Cash
Total Net Receivables
Securitized Funding as Percent of Total Debt
Net receivables of $146.3 billion at December 31, 2025 were funded primarily with term unsecured debt and term asset-backed securities. Securitized funding as a percent of total debt was 42.0% as of December 31, 2025.
Item 7. 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 2023, 2024, and 2025, and its planned issuances for full year 2026, excluding short-term funding programs (in billions):
Actual
Actual
Actual
Forecast
Unsecured
Securitizations
Total public
In 2025, Ford Credit completed $26 billion of public term funding. For 2026, Ford Credit projects full year public term funding in the range of $24 billion to $30 billion. Through February 9, 2026, Ford Credit completed $6 billion of public term issuances.
Liquidity. The following table shows Ford Credit’s liquidity sources and utilization (in billions):
December 31, 2023
December 31, 2024
December 31, 2025
Liquidity Sources (a)
Cash
Committed asset-backed facilities
Other unsecured credit facilities
Total liquidity sources
Utilization of Liquidity (a)
Securitization cash and restricted cash
Committed asset-backed facilities
Other unsecured credit facilities
Total utilization of liquidity
Available liquidity
Other adjustments
Net liquidity available for use
(a) See Definitions and Information Regarding Ford Credit Causal Factors section.
Ford Credit’s net liquidity available for use will fluctuate quarterly based on factors including near-term debt maturities, receivable growth and decline, and timing of funding transactions. At December 31, 2025, Ford Credit’s net liquidity available for use was $24.6 billion, $0.6 billion lower than year-end 2024. At December 31, 2025, Ford Credit’s liquidity sources, including cash, committed asset-backed facilities, and unsecured credit facilities, totaled $54.4 billion, up $0.5 billion from year-end 2024, primarily explained by higher committed asset-backed facilities.
Material Cash Requirements. Ford Credit’s material cash requirements include: (1) the purchase of retail financing and operating lease contracts from dealers and providing wholesale financing for dealers to finance new and used vehicles; and (2) debt repayments (for additional information on debt, see the “Balance Sheet Liquidity Profile” section below and Note 18 of the Notes to the Financial Statements). In addition, subject to approval by Ford Credit’s Board of Directors, shareholder distributions may require the expenditure of a material amount of cash. Moreover, Ford Credit may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, e.g., legal contingencies, uncertain tax positions, and other matters.
Ford Credit plans to utilize its liquidity (as described above) and its cash flows from business operations to fund its material cash requirements.
Item 7. 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 liquidity available to protect for stress scenarios.
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):
2029 and Beyond
Balance Sheet Liquidity Profile
Assets (a)
Total debt (b)
Memo: Unsecured long-term debt maturities
(a) Includes gross finance receivables less the allowance for credit losses (including certain finance receivables that are reclassified in consolidation to Trade and other receivables ), investment in operating leases net of accumulated depreciation, cash and cash equivalents, and marketable securities (excluding amounts related to insurance activities). Amounts shown include the impact of expected prepayments.
(b) Excludes unamortized debt (discount)/premium, unamortized issuance costs, and fair value adjustments.
Maturities of investment in operating leases consist primarily of the portion of rental payments attributable to depreciation over the remaining life of the lease and the expected residual value at lease termination. Maturities of finance receivables and investment in operating leases in the table above include expected prepayments for Ford Credit’s retail installment sale contracts and investment in operating leases. The table above also reflects adjustments to debt maturities to match the asset-backed debt maturities with the underlying asset maturities.
All wholesale securitization transactions and wholesale receivables are shown maturing in the next 12 months, even if the maturities extend beyond 2026. The retail securitization transactions under certain committed asset-backed facilities are assumed to amortize immediately rather than amortizing after the expiration of the commitment period. As of December 31, 2025, Ford Credit had $163 billion of assets, $83 billion of which were unencumbered.
Funding and Liquidity Risks. Ford Credit’s funding plan is subject to risks and uncertainties, many of which are beyond its control, including disruption in the capital markets that could impact both unsecured debt and asset-backed securities issuance and the effects of regulatory changes on the financial markets.
Despite Ford Credit’s diverse sources of funding and liquidity, its ability to maintain liquidity may be affected by, among others, the following factors (not necessarily listed in order of importance or probability of occurrence):
• Prolonged disruption of the debt and securitization markets
• Global capital markets volatility
• Credit ratings assigned to Ford and Ford Credit
• Market capacity for Ford- and Ford Credit-sponsored investments
• General demand for the type of securities Ford Credit offers
• Ford Credit’s ability to continue funding through asset-backed financing structures
• Performance of the underlying assets within Ford Credit’s asset-backed financing structures
• Inability to obtain hedging instruments
• Accounting and regulatory changes
• Ford Credit’s ability to maintain credit facilities and committed asset-backed facilities
Stress Tests. Ford Credit regularly conducts stress testing on its funding and liquidity sources to ensure it can continue to meet its financial obligations and support the sale of Ford and Lincoln vehicles during firm-specific and market-wide stress events. Stress tests are intended to quantify the potential impact of various adverse scenarios on the balance sheet and liquidity. These scenarios include assumptions on access to unsecured and secured debt markets, runoff of short-term funding, and ability to renew expiring liquidity commitments and are measured over various time periods, including 30 days, 90 days, and longer term. Ford Credit’s stress test does not assume any additional funding, liquidity, or capital support from Ford. Ford Credit routinely develops contingency funding plans as part of its liquidity stress testing.
Item 7. 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 (in billions):
December 31, 2023
December 31, 2024
December 31, 2025
Leverage Calculation
Debt
Equity (a)
Financial statement leverage (to 1)
(a) Total shareholder’s interest reported on Ford Credit’s balance sheets.
Ford Credit plans its leverage by considering market conditions and the risk characteristics of its business. At December 31, 2025, Ford Credit’s financial statement leverage was 9.6:1.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Total Company
Pension and OPEB Plan Funded Status and Contributions
Pension Funded Status ($B)
Funded Plans
Unfunded Plans
Total Global Pension
Total Funded Status OPEB
Our defined benefit pension plans were underfunded by $0.2 billion at December 31, 2025, an improvement of $0.3 billion from December 31, 2024, primarily reflecting 2025 plan contributions offset partially by a remeasurement loss and separation costs. Of the $0.2 billion underfunded status at year-end 2025, our funded plans were $3.7 billion overfunded, in aggregate, and our unfunded plans were $3.9 billion underfunded. There was no change in our funding status of our defined benefit OPEB plans, which remain underfunded by $4.4 billion. These unfunded plans, primarily senior management and OPEB plans, are “pay as you go” with benefits paid from Company cash.
We limit our pension contributions to offset ongoing service cost, ensure our funded plans remain fully funded in aggregate, and meet regulatory requirements, if any. During 2026, we expect to contribute about $550 million to our global funded pension plans. We also expect to make about $400 million of benefit payments to participants in unfunded plans. Based on current assumptions and regulations, we do not expect to have a legal requirement to fund our major U.S. pension plans in 2026. Our global funded plans remain fully funded in aggregate, demonstrating the effectiveness of our de-risking strategy and our commitment to a strong balance sheet.
For a detailed discussion of our pension plans, refer to the “Critical Accounting Estimates - Pensions and Other Postretirement Employee Benefits” section of Item 7 and Note 16 of the Notes to the Financial Statements.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Return on Invested Capital (“ROIC”). We analyze total Company performance using an adjusted ROIC financial metric based on an after-tax rolling four quarter average. The following table contains the calculation of our ROIC for the years shown (in billions):
December 31, 2023
December 31, 2024
December 31, 2025
Adjusted Net Operating Profit/(Loss) After Cash Tax
Net income/(loss) attributable to Ford
Add: Noncontrolling interest
Less: Income tax
Add: Cash tax
Less: Interest on debt
Less: Total pension / OPEB income / (cost)
Add: Pension / OPEB service costs
Net operating profit/(loss) after cash tax
Less: Special items (excl. pension / OPEB) pre-tax
Adjusted net operating profit/(loss) after cash tax
Invested Capital
Equity
Debt (excl. Ford Credit)
Net pension and OPEB liability
Invested capital (end of period)
Average invested capital
ROIC (a)
Adjusted ROIC (Non-GAAP) (b)
(a) Calculated as the sum of net operating profit/(loss) after cash tax from the last four quarters, divided by the average invested capital over the last four quarters.
(b) Calculated as the sum of adjusted net operating profit/(loss) after cash tax from the last four quarters, divided by the average invested capital over the last four quarters.
Note: Numbers may not sum due to rounding.
Item 7. 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.
There have been no rating actions by these NRSROs since the filing of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2025.
The following table summarizes certain of the credit ratings and outlook presently assigned by these four NRSROs:
NRSRO RATINGS
Ford
Ford Credit
NRSROs
Issuer
Default /
Corporate /
Issuer Rating
Long-Term Senior Unsecured
Outlook / Trend
Long-Term Senior Unsecured
Short-Term
Unsecured
Outlook / Trend
Minimum Long-Term Investment Grade Rating
DBRS
BBB (low)
BBB (low)
Stable
BBB (low)
R-2 (low)
Stable
BBB (low)
Fitch
BBB-
BBB-
Stable
BBB-
Stable
BBB-
Moody’s
Stable
Stable
Baa3
BBB-
BBB-
Negative
BBB-
Negative
BBB-
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
OUTLOOK
We provided 2026 Company guidance in our earnings release furnished on Form 8-K dated February 10, 2026. The guidance is based on our expectations as of February 10, 2026, and assumes no material change to our current assumptions for inflation, logistics issues, production, or macroeconomic conditions. Moreover, our guidance has not factored in any new policy changes by the administration in the United States, including future or revised tariffs or related offsets, that have not been announced or tariffs or other policy changes that may be announced by other governments after the date hereof. 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 Part I.
2026 Guidance
Total Company
Adjusted EBIT (a)
$8.0 - $10.0 billion
Adjusted Free Cash Flow (a)
$5.0 - $6.0 billion
(a) When we provide guidance for Adjusted EBIT and Adjusted Free Cash Flow, we do not provide guidance for the most comparable GAAP measures because, as described in more detail below in “Non-GAAP Measures That Supplement GAAP Measures,” they include items that are difficult to predict with reasonable certainty.
For full-year 2026, we expect adjusted EBIT of $8.0 billion to $10.0 billion and adjusted free cash flow of $5.0 billion to $6.0 billion.
On a segment basis we expect:
• Ford Pro EBIT of $6.5 billion to $7.5 billion
• Ford Blue EBIT of $4.0 billion to $4.5 billion
• Ford Model e EBIT loss of $4.0 billion to $4.5 billion
• Ford Credit EBT of about $2.5 billion
Our outlook for 2026 assumes:
• U.S. SAAR of 16.0 million to 16.5 million
• Flat U.S. industry pricing
• With respect to Novelis, in 2025, the fires were a headwind of $2 billion. In 2026, we expect a year-over-year improvement of about $1.0 billion, which includes $1.5 billion to $2.0 billion of temporary costs, including tariffs, attributable to continuity in aluminum supply
• Excluding the impact of Novelis:
◦ Positive market factors, including favorable mix associated with the sunset of low-margin nameplates and benefits from changes in the U.S. regulatory environment
◦ About flat cost–We expect lower tariff costs of about $1.0 billion, reflecting a full year’s worth of credit expansion, and further material and warranty cost reductions. We expect these lower costs to offset about $1.0 billion of higher commodity prices, driven by inflation, and incremental investment in support of our Universal EV platform, the ramp of Ford Energy, and cycle plan actions
Item 7. 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’s long-term success depends on delivering the Ford+ plan, including improving cost competitiveness;
• Ford’s products have been and could continue to be affected by defects that result in recall campaigns, increased warranty costs, or delays in new model launches, and the time it takes to improve the quality of our products and services and reduce the costs associated therewith could continue to have an adverse effect on our business;
• Ford is highly dependent on its suppliers to deliver components in accordance with Ford’s production schedule and specifications, and a shortage of or inability to timely acquire key components or raw materials has previously disrupted and may, in the future, disrupt Ford’s operations;
• Ford’s production, as well as Ford’s suppliers’ production, and/or the ability to deliver products to consumers could be disrupted by labor issues, public health issues, natural or man-made disasters, adverse effects of climate change, financial distress, production difficulties, capacity limitations, or other factors;
• Ford may not realize the anticipated benefits of existing or pending strategic alliances, joint ventures, acquisitions, divestitures, commercial relationships, or business strategies or the benefits may take longer than expected to materialize;
• Ford may not realize the anticipated benefits of restructuring actions and such actions may cause Ford to incur significant charges, disrupt our operations, or harm our reputation;
• Failure to develop and deploy secure digital services that appeal to customers, retain existing subscribers, and grow our subscription rates could have a negative impact on Ford’s business;
• Ford’s ability to maintain a competitive cost structure could be affected by labor or other constraints;
• Ford’s ability to attract, develop, grow, support, and reward talent is critical to its success and competitiveness;
• Operational information systems, security systems, products, and services could be affected by cybersecurity incidents, ransomware attacks, and other disruptions and impact Ford, Ford Credit, their suppliers, and dealers;
• To facilitate access to the raw materials and other components necessary for the manufacture of electrified products, Ford has entered into and may, in the future, enter into multi-year commitments to raw material and other suppliers that subject Ford to risks associated with lower future demand for such items as well as costs that fluctuate and are difficult to accurately forecast;
• With a global footprint and supply chain, Ford’s results and operations have been and could continue to be adversely affected by economic or geopolitical developments, including protectionist trade policies such as tariffs, or other events;
• Ford’s new and existing products and digital, software, and physical services are subject to market acceptance and face significant competition from existing and new entrants in the automotive and digital and software services industries, and Ford’s reputation may be harmed based on positions it takes or if it is unable to achieve the initiatives it has announced;
• Ford may face increased price competition for its products and services, including pricing pressure resulting from industry excess capacity, currency fluctuations, competitive actions, legal and policy changes, or economic or other factors, particularly for electrified vehicles;
• Inflationary pressure and fluctuations in commodity and energy prices, foreign currency exchange rates, interest rates, and market value of Ford or Ford Credit’s investments, including marketable securities, can have a significant effect on results;
• Ford’s results are dependent on sales of larger, more profitable vehicles, particularly in the United States;
• Industry sales volume can be volatile and could decline if there is a financial crisis, recession, public health emergency, or significant geopolitical event;
• The impact of government incentives on Ford’s business has been and could continue to be significant, and Ford’s receipt of government incentives could be subject to reduction, termination, or clawback;
• 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, asset portfolios, or other factors;
• Ford Credit could experience higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles;
• Economic and demographic experience for pension and OPEB 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 and Ford Credit have experienced and could continue to experience unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, services, perceived environmental impacts, or otherwise;
• Ford may need to substantially modify its product plans and facilities to respond to shifting consumer sentiment and competitive dynamics as a result of policy changes affecting, or otherwise to comply with, safety, emissions, fuel economy, autonomous driving technology, environmental, and other regulations;
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
• Ford and Ford Credit could be affected by the continued development of more stringent privacy, data use, data protection, data access, and artificial intelligence laws and regulations as well as consumers’ heightened expectations to safeguard their personal information; and
• Ford Credit could be subject to new or increased credit regulations, consumer protection regulations, or other regulations.
We cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake, and expressly disclaim to the extent permitted by law, 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” above.
Item 7. 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 operating results and trends, and a means to compare 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 (excluding Ford Credit Debt), taxes, and pre-tax special items. This non-GAAP measure is useful to management and investors because it focuses on underlying operating results and trends, and improves comparability of our period-over-period results. Our management 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
Significance Guideline
∘ Pension and OPEB remeasurement gains and losses
∘ No minimum
∘ Personnel expenses, supplier- and dealer-related costs, and facility-related charges stemming from our efforts to match production capacity and cost structure to market demand and changing model mix
∘ Generally $100 million or more
∘ Other items that we do not generally consider to be indicative of earnings from ongoing operating activities
∘ $500 million or more for individual field service actions; generally $100 million or more for other items
• Company Adjusted EBIT Margin (Most Comparable GAAP Measure: Company Net Income/(Loss) Margin) – Company adjusted EBIT margin is Company adjusted EBIT divided by Company revenue. This non-GAAP measure is useful to management and investors because it allows users to evaluate our operating results aligned with industry reporting.
• Adjusted Earnings/(Loss) Per Share (Most Comparable GAAP Measure: Earnings/(Loss) Per Share) – Measure of Company’s diluted net earnings/(loss) per share adjusted for impact of pre-tax special items (described above), tax special items, and restructuring impacts in noncontrolling interests. The measure provides investors with useful information to evaluate performance of our business excluding items not indicative of earnings from ongoing 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.
• 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 Company excluding Ford Credit capital spending, Ford Credit distributions to its parent, and settlement of derivatives. The measure excludes cash outflows for funded pension contributions, restructuring actions, 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.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
• Adjusted ROIC – Calculated as the sum of adjusted net operating profit/(loss) 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/(loss) after cash tax measures operating results less special items, interest on debt (excluding Ford Credit Debt), and certain pension/OPEB costs. Average invested capital is the sum of average balance sheet equity, debt (excluding Ford Credit Debt), and net pension/OPEB liability.
When we provide guidance for adjusted EBIT, adjusted earnings/(loss) per share, and adjusted effective tax rate, we do not provide guidance for their respective most comparable GAAP measures as those GAAP measures will include potentially significant special items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-end, including gains and losses on pension and OPEB remeasurement, and other items that are difficult to quantify. When we provide guidance for Company adjusted free cash flow, we do not provide guidance for its most comparable GAAP measure (net cash provided by/(used in) operating activities) as the GAAP measure will include items that are difficult to quantify or predict with reasonable certainty, including cash flows related to the Company’s exposures to foreign currency exchange rates and certain commodity prices (separate from any related hedges), Ford Credit's operating cash flows, and cash flows related to special items, including separation payments, each of which individually or in the aggregate could have a significant impact to our net cash provided by/(used in) our operating activities.
Item 7. 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.
Net Income/(Loss) Reconciliation to Adjusted EBIT ($M)
Net income/(loss) attributable to Ford (GAAP)
Income/(Loss) attributable to noncontrolling interests
Net income/(loss)
Less: (Provision for)/Benefit from income taxes
Income/(Loss) before income taxes
Less: Special items pre-tax
Income/(Loss) before special items pre-tax
Less: Interest on debt
Adjusted EBIT (Non-GAAP)
Memo:
Revenue ($B)
Net income/(loss) margin (%)
Adjusted EBIT margin (%)
Earnings/(Loss) per Share Reconciliation to Adjusted Earnings/(Loss) per Share
Diluted After-Tax Results ($M)
Diluted after-tax results (GAAP)
Less: Impact of pre-tax and tax special items (a)
Adjusted net income/(loss) - diluted (Non-GAAP)
Basic and Diluted Shares (M)
Basic shares (average shares outstanding)
Net dilutive options, unvested restricted stock units, unvested restricted stock shares, and convertible debt
Diluted shares
Earnings/(Loss) per share - diluted (GAAP) (b)
Less: Net impact of adjustments
Adjusted earnings per share - diluted (Non-GAAP)
(a) Includes adjustment for noncontrolling interest in 2023.
(b) In 2025, there were 56 million shares excluded from the GAAP calculation of diluted earnings/(loss) per share due to their anti-dilutive effect.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Effective Tax Rate Reconciliation to Adjusted Effective Tax Rate
Pre-Tax Results ($M)
Income/(Loss) before income taxes (GAAP)
Less: Impact of special items
Adjusted earnings before taxes (Non-GAAP)
Taxes ($M)
(Provision for)/Benefit from income taxes (GAAP) (a)
Less: Impact of special items
Adjusted (provision for)/benefit from income taxes (Non-GAAP)
Tax Rate (%)
Effective tax rate (GAAP) (a)
Adjusted effective tax rate (Non-GAAP)
(a) 2023 reflects benefits from U.S. research tax credits and legal entity restructuring within our leasing operations and China.
Net Cash Provided by/(Used in) Operating Activities Reconciliation to Company Adjusted Free Cash Flow ($M)
Net cash provided by/(used in) operating activities (GAAP)
Less: Items not included in company adjusted free cash flows
Ford Credit operating cash flows
Funded pension contributions
Restructuring (including separations) (a)
Ford Credit tax payments/(refunds) under tax sharing agreement
Other, net
Add: Items included in company adjusted free cash flows
Company excluding Ford Credit capital spending
Ford Credit distributions
Settlement of derivatives
Company adjusted free cash flow (Non-GAAP)
(a) Restructuring excludes cash flows reported in investing activities.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
2025 SUPPLEMENTAL INFORMATION
The tables below provide supplemental consolidating financial information and other financial information. Company excluding Ford Credit includes our Ford Blue, Ford Model e, and Ford Pro reportable segments, Corporate Other, Interest on Debt, and Special Items. Eliminations, where presented, primarily represent eliminations of intersegment transactions and deferred tax netting.
Selected Income Statement Information. The following table provides supplemental income statement information (in millions):
For the Year Ended December 31, 2025
Company excluding Ford Credit
Ford Credit
Consolidated
Revenues
Total costs and expenses
Operating income/(loss)
Interest expense on Company debt excluding Ford Credit
Other income/(loss), net
Equity in net income/(loss) of affiliated companies
Income/(Loss) before income taxes
Provision for/(Benefit from) income taxes
Net income/(loss)
Less: Income/(Loss) attributable to noncontrolling interests
Net income/(loss) attributable to Ford Motor Company
Item 7. 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):
December 31, 2025
Assets
Company excluding
Ford Credit
Ford Credit
Eliminations
Consolidated
Cash and cash equivalents
Marketable securities
Ford Credit finance receivables, net
Trade and other receivables, net
Inventories
Other assets
Receivable from other segments
Total current assets
Ford Credit finance receivables, net
Net investment in operating leases
Net property
Equity in net assets of affiliated companies
Deferred income taxes
Other assets
Total assets
Liabilities
Payables
Other liabilities and deferred revenue
Company excluding Ford Credit debt payable within one year
Ford Credit debt payable within one year
Payable to other segments
Total current liabilities
Other liabilities and deferred revenue
Company excluding Ford Credit long-term debt
Ford Credit long-term debt
Deferred income taxes
Total liabilities
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Selected Cash Flow Information. The following tables provide supplemental cash flow information (in millions):
For the Year Ended December 31, 2025
Cash flows from operating activities
Company excluding Ford Credit
Ford Credit
Eliminations
Consolidated
Net income/(loss)
Depreciation and tooling amortization
Other amortization
EV asset impairment/program cancellation asset write-downs (including depreciation of $8,140)
Provision for credit and insurance losses
Pension and OPEB expense/(income)
Equity method investment (earnings)/losses and impairments in excess of dividends received
Foreign currency adjustments
Net realized and unrealized (gains)/losses on cash equivalents, marketable securities, and other investments
Stock compensation
Provision for/(Benefit from) deferred income taxes
Decrease/(Increase) in finance receivables (wholesale and other)
Decrease/(Increase) in intersegment receivables/payables
Decrease/(Increase) in accounts receivable and other assets
Decrease/(Increase) in inventory
Increase/(Decrease) in accounts payable and accrued and other liabilities
Other
Interest supplements and residual value support to Ford Credit
Net cash provided by/(used in) operating activities
Cash flows from investing activities
Capital spending
Acquisitions of finance receivables and operating leases
Collections of finance receivables and operating leases
Purchases of marketable securities and other investments
Sales and maturities of marketable securities and other investments
Settlements of derivatives
Capital contributions to equity method investments
Returns of capital from equity method investments
Other
Investing activity (to)/from other segments
Net cash provided by/(used in) investing activities
Cash flows from financing activities
Cash payments for dividends and dividend equivalents
Purchases of common stock
Net changes in short-term debt
Proceeds from issuance of long-term debt
Payments on long-term debt
Other
Financing activity to/(from) other segments
Net cash provided by/(used in) financing activities
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Selected Other Information.
Equity. At December 31, 2024, total equity attributable to Ford was $44.8 billion, an increase of $2.1 billion compared with December 31, 2023. At December 31, 2025, total equity attributable to Ford was $36.0 billion, a decrease of $8.9 billion compared with December 31, 2024. The detail for the changes is shown below (in billions):
Increase/(Decrease)
Increase/(Decrease)
Net income/(loss)
Shareholder distributions (a)
Other comprehensive income/(loss)
Common stock issued (including share-based compensation impacts)
Total
(a) Includes cash dividends, dividend equivalents, and anti-dilutive share repurchases.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
CRITICAL ACCOUNTING ESTIMATES
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors. In addition, there are other items within our financial statements that require estimation, but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.
Warranties and Field Service Actions
Nature of Estimates Required. We provide base warranties on the products we sell for specific periods of time and/or mileage, which vary depending upon the type of product and the geographic location of its sale. Separately, we also periodically perform field service actions related to safety recalls, emission recalls, and other product campaigns. Software updates are increasingly a component of vehicle service and may be performed during warranty coverage repairs, through field service actions, or through over-the-air updates. We accrue the estimated cost of both base warranty coverages and field service actions at the time of sale. 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.
Assumptions and Approach Used. We establish our estimate of base warranty obligations using a patterned estimation model. We use historical information regarding the nature, frequency, and average cost of claims for each vehicle line by model year. We reevaluate our estimate of base warranty obligations on a quarterly basis. Experience has shown that initial data for any given model year may be volatile; therefore, our process relies on long-term historical averages until sufficient data are available. With actual experience, we use the data to update the historical averages. We then compare the resulting accruals with present spending rates to assess whether the balances are adequate to meet expected future obligations. Based on this data, we update our estimates as necessary.
Field service actions may occur in periods beyond the base warranty coverage period. We establish our estimates of field service action obligations using a patterned estimation model. We use historical information regarding the nature, frequency, severity, and average cost of claims for each model year. We assess our obligation for field service actions on a regular basis using actual claims experience and update our estimates as necessary.
We disclose our estimate of reasonably possible costs in excess of our accruals for material field service actions and customer satisfaction actions. The estimate we provide is presented on a gross cost basis, and we do not reduce or net our estimate to eliminate any unrealized profit Ford may earn associated with part sales to dealers.
Due to the uncertainty and potential volatility of the factors used in establishing our estimates, changes in our assumptions could materially affect our financial condition and results of operations. See Note 24 of the Notes to the Financial Statements for information regarding warranty and field service action costs.
Pensions and Other Postretirement Employee Benefits
Nature of Estimates Required. The estimation of our defined benefit pension and OPEB plan obligations and expenses requires that we utilize the calculated present value of the projected future payments to all participants, taking into consideration valuation assumptions specific to each plan. Plan obligations and expenses are based on existing retirement plan provisions. No assumption is made regarding any potential future changes to benefit provisions beyond those to which we are presently committed (e.g., in existing labor contracts).
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Assumptions and Approach Used. The assumptions used in developing the required estimates include the following key factors:
• Discount rates. Our discount rate assumptions are based primarily on the results of cash flow matching analyses, which match the future cash outflows for each major plan to a yield curve based on high-quality bonds specific to the country of the plan. Benefit payments are discounted at the rates on the curve to determine the year-end obligations.
• Expected long-term rate of return on plan assets. Our expected long-term rate of return considers inputs from a range of advisors for capital market returns, adjusted for specific aspects of our investment strategy by plan. Historical returns also are considered when appropriate. The assumption is based on consideration of all inputs, with a focus on long-term trends to avoid short-term market influences.
• Salary growth. Our salary growth assumption reflects our actual experience, long-term outlook, and assumed inflation.
• Inflation. Our inflation assumption is based on an evaluation of external market indicators, including real gross domestic product growth and central bank inflation targets.
• Retirement rates. Retirement rates are developed to reflect actual and projected plan experience.
• Mortality rates. Mortality rates are developed to reflect actual and projected plan experience.
• Health care cost trends . Our health care cost trend assumptions are developed based on historical cost data, the near-term outlook, and an assessment of likely long-term trends.
• Expected contributions. Our expected amount and timing of contributions are based on an assessment of minimum requirements, cash availability, and other considerations (e.g., funded status, avoidance of regulatory premiums and levies, and tax efficiency).
Assumptions are set at each year-end and are generally not changed during the year unless there is a major plan event, such as a curtailment or settlement that would trigger a plan remeasurement.
See Note 16 of the Notes to the Financial Statements for more information regarding pension and OPEB costs and assumptions.
Pension Plans
Effect of Actual Results . The year-end 2025 weighted average discount rate was 5.34% for U.S. plans and 4.80% for non-U.S. plans, reflecting a decrease of 31 basis points and an increase of 29 basis points, respectively, compared with year-end 2024. Lower discount rates increased the valuations of U.S. plans, while higher discount rates decreased the valuations of non-U.S. plans. In 2025, the U.S. actual return on assets was 9.37%, which was higher than the expected long-term rate of return of 6.37%. Non-U.S. actual return on assets was 0.30%, which was lower than the expected long-term rate of return of 5.23%. The combination of lower discount rates and higher asset returns for our U.S. plans and higher discount rates and lower asset returns for our non-U.S. plans had offsetting effects and minimal impact to our net remeasurement. In 2025, we recorded a remeasurement loss of $616 million. For U.S. plans, the remeasurement loss was primarily from actuarial losses compared to plan assumptions. For non-U.S. plans, the remeasurement loss was from changes in key measurement assumptions, primarily improved life expectancy. This loss has been recognized within net periodic benefit cost and reported as a special item.
For 2026, the expected long-term rate of return on assets is 6.20% for U.S. plans, down 17 basis points from 2025, and 5.15% for non-U.S. plans, down 8 basis points compared with a year ago, reflecting lower expected capital market return assumptions.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
De-risking Strategy . We employ a broad de-risking strategy for our global funded plans that increases the matching characteristics of our assets relative to our obligation as funded status improves. Changes in interest rates, which directly influence changes in discount rates, in addition to other factors, have a significant impact on the value of our pension obligation and fixed income asset portfolio. Our de-risking strategy has increased the allocation to fixed income investments and reduced our funded status sensitivity to changes in interest rates. Changes in interest rates should result in offsetting effects in the value of our pension obligation and the value of the fixed income asset portfolio. Additionally, we aim to:
• Limit our pension contributions to offset ongoing service cost, ensure our funded plans remain fully funded in aggregate, and to meet regulatory requirements, if any;
• Ensure sufficient liquid assets to pay plan benefits; and
• Evaluate strategic actions to reduce pension liabilities, such as plan design changes or pension risk transfers to insurers
The fixed income mix was 79% in our U.S. plans and 86% in our non-U.S. plans at year-end 2025.
Sensitivity Analysis. The December 31, 2025 pension funded status and 2026 expense are affected by year-end 2025 assumptions. Sensitivities to these assumptions may be asymmetric and are specific to the time periods noted. The effects of changes in the factors that generally have the largest impact on year-end funded status and pension expense are discussed below.
Discount rates and interest rates have the largest impact on our obligations and fixed income assets. The table below estimates the effect on our funded status of an increase/decrease in discount rates and interest rates (in millions):
Basis
Point Change
Increase/(Decrease) in
December 31, 2025 Funded Status
Factor
U.S. Plans
Non-U.S. Plans
Discount rate - obligation
+/- 100 bps
Interest rate - fixed income assets
Net impact on funded status
The fixed income asset sensitivity shown excludes other fixed income return components (e.g., changes in credit spreads, bond coupon and active management excess returns), and growth asset returns. Other factors that affect net funded status (e.g., contributions) are not reflected.
Interest rates and the expected long-term rate of return on assets have the largest effect on pension expense. These assumptions are generally set at each year-end for expense recorded throughout the following year. The table below estimates the effect on pension expense of a higher/lower assumption for these factors (in millions):
Basis
Point Change
Increase/(Decrease) in
2026 Pension Expense
Factor
U.S. Plans
Non-U.S. Plans
Interest rate - service cost and interest cost
+/- 25 bps
Expected long-term rate of return on assets
The effect of changing multiple factors simultaneously cannot be calculated by combining the individual sensitivities. The sensitivity of pension expense to a change in discount rate assumptions may not be linear.
Other Postretirement Employee Benefits
Effect of Actual Results . The weighted average discount rate used to determine the benefit obligation for worldwide OPEB plans at December 31, 2025 was 5.27%, compared with 5.46% at December 31, 2024, resulting in a minimal impact to our worldwide remeasurement. The $19 million gain has been recognized within net periodic benefit cost and reported as a special item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Sensitivity Analysis. Discount rates and interest rates have the largest effect on our OPEB obligation and expense. The table below estimates the effect on 2026 OPEB expense of higher/lower assumptions for these factors (in millions):
Worldwide OPEB
Basis
Point Change
(Increase)/Decrease
2025 YE Obligation
Increase/(Decrease)
2026 Expense
Factor
Discount rate - obligation
+/- 100 bps
Interest rate - service cost and interest cost
Income Taxes
Nature of Estimates Required. We must make estimates and apply judgment in determining the provision for income taxes for financial reporting purposes. We make these estimates and judgments primarily in the following areas: (i) the calculation of tax credits, (ii) the calculation of differences in the timing of recognition of revenue and expense for tax reporting and financial statement purposes, and (iii) the calculation of interest and penalties related to uncertain tax positions.
Assumptions and Approach Used. We are subject to the income tax laws and regulations of the many jurisdictions in which we operate. These tax laws and regulations are complex and involve uncertainties in the application to our facts and circumstances that may be open to interpretation. We recognize benefits for these uncertain tax positions based upon a process that requires judgment regarding the technical application of laws, regulations, and various related judicial opinions. If, in our judgment, it is more likely than not (defined as a likelihood of more than 50%) that the uncertain tax position will be settled favorably for us, we estimate an amount that ultimately will be realized. This process is inherently subjective since it requires our assessment of the probability of future outcomes. We evaluate these uncertain tax positions on a quarterly basis, including consideration of changes in facts and circumstances, such as new regulations or recent judicial opinions, as well as the status of audit activities by taxing authorities.
We must also assess the likelihood that we will be able to recover our deferred tax assets against future sources of taxable income and reduce the carrying amount of deferred tax assets by recording a valuation allowance if, based on all available evidence, it is more likely than not that all or a portion of such assets will not be realized.
This assessment, which is completed on a taxing jurisdiction basis, takes into account various types of evidence, including the following:
• Nature, frequency, and severity of current and cumulative financial reporting losses. A pattern of objectively measured recent financial reporting losses is heavily weighted as a source of negative evidence. We generally consider cumulative pre-tax losses in the three-year period ending with the current quarter to be significant negative evidence regarding future profitability. We also consider the strength and trend of earnings, as well as other relevant factors. In certain circumstances, historical information may not be as relevant due to changes in our business operations;
• Sources of future taxable income. Future reversals of existing temporary differences are heavily weighted sources of objectively verifiable positive evidence. Projections of future taxable income exclusive of reversing temporary differences are a source of positive evidence only when the projections are combined with a history of recent profits and can be reasonably estimated. Otherwise, these projections are considered inherently subjective and generally will not be sufficient to overcome negative evidence that includes relevant cumulative losses in recent years, particularly if the projected future taxable income is dependent on an anticipated turnaround to profitability that has not yet been achieved. In such cases, we generally give these projections of future taxable income no weight for the purposes of our valuation allowance assessment; and
• Tax planning strategies. If necessary and available, tax planning strategies could be implemented to accelerate taxable amounts to utilize expiring carryforwards. These strategies would be a source of additional positive evidence and, depending on their nature, could be heavily weighted.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
In assessing the realizability of deferred tax assets, we consider the trade-offs between cash preservation and cash outlays to preserve tax credits. We presently believe that global valuation allowances of $628 million are required and that we ultimately will recover the remaining $20.6 billion of deferred tax assets. However, realization of our deferred tax assets is impacted by a number of variables, including future profitability within relevant tax jurisdictions, tax law changes, and tax planning and the related effects on our cash and liquidity position. Accordingly, our valuation allowances may increase or decrease in future periods.
For additional information regarding income taxes, see Note 7 of the Notes to the Financial Statements.
Impairment of Long-Lived Assets and Goodwill
Asset groups are tested at the lowest level for which identifiable cash flows are largely independent of the cash flows from other assets or groups of assets. Asset groups are reevaluated when events occur, such as changes in organizational structure and management reporting. Our asset groups for 2025 were: Ford Blue North America, Ford Blue Europe, Ford Blue Rest of World, Ford Model e, Ford Pro, and Ford Credit.
Nature of Estimates Required - Held-and-Used Long-Lived Assets. We test our long-lived asset groups when changes in circumstances indicate their carrying value may not be recoverable. Events that trigger a test for recoverability include:
• Material adverse changes in projected revenues or expenses, present negative cash flows combined with a history of negative cash flows and a forecast that demonstrates significant continuing losses
• Adverse change in legal factors or significant negative industry or regulatory trends (such as overcrowding of market offerings or changes in regulations, resulting in excess capacity relative to market demand)
• Current expectation that a long-lived asset group will be disposed of significantly before the end of its useful life
• Significant adverse change in the manner in which an asset group is used or in its physical condition
• Significant change in the asset group
In addition, investing in new or emerging products or services often requires substantial upfront capital, which may result in initial forecasted negative cash flows in the near term. In these instances, near-term negative cash flows on their own may not be indicative of a triggering event for evaluation of impairment. In such circumstances, when appropriate, we may also conduct a qualitative evaluation of the business growth trajectory, which can include updating our assessment of when positive cash flows are expected to be generated, confirming whether critical milestones have been achieved, and assessing our ability and intent to continue to access required funding to execute the plan. If this evaluation indicates a triggering event has occurred, a test for recoverability is performed.
When a triggering event occurs, a test for recoverability is performed, comparing projected undiscounted future cash flows to the carrying value of the asset group. If the undiscounted future cash flows are less than the carrying value of the assets, the asset group’s estimated fair value is measured by calculating the present value of the discounted cash flows or by valuing our long-lived assets using the market approach or cost approach. An impairment charge is recognized for the amount by which the carrying value of the asset group exceeds its estimated fair value. When an impairment loss is recognized for assets to be held and used, the adjusted carrying amounts of those assets are depreciated over their remaining useful lives.
Nature of Estimates Required - Goodwill . Goodwill is subject to periodic assessments for impairment. We test goodwill for impairment annually during the fourth quarter, or when an event occurs or circumstances change that indicate goodwill may be impaired. We assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If a qualitative assessment identifies a possible impairment or we impair the assets of a reporting unit, then a quantitative goodwill impairment test is performed. If the carrying value of the reporting unit is above fair value, an impairment charge is recognized in an amount equal to the excess.
Assumptions and Approach Used - Held-and-Used Long-Lived Assets and Goodwill. The fair value of an asset group is determined from the perspective of a market participant. Considerations include valuation techniques, the most advantageous market, and assumptions about the highest and best use of the asset group, and appropriate discount rates.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Fair value reflects the price that would be received to sell an asset in an orderly transaction between market participants. The most appropriate method to determine the estimated fair value of an asset group depends on the facts and circumstances pertaining to the asset group being measured, and in certain instances, we may engage third parties to assist with the determination of fair value. We measure the fair value of an asset group based on market prices (i.e., the amount for which the asset could be sold to a third party) when available. When market prices are not available, we estimate the fair value of an asset group using the income approach, a market approach and/or a cost approach. The income approach uses cash flow projections. Inherent in our development of cash flow projections are assumptions and estimates derived from a review of our operating results, business plan forecasts, expected growth rates, and cost of capital, similar to those a market participant would use to assess fair value. We also make certain assumptions about future economic conditions and other data. Many of the factors used in assessing fair value are outside the control of management, and these assumptions and estimates may change in future periods.
Changes in assumptions or estimates can materially affect the fair value of an asset group, and, therefore, can affect test results. The following are key assumptions we use in making cash flow projections:
• Business projections. We make assumptions about the demand for our products in the marketplace. These
assumptions drive our planning assumptions for volume, mix, and pricing. We also make assumptions about our cost levels (e.g., capacity utilization, cost performance). These projections are derived using our internal business plan forecasts that are updated at least annually and reviewed by our Board of Directors.
• Long-term growth rate. A growth rate is used to calculate the terminal value of the business and is added to the present value of the debt-free cash flows. The growth rate is the expected rate at which an asset group’s earnings stream is projected to grow beyond the planning period.
• Discount rate. When measuring possible impairment, future cash flows are discounted at a rate that is consistent with a weighted-average cost of capital that we anticipate a potential market participant would use. Weighted-average cost of capital is an estimate of the overall risk-adjusted pre-tax rate of return expected by equity and debt holders of a business enterprise.
• Economic projections. Assumptions regarding general economic conditions are included in and affect our assumptions regarding industry sales and pricing estimates for our vehicles. These macroeconomic assumptions include, but are not limited to, industry sales volumes, inflation, interest rates, prices of raw materials (e.g., commodities), and foreign currency exchange rates.
The market approach is another method for measuring the fair value of an asset group. This approach relies on the market value (i.e., market capitalization) of companies that are engaged in the same or a similar line of business as the asset group being evaluated. It may also use prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of assets and liabilities, such as a business. The cost approach may also be used to measure the fair value of an asset group. The cost approach reflects the amount that would be required currently to replace the service capacity of an asset (often referred to as current replacement cost). The cost approach must also consider assumptions related to functional and economic obsolescence and marketability of the assets, and also considers factors such as replacement cost, reproduction cost, physical deterioration, age, and remaining useful life. In addition, to the extent available, we may also consider third-party valuations that have been prepared for other business purposes.
Model e Impairment. Despite challenges in the EV market, through the third quarter of 2025, Model e continued to make progress in the following areas, leading the company to conclude that an impairment trigger had not occurred:
• U.S. and EU EV sales were projected to continue to grow over the long term
• The Company continued to invest in next generation products
• Prior business plans indicated significant cash flow improvement by 2028
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
However, during the fourth quarter of 2025, we determined that a triggering event requiring us to test Model e long-lived assets and goodwill for impairment occurred based on the convergence of several events, including:
• Lower-than-anticipated industrywide EV adoption rates due to changes in consumer sentiment, competitive dynamics, legal and policy changes, and, in the last several months, significant developments in vehicle pricing dynamics
• The negative effect on EV adoption rates due to the termination of U.S. tax credits intended to incentivize the purchase of EVs
• Potentially significant relaxations in the stringency of federal emissions and fuel economy standards and federal legislation that eliminates the authority of California and other states to implement and enforce their more stringent emissions standards and zero-emission vehicle sales requirements that may further disrupt the market for EVs in the United States
• Our decision in December to rationalize our EV manufacturing capacity and product roadmap, including cancelling three previously planned EV product programs (a full-size pickup, a commercial van for the United States, and a commercial van for Europe) and ending production of the current generation F-150 Lightning EV
The challenges facing the EV market led us to conclude that a path to long-term profitability for our EV business was not possible without taking the strategic actions described above. As a result, we performed a recoverability test of the Model e asset group and concluded that its carrying value exceeded its fair value. We primarily used the market and cost approaches to estimate fair value for our long-lived assets, and we used the income approach to test goodwill. We subsequently recorded an impairment charge, including goodwill, of $8.4 billion during the fourth quarter.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
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 Ford Credit’s 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 statements and the allowance for credit losses contained within Ford Credit finance receivables, net on our consolidated balance sheets. See Note 10 of the Notes to the Financial Statements for more information regarding allowance for credit losses.
Nature of Estimates Required. Ford Credit estimates the allowance for credit losses for receivables that share similar risk characteristics based on a collective assessment using a combination of measurement models and management judgment. The models consider factors such as historical trends in credit losses, recent portfolio performance, and forward-looking macroeconomic conditions. The models vary by portfolio and receivable type including consumer finance receivables, wholesale loans, and dealer loans. If Ford Credit does not believe the models reflect lifetime expected credit losses for the portfolio, an adjustment is made to reflect management judgment regarding qualitative factors, including economic uncertainty, observable changes in portfolio performance, and other relevant factors.
Assumptions Used. Ford Credit’s allowance for credit losses is based on its assumptions regarding:
• Probability of default . The expected probability of payment and time to default, which include assumptions about macroeconomic factors and recent performance.
• Loss given default. The percentage of the expected balance due at default that is not recoverable. The loss given default takes into account expected collateral value and future recoveries.
Macroeconomic factors used in Ford Credit’s models are country specific and include variables such as unemployment rates, personal bankruptcy filings, housing prices, and gross domestic product.
Sensitivity Analysis. Changes in the probability of default and loss given default assumptions 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 retail financing portfolio at December 31, 2025 is as follows (in millions):
Assumption
Basis Point Change
Increase/(Decrease) in Allowance for Credit Losses
Probability of default (lifetime)
+/- 100 bps
Loss given default
Accumulated Depreciation on Vehicles Subject to Operating Leases
Accumulated depreciation on vehicles subject to operating leases reduces the value of the leased vehicles in Ford Credit’s operating lease portfolio from their original acquisition value to their expected residual value at the end of the lease term.
Ford Credit monitors residual values each month, and it reviews the adequacy of accumulated depreciation on a quarterly basis. If Ford Credit believes that the expected residual values for its vehicles have changed, it revises depreciation to ensure that net investment in operating leases (equal to the acquisition value of the vehicles less accumulated depreciation) will be adjusted to reflect Ford Credit’s revised estimate of the expected residual value at the end of the lease term. Adjustments to depreciation expense result in a change in the depreciation rates of the vehicles subject to operating leases and are recorded prospectively on a straight-line basis.
Generally, lease customers have the option to buy the leased vehicle at the end of the lease or to return the vehicle to the dealer.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Nature of Estimates Required. Each operating lease in Ford Credit’s portfolio represents a vehicle it owns that has been leased to a customer. At the time Ford Credit purchases a lease from a dealer, it establishes an expected residual value for the vehicle. Ford Credit estimates the expected residual value by evaluating recent auction values, return volumes for Ford Credit’s leased vehicles, industrywide used vehicle prices, marketing incentive plans, and vehicle quality data and benchmarks to third-party data depending on availability. Similar factors are considered in the third-party data Ford Credit uses to revise its estimate of the expected residual value during the lease term.
Assumptions Used. Ford Credit’s accumulated depreciation on vehicles subject to operating leases is based on assumptions regarding:
• Auction value. Ford Credit’s projection of the market value of the vehicles when sold at the end of the lease; and
• Return volume. Ford Credit’s projection of the number of vehicles that will be returned at lease-end.
See Note 12 of the Notes to the Financial Statements for more information regarding accumulated depreciation on vehicles subject to operating leases.
Sensitivity Analysis. For returned vehicles, Ford Credit faces a risk that the amount it obtains from the vehicle sold at auction will be less than its estimate of the expected residual value for the vehicle. The impact of the change in assumptions on future auction values and return volumes would increase or decrease accumulated supplemental depreciation and depreciation expense over the remaining terms of the operating leases; however, the impact may be tempered or exacerbated based on future auction values in relation to the purchase price specified in the lease contract. A change in the assumption for an auction value will impact Ford Credit’s estimate of accumulated supplemental depreciation if the future auction value is lower than the purchase price specified in the lease contract. The effect of the indicated increase/decrease in the assumptions for Ford Credit’s U.S. Ford and Lincoln brand operating lease portfolio at December 31, 2025 is as follows (in millions):
Assumption
Basis Point
Change
Increase/(Decrease) in Projected Lifetime Depreciation
Future auction values
+/- 100 bps
Return volumes
Adjustments to the amount of accumulated supplemental depreciation on operating leases are reflected on our balance sheets as Net investment in operating leases and on our income statements in Ford Credit interest, operating, and other expenses.
ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED
For a discussion of recent accounting standards, see Note 3 of the Notes to the Financial Statements.
