UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

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

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

For the transition period from __________ to __________

Commission file number 1-3950

Ford Motor Company

(Exact name of Registrant as specified in its charter)



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

One American Road
Dearborn,	Michigan	48126
(Address of principal executive offices)		(Zip code)

313-322-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	F	New York Stock Exchange
6.200% Notes due June 1, 2059	FPRB	New York Stock Exchange
6.000% Notes due December 1, 2059	FPRC	New York Stock Exchange

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

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

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

Large Accelerated Filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

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

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

As of ~~April~~July 24, 2020, Ford had outstanding ~~3,906,187,867~~3,907,536,920 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit Index begins on page

FORD MOTOR COMPANY

QUARTERLY REPORT ON FORM 10-Q

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



	Table of Contents	Page
	Part I - Financial Information
Item 1	Financial Statements	1
	Consolidated ~~Statement~~Statements of Cash Flows	1
	Consolidated Income ~~Statement~~Statements	2
	Consolidated ~~Statement~~Statements of Comprehensive Income	2
	Consolidated Balance ~~Sheet~~Sheets	3
	Consolidated ~~Statement~~Statements of Equity	4
	Notes to the Financial Statements	5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3435
	Recent Developments	3435
	Results of Operations	36
	Automotive Segment	38
	Mobility Segment	44
	Ford Credit Segment	45
	Corporate Other	48
	Interest on Debt	48
	Taxes	48
	Liquidity and Capital Resources	49
	Credit Ratings	58
	Outlook	59
	Cautionary Note on Forward-Looking Statements	60
	Non-GAAP Financial Measures That Supplement GAAP Measures	61
	Non-GAAP Financial Measure Reconciliations	63
	Supplemental Information	66
	Critical Accounting Estimates	70
	Accounting Standards Issued But Not Yet Adopted	70
Item 3	Quantitative and Qualitative Disclosures About Market Risk	71
Item 4	Controls and Procedures	71

	Part II - Other Information
Item 1	Legal Proceedings	72
Item 1A	Risk Factors	73
Item 6	Exhibits	74
	Signature	75

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CASH FLOWS

(in millions)


	For the periods ended March 31,						For the periods ended June 30,
	2019			2020			2019			2020
	First Quarter						First Half
	(unaudited)						(unaudited)
Cash flows from operating activities
Net income/(loss)	$	1,183		$	(1,993	)	$	1,333		$	(875	)
Depreciation and tooling amortization	2,429			2,444			4,988			4,802
Other amortization	(287		)	(302		)	(587		)	(590		)
Held-for-sale impairment charges	—			3			—			18
Provision for credit and insurance losses	43			598			166			779
Pension and other post-retirement employee benefits (“OPEB”) expense/(income)	(18		)	(178		)	123			(454		)
Equity investment dividends received in excess of (earnings)/losses	17			118			21			169
Foreign currency adjustments	(49		)	338			(92		)	113
Net (gain)/loss on changes in investments in affiliates	(3		)	(15		)	(2		)	(3,480		)
Stock compensation	85			38			169			107
Provision for deferred income taxes	221			702			200			655
Decrease/(Increase) in finance receivables (wholesale and other)	(1,813		)	(1,080		)	715			9,772
Decrease/(Increase) in accounts receivable and other assets	(237		)	39			(962		)	220
Decrease/(Increase) in inventory	(1,083		)	(1,177		)	(1,180		)	66
Increase/(Decrease) in accounts payable and accrued and other liabilities	2,944			194			4,929			(2,485		)
Other	112			(202		)	186			(175		)
Net cash provided by/(used in) operating activities	3,544			(473		)	10,007			8,642

Cash flows from investing activities
Capital spending	(1,633		)	(1,780		)	(3,553		)	(2,955		)
Acquisitions of finance receivables and operating leases	(12,595		)	(12,184		)	(26,202		)	(27,113		)
Collections of finance receivables and operating leases	12,336			12,709			24,974			22,923
Proceeds from sale of business (Note 17)	—			1,340			—			1,340
Purchases of marketable securities and other investments	(3,923		)	(8,244		)	(7,670		)	(19,624		)
Sales and maturities of marketable securities and other investments	4,441			4,998			8,540			10,804
Settlements of derivatives	(14		)	131			83			73
Other	54			(84		)	4			337
Net cash provided by/(used in) investing activities	(1,334		)	(3,114		)	(3,824		)	(14,215		)

Cash flows from financing activities
Cash payments for dividends and dividend equivalents	(597		)	(596		)	(1,196		)	(596		)
Purchases of common stock	—			—			—			—
Net changes in short-term debt	420			(622		)	71			(789		)
Proceeds from issuance of long-term debt	15,411			26,691			26,233			44,303
Principal payments on long-term debt	(13,277		)	(12,948		)	(25,767		)	(23,345		)
Other	(84		)	(71		)	(149		)	(182		)
Net cash provided by/(used in) financing activities	1,873			12,454			(808		)	19,391

Effect of exchange rate changes on cash, cash equivalents, and restricted cash	29			(448		)	24			(378		)

Net increase/(decrease) in cash, cash equivalents, and restricted cash	$	4,112		$	8,419		$	5,399		$	13,440

Cash, cash equivalents, and restricted cash at beginning of period (Note 7)	$	16,907		$	17,741		$	16,907		$	17,741
Net increase/(decrease) in cash, cash equivalents, and restricted cash	4,112			8,419			5,399			13,440
Cash, cash equivalents, and restricted cash at end of period (Note 7)	$	21,019		$	26,160		$	22,306		$	31,181

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED INCOME ~~STATEMENT~~STATEMENTS

(in millions, except per share amounts)


	For the periods ended March 31,					For the periods ended June 30,
	2019		2020			2019		2020			2019		2020
	First Quarter					Second Quarter					First Half
	(unaudited)					(unaudited)
Revenues
Automotive	$	37,239	$	31,340		$	35,758	$	16,622		$	72,997	$	47,962
Ford Credit	3,097		2,967			3,089		2,739			6,186		5,706
Mobility	6		13			6		10			12		23
Total revenues (Note 3)	40,342		34,320			38,853		19,371			79,195		53,691

Costs and expenses
Cost of sales	33,942		30,522			33,657		17,932			67,599		48,454
Selling, administrative, and other expenses	2,843		2,432			2,725		1,965			5,568		4,397
Ford Credit interest, operating, and other expenses	2,355		2,924			2,381		2,233			4,736		5,157
Total costs and expenses	39,140		35,878			38,763		22,130			77,903		58,008
Operating income/(loss)	1,202		(1,558		)	90		(2,759		)	1,292		(4,317		)

Interest expense on Automotive debt	231		214			230		439			461		653
Interest expense on Other debt	14		13			14		11			28		24

Other income/(loss), net (Note 4)	628		680			272		4,318			900		4,998
Equity in net income/(loss) of affiliated companies	25		(41		)	87		(25		)	112		(66		)
Income/(Loss) before income taxes	1,610		(1,146		)	205		1,084			1,815		(62		)
Provision for/(Benefit from) income taxes	427		847			55		(34		)	482		813
Net income/(loss)	1,183		(1,993		)	150		1,118			1,333		(875		)
Less: Income/(Loss) attributable to noncontrolling interests	37		—			2		1			39		1
Net income/(loss) attributable to Ford Motor Company	$	1,146	$	(1,993	)	$	148	$	1,117		$	1,294	$	(876	)

EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 6)
Basic income/(loss)	$	0.29	$	(0.50	)	$	0.04	$	0.28		$	0.33	$	(0.22	)
Diluted income/(loss)	0.29		(0.50		)	0.04		0.28			0.32		(0.22		)

Weighted-average shares used in computation of earnings per share
Basic shares	3,973		3,963			3,984		3,975			3,979		3,969
Diluted shares	3,997		3,963			4,013		3,992			4,005		3,969

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


	For the periods ended March 31,						For the periods ended June 30,
	2019			2020			2019			2020			2019			2020
	First Quarter						Second Quarter						First Half
	(unaudited)						(unaudited)
Net income/(loss)	$	1,183		$	(1,993	)	$	150		$	1,118		$	1,333		$	(875	)
Other comprehensive income/(loss), net of tax (Note 18)
Foreign currency translation	243			(1,453		)	(127		)	(102		)	116			(1,555		)
Marketable securities	63			14			59			99			122			113
Derivative instruments	(446		)	692			117			(24		)	(329		)	668
Pension and other postretirement benefits	5			14			16			17			21			31
Total other comprehensive income/(loss), net of tax	(135		)	(733		)	65			(10		)	(70		)	(743		)
Comprehensive income/(loss)	1,048			(2,726		)	215			1,108			1,263			(1,618		)
Less: Comprehensive income/(loss) attributable to noncontrolling interests	37			—			2			1			39			1
Comprehensive income/(loss) attributable to Ford Motor Company	$	1,011		$	(2,726	)	$	213		$	1,107		$	1,224		$	(1,619	)

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE ~~SHEET~~SHEETS

(in millions)


	December 31, 2019			March 31, 2020			December 31, 2019			June 30, 2020
	(unaudited)						(unaudited)
ASSETS
Cash and cash equivalents (Note 7)	$	17,504		$	25,971		$	17,504		$	30,989
Marketable securities (Note 7)	17,147			20,399			17,147			26,141
Ford Credit finance receivables, net of allowance for credit losses of $162 and $389 (Note 8)	53,651			54,889
Trade and other receivables, less allowances of $63 and $72	9,237			6,625
Ford Credit finance receivables, net of allowance for credit losses of $162 and $396 (Note 8)							53,651			42,720
Trade and other receivables, less allowances of $63 and $75							9,237			9,107
Inventories (Note 9)	10,786			11,312			10,786			10,220
Assets held for sale (Note 17)	2,383			700			2,383			720
Other assets	3,339			4,380			3,339			4,214
Total current assets	114,047			124,276			114,047			124,111

Ford Credit finance receivables, net of allowance for credit losses of $351 and $842 (Note 8)	53,703			51,141
Ford Credit finance receivables, net of allowance for credit losses of $351 and $889 (Note 8)							53,703			53,987
Net investment in operating leases	29,230			28,514			29,230			27,716
Net property	36,469			35,294			36,469			35,276
Equity in net assets of affiliated companies	2,519			2,275			2,519			4,651
Deferred income taxes	11,863			10,922			11,863			11,066
Other assets	10,706			11,728			10,706			12,559
Total assets	$	258,537		$	264,150		$	258,537		$	269,366

LIABILITIES
Payables	$	20,673		$	18,439		$	20,673		$	16,360
Other liabilities and deferred revenue (Note 12)	22,987			22,674			22,987			20,792
Automotive debt payable within one year (Note 14)	1,445			1,609			1,445			2,084
Ford Credit debt payable within one year (Note 14)	52,371			51,303			52,371			53,260
Other debt payable within one year (Note 14)	130			—			130			—
Liabilities held for sale (Note 17)	526			469			526			284
Total current liabilities	98,132			94,494			98,132			92,780

Other liabilities and deferred revenue (Note 12)	25,324			25,105			25,324			25,391
Automotive long-term debt (Note 14)	13,233			28,411			13,233			37,409
Ford Credit long-term debt (Note 14)	87,658			85,533			87,658			82,007
Other long-term debt (Note 14)	470			470			470			470
Deferred income taxes	490			439			490			454
Total liabilities	225,307			234,452			225,307			238,511

EQUITY
Common Stock, par value $.01 per share (4,023 million shares issued of 6 billion authorized)	40			40
Common Stock, par value $.01 per share (4,025 million shares issued of 6 billion authorized)							40			40
Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized)	1			1			1			1
Capital in excess of par value of stock	22,165			22,150			22,165			22,210
Retained earnings	20,320			17,527			20,320			18,645
Accumulated other comprehensive income/(loss) (Note 18)	(7,728		)	(8,461		)	(7,728		)	(8,471		)
Treasury stock	(1,613		)	(1,607		)	(1,613		)	(1,601		)
Total equity attributable to Ford Motor Company	33,185			29,650			33,185			30,824
Equity attributable to noncontrolling interests	45			48			45			31
Total equity	33,230			29,698			33,230			30,855
Total liabilities and equity	$	258,537		$	264,150		$	258,537		$	269,366


The following table includes assets to be used to settle liabilities of the consolidated variable interest entities (“VIEs”). These assets and liabilities are included in the consolidated balance sheet above.
The following table includes assets to be used to settle liabilities of the consolidated variable interest entities (“VIEs”). These assets and liabilities are included in the consolidated balance sheets above.					The following table includes assets to be used to settle liabilities of the consolidated variable interest entities (“VIEs”). These assets and liabilities are included in the consolidated balance sheets above.
	December 31, 2019		March 31, 2020		December 31, 2019		June 30, 2020
	(unaudited)				(unaudited)
ASSETS
Cash and cash equivalents	$	3,202	$	2,549	$	3,202	$	3,204
Ford Credit finance receivables, net	58,478		54,038		58,478		49,806
Net investment in operating leases	14,883		14,410		14,883		14,462
Other assets	12		1		12		1
LIABILITIES
Other liabilities and deferred revenue	$	19	$	110	$	19	$	94
Debt	50,865		48,379		50,865		45,908

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF EQUITY

(in millions, unaudited)


	Equity Attributable to Ford Motor Company																							Equity Attributable to Ford Motor Company
	Capital Stock		Cap. In Excess of Par Value of Stock			Retained Earnings			Accumulated Other Comprehensive Income/(Loss) (Note 18)			Treasury Stock			Total			Equity Attributable to Non-controlling Interests			Total Equity			Capital Stock		Cap. In Excess of Par Value of Stock			Retained Earnings			Accumulated Other Comprehensive Income/(Loss) (Note 18)			Treasury Stock			Total			Equity Attributable to Non-controlling Interests			Total Equity
Balance at December 31, 2018	$	41	$	22,006		$	22,668		$	(7,366	)	$	(1,417	)	$	35,932		$	34		$	35,966		$	41	$	22,006		$	22,668		$	(7,366	)	$	(1,417	)	$	35,932		$	34		$	35,966
Adoption of accounting standards	—		—			13			—			—			13			—			13			—		—			13			—			—			13			—			13
Net income	—		—			1,146			—			—			1,146			37			1,183			—		—			1,146			—			—			1,146			37			1,183
Other comprehensive income/(loss), net	—		—			—			(135		)	—			(135		)	—			(135		)	—		—			—			(135		)	—			(135		)	—			(135		)
Common stock issued (a)	—		20			—			—			—			20			—			20			—		20			—			—			—			20			—			20
Treasury stock/other	—		—			—			—			23			23			(35		)	(12		)	—		—			—			—			23			23			(35		)	(12		)
Dividends and dividend equivalents declared ($0.15 per share) (b)	—		—			(601		)	—			—			(601		)	—			(601		)	—		—			(601		)	—			—			(601		)	—			(601		)
Balance at March 31, 2019	$	41	$	22,026		$	23,226		$	(7,501	)	$	(1,394	)	$	36,398		$	36		$	36,434		$	41	$	22,026		$	23,226		$	(7,501	)	$	(1,394	)	$	36,398		$	36		$	36,434
Net income																								—		—			148			—			—			148			2			150
Other comprehensive income/(loss), net																								—		—			—			65			—			65			—			65
Common stock issued (a)																								—		85			—			—			—			85			—			85
Treasury stock/other																								—		—			—			—			6			6			1			7
Dividends and dividend equivalents declared ($0.15 per share) (b)																								—		—			(605		)	—			—			(605		)	—			(605		)
Balance at June 30, 2019																								$	41	$	22,111		$	22,769		$	(7,436	)	$	(1,388	)	$	36,097		$	39		$	36,136

																								Equity Attributable to Ford Motor Company
																								Capital Stock		Cap. In Excess of Par Value of Stock			Retained Earnings			Accumulated Other Comprehensive Income/(Loss) (Note 18)			Treasury Stock			Total			Equity Attributable to Non-controlling Interests			Total Equity
Balance at December 31, 2019	$	41	$	22,165		$	20,320		$	(7,728	)	$	(1,613	)	$	33,185		$	45		$	33,230		$	41	$	22,165		$	20,320		$	(7,728	)	$	(1,613	)	$	33,185		$	45		$	33,230
Adoption of accounting standards	—		—			(202		)	—			—			(202		)	—			(202		)	—		—			(202		)	—			—			(202		)	—			(202		)
Net income/(loss)	—		—			(1,993		)	—			—			(1,993		)	—			(1,993		)	—		—			(1,993		)	—			—			(1,993		)	—			(1,993		)
Other comprehensive income/(loss), net	—		—			—			(733		)	—			(733		)	—			(733		)	—		—			—			(733		)	—			(733		)	—			(733		)
Common stock issued (a)	—		(15		)	—			—			—			(15		)	—			(15		)	—		(15		)	—			—			—			(15		)	—			(15		)
Treasury stock/other	—		—			—			—			6			6			3			9			—		—			—			—			6			6			3			9
Dividends and dividend equivalents declared ($0.15 per share) (b)	—		—			(598		)	—			—			(598		)	—			(598		)	—		—			(598		)	—			—			(598		)	—			(598		)
Balance at March 31, 2020	$	41	$	22,150		$	17,527		$	(8,461	)	$	(1,607	)	$	29,650		$	48		$	29,698		$	41	$	22,150		$	17,527		$	(8,461	)	$	(1,607	)	$	29,650		$	48		$	29,698
Net income/(loss)																								—		—			1,117			—			—			1,117			1			1,118
Other comprehensive income/(loss), net																								—		—			—			(10		)	—			(10		)	—			(10		)
Common stock issued (a)																								—		60			—			—			—			60			—			60
Treasury stock/other																								—		—			—			—			6			6			(18		)	(12		)
Dividends and dividend equivalents declared																								—		—			1			—			—			1			—			1
Balance at June 30, 2020																								$	41	$	22,210		$	18,645		$	(8,471	)	$	(1,601	)	$	30,824		$	31		$	30,855

__________


(a)	Includes impacts of share-based compensation.


(b)	Dividends and dividend equivalents declared for Common and Class B Stock.

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents



Footnote		Page
Note 1	Presentation	6
Note 2	New Accounting Standards	7
Note 3	Revenue	8
Note 4	Other Income/(Loss)	9
Note 5	Income Taxes	9
Note 6	Capital Stock and Earnings Per Share	910
Note 7	Cash, Cash Equivalents, and Marketable Securities	10
Note 8	Ford Credit Finance Receivables and Allowance for Credit Losses	14
Note 9	Inventories	20
Note 10	Other Investments	20
Note 11	Goodwill	20
Note 12	Other Liabilities and Deferred Revenue	20
Note 13	Retirement Benefits	21
Note 14	Debt	22
Note 15	Derivative Financial Instruments and Hedging Activities	23
Note 16	Employee Separation Actions and Exit and Disposal Activities	25
Note 17	Held-for-Sale Operations and Changes in Investments in Affiliates	26
Note 18	Accumulated Other Comprehensive Income/(Loss)	2829
Note 19	Commitments and Contingencies	2930
Note 20	Segment Information	32
~~Note 21~~	~~Subsequent Event~~	33

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION

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

In the opinion of management, these unaudited financial statements reflect a fair statement of our results of operations and financial condition for the periods, and at the dates, presented. The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K Report”).

Global Pandemic

On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment and mitigation measures. ~~Since then,~~As a result, extraordinary actions ~~have been~~were taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world. These actions ~~include~~included travel bans, quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. Although restrictions have been eased in many locations, some areas that had previously eased restrictions have reverted to more stringent limitations on daily activities.

Consistent with the actions taken by governmental authorities, inby late March 2020, we had idled all of our significant manufacturing operations in regions around the ~~world, other than China, where~~world. By May 2020, we restarted manufacturing operations ~~were suspended~~ in ~~January and February, but began resuming operations~~a phased manner at locations around the world. We have since returned to pre-COVID-19 production levels in ~~March. In addition, nearly all of our non-production employees outside of China are currently working remotely in order to reduce the spread of COVID-19.~~several major markets.

~~To ensure~~Our results include adjustments to our assets and liabilities made due to the ~~Company maintains sufficient cash reserves while taking these unprecedented actions in our operations,~~impact of COVID-19, the most significant of which were a valuation allowance on ~~March 19,~~certain deferred tax assets of $228 million and $1.1 billion for the second quarter and first half of 2020, ~~we announced the suspension of our regular quarterly dividend and fully drew our corporate and supplemental revolving credit facilities for $15.4 billion~~respectively (see Note ~~14). To further enhance our liquidity,~~5), and a charge to the provision for credit losses on ~~April 22,~~Ford Credit’s finance receivables of $46 million and $532 million during the second quarter and first half of 2020, ~~we issued in the aggregate $8 billion of three-year, five-year, and ten-year public, unsecured debt securities~~respectively (see Note ~~21)~~8). Our assessments of the effect of COVID-19 on our financial statements, including estimates, are based on a variety of factors and are subject to many uncertainties.

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

Our first quarter 2020 results include various adjustments to our assets and liabilities made due to the impact of COVID-19, the most significant of which were a valuation allowance of $855 million on certain deferred tax assets (see Note 5), a charge of $486 million to the provision for credit losses on Ford Credit’s finance receivables (see Note 8), and approximately $100 million of adjustments to net realizable value for certain assets to account for declines in auction values. Our assessments of the effect of COVID-19 on our financial statements, including estimates, are based on a variety of factors and are subject to many uncertainties.

Although the potential magnitude and duration of the business and economic impacts of COVID-19 are uncertain, we believe the phased restart of our manufacturing plants, supply network, and other dependent functions is probable of commencing in the second quarter of 2020. We believe this, along with our cash on hand at March 31, 2020, funds received in April 2020 in connection with our unsecured debt offering, and management's operating plan, will provide sufficient liquidity to fund our operations for at least the next twelve months from the issuance of these financial statements. If we experience a significant delay in the phased restart of our manufacturing operations, or we are unable to maintain expected levels of production, we may take additional actions, such as further reducing costs or seeking additional financing.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards

Accounting Standards Update (“ASU”) 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments. On January 1, 2020, we adopted the new credit loss standard and all of the related amendments, which replaced the incurred loss impairment method with a method that reflects lifetime expected credit losses. We adopted the changes in accounting for credit losses by recognizing the cumulative effect of initially applying the new credit loss standard as an adjustment to the opening balance of Retained earnings. The comparative information has not been restated and continues to be reported under the accounting standard in effect for those periods.

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



	Balance at December 31, 2019		Adjustments due to ASU 2016-13			Balance at January 1, 2020
Assets
Ford Credit finance receivables, net, current	$	53,651	$	(69	)	$	53,582
Trade and other receivables, net	9,237		(3		)	9,234
Ford Credit finance receivables, net, non-current	53,703		(183		)	53,520
Equity in net assets of affiliated companies	2,519		(7		)	2,512
Deferred income taxes	11,863		2			11,865
Liabilities
Deferred income taxes	490		(58		)	432
Equity
Retained earnings	20,320		(202		)	20,118

ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. On April 1, 2020, we adopted the new standard, which provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform (e.g., discontinuation of LIBOR) if certain criteria are met. As of June 30, 2020, we have not yet elected any optional expedients provided in the standard. We will apply the accounting relief as relevant contract and hedge accounting relationship modifications are made during the reference rate reform transition period. We do not expect the standard to have a material impact on our consolidated financial statements.

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



ASU		Effective Date
2020-01	Clarifying the Interaction between Equity Securities, Equity Method and Joint Ventures, and Derivatives and Hedging	January 1, 2020
2018-18	Clarifying the Interaction between Collaborative Arrangements and Revenue from Contracts with Customers	January 1, 2020
2018-15	Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract	January 1, 2020

Accounting Standards Issued But Not Yet Adopted

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. REVENUE

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


	First Quarter 2019								Second Quarter 2019
	Automotive		Mobility		Ford Credit		Consolidated		Automotive		Mobility		Ford Credit		Consolidated
Vehicles, parts, and accessories	$	35,576	$	—	$	—	$	35,576	$	34,235	$	—	$	—	$	34,235
Used vehicles	1,020		—		—		1,020		842		—		—		842
Extended service contracts	333		—		—		333		348		—		—		348
Other revenue	213		6		51		270		219		6		55		280
Revenues from sales and services	37,142		6		51		37,199		35,644		6		55		35,705

Leasing income	97		—		1,477		1,574		114		—		1,472		1,586
Financing income	—		—		1,528		1,528		—		—		1,521		1,521
Insurance income	—		—		41		41		—		—		41		41
Total revenues	$	37,239	$	6	$	3,097	$	40,342	$	35,758	$	6	$	3,089	$	38,853

	First Quarter 2020								Second Quarter 2020
	Automotive		Mobility		Ford Credit		Consolidated		Automotive		Mobility		Ford Credit		Consolidated
Vehicles, parts, and accessories	$	29,841	$	—	$	—	$	29,841	$	15,406	$	—	$	—	$	15,406
Used vehicles	931		—		—		931		533		—		—		533
Extended service contracts	364		—		—		364		346		—		—		346
Other revenue	146		13		41		200		252		10		44		306
Revenues from sales and services	31,282		13		41		31,336		16,537		10		44		16,591

Leasing income	58		—		1,459		1,517		85		—		1,401		1,486
Financing income	—		—		1,425		1,425		—		—		1,261		1,261
Insurance income	—		—		42		42		—		—		33		33
Total revenues	$	31,340	$	13	$	2,967	$	34,320	$	16,622	$	10	$	2,739	$	19,371

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

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

									First Half 2020
									Automotive		Mobility		Ford Credit		Consolidated
Vehicles, parts, and accessories									$	45,247	$	—	$	—	$	45,247
Used vehicles									1,464		—		—		1,464
Extended service contracts									710		—		—		710
Other revenue									398		23		85		506
Revenues from sales and services									47,819		23		85		47,927

Leasing income									143		—		2,860		3,003
Financing income									—		—		2,686		2,686
Insurance income									—		—		75		75
Total revenues									$	47,962	$	23	$	5,706	$	53,691

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. REVENUE (Continued)

The amount of consideration we receive and revenue we recognize on our vehicles, parts, and accessories varies with changes in return rights and marketing incentives we offer to our customers and their customers. Estimates of marketing incentives are based on expected retail and fleet sales volumes, mix of products to be sold, and incentive programs to be offered. Customer acceptance of products and programs, as well as other market conditions, will impact these estimates. As a result of changes in our estimate of marketing incentives, we recorded a decrease in revenue of $350 million in the second quarter of 2019 and an increase in revenue of $48 million in the second quarter of 2020 related to revenue recognized in prior ~~periods of $481 million and $885 million in the~~ ~~first quarter~~ of 2019 and 2020, respectively. The change in estimate for the first quarter of 2020 includes additional marketing incentives offered to customers in connection with market conditions affected by the COVID-19 pandemic.periods.

We sell separately-priced service contracts that extend mechanical and maintenance coverages beyond our base warranty agreements to vehicle owners (“extended service contracts”). We had a balance of $4.2 billion and ~~$4.1~~$4 billion of unearned revenue associated with outstanding contracts reported in Other liabilities and deferred revenue at December 31, 2019 and ~~March 31,~~June 30, 2020, respectively. We expect to recognize approximately ~~$1 billion~~$600 million of the unearned amount in the remainder of 2020, $1.1 billion in 2021, and $2$2.3 billion thereafter. We recognized $~~305~~285 million and ~~$330~~$276 million of unearned amounts as revenue during the second quarter of 2019 and 2020, respectively, and $590 million and $606 million in the first ~~quarter~~half of 2019 and 2020, respectively.

Amounts paid to dealers to obtain these contracts are deferred and recorded as Other assets. We had a balance of $270 million and ~~$280~~$276 million in deferred costs as of December 31, 2019 and ~~March 31,~~June 30, 2020, respectively. We recognized ~~$19~~$20 million and ~~$20~~$19 million of amortization during the ~~first~~second quarter of 2019 and 2020, ~~respectively.~~respectively, and $39 million in the first half of both 2019 and 2020.

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

~~FORD MOTOR COMPANY AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

NOTE 4. OTHER INCOME/(LOSS)

The amounts included in Other income/(loss), net for the periods ended ~~March 31~~June 30 were as follows (in millions):


	First Quarter						Second Quarter						First Half
	2019			2020			2019			2020			2019			2020
Net periodic pension and OPEB income/(cost), excluding service cost	$	272		$	451		$	111		$	544		$	383		$	995
Investment-related interest income	203			162			207			122			410			284
Interest income/(expense) on income taxes	(20		)	(23		)	(1		)	12			(21		)	(11		)
Realized and unrealized gains/(losses) on cash equivalents, marketable securities, and other investments	67			(32		)	(187		)	47			(120		)	15
Gains/(Losses) on changes in investments in affiliates(a)	3			15			(1		)	3,465			2			3,480
Gains/(Losses) on extinguishment of debt							(53		)	(1		)	(53		)	(1		)
Royalty income	84			89			108			94			192			183
Other	19			18			88			35			107			53
Total	$	628		$	680		$	272		$	4,318		$	900		$	4,998

__________


(a)	See Note 17 for additional information relating to our Argo AI, LLC (“Argo AI”) and Volkswagen AG (“VW”) transaction.

NOTE 5. INCOME TAXES

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

~~During the first quarter of 2020, based~~Based on all available evidence, we established ~~an $855 million~~a valuation allowance against certain net operating losses and tax credits of $228 million and $1.1 billion during the second quarter and first half of 2020, respectively, as it is more likely than not that these deferred tax assets will not be realized. In assessing the realizability of deferred tax assets, we have changed our priorities due to the effects of COVID-19 on our operations. We ~~are currently prioritizing~~continue to balance preservation of ~~near-term~~ cash ~~in-lieu of~~against long-term tax planning actions ~~which~~that could have resulted in cash outlays to preserve some of our tax credits.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. CAPITAL STOCK AND EARNINGS PER SHARE

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

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


	First Quarter					Second Quarter				First Half
	2019		2020			2019		2020		2019		2020
Basic and Diluted Income/(Loss) Attributable to Ford Motor Company
Basic income/(loss)	$	1,146	$	(1,993	)	$	148	$	1,117	$	1,294	$	(876	)
Diluted income/(loss)	1,146		(1,993		)	148		1,117		1,294		(876		)

Basic and Diluted Shares
Basic shares (average shares outstanding)	3,973		3,963			3,984		3,975		3,979		3,969
Net dilutive options, unvested restricted stock units, and unvested restricted stock shares (a)	24		—			29		17		26		—
Diluted shares	3,997		3,963			4,013		3,992		4,005		3,969

__________


(a)	Not included in the calculation of diluted earnings per share, due to their antidilutive effect, are 3025 million shares for the first ~~quarter~~half of 2020.

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

~~FORD MOTOR COMPANY AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

NOTE 7. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

Cash Equivalents

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

Marketable Securities

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

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

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

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


		December 31, 2019									December 31, 2019
	Fair Value Level	Automotive		Mobility		Ford Credit		Consolidated		Fair Value Level	Automotive		Mobility		Ford Credit		Consolidated
Cash and cash equivalents
U.S. government	1	$	520	$	—	$	—	$	520	1	$	520	$	—	$	—	$	520
U.S. government agencies	2	125		—		—		125		2	125		—		—		125
Non-U.S. government and agencies	2	601		—		350		951		2	601		—		350		951
Corporate debt	2	642		—		604		1,246		2	642		—		604		1,246
Total marketable securities classified as cash equivalents		1,888		—		954		2,842			1,888		—		954		2,842
Cash, time deposits, and money market funds		6,432		117		8,113		14,662			6,432		117		8,113		14,662
Total cash and cash equivalents		$	8,320	$	117	$	9,067	$	17,504		$	8,320	$	117	$	9,067	$	17,504

Marketable securities
U.S. government	1	$	2,930	$	—	$	195	$	3,125	1	$	2,930	$	—	$	195	$	3,125
U.S. government agencies	2	1,548		—		210		1,758		2	1,548		—		210		1,758
Non-U.S. government and agencies	2	4,217		—		2,408		6,625		2	4,217		—		2,408		6,625
Corporate debt	2	4,802		—		193		4,995		2	4,802		—		193		4,995
Equities (a)	1	81		—		—		81		1	81		—		—		81
Other marketable securities	2	273		—		290		563		2	273		—		290		563
Total marketable securities		$	13,851	$	—	$	3,296	$	17,147		$	13,851	$	—	$	3,296	$	17,147

Restricted cash		$	15	$	21	$	139	$	175		$	15	$	21	$	139	$	175

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

		March 31, 2020									June 30, 2020
	Fair Value Level	Automotive		Mobility		Ford Credit		Consolidated		Fair Value Level	Automotive		Mobility		Ford Credit		Consolidated
Cash and cash equivalents
U.S. government	1	$	3,150	$	—	$	825	$	3,975	1	$	4,307	$	—	$	1,568	$	5,875
U.S. government agencies	2	3,024		—		200		3,224		2	1,950		—		825		2,775
Non-U.S. government and agencies	2	795		—		378		1,173		2	1,578		—		1,352		2,930
Corporate debt	2	480		—		598		1,078		2	719		—		992		1,711
Total marketable securities classified as cash equivalents		7,449		—		2,001		9,450			8,554		—		4,737		13,291
Cash, time deposits, and money market funds		8,799		95		7,627		16,521			9,540		57		8,101		17,698
Total cash and cash equivalents		$	16,248	$	95	$	9,628	$	25,971		$	18,094	$	57	$	12,838	$	30,989

Marketable securities
U.S. government	1	$	4,772	$	—	$	294	$	5,066	1	$	6,879	$	—	$	1,924	$	8,803
U.S. government agencies	2	3,985		—		160		4,145		2	5,118		—		410		5,528
Non-U.S. government and agencies	2	3,787		—		1,520		5,307		2	3,451		—		2,215		5,666
Corporate debt	2	5,094		—		199		5,293		2	5,358		—		223		5,581
Equities (a)	1	41		—		—		41		1	49		—		—		49
Other marketable securities	2	267		—		280		547		2	250		—		264		514
Total marketable securities		$	17,946	$	—	$	2,453	$	20,399		$	21,105	$	—	$	5,036	$	26,141

Restricted cash		$	18	$	21	$	150	$	189		$	21	$	6	$	165	$	192

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

__________

(a) Net unrealized gains/losses incurred during the reporting periods on equity securities still held at December 31, 2019 and ~~March 31,~~June 30, 2020 were a $44 million loss and a ~~$38~~$29 million loss, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

The cash equivalents and marketable securities accounted for as available-for-sale (“AFS”) securities were as follows (in millions):


	December 31, 2019															December 31, 2019
										Fair Value of Securities with Contractual Maturities															Fair Value of Securities with Contractual Maturities
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Within 1 Year		After 1 Year through 5 Years		After 5 Years		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Within 1 Year		After 1 Year through 5 Years		After 5 Years
Automotive
U.S. government	$	2,839	$	11	$	(1	)	$	2,849	$	1,028	$	1,772	$	49	$	2,839	$	11	$	(1	)	$	2,849	$	1,028	$	1,772	$	49
U.S. government agencies	1,445		2		(1		)	1,446		830		589		27		1,445		2		(1		)	1,446		830		589		27
Non-U.S. government and agencies	3,925		20		(1		)	3,944		1,546		2,398		—		3,925		20		(1		)	3,944		1,546		2,398		—
Corporate debt	5,029		53		—			5,082		1,837		3,245		—		5,029		53		—			5,082		1,837		3,245		—
Other marketable securities	230		1		—			231		—		149		82		230		1		—			231		—		149		82
Total	$	13,468	$	87	$	(3	)	$	13,552	$	5,241	$	8,153	$	158	$	13,468	$	87	$	(3	)	$	13,552	$	5,241	$	8,153	$	158

	March 31, 2020															June 30, 2020
										Fair Value of Securities with Contractual Maturities															Fair Value of Securities with Contractual Maturities
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Within 1 Year		After 1 Year through 5 Years		After 5 Years		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Within 1 Year		After 1 Year through 5 Years		After 5 Years
Automotive
U.S. government	$	2,598	$	71	$	—		$	2,669	$	574	$	2,033	$	62	$	2,978	$	64	$	—		$	3,042	$	1,072	$	1,935	$	35
U.S. government agencies	1,329		14		—			1,343		444		822		77		1,938		15		—			1,953		704		1,126		123
Non-U.S. government and agencies	3,625		55		(1		)	3,679		1,594		2,085		—		2,849		48		—			2,897		1,192		1,704		1
Corporate debt	5,197		23		(55		)	5,165		1,845		3,293		27		5,751		106		(5		)	5,852		2,157		3,668		27
Other marketable securities	227		—		(4		)	223		—		153		70		212		3		—			215		—		144		71
Total	$	12,976	$	163	$	(60	)	$	13,079	$	4,457	$	8,386	$	236	$	13,728	$	236	$	(5	)	$	13,959	$	5,125	$	8,577	$	257

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


	First Quarter				Second Quarter				First Half
	2019		2020		2019		2020		2019		2020
Automotive
Sales proceeds	$	1,142	$	1,865	$	1,858	$	2,452	$	3,000	$	4,317
Gross realized gains	2		7		3		21		5		28
Gross realized losses	5		7		5		3		10		10

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

The present fair values and gross unrealized losses for cash equivalents and marketable securities accounted for as AFS securities that were in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position, were as follows (in millions):


	December 31, 2019															December 31, 2019
	Less than 1 Year					1 Year or Greater					Total					Less than 1 Year					1 Year or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Automotive
U.S. government	$	183	$	(1	)	$	50	$	—		$	233	$	(1	)	$	183	$	(1	)	$	50	$	—		$	233	$	(1	)
U.S. government agencies	370		(1		)	344		—			714		(1		)	370		(1		)	344		—			714		(1		)
Non-U.S. government and agencies	463		—			390		(1		)	853		(1		)	463		—			390		(1		)	853		(1		)
Corporate debt	29		—			53		—			82		—			29		—			53		—			82		—
Other marketable securities	59		—			17		—			76		—			59		—			17		—			76		—
Total	$	1,104	$	(2	)	$	854	$	(1	)	$	1,958	$	(3	)	$	1,104	$	(2	)	$	854	$	(1	)	$	1,958	$	(3	)

	March 31, 2020															June 30, 2020
	Less than 1 Year					1 Year or Greater					Total					Less than 1 Year					1 Year or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Automotive
U.S. government	$	—	$	—		$	—	$	—		$	—	$	—		$	357	$	—		$	—	$	—		$	357	$	—
U.S. government agencies	70		—			42		—			112		—			25		—			42		—			67		—
Non-U.S. government and agencies	377		(1		)	25		—			402		(1		)	319		—			36		—			355		—
Corporate debt	2,023		(54		)	24		(1		)	2,047		(55		)	783		(4		)	11		(1		)	794		(5		)
Other marketable securities	160		(3		)	20		(1		)	180		(4		)	7		—			16		—			23		—
Total	$	2,630	$	(58	)	$	111	$	(2	)	$	2,741	$	(60	)	$	1,491	$	(4	)	$	105	$	(1	)	$	1,596	$	(5	)

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

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash, as reported in the consolidated ~~statement~~statements of cash flows, were as follows (in millions):


	December 31, 2019		March 31, 2020		December 31, 2019		June 30, 2020
Cash and cash equivalents(a)	$	17,504	$	25,971	$	17,504	$	30,989
Restricted cash ~~(a)~~(b)	175		189		175		192
Cash, cash equivalents, and restricted cash in held-for-sale assets	62		—		62		—
Total cash, cash equivalents, and restricted cash	$	17,741	$	26,160	$	17,741	$	31,181

__________


(a)	Includes a $290 million cash compensating balance at June 30, 2020 in an interest-bearing savings account related to a $498 million debt obligation.


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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

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

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

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

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


	December 31, 2019			March 31, 2020			December 31, 2019			June 30, 2020
Consumer
Retail installment contracts, gross	$	68,905		$	66,116		$	68,905		$	70,773
Finance leases, gross	8,566			8,107			8,566			7,879
Retail financing, gross	77,471			74,223			77,471			78,652
Unearned interest supplements	(3,589		)	(3,402		)	(3,589		)	(3,844		)
Consumer finance receivables	73,882			70,821			73,882			74,808
Non-Consumer
Dealer financing	33,985			36,440			33,985			23,184
Non-Consumer finance receivables	33,985			36,440			33,985			23,184
Total recorded investment	$	107,867		$	107,261		$	107,867		$	97,992

Recorded investment in finance receivables	$	107,867		$	107,261		$	107,867		$	97,992
Allowance for credit losses	(513		)	(1,231		)	(513		)	(1,285		)
Finance receivables, net	$	107,354		$	106,030
Total finance receivables, net							$	107,354		$	96,707

Current portion	$	53,651		$	54,889		$	53,651		$	42,720
Non-current portion	53,703			51,141			53,703			53,987
Total finance receivables, net	$	107,354		$	106,030		$	107,354		$	96,707

Net finance receivables subject to fair value (a)	$	99,168		$	98,332		$	99,168		$	89,207
Fair value (b)	99,297			98,513			99,297			90,298

__________


(a)	Net finance receivables subject to fair value exclude finance leases.


(b)	The fair value of finance receivables is categorized within Level 3 of the fair value hierarchy.

Ford Credit’s finance leases are comprised of sales-type and direct financing leases. Financing revenue from finance leases for the ~~first~~second quarter of 2019 and 2020 was ~~$92~~$97 million and ~~$95~~$77 million, respectively, and for the first half of 2019 and 2020 was $189 million and $172 million, respectively, and is included in Ford Credit revenues on our consolidated income ~~statement.~~statements.

At December 31, 2019 and ~~March 31,~~June 30, 2020, accrued interest was $251 million and ~~$239~~$215 million, respectively, which we report in Other assets in the current assets section of our consolidated balance ~~sheet.~~sheets.

Included in the recorded investment in finance receivables at December 31, 2019 and ~~March 31,~~June 30, 2020, were consumer receivables of $38.3 billion and ~~$37~~$42.1 billion, respectively, and non-consumer receivables of $26.8 billion and ~~$25.7~~$17.8 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. The receivables are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations or the claims of Ford Credit’s other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions.

The value of finance receivables considered held for sale at December 31, 2019 was $1.5 billion, primarily made up of $1.2 billion of Forso Nordic AB (“Forso”) finance receivables. At March 31, 2020, there were $36 million of certain wholesale finance receivables specifically identified as held for sale. These held-for-sale values are reported in ~~Assets held for sale~~ ~~on our consolidated balance sheet. See Note 17 for more information.~~

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

The value of finance receivables considered held for sale at December 31, 2019 was $1.5 billion, primarily made up of $1.2 billion of Forso Nordic AB (“Forso”) related finance receivables. At June 30, 2020, there were $50 million of certain wholesale finance receivables specifically identified as held for sale. These held-for-sale values are reported in Assets held for sale on our consolidated balance sheets. See Note 17 for additional information.

Credit Quality

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


•	Pass – current to 60 days past due;


•	Special Mention – 61 to 120 days past due and in intensified collection status; and


•	Substandard – greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged off, as measured using the fair value of collateral less costs to sell.

The credit quality analysis of consumer receivables at December 31, 2019 was as follows (in millions):



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

The credit quality analysis of consumer receivables at ~~March 31,~~June 30, 2020 was as follows (in millions):


	Amortized Cost Basis by Origination Year														Amortized Cost Basis by Origination Year
	Prior to 2016		2016		2017		2018		2019		2020		Total		Prior to 2016		2016		2017		2018		2019		2020		Total
Consumer
31 - 60 days past due	$	79	$	95	$	139	$	185	$	143	$	10	$	651	$	45	$	60	$	98	$	135	$	124	$	31	$	493
61 - 120 days past due	13		21		36		43		35		1		149		9		17		33		44		40		10		153
Greater than 120 days past due	16		7		6		6		2		—		37		14		7		8		9		6		—		44
Total past due	108		123		181		234		180		11		837		68		84		139		188		170		41		690
Current	2,181		5,080		11,048		19,267		26,210		6,198		69,984		1,631		4,199		9,581		17,452		24,396		16,859		74,118
Total	$	2,289	$	5,203	$	11,229	$	19,501	$	26,390	$	6,209	$	70,821	$	1,699	$	4,283	$	9,720	$	17,640	$	24,566	$	16,900	$	74,808

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

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


•	Group I – strong to superior financial metrics;


•	Group II – fair to favorable financial metrics;


•	Group III – marginal to weak financial metrics; and


•	Group IV – poor financial metrics, including dealers classified as uncollectible.

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

~~FORD MOTOR COMPANY AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

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

The credit quality analysis of dealer financing receivables at December 31, 2019 was as follows (in millions):



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

__________


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

The credit quality analysis of dealer financing receivables at ~~March 31,~~June 30, 2020 was as follows (in millions):


	Amortized Cost Basis by Origination Year														Wholesale Loans								Amortized Cost Basis by Origination Year																											Wholesale Loans
	Dealer Loans																					Dealer Loans
	Prior to 2016		2016		2017		2018		2019		2020		Total					Total				Prior to 2016				2016				2017				2018				2019				2020				Total							Total
Group I	$	676	$	147	$	154	$	276	$	120	$	122	$	1,495		$	26,774			$	28,269			$	608			$	132			$	159			$	221			$	98			$	237			$	1,455		$	14,102			$	15,557
Group II	31		30		28		14		24		45		172			5,886				6,058				38				32				17				18				7				72				184			5,317				5,501
Group III	9		—		4		17		22		17		69		1,943				2,012				9				—				4				17				6				28				64			1,908				1,972
Group IV	2		1		—		—		2		4		9		92				101				2				3				—				—				2				4				11			143				154
Total (a)	$	718	$	178	$	186	$	307	$	168	$	188	$	1,745	$	34,695			$	36,440			$	657			$	167			$	180			$	256			$	113			$	341			$	1,714		$	21,470			$	23,184

__________


(a)	Total past due dealer financing receivables at ~~March 31,~~June 30, 2020 were ~~$34~~$143 million.

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

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

Ford Credit has offered ~~several~~various programs to provide relief to customers and dealers ~~during the COVID-19 pandemic.~~impacted by COVID-19. These programs, which were broadly available to customers and dealers, included payment extensions. Ford Credit concluded that these programs did not meet TDR criteria. As of June 30, 2020, in the United States, Ford Credit has received payments on 88% of the pandemic extensions offered to its customers, and no dealers are delinquent on their payments.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

Allowance for Credit Losses

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

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

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

Consumer Portfolio

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

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

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

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

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

Non-Consumer Portfolio

Dealer financing includes wholesale loans to dealers to finance vehicle inventory, also known as floorplan financing, as well as loans to dealers to finance working capital, improvements to dealership facilities, ~~to finance~~the purchase of dealership real estate, and ~~to finance~~ other dealer programs.

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

For the remaining dealer financing, Ford Credit estimates an allowance for credit losses on a collective basis.

Wholesale Loans. Ford Credit estimates the allowance for credit losses for wholesale loans based on historical loss-to-receivable (LTR) ratios, expected future cash flows, and the fair value of collateral. For wholesale loans with similar risk characteristics, the allowance for credit losses is estimated on a collective basis using the LTR model and management judgment. The LTR model is based on the most recent years of history. An LTR is calculated by dividing credit losses (i.e., charge-offs net of recoveries) by average net finance receivables, excluding unearned interest supplements and allowance for credit losses. The average LTR is multiplied by the end-of-period balances, representing the lifetime expected credit loss reserve.

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

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

An analysis of the allowance for credit losses related to finance receivables for the periods ended ~~March 31~~June 30 was as follows (in millions):


	First Quarter 2019 (a)									Second Quarter 2019 (a)									First Half 2019 (a)
	Consumer			Non-Consumer			Total			Consumer			Non-Consumer			Total			Consumer			Non-Consumer			Total
Allowance for credit losses
Beginning balance	$	566		$	23		$	589		$	496		$	17		$	513		$	566		$	23		$	589
Charge-offs	(137		)	(17		)	(154		)	(117		)	—			(117		)	(254		)	(17		)	(271		)
Recoveries	43			2			45			45			6			51			88			8			96
Provision for credit losses	24			9			33			70			(7		)	63			94			2			96
Other(c)	—			—			—			2			1			3			2			1			3
Ending balance	$	496		$	17		$	513		$	496		$	17		$	513		$	496		$	17		$	513


	First Quarter 2020									Second Quarter 2020									First Half 2020
	Consumer			Non-Consumer			Total			Consumer			Non-Consumer			Total			Consumer			Non-Consumer			Total
Allowance for credit losses
Beginning balance	$	496		$	17		$	513		$	1,157		$	74		$	1,231		$	496		$	17		$	513
Adoption of ASU 2016-13 (b)	247			5			252			—			—			—			247			5			252
Charge-offs(c)	(145		)	(1		)	(146		)	(80		)	—			(80		)	(225		)	(1		)	(226		)
Recoveries(c)	43			2			45			33			1			34			76			3			79
Provision for credit losses	534			52			586			94			(1		)	93			628			51			679
Other ~~(c)~~(d)	(18		)	(1		)	(19		)	7			—			7			(11		)	(1		)	(12		)
Ending balance	$	1,157		$	74		$	1,231		$	1,211		$	74		$	1,285		$	1,211		$	74		$	1,285

__________


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


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


(c)	Charge-offs and recoveries were lower in the second quarter of 2020 reflecting program extensions and decision to temporarily suspend involuntary repossessions due to COVID-19.


(d)	Primarily represents amounts related to translation adjustments.

During the second quarter and first ~~quarter~~half of 2020, the allowance for credit losses increased ~~$718~~$54 million ~~reflecting~~and $772 million, respectively. The change in the second quarter reflects an increase of $46 million, primarily attributable to COVID-19, and an increase for translation adjustments. The change in the first half reflects an increase to the reserve of $252 million related to the adoption of ASU 2016-13 and an increase of ~~$486~~$532 million, primarily attributable to COVID-19, offset by a decrease for translation adjustments. The first half change to the reserve reflects economic uncertainty which, along with ~~government mandated stay-at-home orders, which resulted in extensive temporary closures~~the expectation of ~~businesses and drove a significant increase in~~continued higher unemployment, is expected to increase the probability of default and loss given default rates in ~~the~~our consumer portfolio, ~~over the next twelve months,~~ especially in the United States. These economic trends and conditions are also expected to negatively impact the dealers. ~~While we anticipate~~The relatively moderate reserve increase in the second quarter reflects Ford Credit's view that future economic conditions are largely unchanged from its assumptions at March 31. Although net charge-offs during the second quarter and first half of 2020 remained low, reflecting government relief programs, ~~Ford Credit’s~~ customer payment deferral programs, and ~~dealer support actions~~Ford Credit's decision to ~~mitigate these impacts,~~temporarily suspend involuntary repossessions, the ~~overall result~~future impact of COVID-19 on credit losses is expected to be adverse.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. INVENTORIES

Inventories were as follows (in millions):


	December 31, 2019		March 31, 2020		December 31, 2019		June 30, 2020
Raw materials, work-in-process, and supplies	$	4,402	$	4,598	$	4,402	$	4,367
Finished products	6,384		6,714		6,384		5,853
Total inventories	$	10,786	$	11,312	$	10,786	$	10,220

NOTE 10. OTHER INVESTMENTS

We have investments in entities not accounted for under the equity method for which ~~we do not have the ability to exercise significant influence and~~ fair values are not readily available. We record these investments at cost (less impairment, if any), adjusted for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We report the carrying value of these investments in Other assets in the non-current assets section of our consolidated balance ~~sheet.~~sheets. These investments were $1.2 billion and $1.6 billion at ~~both~~ December 31, 2019 and ~~March 31,~~June 30, ~~2020.~~2020, respectively. The increase from December 31, 2019 primarily reflects our preferred security investment in Argo AI. See Note 17 for additional information relating to our Argo AI and VW transaction. In the ~~first~~second quarter of 2020, there were no material adjustments to the fair values of these investments held at ~~March 31,~~June 30, 2020.

NOTE 11. GOODWILL

The net carrying amount of goodwill was $278 million and $254 million at ~~both~~ December 31, 2019 and ~~March 31,~~June 30, 2020, respectively, and is reported in Other assets in the non-current assets section of our consolidated balance ~~sheet.~~sheets.

NOTE 12. OTHER LIABILITIES AND DEFERRED REVENUE

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


	December 31, 2019		March 31, 2020		December 31, 2019		June 30, 2020
Current
Dealer and dealers’ customer allowances and claims	$	13,113	$	13,257	$	13,113	$	11,632
Deferred revenue	2,091		2,111		2,091		2,021
Employee benefit plans	1,857		1,612		1,857		1,483
Accrued interest	1,128		819		1,128		1,117
OPEB (a)	332		326		332		327
Pension (a)	185		183		185		184
Operating lease liabilities	367		361		367		339
Other	3,914		4,005		3,914		3,689
Total current other liabilities and deferred revenue	$	22,987	$	22,674	$	22,987	$	20,792
Non-current
Pension (a)	$	9,878	$	9,414	$	9,878	$	9,487
OPEB (a)	5,740		5,605		5,740		5,661
Dealer and dealers’ customer allowances and claims	1,921		2,252		1,921		2,464
Deferred revenue	4,191		4,140		4,191		4,257
Operating lease liabilities	1,047		1,006		1,047		914
Employee benefit plans	1,104		1,097		1,104		1,105
Other	1,443		1,591		1,443		1,503
Total non-current other liabilities and deferred revenue	$	25,324	$	25,105	$	25,324	$	25,391

__________

(a)

Balances at ~~March 31,~~June 30, 2020 reflect pension and OPEB liabilities at December 31, 2019, updated for service and interest cost, expected return on assets, curtailment and settlement gains and associated interim remeasurement (where applicable), separation expense, actual benefit payments, and cash contributions. For plans without interim remeasurement, the discount rate and rate of expected return assumptions are unchanged from year-end 2019. Included in Other assets are pension assets of $3.2 billion and ~~$3.4~~$3.8 billion at December 31, 2019 and ~~March 31,~~June 30, 2020, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 13. RETIREMENT BENEFITS

Defined Benefit Plans - Expense

The pre-tax net periodic benefit cost/(income) for our defined benefit pension and OPEB plans for the periods ended ~~March 31~~June 30 were as follows (in millions):


	First Quarter																		Second Quarter
	Pension Benefits																		Pension Benefits
	U.S. Plans						Non-U.S. Plans						Worldwide OPEB						U.S. Plans						Non-U.S. Plans						Worldwide OPEB
	2019			2020			2019			2020			2019			2020			2019			2020			2019			2020			2019			2020
Service cost	$	114		$	130		$	129		$	131		$	11		$	12		$	114		$	130		$	127		$	127		$	11		$	11
Interest cost	409			323			176			133			53			43			409			323			173			130			52			41
Expected return on assets	(649		)	(699		)	(286		)	(267		)	—			—			(649		)	(699		)	(281		)	(254		)	—			—
Amortization of prior service costs/(credits)	22			1			8			9			(18		)	(4		)	21			1			9			8			(17		)	(4		)
Net remeasurement (gain)/loss	—			—			—			(80		)	—			58			(10		)	4			—			(152		)	—			—
Separation programs/other	1			10			12			24			—			(1		)	—			3			232			33			—			1
Settlements and curtailments	—			—			—			1			—			(2		)	(50		)	4			—			17			—			—
Net periodic benefit cost/(income)	$	(103	)	$	(235	)	$	39		$	(49	)	$	46		$	106		$	(165	)	$	(234	)	$	260		$	(91	)	$	46		$	49

																			First Half
																			Pension Benefits
																			U.S. Plans						Non-U.S. Plans						Worldwide OPEB
																			2019			2020			2019			2020			2019			2020
Service cost																			$	228		$	260		$	256		$	258		$	22		$	23
Interest cost																			818			646			349			263			105			84
Expected return on assets																			(1,298		)	(1,398		)	(567		)	(521		)	—			—
Amortization of prior service costs/(credits)																			43			2			17			17			(35		)	(8		)
Net remeasurement (gain)/loss																			(10		)	4			—			(232		)	—			58
Separation programs/other																			1			13			244			57			—			—
Settlements and curtailments																			(50		)	4			—			18			—			(2		)
Net periodic benefit cost/(income)																			$	(268	)	$	(469	)	$	299		$	(140	)	$	92		$	155

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

As part of our ongoing global redesign activities, we recognized additional expense of ~~$13~~$232 million and ~~$24~~$51 million in the second quarter of 2019 and 2020, respectively, and $245 million and $75 million in the first ~~quarter~~half of 2019 and 2020, respectively, related to separation programs.

In addition, in the ~~first~~second quarter, we recognized settlements and curtailments, which required plan remeasurements at current discount rates, asset returns, and economic conditions. This resulted in remeasurement ~~gain~~gains of ~~$22~~$148 million and $170 million in the second quarter and first ~~quarter~~half of ~~2020.~~2020, respectively. Until our global redesign actions are completed, we anticipate further adjustments to our plans in subsequent periods.

Pension Plan Contributions

During 2020, we expect to contribute between $500 million and $700 million of cash to our global funded pension plans. We also expect to make about $350 million of benefit payments to participants in unfunded plans. In the first ~~quarter~~half of 2020, we contributed ~~$175~~$282 million to our worldwide funded pension plans and made ~~$86~~$176 million of benefit payments to participants in unfunded plans.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 14. DEBT

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


	December 31, 2019			March 31, 2020			December 31, 2019			June 30, 2020
Automotive
Debt payable within one year
Short-term	$	315		$	569		$	315		$	1,172
Long-term payable within one year
U.S. Department of Energy Advanced Technology Vehicles Manufacturing (“DOE ATVM”) Incentive Program	591			591
Credit facilities (a)							—			292
U.S. Department of Energy Advanced Technology Vehicles Manufacturing (“DOE ATVM”) Incentive Program (b)							591			148
Other debt	540			450			540			472
Unamortized (discount)/premium	(1		)	(1		)	(1		)	—
Total debt payable within one year	1,445			1,609			1,445			2,084
Long-term debt payable after one year
Public unsecured debt securities	10,583			10,583
Public unsecured debt securities (c)							10,583			18,583
Credit facilities (a)	—			15,068			—			15,068
Delayed draw term loan	1,500			1,500			1,500			1,500
DOE ATVM Incentive Program	880			732
Other debt	547			800
DOE ATVM Incentive Program (b)							880			1,138
Other debt (d)							547			1,559
Unamortized (discount)/premium	(161		)	(157		)	(161		)	(242		)
Unamortized issuance costs	(116		)	(115		)	(116		)	(197		)
Total long-term debt payable after one year	13,233			28,411			13,233			37,409
Total Automotive	$	14,678		$	30,020		$	14,678		$	39,493
Fair value of Automotive debt (b)	$	15,606		$	22,877
Fair value of Automotive debt (e)							$	15,606		$	38,280
Ford Credit
Debt payable within one year
Short-term	$	13,717		$	12,424		$	13,717		$	11,681
Long-term payable within one year
Unsecured debt	15,062			17,137			15,062			18,567
Asset-backed debt	23,609			21,736			23,609			22,997
Unamortized (discount)/premium	1			2			1			1
Unamortized issuance costs	(17		)	(19		)	(17		)	(19		)
Fair value adjustments (c)	(1		)	23
Fair value adjustments (f)							(1		)	33
Total debt payable within one year	52,371			51,303			52,371			53,260
Long-term debt payable after one year
Unsecured debt	55,148			51,138			55,148			49,711
Asset-backed debt	32,162			32,973			32,162			30,794
Unamortized (discount)/premium	6			4			6			4
Unamortized issuance costs	(197		)	(188		)	(197		)	(186		)
Fair value adjustments (c)	539			1,606
Fair value adjustments (f)							539			1,684
Total long-term debt payable after one year	87,658			85,533			87,658			82,007
Total Ford Credit	$	140,029		$	136,836		$	140,029		$	135,267
Fair value of Ford Credit debt (b)	$	141,678		$	128,714
Fair value of Ford Credit debt (e)							$	141,678		$	132,836
Other
Long-term debt payable within one year	$	130		$	—		$	130		$	—
Long-term debt payable after one year
Unsecured debt	474			474			474			474
Unamortized (discount)/premium	(3		)	(3		)
Unamortized issuance costs	(1		)	(1		)
Unamortized (discount)/premium and issuance costs							(4		)	(4		)
Total long-term debt payable after one year	470			470			470			470
Total Other	$	600		$	470		$	600		$	470
Fair value of Other debt	$	720		$	448		$	720		$	534

__________


(a)	We drew $15.4 billion under our corporate credit facility and supplemental revolving credit facility in the first quarter of 2020. On July 27, 2020, ~~and received $15.1~~we repaid $5.7 billion as of ~~March 31, 2020,~~our corporate credit facility and the ~~remaining $300~~full $2 billion outstanding under our supplemental revolving credit facility.


(b)	In June 2020, our DOE ATVM loan was modified, reducing quarterly principal payments from $148 million onto $37 million. The deferred portion of the principal payments will be due upon original maturity in June 2022.


(c)	Public unsecured debt securities increased by $8 billion reflecting our unsecured debt issuance in April 8, 2020.


~~(b)~~(d)	Includes a £625 million five-year term loan entered into by Ford Motor Company Limited in June 2020 pursuant to U.K. Export Finance program.


(e)	The fair value of debt includes ~~$315~~$315 million and $~~569 million~~1.2 billion of Automotive short-term debt and $12.8 billion and $~~11.3~~10.9 billion of Ford Credit short-term debt at December 31, 2019 and ~~March 31,~~June 30, 2020, respectively, carried at cost, which approximates fair value. All debt is categorized within Level 2 of the fair value hierarchy.


~~(c)~~(f)	These adjustments relate to fair value hedges. The carrying value of hedged debt was $39.4 billion and ~~$41.6~~$42.5 billion at December 31, 2019 and ~~March 31,~~June 30, 2020, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 15. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

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

Income Effect of Derivative Financial Instruments

The gains/(losses), by hedge designation, reported in income for the periods ended ~~March 31~~June 30 were as follows (in millions):


	First Quarter						Second Quarter						First Half
Cash flow hedges (a)	2019			2020			2019			2020			2019			2020
Reclassified from AOCI to Cost of sales
Foreign currency exchange contracts	$	54		$	(70	)	$	44		$	(4	)	$	98		$	(74	)
Commodity contracts	(5		)	(14		)	(6		)	(14		)	(11		)	(28		)
Fair value hedges
Interest rate contracts
Net interest settlements and accruals on hedging instruments	(20		)	28			(12		)	68			(32		)	96
Fair value changes on hedging instruments	250			1,110			474			112			724			1,222
Fair value changes on hedged debt	(253		)	(1,093		)	(463		)	(98		)	(716		)	(1,191		)
Derivatives not designated as hedging instruments
Foreign currency exchange contracts (b)	(28		)	586			5			(274		)	(23		)	312
Cross-currency interest rate swap contracts	(145		)	(151		)	141			154			(4		)	3
Interest rate contracts	(27		)	(74		)	(3		)	(12		)	(30		)	(86		)
Commodity contracts	11			(43		)	(12		)	12			(1		)	(31		)
Total	$	(163	)	$	279		$	168		$	(56	)	$	5		$	223

__________

(a)

For the second quarter and first ~~quarter~~half of 2019, a $205 million gain and a $316 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax related to foreign currency exchange contracts. For the second quarter and first half of 2020, ~~a $521~~an $81 million loss and an ~~$897~~$816 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax related to foreign currency exchange contracts. For the second quarter and first ~~quarter~~half of 2019, a $37 million loss and a $26 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax related to commodity contracts. For the second quarter and first half of 2020, ~~an $11~~a $17 million gain and ~~a $101~~an $84 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax related to commodity contracts.

(b)

For the second quarter and first ~~quarter~~half of 2019, ~~and 2020,~~ a ~~$22~~$35 million loss and a ~~$376~~$57 million loss were reported in Cost of sales, respectively, and a $40 million gain and a $34 million gain were reported in Other income/(loss), net, respectively. For the second quarter and first half of 2020, a $231 million loss and a $145 million gain were reported in Cost of sales, respectively, and a $6$43 million loss and a ~~$210~~$167 million gain were reported in Other income/(loss), net, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

Balance Sheet Effect of Derivative Financial Instruments

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

The fair value of our derivative instruments and the associated notional amounts were as follows (in millions):


	December 31, 2019						March 31, 2020						December 31, 2019						June 30, 2020
	Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities
Cash flow hedges
Foreign currency exchange contracts	$	15,349	$	47	$	493	$	13,148	$	606	$	168	$	15,349	$	47	$	493	$	12,966	$	371	$	55
Commodity contracts	673		5		29		665		—		108		673		5		29		617		2		69
Fair value hedges
Interest rate contracts	26,577		702		19		23,663		1,549		—		26,577		702		19		24,434		1,682		—
Derivatives not designated as hedging instruments
Foreign currency exchange contracts	19,350		58		270		17,509		476		130		19,350		58		270		20,075		225		238
Cross-currency interest rate swap contracts	5,849		134		67		5,938		126		238		5,849		134		67		5,611		163		53
Interest rate contracts	68,914		275		191		72,822		651		561		68,914		275		191		71,075		752		573
Commodity contracts	467		9		9		474		1		46		467		9		9		450		12		29
Total derivative financial instruments, gross (a) (b)	$	137,179	$	1,230	$	1,078	$	134,219	$	3,409	$	1,251	$	137,179	$	1,230	$	1,078	$	135,228	$	3,207	$	1,017

Current portion			$	390	$	772			$	1,388	$	759			$	390	$	772			$	1,239	$	683
Non-current portion			840		306				2,021		492				840		306				1,968		334
Total derivative financial instruments, gross			$	1,230	$	1,078			$	3,409	$	1,251			$	1,230	$	1,078			$	3,207	$	1,017

__________


(a)	At December 31, 2019 and ~~March 31,~~June 30, 2020, we held collateral of $18 million and ~~$23~~$20 million, and we posted collateral of $78 million and ~~$86~~$91 million, respectively.


(b)	At December 31, 2019 and ~~March 31,~~June 30, 2020, the fair value of assets and liabilities available for counterparty netting was $269 million and ~~$841~~$600 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 16. EMPLOYEE SEPARATION ACTIONS AND EXIT AND DISPOSAL ACTIVITIES

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

Automotive Segment

Global Redesign

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

Brazil. In February 2019, Ford Motor Company Brasil Ltda. (“Ford Brazil”), our subsidiary in Brazil, committed to a plan to exit the commercial heavy truck business in South America. As a result, Ford Brazil ceased production at the São Bernardo do Campo plant in Brazil during 2019.

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

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

United Kingdom. In June 2019, Ford Motor Company Limited (“Ford of Britain”), a subsidiary of Ford, announced its plan to exit the Ford Bridgend plant in South Wales in 2020.

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

Other Global Redesign Actions. In 2018, we announced our plan to end production at the Ford Aquitaine Industries plant in Bordeaux, France, and in March 2019, we announced our plan to phase-out the production of the C-Max at the Saarlouis Body and Assembly Plant in Germany. Furthermore, we are reducing our global workforce and taking other restructuring actions.

The following table summarizes the redesign-related activities for the periods ended ~~March 31,~~June 30, which are recorded in Other liabilities and deferred revenue (in millions):


	First Quarter						Second Quarter						First Half
	2019			2020			2019			2020			2019			2020
Beginning balance	$	291		$	734		$	414		$	601		$	291		$	734
Changes in accruals (a)	267			68			741			26			1,008			94
Payments	(136		)	(172		)	(222		)	(99		)	(358		)	(271		)
Foreign currency translation	(8		)	(29		)	(4		)	(4		)	(12		)	(33		)
Ending balance	$	414		$	601		$	929		$	524		$	929		$	524

__________

(a) Excludes pension costs of ~~$13~~$182 million and ~~$24~~$51 million in the second quarter of 2019 and 2020, respectively, and $195 million and $75 million in the first ~~quarter~~half of 2019 and 2020, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

We also recorded ~~$251~~$291 million and ~~$14~~$36 million in the second quarter of 2019 and 2020, respectively, and $542 million and $50 million in the first ~~quarter~~half of 2019 and 2020, respectively, for accelerated depreciation and other non-cash items. We estimate that we will incur total charges in 2020 that range between $700 million and $1.2 billion related to the actions above, primarily attributable to employee separations, accelerated depreciation, and dealer and supplier settlements.

Other Actions

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

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

Automotive Segment

In the third quarter of 2019, we committed to a plan to sell specific net assets in our India Automotive operations. We entered into a definitive agreement to form a joint venture with Mahindra & Mahindra Limited (“Mahindra”), with Mahindra owning a 51% controlling stake and Ford owning a 49% stake. Under the terms of the transaction, which is expected to close ~~mid-2020,~~in 2020, we will sell certain India Automotive operations to the joint venture. Accordingly, we have reported the assets and liabilities of these operations as held for sale and ceased depreciation and amortization of those assets.

The assets and liabilities of our India Automotive operations classified as held for sale were as follows (in millions):


	December 31, 2019			March 31, 2020			December 31, 2019			June 30, 2020
Assets
Trade and other receivables, net	$	269		$	186		$	269		$	101
Inventories	208			261			208			244
Other assets, current	147			96			147			108
Net property	279			263			279			263
Other assets, non-current	10			9			10			8
Total assets of held-for-sale operations	913			815			913			724
Less: Intercompany asset balances	(228		)	(151		)	(228		)	(54		)
Automotive segment total assets of held-for-sale operations (a)	$	685		$	664		$	685		$	670

Liabilities
Payables	$	461		$	473		$	461		$	263
Other liabilities and deferred revenue, current	71			68			71			53
Automotive debt payable within one year	90			84			90			83
Other liabilities and deferred revenue, non-current	28			25			28			25
Total liabilities of held-for-sale operations	650			650			650			424
Less: Intercompany liability balances	(169		)	(181		)	(169		)	(140		)
Automotive segment total liabilities of held-for-sale operations (a)	$	481		$	469		$	481		$	284

__________


(a)	As of December 31, 2019 and ~~March 31,~~June 30, 2020, intercompany items and transactions have been eliminated on the consolidated balance ~~sheet.~~sheets. Upon closing, the buyer will assume the intercompany assets and liabilities. Accordingly, we have presented those balances in the table for informational purposes.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

We recognized pre-tax impairment charges of $804 million in 2019, and $3$15 million and $18 million in the second quarter and first ~~quarter~~half of 2020, respectively, to adjust the carrying value of the held-for-sale assets to fair value less cost to sell. These charges are reported in Cost of sales. The value is measured on a nonrecurring basis and categorized within Level 3 of the fair value hierarchy. We determined fair value using a market approach, estimated based on expected proceeds to be received, which we conclude is most representative of the value of the assets given the current market conditions, the characteristics of viable market participants, and the pending sales transaction. The transaction is subject to regulatory approvals and satisfaction of other closing conditions that may impact the final proceeds received.

Mobility Segment

On June 1, 2020, we completed a transaction with VW that reduced our ownership interest in the autonomous vehicle technology company Argo AI and resulted in Ford and VW holding equal interests in Argo AI, with the remaining interest consisting of incentive units and founders’ equity. The transaction involved us selling a portion of our Argo AI equity to VW for $500 million and VW making additional investments in Argo AI, including contributing its Autonomous Intelligent Driving company. As a result of the transaction, we deconsolidated Argo AI, remeasured our retained investment in Argo AI at fair value, and recognized a $3.5 billion gain in Other income/(loss), of which $2.9 billion related to our retained investment in Argo AI. We measured the fair value of Argo AI using the income approach. The significant assumptions used in the valuation included Argo AI’s projected long-term cash flows and related terminal value, discounted at a rate typically used for a company at Argo AI’s stage of development.

Our retained investment in Argo AI consists of an equity method investment of $2.4 billion and a preferred equity security investment of $400 million, reflected on our consolidated balance sheets in Equity in net assets of affiliated companies and Other assets, respectively. The difference between the fair value of our equity method investment and the carrying value of Argo AI’s net assets is primarily related to indefinite-lived assets. We also have agreed to future funding of Argo AI of $600 million, subject to capital calls, which will increase our preferred equity investment.

Argo AI is a variable interest entity of which we are not the primary beneficiary. As of June 30, 2020, our maximum exposure to any potential losses associated with Argo AI is limited to our $2.8 billion of investments.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

Ford Credit Segment

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

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



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

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

__________


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

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

The changes in the balances for each component of accumulated other comprehensive income/(loss) attributable to Ford Motor Company for the periods ended ~~March 31~~June 30 were as follows (in millions):


	First Quarter						Second Quarter						First Half
	2019			2020			2019			2020			2019			2020
Foreign currency translation
Beginning balance	$	(4,800	)	$	(4,626	)	$	(4,557	)	$	(6,079	)	$	(4,800	)	$	(4,626	)
Gains/(Losses) on foreign currency translation	271			(1,406		)	(139		)	(141		)	132			(1,547		)
Less: Tax/(Tax benefit)	28			27			(12		)	(50		)	16			(23		)
Net gains/(losses) on foreign currency translation	243			(1,433		)	(127		)	(91		)	116			(1,524		)
(Gains)/Losses reclassified from AOCI to net income (a)	—			(20		)	—			(11		)	—			(31		)
Other comprehensive income/(loss), net of tax	243			(1,453		)	(127		)	(102		)	116			(1,555		)
Ending balance	$	(4,557	)	$	(6,079	)	$	(4,684	)	$	(6,181	)	$	(4,684	)	$	(6,181	)

Marketable securities
Beginning balance	$	(59	)	$	71		$	4		$	85		$	(59	)	$	71
Gains/(Losses) on available for sale securities	80			19			74			146			154			165
Less: Tax/(Tax benefit)	19			5			17			33			36			38
Net gains/(losses) on available for sale securities	61			14			57			113			118			127
(Gains)/Losses reclassified from AOCI to net income	3			—			2			(18		)	5			(18		)
Less: Tax/(Tax benefit)	1			—			—			(4		)	1			(4		)
Net (gains)/losses reclassified from AOCI to net income	2			—			2			(14		)	4			(14		)
Other comprehensive income/(loss), net of tax	63			14			59			99			122			113
Ending balance	$	4		$	85		$	63		$	184		$	63		$	184

Derivative instruments
Beginning balance	$	201		$	(488	)	$	(245	)	$	204		$	201		$	(488	)
Gains/(Losses) on derivative instruments	(510		)	796			168			(64		)	(342		)	732
Less: Tax/(Tax benefit)	(102		)	173			24			(23		)	(78		)	150
Net gains/(losses) on derivative instruments	(408		)	623			144			(41		)	(264		)	582
(Gains)/Losses reclassified from AOCI to net income	(49		)	84			(38		)	18			(87		)	102
Less: Tax/(Tax benefit)	(11		)	15			(11		)	1			(22		)	16
Net (gains)/losses reclassified from AOCI to net income (b)	(38		)	69			(27		)	17			(65		)	86
Other comprehensive income/(loss), net of tax	(446		)	692			117			(24		)	(329		)	668
Ending balance	$	(245	)	$	204		$	(128	)	$	180		$	(128	)	$	180

Pension and other postretirement benefits
Beginning balance	$	(2,708	)	$	(2,685	)	$	(2,703	)	$	(2,671	)	$	(2,708	)	$	(2,685	)
Amortization and recognition of prior service costs/(credits)	12			4			13			22			25			26
Less: Tax/(Tax benefit)	2			1			3			3			5			4
Net prior service costs/(credits) reclassified from AOCI to net income	10			3			10			19			20			22
Translation impact on non-U.S. plans	(5		)	11			6			(2		)	1			9
Other comprehensive income/(loss), net of tax	5			14			16			17			21			31
Ending balance	$	(2,703	)	$	(2,671	)	$	(2,687	)	$	(2,654	)	$	(2,687	)	$	(2,654	)

Total AOCI ending balance at March 31	$	(7,501	)	$	(8,461	)
Total AOCI ending balance at June 30							$	(7,436	)	$	(8,471	)	$	(7,436	)	$	(8,471	)

__________


(a)	Reclassified to Other income/(loss), net.


(b)	Reclassified to Cost of sales. During the next twelve months we expect to reclassify existing net gains on cash flow hedges of $~~147~~165 million. See Note 15 for additional information.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. COMMITMENTS AND CONTINGENCIES

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

Guarantees and Indemnifications

Financial Guarantees. Financial guarantees and indemnifications are recorded at fair value at their inception. Subsequent to initial recognition, the guarantee liability is adjusted at each reporting period to reflect the current estimate of expected payments resulting from possible default events over the remaining life of the guarantee. The probability of default is applied to the expected exposure at the time of default less recoveries to determine the expected payments. Factors to consider when estimating the probability of default include the obligor’s financial position, forecasted economic environment, historical loss rates, and other communications. The liability recorded represents Ford’s exposure to credit risk. The maximum potential payments for financial guarantees were $162 million and ~~$427~~$429 million at December 31, 2019 and ~~March 31,~~June 30, 2020, respectively. The carrying value of recorded liabilities related to financial guarantees was $33 million and ~~$49~~$43 million at December 31, 2019 and ~~March 31,~~June 30, 2020, respectively.

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

Non-Financial Guarantees. Non-financial guarantees and indemnifications are recorded at fair value at their inception. We regularly review our performance risk under these arrangements, and in the event it becomes probable we will be required to perform under a guarantee or indemnity, the amount of probable payment is recorded. The maximum potential payments for non-financial guarantees were $587 million and ~~$678~~$415 million at December 31, 2019 and ~~March 31,~~June 30, 2020, respectively. The carrying value of recorded liabilities related to non-financial guarantees was $200 million and ~~$253~~$110 million at December 31, 2019 and ~~March 31,~~June 30, 2020, respectively.

We guarantee the resale value of vehicles sold in certain arrangements to daily rental companies. The maximum potential payment of ~~$673~~$410 million as of ~~March 31,~~June 30, 2020 represents the total proceeds we guarantee the rental company will receive on re-sale. Reflecting our present estimate of proceeds the rental companies will receive on resale from third parties, we have recorded ~~$252~~$109 million as our best estimate of the amount we will have to pay under the guarantee.

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. COMMITMENTS AND CONTINGENCIES (Continued)

Litigation and Claims

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

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

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

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

For the remaining matters, where our historical experience with similar matters is of more limited value (i.e., “non-pattern matters”), we evaluate the matters primarily based on the individual facts and circumstances. For non-pattern matters, we evaluate whether there is a reasonable possibility of a material loss in excess of any accrual that can be estimated. Our estimate of reasonably possible loss in excess of our accruals for all material matters currently reflects indirect tax and customs matters, for which we estimate the aggregate risk to be a range of up to about $400 million. In addition, we have a reasonably possible risk of loss for an emission certification matter. At this stage, we cannot estimate the risk of loss or predict the outcome, and cannot provide reasonable assurance that it will not have a material adverse effect on us.

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 19. COMMITMENTS AND CONTINGENCIES (Continued)

Warranty and Field Service Actions

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

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

The estimate of our future warranty and field service action costs, net of estimated supplier recoveries, for the periods ended ~~March 31~~June 30 was as follows (in millions):


	First Quarter						First Half
	2019			2020			2019			2020
Beginning balance	$	5,137		$	5,702		$	5,137		$	5,702
Payments made during the period	(1,074		)	(1,075		)	(2,192		)	(1,945		)
Changes in accrual related to warranties issued during the period	693			805			1,424			1,253
Changes in accrual related to pre-existing warranties	271			521			715			1,183
Foreign currency translation and other	7			(164		)	23			(112		)
Ending balance	$	5,034		$	5,789		$	5,107		$	6,081

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. SEGMENT INFORMATION

We report segment information consistent with the way our chief operating decision maker evaluates the operating results and performance of the Company. Accordingly, we analyze the results of our business through the following segments: Automotive, Mobility, and Ford Credit. Below is a description of our reportable segments and other activities.

Automotive Segment

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

the International Markets Group.

Mobility Segment

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

Ford Credit Segment

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

Corporate Other

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

Interest on Debt

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

Special Items

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. SEGMENT INFORMATION (Continued)

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


	Automotive			Mobility			Ford Credit		Corporate Other			Interest on Debt			Special Items			Adjustments				Total			Automotive			Mobility			Ford Credit		Corporate Other			Interest on Debt			Special Items			Adjustments				Total
First Quarter 2019
Second Quarter 2019
Revenues	$	37,239		$	6		$	3,097	$	—		$	—		$	—		$	—			$	40,342		$	35,758		$	6		$	3,089	$	—		$	—		$	—		$	—			$	38,853
Income/(loss) before income taxes	2,009			(288		)	801		(75		)	(245		)	(592		)	—				1,610			1,373			(264		)	831		(286		)	(244		)	(1,205		)	—				205
Equity in net income/(loss) of affiliated companies	17			2			6		—			—			—			—				25			72			7			8		—			—			—			—				87
Cash, cash equivalents, marketable securities, and restricted cash	24,034			167			13,700		—			—			—			—				37,901			23,106			142			14,989		—			—			—			—				38,237
Total assets	102,113			949			164,409		—			—			—			(4,190		)	(a)	263,281			102,641			1,153			163,141		—			—			—			(4,751		)	(a)	262,184

First Quarter 2020
Second Quarter 2020
Revenues	$	31,340		$	13		$	2,967	$	—		$	—		$	—		$	—			$	34,320		$	16,622		$	10		$	2,739	$	—		$	—		$	—		$	—			$	19,371
Income/(loss) before income taxes	(177		)	(334		)	30		(151		)	(227		)	(287		)	—				(1,146		)	(2,089		)	(332		)	543		(68		)	(450		)	3,480			—				1,084
Equity in net income/(loss) of affiliated companies	(47		)	—			6		—			—			—			—				(41		)	(9		)	(12		)	2		—			—			(6		)	—				(25		)
Cash, cash equivalents, marketable securities, and restricted cash	34,212			116			12,231		—			—			—			—				46,559			39,220			63			18,039		—			—			—			—				57,322
Total assets	111,388			941			156,393		—			—			—			(4,572		)	(a)	264,150			114,414			4,112			154,674		—			—			—			(3,834		)	(a)	269,366

																									Automotive			Mobility			Ford Credit		Corporate Other			Interest on Debt			Special Items			Adjustments				Total
First Half 2019
Revenues																									$	72,997		$	12		$	6,186	$	—		$	—		$	—		$	—			$	79,195
Income/(loss) before income taxes																									3,382			(552		)	1,632		(361		)	(489		)	(1,797		)	—				1,815
Equity in net income/(loss) of affiliated companies																									89			9			14		—			—			—			—				112

First Half 2020
Revenues																									$	47,962		$	23		$	5,706	$	—		$	—		$	—		$	—			$	53,691
Income/(loss) before income taxes																									(2,266		)	(666		)	573		(219		)	(677		)	3,193			—				(62		)
Equity in net income/(loss) of affiliated companies																									(56		)	(12		)	8		—			—			(6		)	—				(66		)

__________


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

~~NOTE 21. SUBSEQUENT EVENT~~

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

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

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

RECENT DEVELOPMENTS

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

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

Remote Work Arrangements and ~~Suspension~~Resumption of Manufacturing Operations

We released our ~~fourth~~first quarter ~~and full year 2019~~2020 results on ~~February 4,~~April 28, 2020. At that time, ~~the impact of COVID-19 was concentrated in China. COVID-19 spread quickly, and the World Health Organization declared it a global pandemic on March 11, 2020. As of March 16, 2020,~~ our non-production personnel ~~began~~had been working remotely in ~~virtually~~almost all locations globally ~~except China. On March 19, 2020,~~for over a month, and we had suspended our manufacturing operations in North America, ~~followed shortly afterwards with suspension of our manufacturing operations in~~ Europe, and other regions. ~~The suspension of manufacturing operations has not only interrupted current vehicle production but also delayed new vehicle launches from our original plan.~~

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

~~Liquidity~~A phased restart of our manufacturing plants, supply network, and ~~Guidance Actions~~other dependent functions occurred in the second quarter of 2020. In significant regions, we have returned to pre-COVID-19 production levels. For example, by the end of the second quarter, North America was operating at 96 percent of pre-COVID-19 production levels.

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

~~With~~We ended the second quarter of 2020 with $39.8 billion of liquidity, including $39.3 billion of cash. On July 27, 2020, we repaid $7.7 billion of our outstanding $15.4 billion corporate revolvers. We believe our liquidity of almost $40 billion is sufficient to maintain or exceed our target cash balance of $20 billion through the second half of this year even if global demand declines or there is another widespread suspension of manufacturing operations ~~suspended~~in the second half of the year due to the COVID-19 pandemic, we have been unable to generate any meaningful revenue since late March 2020. Accordingly, on March 19, 2020, we provided notice to our lenders under our credit facilities that we were fully drawing the credit facilities in order to increase our cash balance by $15.4 billion. Further, we announced that we were suspending our $0.6 billion regular quarterly dividend and anti-dilutive share repurchase program, and taking other steps to preserve cash, including lowering operating costs, reducing capital expenditures, and deferring portions of executive salaries. On March 19, 2020, we withdrew all financial guidance for 2020.

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

~~Rating Agency Actions~~

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

~~Medical Supplies~~

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

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

Enhanced Safety Standards

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

Medical Supplies

During the second quarter, we worked with medical equipment makers, including GE Healthcare and 3M, to produce medical equipment and supplies. Among other things, we produced ventilators, powered air-purifying respirators, and face shields, as well as medical masks and reusable gowns for health care workers. We also worked with Thermo Fisher Scientific to produce COVID-19 test kits. We continue to produce ventilators, face shields, and medical masks.

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

Forward Looking Information

Due to the successful restart of our manufacturing operations, our strong liquidity, and the repayment of $7.7 billion of Automotive debt, we will consider paying, as early as October 2020, the accumulated deferred salary amounts that have been deferred since May 1, 2020.

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

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

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

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

RESULTS OF OPERATIONS

In the ~~first~~second quarter of 2020, the net ~~loss~~income attributable to Ford Motor Company was ~~$1,993~~$1,117 million, and Company adjusted EBIT was a loss of ~~$632~~$1,946 million.

Net income/(loss) includes certain items (“special items”) that are excluded from Company adjusted EBIT. These items are discussed in more detail in Note 20 of the Notes to the Financial Statements. We report special items separately to allow investors analyzing our results to identify certain infrequent significant items that they may wish to exclude when considering the trend of ongoing operating results. Our pre-tax and tax special items were as follows (in millions):


	First Quarter						Second Quarter						First Half
	2019			2020			2019			2020			2019			2020
Global Redesign
Europe excl. Russia	$	(115	)	$	(105	)	$	(707	)	$	(94	)	$	(822	)	$	(199	)
India	—			(3		)	—			(15		)	—			(18		)
South America	(201		)	(17		)	(235		)	(1		)	(436		)	(18		)
Russia	(174		)	20			(211		)	(3		)	(385		)	17
China	—			—			(2		)	(6		)	(2		)	(6		)
Separations and Other (not included above)	(24		)	(1		)	(56		)	—			(80		)	(1		)
Subtotal Global Redesign	$	(514	)	$	(106	)	$	(1,211	)	$	(119	)	$	(1,725	)	$	(225	)
Other Items
Focus cancellation	$	(67	)	$	—
Other incl. UAW Retirement Buyout and Chariot	(11		)	(203		)
Gain on transaction with Argo AI and VW							$	—		$	3,454		$	—		$	3,454
Other incl. Focus Cancellation, Transit Connect Customs Ruling*, UAW Retirement Buyout, and Chariot							(5		)	(3		)	(83		)	(206		)
Subtotal Other Items	$	(78	)	$	(203	)	$	(5	)	$	3,451		$	(83	)	$	3,248
Pension and OPEB Gain/(Loss)
Pension and OPEB remeasurement	$	—		$	22		$	10		$	148		$	10		$	170
Pension curtailment	—			—			—			—			—			—
Subtotal Pension and OPEB Gain/(Loss)	$	—		$	22		$	10		$	148		$	10		$	170
Total EBIT Special Items	$	(592	)	$	(287	)	$	(1,205	)	$	3,480		$	(1,797	)	$	3,193

Cash effect of Global Redesign (incl. separations)	$	(136	)	$	(172	)	$	(222	)	$	(99	)	$	(358	)	$	(271	)

Tax special items*	$	7		$	(787	)
Tax special items**							$	216		$	(955	)	$	223		$	(1,742	)

__________


*	Transit Connect impact of $187 million was accrued in the third quarter of 2019.


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

We recorded ~~$287 million~~$3.5 billion of pre-tax special ~~item charges~~items in the ~~first~~second quarter of 2020, primarily reflecting the gain on our investment in Argo AI as a result of the transaction with ~~cash effects of $172 million. Our pre-tax special items reflect primarily buyouts accepted under the terms of our UAW contract ratified in the fourth quarter of 2019~~Argo AI and ~~Global Redesign actions.~~Volkswagen. Tax special item charges of $955 million in the quarter included ~~$855 million for a~~the impact of Volkswagen’s investment in Argo AI and an additional valuation allowance related to certain deferred tax assets.

In Note 20 of the Notes to the Financial Statements, special items are reflected as a separate reconciling item, as opposed to being allocated among the Automotive, Mobility, and Ford Credit segments. This reflects the fact that management excludes these items from its review of operating segment results for purposes of measuring segment profitability and allocating resources.

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

COMPANY KEY METRICS

The table below shows our ~~first~~second quarter 2020 key metrics for the Company, compared to a year ago.


	First Quarter									Second Quarter									First Half
	2019			2020			H / (L)			2019			2020			H / (L)			2019			2020			H / (L)
GAAP Financial Measures
Cash Flows from Operating Activities ($B)	$	3.5		$	(0.5	)	$	(4.0	)	$	6.5		$	9.1		$	2.7		$	10.0		$	8.6		$	(1.4	)
Revenue ($M)	40,342			34,320			(15		)%	38,853			19,371			(50		)%	79,195			53,691			(32		)%
Net Income/(Loss) ($M)	1,146			(1,993		)	(3,139		)	148			1,117			969			1,294			(876		)	(2,170		)
Net Income/(Loss) Margin (%)	2.8		%	(5.8		)%	(8.6) ppts			0.4		%	5.8		%	5.4 ppts			1.6		%	(1.6		)%	(3.3) ppts
EPS (Diluted)	$	0.29		$	(0.50	)	$	(0.79	)	$	0.04		$	0.28		$	0.24		$	0.32		$	(0.22	)	$	(0.54	)

Non-GAAP Financial Measures *
Company Adj. Free Cash Flow ($B)	$	1.9		$	(2.2	)	$	(4.1	)	$	0.2		$	(5.3	)	$	(5.5	)	$	2.1		$	(7.6	)	$	(9.6	)
Company Adj. EBIT ($M)	2,447			(632		)	(3,079		)	1,654			(1,946		)	(3,600		)	4,101			(2,578		)	(6,679		)
Company Adj. EBIT Margin (%)	6.1		%	(1.8		)%	(7.9) ppts			4.3		%	(10.0		)%	(14.3) ppts			5.2		%	(4.8		)%	(10.0) ppts
Adjusted EPS (Diluted)	$	0.44		$	(0.23	)	$	(0.67	)	$	0.28		$	(0.35	)	$	(0.63	)	$	0.72		$	(0.59	)	$	(1.31	)
Adjusted ROIC (Trailing Four Quarters)	8.0		%	2.5		%	(5.5) ppts			8.5		%	(3.1		)%	(11.6) ppts

__________


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

In the ~~first~~second quarter of 2020, our diluted earnings per share of Common and Class B Stock was ~~a loss of $0.50~~$0.28 and our diluted adjusted earnings per share was a loss of ~~$0.23.~~$0.35.

Net income/(loss) margin was ~~negative~~ 5.8% in the ~~first~~second quarter of 2020, ~~down 8.6~~up 5.4 percentage points from a year ago. Company adjusted EBIT margin was negative ~~1.8%~~10.0% in the ~~first~~second quarter of 2020, down ~~7.9~~14.3 percentage points from a year ago.

The ~~$3.1 billion~~$969 million year-over-year ~~decline~~increase in net income/(loss) ~~and~~in the second quarter of 2020 reflects the gain on our investment in Argo AI as a result of the Volkswagen transaction, partially offset by lower Automotive EBIT driven by the impact of COVID-19. The $3.6 billion decline in Company adjusted EBIT in the ~~first~~second quarter of 2020 was driven by the impact of COVID-19. We estimate the unfavorable impact to net income/(loss) and Company adjusted EBIT was at least $2 billion. Both net income/(loss) and Company adjusted EBIT were further impacted by higher new model material cost, higher warranty, and adverse exchange, partially offset by lower ~~structural cost and commodities. The impact on net income/(loss) of the valuation allowance against certain deferred tax assets was offset by lower tax expense and lower Global Redesign charges.~~Automotive EBIT.

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


	First Quarter									Second Quarter									First Half
	2019			2020			H / (L)			2019			2020			H / (L)			2019			2020			H / (L)
Automotive	$	2,009		$	(177	)	$	(2,186	)	$	1,373		$	(2,089	)	$	(3,462	)	$	3,382		$	(2,266	)	$	(5,648	)
Mobility	(288		)	(334		)	(46		)	(264		)	(332		)	(68		)	(552		)	(666		)	(114		)
Ford Credit	801			30			(771		)	831			543			(288		)	1,632			573			(1,059		)
Corporate Other	(75		)	(151		)	(76		)	(286		)	(68		)	218			(361		)	(219		)	142
Company Adjusted EBIT *	2,447			(632		)	(3,079		)	1,654			(1,946		)	(3,600		)	4,101			(2,578		)	(6,679		)
Interest on Debt	(245		)	(227		)	(18		)	(244		)	(450		)	206			(489		)	(677		)	188
Special Items	(592		)	(287		)	(305		)	(1,205		)	3,480			(4,685		)	(1,797		)	3,193			(4,990		)
Taxes / Noncontrolling Interests	(464		)	(847		)	383			(57		)	33			(90		)	(521		)	(814		)	293
Net Income/(Loss)	$	1,146		$	(1,993	)	$	(3,139	)	$	148		$	1,117		$	969		$	1,294		$	(876	)	$	(2,170	)

__________


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

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

Automotive Segment

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


	First Quarter									Second Quarter									First Half
	2019			2020			H / (L)			2019			2020			H / (L)			2019			2020			H / (L)
North America	$	2,205		$	346		$	(1,859	)	$	1,696		$	(974	)	$	(2,670	)	$	3,900		$	(628	)	$	(4,528	)
South America	(158		)	(113		)	45			(205		)	(165		)	40			(362		)	(278		)	84
Europe	85			(143		)	(228		)	110			(664		)	(774		)	195			(807		)	(1,002		)
China (including Taiwan)	(128		)	(241		)	(113		)	(155		)	(136		)	19			(283		)	(377		)	(94		)
International Markets Group	5			(26		)	(31		)	(73		)	(150		)	(77		)	(68		)	(176		)	(108		)
Automotive Segment	$	2,009		$	(177	)	$	(2,186	)	$	1,373		$	(2,089	)	$	(3,462	)	$	3,382		$	(2,266	)	$	(5,648	)

The tables below and on the following pages provide ~~first~~second quarter 2020 key metrics and the change in ~~first~~second quarter 2020 EBIT compared with ~~first~~second quarter 2019 by causal factor for our Automotive segment and its regional business units: North America, South America, Europe, China (including Taiwan), and the International Markets Group. For a description of these causal factors, see Definitions and Information Regarding Automotive Causal Factors.


	First Quarter									Second Quarter									First Half
Key Metrics	2019			2020			H / (L)			2019			2020			H / (L)			2019			2020			H / (L)
Market Share (%)	6.0		%	6.0		%	— ppts			6.2		%	5.9		%	(0.3) ppts			6.1		%	5.9		%	(0.2) ppts
Wholesale Units (000)	1,425			1,126			(299		)	1,364			645			(719		)	2,789			1,771			(1,018		)
Revenue ($M)	$	37,239		$	31,340		$	(5,899	)	$	35,758		$	16,622		$	(19,136	)	$	72,997		$	47,962		$	(25,035	)
EBIT ($M)	2,009			(177		)	(2,186		)	1,373			(2,089		)	(3,462		)	3,382			(2,266		)	(5,648		)
EBIT Margin (%)	5.4		%	(0.6		)%	(6.0) ppts			3.8		%	(12.6		)%	(16.4) ppts			4.6		%	(4.7		)%	(9.4) ppts


Change in EBIT by Causal Factor (in millions)
First Quarter 2019 EBIT	$	2,009
Second Quarter 2019 EBIT				$	1,373
Volume / Mix	(1,482		)	(5,671		)
Net Pricing	13			1,330
Cost	(548		)	1,096
Exchange	(190		)	(118		)
Other	21			(99		)
First Quarter 2020 EBIT	$	(177	)
Second Quarter 2020 EBIT				$	(2,089	)

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

Our ~~first~~second quarter 2020 Automotive segment EBIT was a loss of ~~$177 million,~~$2.1 billion, down ~~$2.2~~$3.5 billion from a year ago, ~~as $346 million of positive EBIT from North America was more than offset by losses in other business units. Our first~~and our second quarter 2020 Automotive EBIT margin was negative ~~0.6~~12.6 percent. The lower EBIT was driven by ~~lower~~the decline in volume, ~~higher new model material cost, higher warranty, and adverse exchange,~~but was partially offset by an over $1 billion improvement in both net pricing and cost. The cost improvement reflects lower structural costs due to suspended production and one-time cost actions (e.g., reduced marketing activity), partially offset by higher material costs for new products and ~~commodities.~~regulatory compliance as well as higher warranty. For the full year, we expect warranty to be up year over year.

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

North America


	First Quarter									Second Quarter									First Half
Key Metrics	2019			2020			H / (L)			2019			2020			H / (L)			2019			2020			H / (L)
Market Share (%)	13.6		%	13.6		%	— ppts			13.8		%	14.2		%	0.4 ppts			13.7		%	13.8		%	0.1 ppts
Wholesale Units (000)	753			619			(134		)	693			272			(421		)	1,446			890			(556		)
Revenue ($M)	$	25,389		$	21,809		$	(3,580	)	$	23,970		$	10,943		$	(13,027	)	$	49,359		$	32,752		$	(16,607	)
EBIT ($M)	2,205			346			(1,859		)	1,696			(974		)	(2,670		)	3,900			(628		)	(4,528		)
EBIT Margin (%)	8.7		%	1.6		%	(7.1) ppts			7.1		%	(8.9		)%	(16.0) ppts			7.9		%	(1.9		)%	(9.8) ppts


Change in EBIT by Causal Factor (in millions)
First Quarter 2019 EBIT	$	2,205
Second Quarter 2019 EBIT				$	1,696
Volume / Mix	(1,031		)	(4,330		)
Net Pricing	(197		)	813
Cost	(685		)	758
Exchange	(53		)	30
Other	107			59
First Quarter 2020 EBIT	$	346
Second Quarter 2020 EBIT				$	(974	)

In North America, ~~first~~second quarter 2020 wholesales declined 1861 percent from a year ago, primarily reflecting ~~primarily COVID-19 related disruption. First~~lower industry volume and suspended production through May 17, 2020. Second quarter 2020 revenue decreased 1454 percent year over year, driven by lower volume, partially offset by ~~improved product and series/option mix.~~higher net pricing on new products.

North America’s ~~first~~second quarter 2020 EBIT was down ~~$1.9~~$2.7 billion from a year ago with an EBIT margin of ~~1.6~~negative 8.9 percent. The lower EBIT was driven by lower volume, ~~and net pricing,~~ higher ~~warranty cost, and~~ new model material cost, and higher warranty, partially offset by ~~improved mix.~~higher net pricing, lower structural cost arising from suspended production, reduced marketing activity, and other one-time cost actions.

South America


	First Quarter									Second Quarter									First Half
Key Metrics	2019			2020			H / (L)			2019			2020			H / (L)			2019			2020			H / (L)
Market Share (%)	7.7		%	6.9		%	(0.8) ppts			7.4		%	6.5		%	(0.9) ppts			7.5		%	6.8		%	(0.7) ppts
Wholesale Units (000)	68			59			(9		)	75			14			(61		)	143			73			(70		)
Revenue ($M)	$	925		$	728		$	(197	)	$	976		$	242		$	(734	)	$	1,901		$	970		$	(931	)
EBIT ($M)	(158		)	(113		)	45			(205		)	(165		)	40			(362		)	(278		)	84
EBIT Margin (%)	(17.0		)%	(15.5		)%	1.6 ppts			(21.0		)%	(68.3		)%	(47.3) ppts			(19.1		)%	(28.6		)%	(9.6) ppts


Change in EBIT by Causal Factor (in millions)
First Quarter 2019 EBIT	$	(158	)
Second Quarter 2019 EBIT				$	(205	)
Volume / Mix	(2		)	(93		)
Net Pricing	74			103
Cost	48			50
Exchange	(76		)	(6		)
Other	1			(14		)
First Quarter 2020 EBIT	$	(113	)
Second Quarter 2020 EBIT				$	(165	)

In South America, ~~first~~second quarter 2020 wholesales declined 1381 percent from a year ago, primarily reflecting ~~COVID-19 related disruption. First~~lower industry volume and suspended production for most of the quarter. Second quarter 2020 revenue decreased 2175 percent year over year, driven by lower volume and weaker currencies, partially offset by higher net pricing.

South America’s ~~first~~second quarter 2020 EBIT loss improved ~~29 percent~~$40 million from a year ago with an EBIT margin of negative ~~15.5~~68.3 percent. ~~The~~ EBIT ~~improvement reflects progress on restructuring actions~~improved despite a significant wholesale reduction. South America’s higher net pricing, cost performance (including ~~exiting heavy truck production, discontinuing certain passenger vehicles,~~lower headcount), and ~~reducing headcount) and~~favorable vehicle mix more than offset inflationary cost ~~reductions. The adverse exchange reflects currency weakening of 12 percent in Brazil and 37 percent in Argentina.~~increases.

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

Europe


	First Quarter									Second Quarter									First Half
Key Metrics	2019			2020			H / (L)			2019			2020			H / (L)			2019			2020			H / (L)
Market Share (%)	7.6		%	6.9		%	(0.7) ppts			7.0		%	7.1		%	0.1 ppts			7.3		%	7.0		%	(0.3) ppts
Wholesale Units * (000)	382			288			(94		)	368			154			(214		)	750			442			(308		)
Revenue ($M)	$	7,448		$	6,247		$	(1,201	)	$	7,329		$	3,613		$	(3,716	)	$	14,777		$	9,860		$	(4,917	)
EBIT ($M)	85			(143		)	(228		)	110			(664		)	(774		)	195			(807		)	(1,002		)
EBIT Margin (%)	1.1		%	(2.3		)%	(3.4) ppts			1.5		%	(18.4		)%	(19.9) ppts			1.3		%	(8.2		)%	(9.5) ppts

__________


*	Includes Ford brand vehicles produced and sold by our unconsolidated affiliate in Turkey (about ~~6,000~~7,000 units in Q1Q2 2019 and ~~11,000~~9,000 units in Q1Q2 2020). Revenue does not include these sales.


Change in EBIT by Causal Factor (in millions)
First Quarter 2019 EBIT	$	85
Second Quarter 2019 EBIT				$	110
Volume / Mix	(304		)	(957		)
Net Pricing	164			392
Cost	(64		)	38
Exchange	49			(106		)
Other	(73		)	(141		)
First Quarter 2020 EBIT	$	(143	)
Second Quarter 2020 EBIT				$	(664	)

In Europe, ~~first~~second quarter 2020 wholesales declined 2558 percent from a year ago, ~~driven by COVID-19 related disruption, the Kuga launch,~~primarily reflecting lower industry volume and ~~the discontinuation of low margin products. First~~suspended production. Second quarter 2020 revenue decreased 1651 percent year over year, driven by lower volume and weaker ~~currencies.~~currencies, partially offset by higher net pricing and favorable series/option mix.

Europe’s ~~first~~second quarter 2020 EBIT decreased ~~$228~~$774 million year over year with an EBIT margin of negative ~~2.3~~18.4 percent. The lower EBIT was more than explained by lower ~~volume~~volume. Higher net pricing and ~~higher material~~ cost ~~to support~~improvement from personnel reduction actions were partially offset by regulatory (CO₂) ~~requirements, partially offset by higher net pricing~~product actions and ~~lower structural costs as a result of ongoing restructuring actions.~~warranty expense.

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

China (Including Taiwan)


	First Quarter									Second Quarter									First Half
Key Metrics	2019			2020			H / (L)			2019			2020			H / (L)			2019			2020			H / (L)
Market Share (%)	2.1		%	2.2		%	0.1 ppts			2.3		%	2.5		%	0.2 ppts			2.2		%	2.4		%	0.2 ppts
Wholesale Units * (000)	115			81			(34		)	126			169			43			241			251			10
Revenue ($M)	$	858		$	593		$	(265	)	$	915		$	803		$	(112	)	$	1,774		$	1,396		$	(378	)
EBIT ($M)	(128		)	(241		)	(113		)	(155		)	(136		)	19			(283		)	(377		)	(94		)
EBIT Margin (%)	(14.9		)%	(40.7		)%	(25.7) ppts			(17.0		)%	(17.0		)%	— ppts			(16.0		)%	(27.0		)%	(11.0) ppts

China Unconsolidated Affiliates
Wholesales (000)	99			72			(27		)	108			156			48			207			228			21
Ford Equity Income/(Loss) ($M)	$	(41	)	$	(91	)	$	(50	)	$	7		$	3		$	(4	)	$	(34	)	$	(88	)	$	(54	)

__________


*	Includes Ford brand and JMC brand vehicles produced and sold in China by our unconsolidated affiliates. Revenue does not include these sales.


Change in EBIT by Causal Factor (in millions)
First Quarter 2019 EBIT	$	(128	)
Second Quarter 2019 EBIT				$	(155	)
Volume / Mix	(54		)	(34		)
Net Pricing	(15		)	(12		)
Cost	79			59
Exchange	(73		)	(34		)
Other (Including Joint Ventures)	(50		)	40
First Quarter 2020 EBIT	$	(241	)
Second Quarter 2020 EBIT				$	(136	)

In China, ~~compared with a year ago, first~~second quarter 2020 wholesales ~~declined 29 percent and revenue was down 31 percent, driven by COVID-19 related disruption. Our 29 percent decline in wholesales was lower than the industry’s, which was down 37~~increased 34 percent from a year ~~ago. China’s market share~~ago, reflecting the newly launched Corsair and Escape and strong commercial vehicle sales. Second quarter 2020 revenue at our consolidated operations was down 12 percent, reflecting the planned transition of ~~2.2 percent increased 0.1 percentage points, reflecting recent product launches and a sales recovery slightly ahead of the industry.~~Lincoln to local production at our Changan Ford joint venture.

China’s ~~first~~second quarter 2020 EBIT ~~was $113~~loss improved $19 million ~~lower than~~from a year ago with an EBIT margin of negative ~~40.7~~17 percent. The ~~higher~~improvement in EBIT ~~loss~~ was driven by ~~lower wholesales~~volume growth at our joint ventures and ~~adverse exchange, partially offset by~~ structural cost ~~improvements of $65 million.~~improvements.

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

International Markets Group


	First Quarter									Second Quarter									First Half
Key Metrics	2019			2020			H / (L)			2019			2020			H / (L)			2019			2020			H / (L)
Market Share (%)	1.9		%	1.5		%	(0.4) ppts			2.1		%	1.7		%	(0.4) ppts			2.0		%	1.6		%	(0.4) ppts
Wholesale Units * (000)	107			78			(29		)	103			36			(66		)	210			114			(96		)
Revenue ($M)	$	2,618		$	1,962		$	(656	)	$	2,568		$	1,021		$	(1,547	)	$	5,186		$	2,983		$	(2,203	)
EBIT ($M)	5			(26		)	(31		)	(73		)	(150		)	(77		)	(68		)	(176		)	(108		)
EBIT Margin (%)	0.2		%	(1.3		)%	(1.5) ppts			(2.8		)%	(14.7		)%	(11.8) ppts			(1.3		)%	(5.9		)%	(4.6) ppts

__________


*	Includes Ford brand vehicles produced and sold by our unconsolidated affiliate in Russia (about ~~9,000~~11,000 units in Q1Q2 2019 and ~~3,000~~2,000 units in Q1Q2 2020). Revenue after Q2 2019 does not include these sales.


Change in EBIT by Causal Factor (in millions)
First Quarter 2019 EBIT	$	5
Second Quarter 2019 EBIT				$	(73	)
Volume / Mix	(92		)	(256		)
Net Pricing	(14		)	33
Cost	73			191
Exchange	(37		)	(2		)
Other	39			(43		)
First Quarter 2020 EBIT	$	(26	)
Second Quarter 2020 EBIT				$	(150	)

In our International Markets Group, ~~first~~second quarter 2020 wholesales declined 2764 percent from a year ago, primarily reflecting ~~COVID-19 related disruption~~lower industry volume, suspended production, and ~~the expected lower volume at~~a revised commercial vehicle offering strategy with our Russian joint venture. ~~First~~Second quarter 2020 revenue decreased 2560 percent year over year, driven by lower ~~volume.~~volume and weaker currencies.

Our International Market Group’s ~~first~~second quarter 2020 EBIT was ~~down $31~~$77 million ~~from~~lower than a year ago with an EBIT margin of negative ~~1.3~~14.7 percent. The ~~lower~~higher EBIT loss was driven by lower volume, ~~and adverse exchange,~~ partially offset by ~~cost improvements.~~

lower structural costs.

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

Definitions and Information Regarding Automotive Causal Factors

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


•	Market Factors (exclude the impact of unconsolidated affiliate wholesale units):


◦	Volume and Mix – primarily measures EBIT variance from changes in wholesale unit volumes (at prior-year average contribution margin per unit) driven by changes in industry volume, market share, and dealer stocks, as well as the EBIT variance resulting from changes in product mix, including mix among vehicle lines and mix of trim levels and options within a vehicle line


◦	Net Pricing – primarily measures EBIT variance driven by changes in wholesale unit prices to dealers and marketing incentive programs such as rebate programs, low-rate financing offers, special lease offers, and stock adjustments on dealer inventory

Cost:


◦	Contribution Costs – primarily measures EBIT variance driven by per-unit changes in cost categories that typically vary with volume, such as material costs (including commodity and component costs), warranty expense, and freight and duty costs


◦	Structural Costs – primarily measures EBIT variance driven by absolute change in cost categories that typically do not have a directly proportionate relationship to production volume. Structural costs include the following cost categories:


▪	Manufacturing, Including Volume-Related – consists primarily of costs for hourly and salaried manufacturing personnel, plant overhead (such as utilities and taxes), and new product launch expense. These costs could be affected by volume for operating pattern actions such as overtime, line-speed, and shift schedules


▪	Engineering – consists primarily of costs for engineering personnel, prototype materials, testing, and outside engineering services


▪	Spending-Related – consists primarily of depreciation and amortization of our manufacturing and engineering assets, but also includes asset retirements and operating leases


▪	Advertising and Sales Promotions – includes costs for advertising, marketing programs, brand promotions, customer mailings and promotional events, and auto shows


▪	Administrative and Selling – includes primarily costs for salaried personnel and purchased services related to our staff activities and selling functions, as well as associated information technology costs


▪	Pension and OPEB – consists primarily of past service pension costs and other postretirement employee benefit costs

•

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


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

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

•

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


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


•	SAAR – seasonally adjusted annual rate

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

Mobility Segment

In our Mobility segment, our ~~first~~second quarter 2020 EBIT loss was ~~$334~~$332 million, a ~~$46~~$68 million higher loss than a year ago. Our strategic investments in ~~future growth opportunities in mobility services and~~ vehicle and business model development for our autonomous vehicle platform and future growth opportunities in mobility services continue, in line with a disciplined approach. ~~We are assessing~~

On June 1, 2020, Ford, Volkswagen AG, and Argo AI completed the ~~impact of COVID-19 on consumer behavior~~previously announced transaction for Volkswagen to join Ford in investing in Argo AI. This collaboration allows Volkswagen and ~~its impact on mobility services. We are shifting the launch of~~Ford to better serve our future autonomous vehicle ~~commercial services,~~customers while improving cost and capital efficiencies. The companies will both work with Argo AI to form distinct, highly capable autonomous-vehicle businesses based on Argo AI’s self-driving technology. This Volkswagen/Ford alliance does not include cross-ownership between the companies, which ~~was previously scheduled to commence~~will remain competitors in ~~2021, until 2022.~~

~~Volkswagen’s~~the marketplace. As a result of this transaction, we have reported a gain on our investment in Argo AI ~~remains on track~~of $3.5 billion, which has been treated as a special item in our results for the second quarter of 2020.

Effective June 1, 2020, Argo AI was deconsolidated from Ford. Despite the deconsolidation, we expect our investments in autonomous vehicles to ~~close by mid-2020.~~continue at similar levels and will continue to be reflected in our Mobility segment results.

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

Ford Credit Segment

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

The tables below provide ~~first~~second quarter and year-to-date 2020 key metrics and the change in ~~first~~second quarter 2020 EBT compared with ~~first~~second quarter 2019 by causal factor for the Ford Credit segment. For a description of these causal factors, see Definitions and Information Regarding Ford Credit Causal Factors.


	First Quarter									Second Quarter									First Half
GAAP Financial Measures	2019			2020			H / (L)			2019			2020			H / (L)			2019			2020			H / (L)
Net Receivables ($B)	$	147		$	138		(6		)%	$	143		$	130		(9		)%	$	143		$	130		(9		)%
Loss-to-Receivables * (bps)	55			62			7			39			15			(24		)	48			37			(11		)
Auction Values **	$	18,445		$	18,630		1		%	$	20,115		$	19,755		(2		)%	$	19,525		$	19,435		(1		)%
EBT ($M)	$	801		$	30		$	(771	)	$	831		$	543		$	(288	)	$	1,632		$	573		$	(1,059	)
ROE (%)	16		%	0.6		%	(15.4) ppts			16		%	12		%	(4) ppts			16		%	6		%	(10) ppts

Other Balance Sheet Metrics
Debt ($B)	$	143		$	137		(4		)%										$	141		$	135		(4		)%
Net Liquidity ($B)	31			28			(10		)%										34			32			(6		)%
Financial Statement Leverage (to 1)	9.6			10.1			0.5												9.5			9.8			0.3

__________


*	U.S. retail financing ~~only~~only.


**	U.S. 36-month off-lease ~~first~~second quarter auction values at Q1Q2 2020 mix and YTD amounts at 2020 YTD mix.


	First Quarter						First Half
Non-GAAP Financial Measures	2019		2020		H / (L)		2019		2020		H / (L)
Managed Receivables * ($B)	$	155	$	146	(6	)%	$	152	$	139	(9	)%
Managed Leverage ** (to 1)	8.8		9.2		0.4		8.6		8.5		(0.1	)

__________


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


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


Change in EBT by Causal Factor (in millions)
First Quarter 2019 EBT	$	801
Second Quarter 2019 EBT				$	831
Volume / Mix	(48		)	(46		)
Financing Margin	32			(13		)
Credit Loss	(554		)	(33		)
Lease Residual	(146		)	(127		)
Exchange	(4		)	(6		)
Other	(51		)	(63		)
First Quarter 2020 EBT	$	30
Second Quarter 2020 EBT				$	543

Ford Credit’s ~~consumer credit metrics were healthy~~loss-to-receivables ratio remained at a low level in the ~~United States, with the loss-to-receivables ratio~~second quarter of 2020, at ~~0.62~~0.15 percent, 7which was 24 basis points ~~higher~~lower than a year ago. U.S. auction values in the second quarter of 2020 were 12 percent ~~higher~~lower than a year ago. ~~Ford Credit now expects full~~Full year 2020 auction values are now forecasted to be down ~~more than the~~about 5 percent, forecasted in February. Ford Credit’s receivables declined year over year, and Ford Credit expects its receivables to continue to decline in subsequent quarters due to the impact of COVID-19 on vehicle sales. In response to COVID-19, Ford Credit is broadly offering its existing customers payment deferrals, due date changes, and lease-end extensions.consistent with third party estimates.

Ford Credit’s ~~first~~second quarter 2020 EBT of ~~$30~~$543 million was ~~$771~~$288 million lower than a year ago, primarily reflecting higher supplemental depreciation on operating leases, lower derivative market valuation gains (reflected in Other), unfavorable volume and mix driven by ~~about $600 million for~~lower average receivables, and an increase in the credit loss reserve ~~increases, lower values of~~during the quarter. Favorable year-over-year off-lease ~~vehicles awaiting sale,~~auction performance and anticipated lease defaults. In total, the impact of COVID-19 deteriorated first quarter 2020 EBT by about $700 million. In addition to the $600 million previously discussed, the remaining $100 million of COVID-19 impact was primarily driven by unfavorable performance in market valuation adjustments to derivatives as a result of interest rate declines.credit losses were partial offsets.

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

Definitions and Information Regarding Ford Credit Causal Factors

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

Volume and Mix:

◦

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


◦	Mix primarily measures changes in net financing margin driven by period-over-period changes in the composition of Ford Credit’s average managed receivables by product within each region

•Financing Margin:

◦

Financing margin variance is the period-to-period change in financing margin yield multiplied by the present period average managed receivables at prior period exchange rates. This calculation is performed at the product and country level and then aggregated. Financing margin yield equals revenue, less interest expense and scheduled depreciation for the period, divided by average managed receivables for the same period


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


•	Credit Loss:


◦	Credit loss is the change in the provision for credit losses at prior period exchange rates. For analysis purposes, management splits the provision for credit losses into net charge-offs and the change in the allowance for credit losses

◦

Net charge-off changes are primarily driven by the number of repossessions, severity per repossession, and recoveries. Changes in the allowance for credit losses are primarily driven by changes in historical trends in credit losses and recoveries, changes in the composition and size of Ford Credit’s present portfolio, changes in trends in historical used vehicle values, and changes in forward looking macroeconomic conditions. For additional information, refer to the “Critical Accounting Estimates” section


•	Lease Residual:


◦	Lease residual measures changes to residual performance at prior period exchange rates. For analysis purposes, management splits residual performance primarily into residual gains and losses, and the change in accumulated supplemental depreciation

◦

Residual gain and loss changes are primarily driven by the number of vehicles returned to Ford Credit and sold, and the difference between the auction value and the depreciated value (which includes both base and accumulated supplemental depreciation) of the vehicles sold. Changes in accumulated supplemental depreciation are primarily driven by changes in Ford Credit’s estimate of the expected auction value at the end of the lease term and changes in Ford Credit’s estimate of the number of vehicles that will be returned to it and sold. Accumulated depreciation reflects early termination losses on operating leases due to customer default events for all periods presented. For additional information, refer to the “Critical Accounting Estimates - Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 of Part II of our 2019 Form 10-K Report

Exchange:


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


•	Other:


◦	Primarily includes operating expenses, other revenue, insurance expenses, and other income at prior period exchange rates


◦	Changes in operating expenses are primarily driven by salaried personnel costs, facilities costs, and costs associated with the origination and servicing of customer contracts


◦	In general, other income changes are primarily driven by changes in earnings related to market valuation adjustments to derivatives (primarily related to movements in interest rates) and other miscellaneous items

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

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


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

•

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


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


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


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


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


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

•

Total Net Receivables (as shown in the Key Metrics and Ford Credit Net Receivables Reconciliation To Managed Receivables tables) – Includes finance receivables (retail financing and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance ~~sheet~~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 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Corporate Other

Corporate Other primarily includes corporate governance expenses, interest income (excluding interest earned on our extended service contract portfolio that is included in our Automotive segment) and gains and losses from our cash, cash equivalents, marketable securities, and other investments, and foreign exchange derivatives gains and losses associated with intercompany lending. Corporate governance expenses are primarily administrative, delivering benefit on behalf of the global enterprise, and are not allocated to specific Automotive business units or operating segments. These include expenses related to setting and directing global policy, providing oversight and stewardship, and promoting the Company’s interests. In the ~~first~~second quarter of 2020, Corporate Other had a ~~$151~~$68 million loss, compared with a ~~$75~~$286 million loss a year ago. The ~~higher loss~~improvement is more than explained by the nonrecurrence of the mark-to-market loss on our investment in Pivotal Software we had in the second quarter of 2019, as well as mark-to-market gains on other investments this quarter, partially offset by lower ~~corporate governance expenses.~~interest income.

Interest on Debt

Interest on Debt consists of interest expense on Automotive and Other debt. ~~First~~Second quarter 2020 interest expense on Automotive and Other debt was ~~$227~~$450 million, which is ~~$18~~$206 million ~~lower~~higher than a year ago, more than explained ~~by lower foreign debt interest expense, partially offset~~ by higher U.S. debt interest expense.

Taxes

~~Our provision for income taxes for~~In the second quarter of 2020, we recognized a tax benefit of $34 million. For the first ~~quarter~~half of 2020, ~~was $847 million, resulting~~we recognized a tax provision of $813 million. This resulted in a negative effective tax ~~rate~~rates of ~~73.9%. During the quarter, we recognized tax expense of $855 million for valuation allowances against certain tax credits recorded as deferred tax assets.~~3.1% and 1,311%, respectively.

Our second quarter and first ~~quarter~~half of 2020 adjusted effective tax ~~rate,~~rates, which ~~excludes~~exclude special items, ~~the valuation allowance adjustment,~~were 41.3% and ~~the tax impact on special items, was negative 7.0%.~~28.5%, respectively.

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

LIQUIDITY AND CAPITAL RESOURCES

~~The~~ COVID-19 ~~pandemic~~ has created significant volatility in the global economy, led to reduced economic activity, and adversely affected our operations. ~~Consistent with actions taken by governmental authorities, in late March we suspended~~Moreover, our ~~manufacturing operations in regions around the world, other than China, where manufacturing operations were suspended in January and February, but began resuming operations in March. This action has~~suspension of production earlier this year put pressure on our Automotive liquidity. ~~In response,~~Beginning in May 2020, taking a phased approach and after introducing new safety protocols at our plants, we ~~have assessed,~~resumed manufacturing operations around the world, and ~~will continue~~by July 2020, we returned to ~~assess, all options available~~pre-COVID-19 production levels in North America, Europe, and China. Throughout, we demonstrated discipline in the management of our balance sheet and continued to usmaintain strong liquidity to ~~increase our liquidity.~~ensure financial flexibility in these uncertain times. As discussed in more detail below, we ended the second quarter of 2020 with $39.8 billion of liquidity, including $39.3 billion of cash. During the quarter we issued almost $10 billion of new debt, including the $8 billion unsecured issuance we completed in April.

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

Company excluding Ford Credit


	December 31, 2019			March 31, 2020			December 31, 2019			June 30, 2020
Balance Sheet ($B)
Company Cash	$	22.3		$	34.3
Balance Sheets ($B)
Company Cash *							$	22.3		$	39.3
Liquidity	35.4			35.1			35.4			39.8
Debt	(15.3		)	(30.5		)	(15.3		)	(40.0		)
Cash Net of Debt	7.0			3.8			7.0			(0.7		)

Pension Funded Status ($B) *
Pension Funded Status ($B) **
Funded Plans	$	(0.4	)	$	—		$	(0.4	)	$	0.4
Unfunded Plans	(6.4		)	(6.2		)	(6.4		)	(6.2		)
Total Global Pension	$	(6.8	)	$	(6.2	)	$	(6.8	)	$	(5.8	)

Total Funded Status OPEB	$	(6.1	)	$	(5.9	)	$	(6.1	)	$	(6.0	)

__________


*	Includes a $290 million cash compensating balance at June 30, 2020 in an interest-bearing savings account related to a $498 million debt obligation.

Balances at ~~March 31,~~June 30, 2020 reflect net underfunded status at December 31, 2019, updated for service and interest cost, expected return on assets, curtailment and settlement gains and associated interim remeasurement (where applicable), separation expense, actual benefit payments, and cash contributions. For plans without interim remeasurement, the discount rate and rate of expected return assumptions are unchanged from year-end 2019.

Liquidity. At ~~March 31,~~June 30, 2020, we had Company cash of ~~$34.3~~$39.3 billion, an increase of ~~$12~~$17 billion compared with December 31, 2019. Company cash at ~~March 31,~~June 30, 2020 includes ~~$15.1~~$15.4 billion of the loan proceeds we received in March and April 2020 under our corporate and supplemental revolving credit facilities, a portion of which was repaid on July 27, 2020, as described in more detail ~~below. At April 24, 2020, we had Company cash of $34.6 billion, including~~below, and $8 billion from our unsecured debt issuance, which settled on April 22, 2020. At ~~March 31,~~June 30, 2020, about ~~92%~~90% of Company cash was held by consolidated entities domiciled in the United States.

~~Our key liquidity objective during these unprecedented and uncertain times is to prioritize actions that preserve or improve~~ With our cash balance until we are able to resume and sustain normal production and generate revenue. In aggregate, drawing on our corporate credit facilities and issuing unsecured debt securities increased our Company cash balance by $23.4 billion. We believe the phased restart of ~~our manufacturing plants, supply network, and other dependent functions is probable of commencing~~production in ~~the second quarter of 2020. With our current balance of Company cash and the Company’s operating plan to resume production,~~mid-May 2020, we believe we have sufficient liquidity to ~~fund~~maintain or exceed our ~~operations for at least~~Company cash target of $20 billion through the ~~next twelve months. If we experience a significant delay in the phased restart~~second half of ~~our~~this year even if global demand declines or there is another widespread suspension of manufacturing ~~operations, or we are unable to maintain expected levels of production, we may take additional actions such as reducing costs or seeking additional financing.~~operations.

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

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

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

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

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

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


	First Quarter						Second Quarter						First Half
	2019			2020			2019			2020			2019			2020
Company Excluding Ford Credit
Company Adjusted EBIT* excluding Ford Credit	$	1.6		$	(0.7	)	$	0.8		$	(2.5	)	$	2.5		$	(3.2	)

Capital spending	$	(1.6	)	$	(1.8	)	$	(1.9	)	$	(1.2	)	$	(3.5	)	$	(2.9	)
Depreciation and tooling amortization	1.4			1.4			1.4			1.3			2.7			2.7
Net spending	$	(0.3	)	$	(0.4	)	$	(0.5	)	$	0.2		$	(0.8	)	$	(0.2	)

Receivables	$	(0.1	)	$	0.5		$	0.2		$	0.1		$	0.1		$	0.6
Inventory	(1.1		)	(1.1		)	(0.1		)	1.2			(1.2		)	0.1
Trade Payables	1.7			(0.5		)	(0.2		)	(2.2		)	1.5			(2.7		)
Changes in working capital	$	0.5		$	(1.2	)	$	(0.1	)	$	(0.9	)	$	0.3		$	(2.1	)

Ford Credit distributions	$	0.7		$	0.3		$	0.7		$	0.3		$	1.3		$	0.6
All other and timing differences	(0.6		)	(0.2		)	(0.6		)	(2.4		)	(1.3		)	(2.6		)
Company adjusted free cash flow *	$	1.9		$	(2.2	)	$	0.2		$	(5.3	)	$	2.1		$	(7.6	)

Global Redesign (including separations)	$	(0.1	)	$	(0.2	)	$	(0.2	)	$	(0.1	)	$	(0.4	)	$	(0.3	)
Changes in debt	—			15.1			0.3			9.6			0.3			24.7
Funded pension contributions	(0.3		)	(0.2		)	(0.1		)	(0.1		)	(0.4		)	(0.3		)
Shareholder distributions	(0.6		)	(0.6		)	(0.6		)	—			(1.2		)	(0.6		)
All other (including acquisitions and divestitures)	0.2			0.1			(0.5		)	0.9			(0.3		)	1.0
Change in cash	$	1.1		$	12.0		$	(1.0	)	$	5.0		$	0.2		$	17.0

__________


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


*	Note: Numbers may not sum due to rounding.

Our second quarter 2020 Net cash provided by/(used in) operating activities was up $2.7 billion year over year. This improvement is more than explained by Ford Credit operating cash flow, which is up $8.1 billion year over year. Excluding Ford Credit operating cash flow, the Net cash provided by/(used in) operating activities is $5.5 billion lower than a year ago. Our Company adjusted free cash flow was negative $5.3 billion, which was $5.5 billion lower than a year ago driven by lower adjusted EBIT and more unfavorable timing differences and working capital.

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

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

Capital spending was ~~$1.8~~$1.2 billion in the ~~first~~second quarter of 2020, ~~$0.2~~$0.7 billion ~~higher~~lower than a year ago. We expect full year 2020 capital spending to be between ~~$6.3~~$6.1 billion and ~~$6.8~~$6.6 billion, down from our prior expectation of $6.3 billion to $6.8 billion, ~~to $7.3 billion.~~and down between $1 billion and $1.5 billion from the $7.6 billion of capital spending in 2019.

~~First~~Second quarter 2020 working capital was ~~$1.2~~$0.9 billion negative, more than explained by ~~higher inventory and~~ lower trade payables ~~reflecting~~driven by suspended production at most of our ~~suspension of manufacturing operations in March.~~assembly plants and lower industry volumes. Lower inventory also reflects the impact from lower production and finished vehicle inventory, and provided a partial offset.

~~First~~Second quarter 2020 all other and timing differences were about ~~$0.2~~$2.4 billion negative, reflecting assorted timing differences including differences between accrual-based EBIT and the associated cash flows (e.g., marketing incentive and warranty payments to dealers), interest payments on Automotive and Other debt, and cash taxes.

In the ~~first~~second quarter of 2020, we contributed ~~$175~~$107 million to our worldwide funded pension plans. We ~~now~~continue to expect to contribute between $0.5 billion and $0.7 billion to our funded plans (most of which are mandatory contributions)~~, down from our prior expectation of $0.6 billion to $0.8 billion.~~.

~~Shareholder~~There were no shareholder distributions ~~were $595 million~~ in the ~~first~~second quarter of ~~2020, all of which was attributable to our regular quarterly dividend. On March 19, 2020, we announced the suspension of our regular quarterly dividend and share repurchase program.~~2020.

Available Credit Lines. ~~On March 19,~~At June 30, 2020, ~~Ford Credit reallocated $3~~the full amount under each of our $13.4 billion ~~of commitments under our~~ corporate credit facility, ~~back to us, and we submitted borrowing notices to our lenders for $13.4 billion under our corporate credit facility and~~ $2 billion ~~under our~~ supplemental revolving credit facility, ~~to offset the temporary working capital impacts of the COVID-19 related suspension of manufacturing operations~~ and ~~to preserve our financial flexibility. On March 24, 2020, we received $15.1~~$1.5 billion delayed draw term loan remained drawn, and on April 8, 2020, our subsidiary, Ford Motor Company Brasil Ltda., received the remaining $300 million attributable to the Brazilian real sub-facility under the corporate credit facility. Accordingly, as of April 8, 2020, we had $0.5 billion of ~~available~~ committed Company credit lines excluding Ford Credit was available ~~to us, all of which constitutes~~under local credit facilities for our affiliates.

~~Under our~~Our corporate and supplemental revolving credit facilities were amended as of July 27, 2020 to extend the maturity dates for a portion of the commitments under each facility. Following the corporate credit facility ~~$3.35~~amendment, $0.4 billion of ~~our loans~~commitments mature on April 30, 2022, $3 billion of commitments mature on July 27, 2023, and $10.1 billion of commitments mature on April 30, 2024. Following the supplemental revolving credit facility amendment, $0.2 billion of commitments mature on April 30, 2022 and ~~$10.05~~$1.8 billion of ~~our loans~~commitments mature on ~~April~~July 27, 2023. Additional information about the amendments is available in our Current Report on Form 8-K filed on July 30, 2024. Under our supplemental revolving credit facility, all $2 billion matures on April 30, 2022, and under our delayed draw term loan, which we drew in full in 2019, all $1.5 billion matures on December 31, 2022.2020.

The corporate credit facility is unsecured and free of material adverse change conditions to borrowing, restrictive financial covenants (for example, interest or fixed-charge coverage ratio, debt-to-equity ratio, and minimum net worth requirements), and credit rating triggers that could limit our ability to obtain funding or trigger early repayment. The corporate credit facility contains a liquidity covenant that requires us to maintain a minimum of $4 billion in aggregate of domestic cash, cash equivalents, and loaned and marketable securities and/or availability under the facility. As part of the July 27, 2020 extension of the corporate and supplemental revolving credit facilities, we agreed not to engage in share repurchases (with limited exceptions) while any portion of either facility is outstanding and not to pay dividends on our common or Class B stock while more than 50% of the aggregate amount of commitments under the two facilities is utilized. The terms and conditions of the delayed draw term loan (other than the restrictions on share repurchases and dividends) and the supplemental revolving credit facility ~~and delayed draw term loan~~ are consistent with our corporate credit facility.

Also on July 27, 2020, we repaid $5.7 billion of our corporate credit facility and the full $2 billion outstanding under our supplemental revolving credit facility. As of July 30, 2020, the utilized portion of the corporate credit facility is $7.7 billion, all of which matures on April 30, 2024, and the entire $2 billion supplemental revolving credit facility is available.

Each of the corporate credit facility, supplemental revolving credit facility, delayed draw term loan, and our Loan Arrangement and Reimbursement Agreement with the U.S. Department of Energy (the “DOE”) include a covenant that requires us to provide guarantees from certain of our subsidiaries in the event that our senior, unsecured, long-term debt does not maintain at least two investment grade ratings from Fitch, Moody’s, and S&P. ~~As a result of being downgraded by Moody's in September 2019 and S&P in March 2020, on April 23, 2020, the~~The following subsidiaries have provided unsecured guarantees to the lenders under the credit facilities and to the DOE: Ford Component Sales, LLC; Ford European Holdings LLC; Ford Global Technologies, LLC; Ford Holdings LLC (the parent company of Ford Credit); Ford International Capital LLC; Ford Mexico Holdings LLC; Ford Motor Service Company; Ford Smart Mobility LLC; and Ford Trading Company, LLC.

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

On June 29, 2020, Ford Motor Company Limited, our operating subsidiary in the United Kingdom (“Ford Britain”), entered into a £625 million term loan credit facility with a syndicate of banks to support Ford Britain’s general export activities. Accordingly, U.K. Export Finance (“UKEF”) provided a £500 million guarantee of the credit facility under its new Export Development Guarantee scheme, which supports high value commercial lending to U.K. exporters. We have also guaranteed Ford Britain’s obligations under the credit facility to the lenders. On June 30, 2020, Ford Britain drew the full £625 million available under the facility. This five-year, non-amortizing loan matures on June 30, 2025.

Debt. As shown in Note 14 of the Notes to the Financial Statements, at ~~March 31,~~June 30, 2020, Company debt excluding Ford Credit was ~~$30.5~~$40 billion, including Automotive debt of ~~$30~~$39.5 billion. These June 30, 2020 balances were ~~$15.2~~$24.7 billion and ~~$15.3~~$24.8 billion higher, respectively, than at December 31, 2019, primarily reflecting the draws on our credit ~~facilities. Our~~facilities and our $8 billion unsecured debt issuance in April ~~2020,~~2020. As described above, ~~is not included~~$7.7 billion of the outstanding amount under our credit facilities was repaid on July 27, 2020.

In June 2020, our Loan Arrangement and Reimbursement Agreement with the DOE was modified to reduce quarterly principal payments from $148 million to $37 million. The deferred portion of the principal payments will be due upon the original maturity date in ~~these amounts.~~June 2022. In the event we pay a dividend, repurchase shares above a specified materiality threshold, or provide security to other lenders, any principal payments remaining at such time will revert to the original payment schedule.

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

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

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

Ford Credit Segment

Ford Credit ended the ~~first~~second quarter with ~~$28~~$32.4 billion in ~~liquidity, which exceeded its target of about $25 billion. Ford Credit’s liquidity target was established to withstand a severe stress funding environment.~~liquidity. During the ~~first~~second quarter of 2020, Ford Credit completed $6$5 billion of public term funding. Lower expected originations as a result of COVID-19 are projected to decrease the size of Ford Credit’s balance sheet and reduce Ford Credit’s funding requirements in 2020. Ford Credit expects to increase ABS mix, ~~and~~ prudently issue unsecured ~~debt; however, even without any incremental unsecured issuance in 2020, Ford Credit expects to~~debt, and maintain strong liquidity ~~around its target level for the rest of the year.~~throughout 2020.

Key elements of Ford Credit’s funding strategy include:

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

~~Continue to leverage~~Prudently access public ~~market issuance;~~markets

~~Assets and committed capacity available~~Flexibility to increase ABS mix as needed; preserving assets and committed capacity

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

Maintain self-liquidating balance ~~sheet.~~sheet

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

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


	March 31, 2019			December 31, 2019			March 31, 2020			June 30, 2019			December 31, 2019			June 30, 2020
Term Debt (incl. Bank Borrowings)	$	73		$	73		$	72		$	74		$	73		$	73
Term Asset-Backed Securities	60			57			56			57			57			55
Commercial Paper	4			4			3			4			4			2
Ford Interest Advantage / Deposits	6			7			6			6			7			6
Other	10			9			6			10			9			6
Equity	15			14			14			15			14			14
Adjustments for Cash	(13		)	(12		)	(11		)	(14		)	(12		)	(17		)
Total Managed Receivables *	$	155		$	152		$	146		$	152		$	152		$	139

Securitized Funding as Percent of Managed Receivables	38		%	38		%	38		%	38		%	38		%	39		%

__________


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

Managed receivables were ~~$146~~$139 billion at ~~March 31,~~June 30, 2020, and were funded primarily with term debt and term asset-backed securities. Securitized funding as a percent of managed receivables was ~~38%~~39% at the end of the ~~first~~second quarter of 2020. Ford Credit expects this to increase modestly by the end of the year. The calendarization of the funding plan will result in quarterly fluctuations of the securitized funding percentage.

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

Public Term Funding Plan. The following table shows Ford Credit’s issuances for full year 2018 and 2019, planned issuances for full year 2020, and its global public term funding issuances through ~~April 27,~~July 29, 2020, excluding short-term funding programs (in billions):


	2018 Actual		2019 Actual		2020 Forecast	Through Apr 27		2018 Actual		2019 Actual		2020 Forecast	Through July 29
Unsecured	$	13	$	17	$ 3 - 8	$	3	$	13	$	17	$ 7 - 10	$	5
Securitizations *	14		14		9 - 14	3		14		14		11 - 14	7
Total public	$	27	$	31	$ 12 - 22	$	6	$	27	$	31	$ 18 - 24	$	12

__________


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


*	Note: Numbers may not sum due to rounding.

For 2020, Ford Credit now projects full year public term funding in the range of ~~$12~~$18 billion to ~~$22~~$24 billion. ~~This is lower than previously estimated because the impact of COVID-19 has resulted in lower originations, which, in turn, leads to a smaller balance sheet and reduced funding requirements in 2020.~~

Through ~~April 27,~~July 29, 2020, Ford Credit has completed $6$12 billion of public term issuances.

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


	March 31, 2019			December 31, 2019			March 31, 2020			June 30, 2019			December 31, 2019			June 30, 2020
Liquidity Sources *
Cash	$	12.8		$	11.7		$	11.3		$	14.1		$	11.7		$	17.1
Committed asset-backed facilities	35.2			36.6			35.9			35.7			36.6			37.1
Other unsecured credit facilities	3.3			3.0			2.8			2.9			3.0			2.5
Ford corporate credit facility allocation	3.0			3.0			—			3.0			3.0			—
Total liquidity sources	$	54.3		$	54.3		$	50.0		$	55.7		$	54.3		$	56.7

Utilization of Liquidity *
Securitization cash	$	(3.3	)	$	(3.5	)	$	(2.9	)	$	(4.0	)	$	(3.5	)	$	(3.6	)
Committed asset-backed facilities	(19.8		)	(17.3		)	(18.6		)	(17.5		)	(17.3		)	(17.7		)
Other unsecured credit facilities	(0.6		)	(0.8		)	(0.5		)	(0.9		)	(0.8		)	(0.6		)
Ford corporate credit facility allocation	—			—			—			—			—			—
Total utilization of liquidity	$	(23.7	)	$	(21.6	)	$	(22.0	)	$	(22.4	)	$	(21.6	)	$	(21.9	)

Gross liquidity	$	30.6		$	32.7		$	28.0		$	33.3		$	32.7		$	34.8
Adjustments **	0.4			0.4			0.3			0.3			0.4			(2.4		)
Net liquidity available for use	$	31.0		$	33.1		$	28.3		$	33.6		$	33.1		$	32.4

__________


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


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

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

At ~~March 31,~~June 30, 2020, Ford Credit’s net liquidity available for use was ~~$28.3~~$32.4 billion, ~~$4.8~~$0.7 billion lower than year-end 2019. Ford Credit’s sources of liquidity include cash, committed asset-backed facilities, and unsecured credit facilities. At ~~March 31,~~June 30, 2020, Ford Credit’s liquidity sources including cash totaled ~~$50.0~~$56.7 billion, ~~down $4.3~~up $2.4 billion from year-end ~~2019, primarily reflecting Ford Credit’s reallocation of $3 billion of commitments under the corporate credit facility to us.~~2019.

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

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

The following table shows Ford Credit’s cumulative maturities for assets and total debt for the periods presented and unsecured long-term debt maturities in the individual periods presented (in billions):


	April - December 2020		2021		2022		2023 and Beyond		July - December 2020		2021		2022		2023 and Beyond
Balance Sheet Liquidity Profile
Assets (a)	$	72	$	116	$	139	$	155	$	64	$	95	$	121	$	154
Total debt (b)	50		83		102		135		35		75		97		134
Memo: Unsecured Long-Term Debt Maturities	11		17		13		28		8		17		13		30

__________

(a)

Includes gross finance receivables less the allowance for credit losses (including certain finance receivables that are reclassified in consolidation to Trade and other receivables), investment in operating leases net of accumulated depreciation, cash and cash equivalents, and marketable securities (excluding amounts related to insurance activities). Amounts shown include the impact of expected prepayments.


(b)	Excludes unamortized debt (discount) / premium, unamortized issuance costs, and fair value adjustments.

Maturities of investment in operating leases consist primarily of the portion of rental payments attributable to

depreciation over the remaining life of the lease and the expected residual value at lease termination. Maturities of finance receivables and investment in operating leases in the table above include expected prepayments for Ford Credit’s retail installment sale contracts and investment in operating leases. The table above also reflects adjustments to debt maturities to match ~~all~~ the asset-backed debt maturities with the underlying asset maturities. All wholesale securitization transactions and wholesale receivables are shown maturing in the next 12 months, even if the maturities extend beyond ~~first~~second quarter 2021. The retail securitization transactions under certain committed asset-backed facilities are assumed to amortize immediately rather than amortizing after the expiration of the commitment period. As of June 30, 2020, out of $154 billion of assets, $76 billion are unencumbered. See Notes 8 and 14 for additional information.

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

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

Prolonged disruption of the debt and securitization markets;

Global capital market volatility;

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

General demand for the type of securities Ford Credit offers;

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

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

Inability to obtain hedging instruments;

Accounting and regulatory changes (including LIBOR); and

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

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

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

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


	March 31, 2019			December 31, 2019			March 31, 2020			June 30, 2019			December 31, 2019			June 30, 2020
Leverage Calculation
Debt *	$	142.9		$	140.0		$	136.8
Debt										$	141.5		$	140.0		$	135.3
Adjustments for cash	(12.8		)	(11.7		)	(11.3		)	(14.1		)	(11.7		)	(17.1		)
Adjustments for derivative accounting *	(0.1		)	(0.5		)	(1.6		)	(0.6		)	(0.5		)	(1.8		)
Total adjusted debt	$	130.0		$	127.8		$	123.9		$	126.8		$	127.8		$	116.4

Equity **	$	14.9		$	14.3		$	13.5		$	14.9		$	14.3		$	13.8
Adjustments for derivative accounting *	(0.2		)	—			—			(0.1		)	—			—
Total adjusted equity	$	14.7		$	14.3		$	13.5		$	14.8		$	14.3		$	13.8

Financial statement leverage (to 1) (GAAP)	9.6			9.8			10.1			9.5			9.8			9.8
Managed leverage (to 1) (Non-GAAP)	8.8			8.9			9.2			8.6			8.9			8.5

__________


*	Related primarily to market valuation adjustments to derivatives due to movements in interest rates. Adjustments to debt are related to designated fair value hedges and adjustments to equity are related to retained earnings.


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

Ford Credit plans its managed leverage by considering market conditions and the risk characteristics of its business. At ~~March 31,~~June 30, 2020, Ford Credit’s financial statement leverage was ~~10.1:~~9.8:1, and its managed leverage was ~~9.2:~~8.5:1. Ford Credit targets managed leverage in the range of 8:1 to 9:~~1, and expects its managed leverage to return to the targeted range later in 2020.~~

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

Total Company

Pension Plans - Underfunded Balances. As of ~~March 31,~~June 30, 2020, our total Company pension underfunded status reported on our consolidated balance ~~sheet~~sheets was ~~$6.2~~$5.8 billion and reflects the net underfunded status at December 31, 2019, updated for service and interest cost, expected return on assets, curtailment and settlement gains, and associated interim remeasurement (where applicable), separation expense, actual benefit payments, and cash contributions. For plans without interim remeasurement, the discount rate and rate of expected return assumptions are unchanged from year-end 2019.

Return on Invested Capital. We analyze total Company performance using an adjusted Return on Invested Capital (“ROIC”) financial metric based on an after-tax, rolling four quarter average. The following table contains the calculation of our ROIC for the periods shown (in billions):


	Four Quarters Ending						Four Quarters Ending
	March 31, 2019			March 31, 2020			June 30, 2019			June 30, 2020
Adjusted Net Operating Profit After Cash Tax
Net income/(loss) attributable to Ford	$	3.1		$	(3.1	)	$	2.2		$	(2.1	)
Add: Noncontrolling interest	—			—			—			—
Less: Income tax	(0.9		)	0.3			(0.7		)	0.4
Add: Cash tax	(0.7		)	(0.6		)	(0.8		)	(0.4		)
Less: Interest on debt	(1.2		)	(1.0		)	(1.1		)	(1.2		)
Less: Total pension / OPEB income/(cost)	(0.6		)	(2.5		)
Add: Pension / OPEB service costs	(1.1		)	(1.0		)
Less: Total pension/OPEB income/(cost)							(0.8		)	(2.0		)
Add: Pension/OPEB service costs							(1.1		)	(1.1		)
Net operating profit/(loss) after cash tax	$	3.9		$	(1.6	)	$	3.0		$	(0.7	)
Less: Special items (excl. pension / OPEB) pre-tax	(1.2		)	(3.2		)
Less: Special items (excl. pension/OPEB) pre-tax							(2.3		)	1.4
Adjusted net operating profit after cash tax	$	5.1		$	1.6		$	5.3		$	(2.1	)

Invested Capital
Equity	$	36.4		$	29.7		$	36.1		$	30.9
Redeemable noncontrolling interest	0.1			—			—			—
Debt (excl. Ford Credit)	14.2			30.5			14.6			40.0
Net pension and OPEB liability	11.1			12.2			11.2			11.8
Invested capital (end of period)	$	61.9		$	72.4		$	62.0		$	82.6
Average invested capital	$	63.4		$	63.7		$	62.7		$	67.9

ROIC *	6.2		%	(2.5		)%	4.8		%	(1.1		)%
Adjusted ROIC (Non-GAAP) **	8.0		%	2.5		%	8.5		%	(3.1		)%

__________


*	Calculated as the sum of net operating profit after cash tax from the last four quarters, divided by the average invested capital over the last four quarters.


**	Calculated as the sum of adjusted net operating profit after cash tax from the last four quarters, divided by the average invested capital over the last four quarters.


*	Note: Numbers may not sum due to rounding.

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

CREDIT RATINGS

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

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

The following rating actions were taken by these NRSROs since the filing of our ~~2019~~Quarterly Report on Form ~~10-K Report:~~10-Q for the quarter ended March 31, 2020:

On ~~March 23,~~May 7, 2020, Fitch ~~downgraded the credit ratings for Ford and Ford Credit (to BBB- from BBB) and maintained a negative outlook.~~

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

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

On ~~March~~May 21, 2020, DBRS downgraded the credit ratings for Ford and Ford Credit (to BB (high) from BBB), and maintained a negative outlook.

On May 27, 2020, ~~DBRS placed all~~Moody’s concluded its ~~rated automotive issuers~~review of Ford and Ford Credit for possible downgrade, confirmed their ratings at Ba2, and revised the outlook to negative from under review ~~with negative implications (prior outlook was negative).~~for downgrade.

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~~BB (high)

~~Under review with negative implications~~Negative

~~BBB~~BB (high)

~~R-2M~~R-4

~~Under review with negative implications~~Negative

BBB (low)

Fitch

~~BBB-~~BB+

Negative

~~BBB-~~BB+

F3B

Negative

BBB-

Moody’s

N/A

Ba2

~~Under review for downgrade~~Negative

Ba2

~~Under review for downgrade~~Negative

Baa3

S&P

BB+

CreditWatch with negative implications

BB+

CreditWatch with negative implications

BBB-

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

OUTLOOK

We provided 2020 Company guidance in our earnings release furnished on Form 8-K dated ~~April 28, 2020~~July 30, 2020. The guidance is based on our expectations as of ~~April 28, 2020.~~July 30, 2020 and assumes no material change to the current economic environment, continued steady improvement in the stability of the global automotive supply base, and no further significant COVID-19-related disruptions to production or distribution. Our actual results could differ materially from our guidance due to risks, uncertainties, and other factors, including those set forth in “Risk Factors” in Item 1A of our 2019 Form 10-K Report ~~in Item 1A of this 10-Q Report,~~ and as updated by our subsequent filings with the ~~SEC.~~SEC, including the updates in Item 1A of this 10-Q Report.



		2020 Guidance
Total Company
Q2 Adjusted EBITEBIT
Q3		$0.5 - $1.5 billion
Q4		Loss ~~> $5 billion~~
Full Year		Loss
Capital spending		$~~6.3~~6.1 - ~~$6.8~~$6.6 billion
Pension contributions		$0.5 - $0.7 billion
Global Redesign EBIT charges		$~~(0.7)~~0.7 - ~~$(1.2)~~$1.2 billion
Global Redesign cash effects		$~~(0.7)~~0.7 - ~~$(1.2)~~$1.2 billion

Ford Credit
Auction values		Down >about 5%**
~~Receivables~~		~~Continue to decline~~
Securitized funding as percent of managed receivables		Increase modestly by year-end
Total public funding issuances		$1218 - ~~$22~~$24 billion
~~Liquidity~~		~~Around $25 billion~~
~~Managed leverage~~		~~8:1 - 9:1~~


*	When we provide guidance for Adjusted EBIT we do not provide guidance for net income/(loss), the most comparable GAAP measure, because, as described in more detail below in “Non-GAAP Measures That Supplement GAAP Measures,” it includes items that are difficult to predict with reasonable certainty prior to year-end, including pension and OPEB remeasurement gains and losses.


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

For third quarter 2020, we expect Company adjusted EBIT of $0.5 billion to $1.5 billion, reflecting the economic impact of COVID-19, weaker global demand for new vehicles, parts, and services, and lower EBT from Ford Credit.

For fourth quarter 2020, we expect Company adjusted EBIT to be a loss, driven by the volume impact of the new F-150 launch and lower ongoing industry volumes. Our major launches in North America have shifted to the fourth quarter of 2020 following our COVID-19-related production disruption. We anticipate that downtime, changeover, and ramp-up will reduce F-150 wholesales significantly in the fourth quarter. This launch impact will more than offset the non-recurrence of UAW contract bonuses in the fourth quarter of 2019, which totaled approximately $600 million.

Although the all-new Bronco Sport and Mustang Mach-E are also launching in the fourth quarter, the limited number of wholesales will not have a material impact on our fourth quarter results. We also expect lower year-over-year Ford Credit EBT in the fourth quarter.

For full year 2020, we expect Company adjusted EBIT to be a loss. We also expect full year warranty costs to be higher than 2019.

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

Cautionary Note on Forward-Looking Statements

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

Ford and Ford Credit’s financial condition and results of operations have been and may continue to be adversely affected by public health issues, including epidemics or pandemics such as COVID-19;

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

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

Ford may not realize the anticipated benefits of existing or pending strategic alliances, joint ventures, acquisitions, divestitures, or new business strategies;

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

Ford’s production, as well as Ford’s suppliers’ production, could be disrupted by labor issues, natural or man-made disasters, financial distress, production difficulties, or other factors;

Ford’s ability to maintain a competitive cost structure could be affected by labor or other constraints;

Ford’s ability to attract and retain talented, diverse, and highly skilled employees is critical to its success and competitiveness;

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

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

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

Industry sales volume in any of our key markets can be volatile and could decline if there is a financial crisis, recession, or significant geopolitical event;

Ford may face increased price competition or a reduction in demand for its products resulting from industry excess capacity, currency fluctuations, competitive actions, or other factors;

Fluctuations in commodity prices, foreign currency exchange rates, interest rates, and market value of our investments can have a significant effect on results;

Ford and Ford Credit’s access to debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts could be affected by credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors;

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

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

Economic and demographic experience for pension and other postretirement benefit plans (e.g., discount rates or investment returns) could be worse than Ford has assumed;

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

Ford could experience unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, perceived environmental impacts, or otherwise;

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

Ford and Ford Credit could be affected by the continued development of more stringent privacy, data use, and data protection laws and regulations as well as consumer expectations for the safeguarding of personal information; and

Ford Credit could be subject to new or increased credit regulations, consumer protection regulations, or other regulations.

We cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. For additional discussion, see “Item 1A. Risk Factors” in our 2019 Form 10-K Report, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

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

NON-GAAP FINANCIAL MEASURES THAT SUPPLEMENT GAAP MEASURES

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

•

Company Adjusted EBIT (Most Comparable GAAP Measure: Net Income Attributable to Ford) – Earnings before interest and taxes (EBIT) excludes interest on debt (excl. Ford Credit Debt), taxes and pre-tax special items. This non-GAAP measure is useful to management and investors because it allows users to evaluate our operating results aligned with industry reporting. Pre-tax special items consist of (i) pension and OPEB remeasurement gains and losses, (ii) significant personnel expenses, dealer-related costs, and facility-related charges stemming from our efforts to match production capacity and cost structure to market demand and changing model mix, and (iii) other items that we do not necessarily consider to be indicative of earnings from ongoing operating activities. When we provide guidance for adjusted EBIT, we do not provide guidance on a net income basis because the GAAP measure will include potentially significant special items that have not yet occurred and are difficult to predict with reasonable certainty prior to year-end, including pension and OPEB remeasurement gains and losses.


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

•

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

•

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

•

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

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

•

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

•

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

•

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

•

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

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

Non-GAAP Financial Measure Reconciliations

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

Net Income Reconciliation to Adjusted EBIT ($M)


	First Quarter						Second Quarter						First Half
	2019			2020			2019			2020			2019			2020
Net income/(loss) attributable to Ford (GAAP)	$	1,146		$	(1,993	)	$	148		$	1,117		$	1,294		$	(876	)
Income/(Loss) attributable to noncontrolling interests	37			—			2			1			39			1
Net income/(loss)	$	1,183		$	(1,993	)	$	150		$	1,118		$	1,333		$	(875	)
Less: (Provision for)/Benefit from income taxes	(427		)	(847		)	(55		)	34			(482		)	(813		)
Income/(Loss) before income taxes	$	1,610		$	(1,146	)	$	205		$	1,084		$	1,815		$	(62	)
Less: Special items pre-tax	(592		)	(287		)	(1,205		)	3,480			(1,797		)	3,193
Income/(Loss) before special items pre-tax	$	2,202		$	(859	)	$	1,410		$	(2,396	)	$	3,612		$	(3,255	)
Less: Interest on debt	(245		)	(227		)	(244		)	(450		)	(489		)	(677		)
Adjusted EBIT (Non-GAAP)	$	2,447		$	(632	)	$	1,654		$	(1,946	)	$	4,101		$	(2,578	)

Memo:
Revenue ($B)	$	40.3		$	34.3		$	38.9		$	19.4		$	79.2		$	53.7
Net income/(loss) margin (%)	2.8		%	(5.8		)%	0.4		%	5.8		%	1.6		%	(1.6		)%
Adjusted EBIT margin (%)	6.1		%	(1.8		)%	4.3		%	(10.0		)%	5.2		%	(4.8		)%

Earnings per Share Reconciliation to Adjusted Earnings per Share


	First Quarter						Second Quarter						First Half
	2019			2020			2019			2020			2019			2020
Diluted After-Tax Results ($M)
Diluted after-tax results (GAAP)	$	1,146		$	(1,993	)	$	148		$	1,117		$	1,294		$	(876	)
Less: Impact of pre-tax and tax special items	(585		)	(1,074		)	(989		)	2,525			(1,574		)	1,451
Less: Noncontrolling interests impact of Russia restructuring	(35		)	—			—			—			(35		)	—
Adjusted net income/(loss) – diluted (Non-GAAP)	$	1,766		$	(919	)	$	1,137		$	(1,408	)	$	2,903		$	(2,327	)

Basic and Diluted Shares (M)
Basic shares (average shares outstanding)	3,973			3,963			3,984			3,975			3,979			3,969
Net dilutive options, unvested restricted stock units and restricted stock	24			—			29			17			26			—
Diluted shares	3,997			3,963			4,013			3,992			4,005			3,969

Earnings per share – diluted (GAAP)	$	0.29		$	(0.50	)	$	0.04		$	0.28		$	0.32		$	(0.22	)
Less: Net impact of adjustments	(0.15		)	(0.27		)	(0.24		)	0.63			(0.40		)	0.37
Adjusted earnings per share – diluted (Non-GAAP)	$	0.44		$	(0.23	)	$	0.28		$	(0.35	)	$	0.72		$	(0.59	)

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

Effective Tax Rate Reconciliation to Adjusted Effective Tax Rate


	First Quarter									Second Quarter						First Half
	2019			2020			Memo: FY 2019			2019			2020			2019			2020			Memo: FY 2019
Pre-Tax Results ($M)
Income / (Loss) before income taxes (GAAP)	$	1,610		$	(1,146	)	$	(640	)
Income/(Loss) before income taxes (GAAP)										$	205		$	1,084		$	1,815		$	(62	)	$	(640	)
Less: Impact of special items	(592		)	(287		)	(5,999		)	(1,205		)	3,480			(1,797		)	3,193			(5,999		)
Adjusted earnings before taxes (Non-GAAP)	$	2,202		$	(859	)	$	5,359		$	1,410		$	(2,396	)	$	3,612		$	(3,255	)	$	5,359

Taxes ($M)
(Provision for) / Benefit from income taxes (GAAP)	$	(427	)	$	(847	)	$	724
(Provision for)/Benefit from income taxes (GAAP)										$	(55	)	$	34		$	(482	)	$	(813	)	$	724
Less: Impact of special items	7			(787		)	1,323			216			(955		)	223			(1,742		)	1,323
Adjusted (provision for) / benefit from income taxes (Non-GAAP)	$	(434	)	$	(60	)	$	(599	)	$	(271	)	$	989		$	(705	)	$	929		$	(599	)

Tax Rate (%)
Effective tax rate (GAAP)	26.5		%	(73.9		)%	113.1		%	26.6		%	(3.1		)%	26.5		%	(1,311		)%	113.1		%
Adjusted effective tax rate (Non-GAAP)	19.7		%	(7.0		)%	11.2		%	19.2		%	41.3		%	19.5		%	28.5		%	11.2		%

Net Cash Provided by/(Used in) Operating Activities Reconciliation to Company Adjusted Free Cash Flow ($M)


	First Quarter						Second Quarter						First Half
	2019			2020			2019			2020			2019			2020
Net cash provided by / (used in) operating activities (GAAP)	$	3,544		$	(473	)	$	6,463		$	9,115		$	10,007		$	8,642

Less: Items not included in Company Adjusted Free Cash Flows
Ford Credit operating cash flows	$	1,118		$	133		$	5,267		$	13,413		$	6,385		$	13,546
Funded pension contributions	(294		)	(175		)	(106		)	(107		)	(400		)	(282		)
Global Redesign (including separations)	(136		)	(172		)	(222		)	(99		)	(358		)	(271		)
Ford Credit tax payments / (refunds) under tax sharing agreement	98			475			—			569			98			1,044
Other, net	(120		)	(15		)	175			(178		)	55			(193		)

Add: Items included in Company Adjusted Free Cash Flows
Automotive and Mobility capital spending	$	(1,620	)	$	(1,770	)	$	(1,911	)	$	(1,165	)	$	(3,531	)	$	(2,935	)
Ford Credit distributions	675			275			650			275			1,325			550
Settlement of derivatives	(26		)	(28		)	86			64			60			36

Company adjusted free cash flow (Non-GAAP)	$	1,907		$	(2,242	)	$	174		$	(5,309	)	$	2,081		$	(7,551	)

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

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

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


	March 31, 2019		December 31, 2019		March 31, 2020		June 30, 2019		December 31, 2019		June 30, 2020
Ford Credit finance receivables, net (GAAP) *	$	109.8	$	107.4	$	106.0	$	107.6	$	107.4	$	96.7
Net investment in operating leases (GAAP) *	27.6		27.6		27.0		27.7		27.6		26.4
Consolidating adjustments **	9.5		7.0		4.8		8.1		7.0		7.2
Total net receivables	$	146.9	$	142.0	$	137.8	$	143.4	$	142.0	$	130.3

Held-for-sale receivables (GAAP)	$	—	$	1.5	$	—	$	—	$	1.5	$	—
Ford Credit unearned interest supplements and residual support	6.8		6.7		6.3		6.9		6.7		6.5
Allowance for credit losses	0.5		0.5		1.2		0.5		0.5		1.3
Other, primarily accumulated supplemental depreciation	1.1		1.0		1.1		1.1		1.0		1.3
Total managed receivables (Non-GAAP)	$	155.3	$	151.7	$	146.4	$	151.9	$	151.7	$	139.4

__________

Includes finance receivables (retail and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance ~~sheet~~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.


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


*	Note: Numbers may not sum due to rounding.

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

SUPPLEMENTAL INFORMATION

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

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


		For the period ended March 31, 2020												For the period ended June 30, 2020
		First Quarter												First Half
Cash flows from operating activities		Company excluding Ford Credit			Ford Credit			Eliminations		Consolidated				Company excluding Ford Credit			Ford Credit			Eliminations		Consolidated
Net income/(loss)		$	(2,014	)	$	21		$	—	$	(1,993	)		$	(1,303	)	$	428		$	—	$	(875	)
Depreciation and tooling amortization		1,384			1,060			—		2,444				2,743			2,059			—		4,802
Other amortization		8			(310		)	—		(302		)		28			(618		)	—		(590		)
Held-for-sale impairment charges		3			—			—		3				18			—			—		18
Provision for credit and insurance losses		6			592			—		598				34			745			—		779
Pension and OPEB expense/(income)		(178		)	—			—		(178		)		(454		)	—			—		(454		)
Equity investment dividends received in excess of (earnings)/losses	Equity investment dividends received in excess of (earnings)/losses	124			(6		)	—		118			Equity investment dividends received in excess of (earnings)/losses	177			(8		)	—		169
Foreign currency adjustments		362			(24		)	—		338				160			(47		)	—		113
Net (gain)/loss on changes in investments in affiliates		(20		)	5			—		(15		)		(3,472		)	(8		)	—		(3,480		)
Stock compensation		37			1			—		38				105			2			—		107
Provision for deferred income taxes		974			(272		)	—		702				1,347			(692		)	—		655
Decrease/(Increase) in finance receivables (wholesale and other)	Decrease/(Increase) in finance receivables (wholesale and other)	—			(1,080		)	—		(1,080		)	Decrease/(Increase) in finance receivables (wholesale and other)	—			9,772			—		9,772
Decrease/(Increase) in intersegment receivables/payables	Decrease/(Increase) in intersegment receivables/payables	488			(488		)	—		—			Decrease/(Increase) in intersegment receivables/payables	(35		)	35			—		—
Decrease/(Increase) in accounts receivable and other assets	Decrease/(Increase) in accounts receivable and other assets	16			23			—		39			Decrease/(Increase) in accounts receivable and other assets	242			(22		)	—		220
Decrease/(Increase) in inventory		(1,177		)	—			—		(1,177		)		66			—			—		66
Increase/(Decrease) in accounts payable and accrued and other liabilities	Increase/(Decrease) in accounts payable and accrued and other liabilities	478			(284		)	—		194			Increase/(Decrease) in accounts payable and accrued and other liabilities	(2,365		)	(120		)	—		(2,485		)
Other		(278		)	76			—		(202		)		(130		)	(45		)	—		(175		)
Interest supplements and residual value support to Ford Credit	Interest supplements and residual value support to Ford Credit	(819		)	819			—		—			Interest supplements and residual value support to Ford Credit	(2,065		)	2,065			—		—
Net cash provided by/(used in) operating activities		$	(606	)	$	133		$	—	$	(473	)		$	(4,904	)	$	13,546		$	—	$	8,642


Cash flows from investing activities		Company excluding Ford Credit			Ford Credit			Eliminations			Consolidated				Company excluding Ford Credit			Ford Credit			Eliminations			Consolidated
Capital spending		$	(1,770	)	$	(10	)	$	—		$	(1,780	)		$	(2,935	)	$	(20	)	$	—		$	(2,955	)
Acquisitions of finance receivables and operating leases		—			(12,184		)	—			(12,184		)		—			(27,113		)	—			(27,113		)
Collections of finance receivables and operating leases		—			12,709			—			12,709				—			22,923			—			22,923
Proceeds from sale of business		—			1,340			—			1,340				—			1,340						1,340
Purchases of marketable and other investments		(7,564		)	(680		)	—			(8,244		)		(15,485		)	(4,139		)	—			(19,624		)
Sales and maturities of marketable securities and other investments	Sales and maturities of marketable securities and other investments	3,463			1,535			—			4,998			Sales and maturities of marketable securities and other investments	8,379			2,425			—			10,804
Settlements of derivatives		(28		)	159			—			131				36			37			—			73
Other		(83		)	(1		)	—			(84		)		338			(1		)	—			337
Investing activity (to)/from other segments		275			(10		)	(265		)	—				550			(11		)	(539		)	—
Net cash provided by/(used in) investing activities		$	(5,707	)	$	2,858		$	(265	)	$	(3,114	)		$	(9,117	)	$	(4,559	)	$	(539	)	$	(14,215	)


Cash flows from financing activities		Company excluding Ford Credit			Ford Credit			Eliminations		Consolidated				Company excluding Ford Credit			Ford Credit			Eliminations			Consolidated
Cash payments for dividends and dividend equivalents		$	(596	)	$	—		$	—	$	(596	)		$	(596	)	$	—		$	—		$	(596	)
Purchases of common stock		—			—			—		—				—			—			—			—
Net changes in short-term debt		282			(904		)	—		(622		)		879			(1,668		)	—			(789		)
Proceeds from issuance of long-term debt		15,068			11,623			—		26,691				24,157			20,146			—			44,303
Principal payments on long-term debt		(296		)	(12,652		)	—		(12,948		)		(380		)	(22,965		)	—			(23,345		)
Other		(50		)	(21		)	—		(71		)		(141		)	(41		)	—			(182		)
Financing activity to/(from) other segments		10			(275		)	265		—				11			(550		)	539			—
Net cash provided by/(used in) financing activities		$	14,418		$	(2,229	)	$	265	$	12,454			$	23,930		$	(5,078	)	$	539		$	19,391

Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	$	(196	)	$	(252	)	$	—	$	(448	)	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	$	(204	)	$	—		$	(174	)	$	(378	)

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

Selected Income Statement Information. The following table provides supplemental income statement information (in millions):


		For the period ended March 31, 2020																			For the period ended June 30, 2020
		First Quarter																			Second Quarter
		Company excluding Ford Credit																			Company excluding Ford Credit
		Automotive			Mobility			Other (a)			Subtotal			Ford Credit			Consolidated				Automotive			Mobility			Other (a)			Subtotal			Ford Credit		Consolidated
Revenues		$	31,340		$	13		$	—		$	31,353		$	2,967		$	34,320			$	16,622		$	10		$	—		$	16,632		$	2,739	$	19,371
Total costs and expenses	Total costs and expenses	32,106			381			467			32,954			2,924			35,878			Total costs and expenses	19,303			361			233			19,897			2,233		22,130
Operating income/(loss)	Operating income/(loss)	(766		)	(368		)	(467		)	(1,601		)	43			(1,558		)	Operating income/(loss)	(2,681		)	(351		)	(233		)	(3,265		)	506		(2,759		)
Interest expense on Automotive debt	Interest expense on Automotive debt	—			—			214			214			—			214			Interest expense on Automotive debt	—			—			439			439			—		439
Interest expense on Other debt	Interest expense on Other debt	—			—			13			13			—			13			Interest expense on Other debt	—			—			11			11			—		11
Other income/(loss), net	Other income/(loss), net	636			34			29			699			(19		)	680			Other income/(loss), net	601			31			3,651			4,283			35		4,318
Equity in net income/(loss) of affiliated companies	Equity in net income/(loss) of affiliated companies	(47		)	—			—			(47		)	6			(41		)	Equity in net income/(loss) of affiliated companies	(9		)	(12		)	(6		)	(27		)	2		(25		)
Income/(Loss) before income taxes	Income/(Loss) before income taxes	(177		)	(334		)	(665		)	(1,176		)	30			(1,146		)	Income/(Loss) before income taxes	(2,089		)	(332		)	2,962			541			543		1,084
Provision for/(Benefit from) income taxes	Provision for/(Benefit from) income taxes	221			(80		)	697			838			9			847			Provision for/(Benefit from) income taxes	(922		)	(79		)	831			(170		)	136		(34		)
Net income/(loss)	Net income/(loss)	(398		)	(254		)	(1,362		)	(2,014		)	21			(1,993		)	Net income/(loss)	(1,167		)	(253		)	2,131			711			407		1,118
Less: Income/(Loss) attributable to noncontrolling interests	Less: Income/(Loss) attributable to noncontrolling interests	—			—			—			—			—			—			Less: Income/(Loss) attributable to noncontrolling interests	1			—			—			1			—		1
Net income/(loss) attributable to Ford Motor Company	Net income/(loss) attributable to Ford Motor Company	$	(398	)	$	(254	)	$	(1,362	)	$	(2,014	)	$	21		$	(1,993	)	Net income/(loss) attributable to Ford Motor Company	$	(1,168	)	$	(253	)	$	2,131		$	710		$	407	$	1,117

																					For the period ended June 30, 2020
																					First Half
																					Company excluding Ford Credit
																					Automotive			Mobility			Other (a)			Subtotal			Ford Credit		Consolidated
Revenues																					$	47,962		$	23		$	—		$	47,985		$	5,706	$	53,691
Total costs and expenses																				Total costs and expenses	51,409			742			700			52,851			5,157		58,008
Operating income/(loss)																				Operating income/(loss)	(3,447		)	(719		)	(700		)	(4,866		)	549		(4,317		)
Interest expense on Automotive debt																				Interest expense on Automotive debt	—			—			653			653			—		653
Interest expense on Other debt																				Interest expense on Other debt	—			—			24			24			—		24
Other income/(loss), net																				Other income/(loss), net	1,237			65			3,680			4,982			16		4,998
Equity in net income/(loss) of affiliated companies																				Equity in net income/(loss) of affiliated companies	(56		)	(12		)	(6		)	(74		)	8		(66		)
Income/(Loss) before income taxes																				Income/(Loss) before income taxes	(2,266		)	(666		)	2,297			(635		)	573		(62		)
Provision for/(Benefit from) income taxes																				Provision for/(Benefit from) income taxes	(701		)	(159		)	1,528			668			145		813
Net income/(loss)																				Net income/(loss)	(1,565		)	(507		)	769			(1,303		)	428		(875		)
Less: Income/(Loss) attributable to noncontrolling interests																				Less: Income/(Loss) attributable to noncontrolling interests	1			—			—			1			—		1
Net income/(loss) attributable to Ford Motor Company																				Net income/(loss) attributable to Ford Motor Company	$	(1,566	)	$	(507	)	$	769		$	(1,304	)	$	428	$	(876	)

__________

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

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

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


	March 31, 2020									June 30, 2020
Assets	Company excluding Ford Credit		Ford Credit		Eliminations			Consolidated		Company excluding Ford Credit		Ford Credit		Eliminations			Consolidated
Cash and cash equivalents	$	16,343	$	9,628	$	—		$	25,971	$	18,151	$	12,838	$	—		$	30,989
Marketable securities	17,946		2,453		—			20,399		21,105		5,036		—			26,141
Ford Credit finance receivables, net	—		54,889		—			54,889		—		42,720		—			42,720
Trade and other receivables, net	3,128		3,497		—			6,625		3,065		6,042		—			9,107
Inventories	11,312		—		—			11,312		10,220		—		—			10,220
Assets held for sale	664		36		—			700		670		50		—			720
Other assets	2,689		1,691		—			4,380		2,171		2,043		—			4,214
Receivable from other segments	21		2,673		(2,694		)	—		253		2,157		(2,410		)	—
Total current assets	52,103		74,867		(2,694		)	124,276		55,635		70,886		(2,410		)	124,111

Ford Credit finance receivables, net	—		51,141		—			51,141		—		53,987		—			53,987
Net investment in operating leases	1,509		27,005		—			28,514		1,349		26,367		—			27,716
Net property	35,082		212		—			35,294		35,064		212		—			35,276
Equity in net assets of affiliated companies	2,159		116		—			2,275		4,539		112		—			4,651
Deferred income taxes	12,607		168		(1,853		)	10,922		12,319		153		(1,406		)	11,066
Other assets	8,860		2,868		—			11,728		9,613		2,946		—			12,559
Receivable from other segments	9		16		(25		)	—		7		11		(18		)	—
Total assets	$	112,329	$	156,393	$	(4,572	)	$	264,150	$	118,526	$	154,674	$	(3,834	)	$	269,366


Liabilities	Company excluding Ford Credit		Ford Credit		Eliminations			Consolidated		Company excluding Ford Credit		Ford Credit		Eliminations			Consolidated
Payables	$	17,449	$	990	$	—		$	18,439	$	15,312	$	1,048	$	—		$	16,360
Other liabilities and deferred revenue	21,225		1,449		—			22,674		19,233		1,559		—			20,792
Automotive debt payable within one year	1,609		—		—			1,609		2,084		—		—			2,084
Ford Credit debt payable within one year	—		51,303		—			51,303		—		53,260		—			53,260
Other debt payable within one year	—		—		—			—		—		—		—			—
Liabilities held for sale	469		—		—			469		284		—		—			284
Payable to other segments	2,694		—		(2,694		)	—		2,410		—		(2,410		)	—
Total current liabilities	43,446		53,742		(2,694		)	94,494		39,323		55,867		(2,410		)	92,780

Other liabilities and deferred revenue	23,757		1,348		—			25,105		24,156		1,235		—			25,391
Automotive long-term debt	28,411		—		—			28,411		37,409		—		—			37,409
Ford Credit long-term debt	—		85,533		—			85,533		—		82,007		—			82,007
Other long-term debt	470		—		—			470		470		—		—			470
Deferred income taxes	67		2,225		(1,853		)	439		56		1,804		(1,406		)	454
Payable to other segments	25		—		(25		)	—		18		—		(18		)	—
Total liabilities	$	96,176	$	142,848	$	(4,572	)	$	234,452	$	101,432	$	140,913	$	(3,834	)	$	238,511

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

Selected Other Information.

Equity. At ~~March 31,~~June 30, 2020, total equity attributable to Ford was ~~$29.7~~$30.8 billion, a decrease of ~~$3.5~~$2.4 billion compared with December 31, 2019. The detail for this change is shown below (in billions):


	Increase/ (Decrease)			Increase/ (Decrease)
Net income	$	(2.0	)	$	(0.9	)
Shareholder distributions	(0.6		)	(0.6		)
Adoption of accounting standards	(0.2		)	(0.2		)
Other comprehensive income	(0.7		)	(0.7		)
Total	$	(3.5	)	$	(2.4	)

U.S. Sales by Type. The following table shows ~~first~~second quarter 2020 U.S. sales volume and U.S. wholesales segregated by truck, SUV, and car sales. U.S. sales volume reflects transactions with (i) retail and fleet customers (as reported by dealers), (ii) governments, and (iii) Ford management. U.S. wholesales reflect sales to dealers.


	U.S. Sales	U.S. Wholesales	U.S. Sales	U.S. Wholesales
Trucks	263,757	265,966	237,891	138,496
SUVs	189,720	194,013	151,328	74,633
Cars	62,853	73,896	44,650	26,001
Total Vehicles	516,330	533,875	433,869	239,130

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

CRITICAL ACCOUNTING ESTIMATES

As a result of the January 1, 2020 adoption of the current expected credit loss (“CECL”) standard (ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments), we ~~are updating the~~updated our Critical Accounting Estimate ~~disclosure in~~disclosure. For additional information on our ~~2019 Form 10-K Report as follows:~~

Allowance for Credit Losses

~~The allowance for credit losses represents Ford Credit’s estimate of the expected lifetime credit losses inherent~~ Critical Accounting Estimate, see “Critical Accounting Estimates” in finance receivables as of the balance sheet date. The adequacy of the allowance for credit losses is assessed quarterly and the assumptions and models used in establishing the allowance are evaluated regularly. Because credit losses can vary substantially over time, estimating credit losses requires a number of assumptions about matters that are uncertain. Changes in assumptions affect ~~Ford Credit interest, operating, and other expenses~~ ~~on our consolidated income statement and the allowance for credit losses contained within~~ ~~Ford Credit finance receivables, net~~ ~~on our consolidated balance sheet. For additional information regarding the allowance for credit losses, see Note 8~~Item 2 of our ~~Notes to~~Quarterly Report on Form 10-Q for the ~~Financial Statements.~~quarter ended March 31, 2020.

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


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


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

~~Sensitivity Analysis~~.

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



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

ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED

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



ASU		Effective Date (a)
~~2020-04~~	~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~	~~April 1, 2020~~
2019-12	Simplifying the Accounting for Income Taxes	January 1, 2021
2018-12	Targeted Improvements to the Accounting for Long Duration Contracts	January 1, 2022

__________


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

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

Automotive Segment

Foreign Currency Risk. The net fair value of foreign exchange forward contracts (including adjustments for credit risk) as of ~~March 31,~~June 30, 2020, was an asset of ~~$689~~$302 million, compared with a liability of $596 million as of December 31, 2019. The potential decrease in fair value from a 10% adverse change in the underlying exchange rates, in U.S. dollar terms, would have been $2.3 billion at ~~March 31,~~both June 30, 2020 ~~compared with $2.3 billion at~~and December 31, 2019.

Commodity Price Risk. The net fair value of commodity forward contracts (including adjustments for credit risk) as of ~~March 31,~~June 30, 2020, was a liability of ~~$153~~$84 million, compared with a liability of $24 million at December 31, 2019. The potential decrease in fair value from a 10% adverse change in the underlying commodity prices would have been ~~$99~~$98 million at ~~March 31,~~June 30, 2020, compared with $112 million at December 31, 2019.

Ford Credit Segment

Interest Rate Risk. To provide a quantitative measure of the sensitivity of its pre-tax cash flow to changes in interest rates, Ford Credit uses interest rate scenarios that assume a hypothetical, instantaneous increase or decrease of one percentage point in all interest rates across all maturities (a “parallel shift”), as well as a base case that assumes that all interest rates remain constant at existing levels. The differences in pre-tax cash flow between these scenarios and the base case over a 12-month period represent an estimate of the sensitivity of Ford Credit’s pre-tax cash flow. Under this model, Ford Credit estimates that at ~~March 31,~~June 30, 2020, all else constant, such an increase in interest rates would ~~increase~~decrease its pre-tax cash flow by $3$11 million over the next 12 months, compared with a decrease of $26 million at December 31, 2019. In reality, interest rate changes are rarely instantaneous or parallel and rates could move more or less than the one percentage point assumed in Ford Credit’s analysis. As a result, the actual impact to pre-tax cash flow could be higher or lower than the results detailed above.

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. James P. Hackett, our Chief Executive Officer (“CEO”), and Tim Stone, our Chief Financial Officer (“CFO”), have performed an evaluation of the Company’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of ~~March 31,~~June 30, 2020, and each has concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by SEC rules and forms, and that such information is accumulated and communicated to the CEO and CFO to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting. There were no changes in internal control over financial reporting during the quarter ended ~~March 31,~~June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings.

~~CLASS ACTIONS~~

~~In re: Takata Airbag Product Liability Litigation; Economic Loss Track Cases Against Ford Motor Company.~~ On July 16, 2018, Ford entered into a settlement agreement related to a consumer economic loss class action pending before the U.S. District Court for the Southern District of Florida. The first case was originally filed on October 27, 2014, against Ford, Takata, and several other automotive manufacturers, and was brought by consumers who own or owned vehicles equipped with Takata airbag inflators. Additional cases were subsequently filed in courts throughout the United States and consolidated into a multidistrict case before the Florida court, which also included personal injury claims and claims by automotive recyclers. Ford’s July 16, 2018 settlement relates only to the consumer economic loss matters. In these cases, plaintiffs allege that Ford vehicles equipped with Takata airbags are defective and that Ford did not disclose this defect to consumers. Plaintiffs allege that they suffered several forms of economic damages as a result of purchasing vehicles with defective airbags. The settlement is for $299 million, which is subject to certain discounts, and is subject to court approval. On December 20, 2018, the court overruled all objections and entered a final order approving the settlement. Several objectors then filed notices of appeal of the trial court’s order. On December 10, 2019, plaintiffs filed a motion with the court indicating they reached an agreement with the objectors to resolve the dispute. The agreement does not increase the total cost to Ford of the settlement. On January 23, 2020, the court held a hearing on the motion to approve the agreement, and on January 27, 2020, the court entered an “Indicative Ruling” indicating it would approve the agreement. On March 3, 2020, the U.S. Court of Appeals for the Eleventh Circuit dismissed the appeal, and on March 9, 2020, the trial court entered a final approval order and the settlement became effective.

OTHER MATTERS

Brazilian Tax Matters. ~~Two~~One Brazilian ~~states~~state (São Paulo) and the Brazilian federal tax authority currently have outstanding substantial tax assessments against Ford Brazil related to state and federal tax incentives Ford Brazil receives for its operations in the Brazilian state of Bahia. All assessments have been appealed to the relevant administrative court of each jurisdiction. ~~Our appeals with the State of São Paulo and the federal tax authority remain at the administrative level.~~ In the State of Minas Gerais, one case that had been pending at the administrative level was dismissed on April 1, 2020, ~~while~~and on July 13, 2020, the other two cases ~~remain pending~~that were on appeal to the judicial ~~court.~~court were dismissed. Our appeals with the State of São Paulo and the federal tax authority remain at the administrative level. To proceed with an appeal within the judicial court system, an appellant may be required to post collateral, which would likely be significant. To date we have not been required to post any collateral.

The state assessments are part of a broader conflict among various states in Brazil. The federal legislature enacted laws designed to encourage the states to end that conflict, and in 2017 the states reached an agreement on a framework for resolution. Ford Brazil continues to pursue a resolution under the framework and expects the amount of any remaining assessments by the states to be resolved under that framework. The federal assessments are outside the scope of the legislation.

Transit Connect Customs Ruling. On March 8, 2013, U.S. Customs and Border Protection (“CBP”) ruled that Transit Connects imported as passenger wagons and later converted into cargo vans are subject to the 25% duty applicable to cargo vehicles, rather than the 2.5% duty applicable to passenger vehicles. As a result of the ruling, beginning in March 2013 CBP required Ford to pay the 25% duty upon importation of Transit Connects that were to be converted to cargo vehicles, and sought the difference in duty rates for certain prior imports. Our protest of the ruling within CBP was denied, and we filed a challenge in the U.S. Court of International Trade (“CIT”). On August 9, 2017, the CIT ruled in our favor. On October 6, 2017, CBP filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”), and on June 7, 2019, a panel of three Federal Circuit judges ruled in favor of CBP. On July 22, 2019, we filed a petition for rehearing and rehearing en banc with the Federal Circuit. On October 16, 2019, the Federal Circuit denied our petition. On February 13, 2020, we filed a petition for a writ of certiorari with the U.S. Supreme Court, and on June 29, 2020, our petition was denied. Accordingly, Ford will have to pay the increased duties for certain prior imports, plus interest, and CBP might assert a claim for penalties.

ITEM 1A. Risk Factors.

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

Ford and Ford Credit’s financial condition and results of operations have been and may continue to be adversely affected by public health issues, including epidemics or pandemics such as COVID-19.We face various risks related to public health issues, including epidemics, pandemics, and other outbreaks, including the deadly global outbreak of COVID-19. The impact of COVID-19, including changes in consumer behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity. There have been extraordinary actions taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world, including travel bans, quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. Although restrictions have been partially eased in many locations, some areas that had previously eased restrictions have reverted to more stringent limitations on daily activities.

Consistent with the actions taken by governmental authorities, in late March 2020, we idled our manufacturing operations in regions around the world other than China, where manufacturing operations were suspended in January and February before beginning to resume operations in March. ~~We believe the~~Beginning in May 2020, taking a phased ~~restart of~~approach and after introducing new safety protocols at our ~~manufacturing~~ plants, ~~supply network, and other dependent functions is probable of commencing in the second quarter of 2020. Our automotive operations will generally not realize revenue while our~~we resumed manufacturing operations ~~are suspended, but~~around the world, and by July 2020, we ~~will continue~~returned to ~~incur operating~~pre-COVID-19 production levels in North America, Europe, and non-operating expenses. Any decisions on resumptions will be made in cooperation with local unions, suppliers, dealers, and other stakeholders. A continued significant disruption to our production schedule will have a substantial adverse effect on our financial condition, liquidity, and results of operations.China.

The economic slowdown attributable to COVID-19 ~~has~~ led to a global decrease in vehicle sales in markets around the world. As described in more detail under “Industry sales volume in any of our key markets can be volatile and could decline if there is a financial crisis, recession, or significant geopolitical event” in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, a sustained decline in vehicle sales would have a substantial adverse effect on our financial condition, results of operations, and cash flow. Moreover, as a result of the restrictions described above and consumers’ reaction to COVID-19 in general, showroom traffic at our dealers ~~has~~ dropped significantly and many dealers ~~have~~ temporarily ceased normal operations, thereby reducing the demand for our products and leading dealers to purchase fewer vehicles from us, as well as a reduction in parts and accessories sales. AtTo the ~~same time, despite the decrease in revenue,~~extent dealer operations are impacted by restrictions on daily activities, it could have a substantial adverse effect on our ~~production trade payables continue to come due through early May, resulting in a deterioration~~financial condition, liquidity, and results of ~~our cash flow. The extent and duration of the deterioration is uncertain at this time.~~operations.

The predominant share of Ford Credit’s business consists of financing Ford and Lincoln ~~vehicles.~~vehicles, and the duration or reemergence of COVID-19 or similar public health issues may negatively impact the level of originations at Ford Credit. For example, Ford’s suspension of manufacturing operations, ~~the~~a significant decline in dealer showroom traffic, and ~~the~~/ or a reduction of operations at ~~many~~ dealers ~~has resulted in~~may lead to a significant decline in Ford Credit’s ~~retail financing~~consumer and ~~lease originations, and~~non-consumer originations. Moreover, a sustained decline in sales could have a significant adverse effect on dealer profitability and creditworthiness. Further, COVID-19 has had a significant negative impact on many businesses and unemployment rates have increased ~~sharply.~~sharply from pre-COVID-19 levels. Ford Credit expects the economic uncertainty and higher unemployment to result in higher defaults in its consumer portfolio, and prolonged unemployment is expected to have a negative impact on both new and used vehicle demand.

The global economic slowdown and stay-at-home orders enacted across the United States ~~have~~ disrupted auction activity in many locations, which ~~may~~ adversely ~~impact, or cause~~impacted and caused delays in realizing the resale value for off-lease and repossessed vehicles. Although auction performance has improved, future or additional restrictions could have a similar adverse impact on Ford Credit. For more information about the impact of higher credit losses and lower residual values on Ford Credit’s business, see “Ford Credit could experience higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles” in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019.

As described in more detail under “Ford and Ford Credit’s access to debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts could be affected by credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors” in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, the volatility created by COVID-19 has adversely affected Ford Credit’s access to the debt and securitization markets and its cost of funding.

The full impact of ~~the~~ COVID-19 ~~pandemic~~ on our financial condition and results of operations will depend on future developments, such as the ultimate duration and scope of the outbreak (including any potential second wave or future waves), its impact on our customers, dealers, and suppliers, how quickly normal economic conditions, operations, and the demand for our products can resume, the duration and ~~whether~~severity of the current recession, and any permanent behavioral changes that the pandemic ~~leads to recessionary conditions~~may cause. For example, in ~~any of our key markets. For example,~~the event manufacturing operations are again suspended, fully ramping up our production schedule to prior levels may take ~~several months~~longer than the prior resumption and will depend, in part, on whether our suppliers and dealers have resumed normal operations. Our automotive operations generally do not realize revenue while our manufacturing operations are suspended, but we continue to incur operating and non-operating expenses, resulting in a deterioration of our cash flow. Accordingly, any significant future disruption to our production schedule, whether as a result of our own or a supplier’s suspension of operations, could have a substantial adverse effect on our financial condition, liquidity, and results of operations. Further, government-sponsored liquidity or stimulus programs in response to ~~the~~ COVID-19 ~~pandemic~~ may not be available to our customers, suppliers, dealers, or us, and if available, may nevertheless be insufficient to address the impacts of COVID-19. Moreover, our supply and distribution chains may be disrupted by supplier or dealer bankruptcies or their permanent discontinuation of operations. ~~Accordingly,~~While the ultimate impact on our financial condition and results of operations cannot be determined at this ~~time. Nevertheless, despite the uncertainty of the COVID-19 situation,~~time, we continue to expect our full year 2020 results of operations to be adversely ~~affected.~~affected by COVID-19.

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

ITEM 6. Exhibits.



Designation	Description	Method of Filing
Exhibit ~~10.1~~10	~~Annual Incentive Compensation~~Defined Contribution Supplemental Executive Retirement Plan, ~~for 2020.~~	~~Filed with this Report.~~
~~Exhibit 10.2~~	~~Performance-Based Restricted Stock Unit Metrics for 2020.~~	~~Filed with this Report.~~
~~Exhibit 10.3~~	~~Executive Waiver~~as amended and ~~Release Agreement between Ford Motor Company and Joseph R. Hinrichs dated February 21, 2020.~~restated.	Filed with this Report.
Exhibit 31.1	Rule 15d-14(a) Certification of CEO.	Filed with this Report.
Exhibit 31.2	Rule 15d-14(a) Certification of CFO.	Filed with this Report.
Exhibit 32.1	Section 1350 Certification of CEO.	Furnished with this Report.
Exhibit 32.2	Section 1350 Certification of CFO.	Furnished with this Report.
Exhibit 101.INS	Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language (“Inline XBRL”).	*
Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document.	*
Exhibit 101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	*
Exhibit 101.LAB	XBRL Taxonomy Extension Label Linkbase Document.	*
Exhibit 101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.	*
Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.	*
Exhibit 104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).	*

__________

* Submitted electronically with this Report.

SIGNATURE

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

FORD MOTOR COMPANY



By:	/s/ Cathy O’Callaghan
	Cathy O’Callaghan, Controller
	(principal accounting officer)

Date:	~~April 28,~~July 30, 2020