UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, ~~2022~~2023


☐			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 1-6368

Ford Motor Credit Company LLC

(Exact name of registrant as specified in its charter)

Delaware

38-1612444

(State of organization)

(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

~~0.623%~~Floating Rate Notes due ~~June 28,~~November 15, 2023*

F/~~23E~~23D

New York Stock Exchange

~~1.355%~~3.021% Notes due February 7, 2025*March 6, 2024*

F/~~25I~~24M

New York Stock Exchange

2.748% Notes due on June 14, 2024*

F/24S

New York Stock Exchange

4.125% Notes due on June 20, 2024*

F/24O

New York Stock Exchange

~~3.021%~~1.744% Notes due ~~March 6,~~July 19, 2024*

F/~~24M~~24R

New York Stock Exchange

Floating Rate Notes due December 1, 2024*

F/24L

New York Stock Exchange

3.683% Notes due on December 3, 2024*

F/24Q

New York Stock Exchange

1.355% Notes due February 7, 2025*

F/25I

New York Stock Exchange

4.535% Notes due March 6, 2025*

F/25K

New York Stock Exchange

3.250% Notes due September 15, 2025*

F/25M

New York Stock Exchange

2.330% Notes due on November 25, 2025*

F/25L

New York Stock Exchange

2.386% Notes due February 17, 2026*

F/26AB

New York Stock Exchange

6.860% Notes due June 5, 2026*

F/26A

New York Stock Exchange

3.350% Notes due Nine Months or More from the Date of Issue due August 20, 2026

F/26N

New York Stock Exchange

~~1.514%~~4.867% Notes due February 17, 2023*August 3, 2027*

F/~~23G~~27A

New York Stock Exchange

~~2.386%~~6.125% Notes due February 17, 2026*May 15, 2028*

F/~~26AB~~

~~New York Stock Exchange~~

1.744% Notes due July 19, 2024*

~~F/24R~~

~~New York Stock Exchange~~

2.330% Notes due on November 25, 2025*

~~F/25L~~

~~New York Stock Exchange~~

3.683% Notes due on December 3, 2024*

~~F/24Q~~

~~New York Stock Exchange~~

3.250% Notes due September 15, 2025*

~~F/25M~~

~~New York Stock Exchange~~

2.748% Notes due on June 14, 2024*

~~F/24S~~

~~New York Stock Exchange~~

Floating Rate Notes due December 7, 2022*

~~F/22T~~

~~New York Stock Exchange~~

Floating Rate Notes due November 15, 2023*

~~F/23D~~

~~New York Stock Exchange~~

Floating Rate Notes due December 1, 2024*

~~F/24L~~28B

New York Stock Exchange

*Issued under Euro Medium Term Notes due Nine Months or More from The Date of Issue Program

Indicate by check mark whether 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. þ Yes o 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). þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the 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 þ 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

☑

All of the limited liability company interests in the registrant (“Shares”) are held by an affiliate of the registrant. None of the Shares are publicly traded.

REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.


Exhibit Index begins on page 3841

FORD MOTOR CREDIT COMPANY LLC

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended June 30, ~~2022~~2023



	Table of Contents	Page

	Part I. Financial Information
Item 1	Financial Statements	1
	Consolidated Income Statements	1
	Consolidated Statements of Comprehensive Income	1
	Consolidated Balance Sheets	2
	Consolidated Statements of Shareholder’s Interest	3
	Consolidated Statements of Cash Flows	4
	Notes to the Financial Statements	5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	~~Recent Developments~~	2325
	Definitions and Information Regarding Causal Factors	2425
	Results of Operations	2627
	Financing Shares and Contract Placement Volume	2829
	Financial Condition	2930
	Credit Risk	3031
	Residual Risk	3233
	Credit Ratings	3334
	Funding and Liquidity	3435
	Leverage	3538
	Outlook	3538
	Cautionary Note on Forward-Looking Statements	3639
	Accounting Standards Issued But Not Yet Adopted	3740
Item 3	Quantitative and Qualitative Disclosures About Market Risk	3740
Item 4	Controls and Procedures	3740
	Part II. Other Information
Item 1	Legal Proceedings	3841
Item 5	Other Information	3841
Item 6	Exhibits	3841
	Signature	3942

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(in millions)


		For the periods ended June 30,									For the periods ended June 30,
		2021		2022		2021		2022			2022		2023		2022		2023
		Second Quarter				First Half					Second Quarter				First Half
		(unaudited)									(unaudited)
Financing revenue	Financing revenue									Financing revenue
Operating leases	Operating leases	$	1,367	$	1,166	$	2,747	$	2,377	Operating leases	$	1,166	$	1,029	$	2,377	$	2,078
Retail financing	Retail financing	1,004		874		1,994		1,780		Retail financing	874		1,013		1,780		1,942
Dealer financing	Dealer financing	187		221		473		385		Dealer financing	221		600		385		1,104
Other financing	Other financing	13		15		27		22		Other financing	15		31		22		58
Total financing revenue	Total financing revenue	2,571		2,276		5,241		4,564		Total financing revenue	2,276		2,673		4,564		5,182
Depreciation on vehicles subject to operating leases	Depreciation on vehicles subject to operating leases	(191)		(549)		(759)		(1,064)		Depreciation on vehicles subject to operating leases	(549)		(555)		(1,064)		(1,114)
Interest expense	Interest expense	(680)		(657)		(1,484)		(1,268)		Interest expense	(657)		(1,530)		(1,268)		(2,922)
Net financing margin	Net financing margin	1,700		1,070		2,998		2,232		Net financing margin	1,070		588		2,232		1,146
Other revenue	Other revenue									Other revenue
Insurance premiums earned	Insurance premiums earned	17		17		44		32		Insurance premiums earned	17		29		32		55
Fee based revenue and other	Fee based revenue and other	53		55		73		78		Fee based revenue and other	55		53		78		74
Total financing margin and other revenue	Total financing margin and other revenue	1,770		1,142		3,115		2,342		Total financing margin and other revenue	1,142		670		2,342		1,275
Expenses	Expenses									Expenses
Operating expenses	Operating expenses	322		307		665		655		Operating expenses	307		340		655		660
Provision for/(benefit from) credit losses (Note 4)		(166)		(56)		(206)		(120)
Provision for/(Benefit from) credit losses (Note 4)										Provision for/(Benefit from) credit losses (Note 4)	(56)		40		(120)		117
Insurance expenses	Insurance expenses	4		9		9		2		Insurance expenses	9		35		2		40
Total expenses	Total expenses	160		260		468		537		Total expenses	260		415		537		817

Other income/(loss), net (Note 11)	Other income/(loss), net (Note 11)	13		21		(62)		(148)		Other income/(loss), net (Note 11)	21		126		(148)		226

Income before income taxes	Income before income taxes	1,623		903		2,585		1,657		Income before income taxes	903		381		1,657		684
Provision for/(benefit from) income taxes		(28)		99		89		184
Provision for/(Benefit from) income taxes										Provision for/(Benefit from) income taxes	99		95		184		158
Net income	Net income	$	1,651	$	804	$	2,496	$	1,473	Net income	$	804	$	286	$	1,473	$	526

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


		For the periods ended June 30,									For the periods ended June 30,
		2021		2022		2021		2022			2022		2023		2022		2023
		Second Quarter				First Half					Second Quarter				First Half
		(unaudited)									(unaudited)
Net income	Net income	$	1,651	$	804	$	2,496	$	1,473	Net income	$	804	$	286	$	1,473	$	526
Other comprehensive income/(loss), net of tax	Other comprehensive income/(loss), net of tax									Other comprehensive income/(loss), net of tax
Foreign currency translation gains/(losses)	Foreign currency translation gains/(losses)	108		(403)		7		(446)		Foreign currency translation gains/(losses)	(403)		18		(446)		106
Reclassification of accumulated foreign currency translation (gains)/losses to net income	Reclassification of accumulated foreign currency translation (gains)/losses to net income	—		36		—		231		Reclassification of accumulated foreign currency translation (gains)/losses to net income	36		—		231		—
Comprehensive income		$	1,759	$	437	$	2,503	$	1,258
Comprehensive income/(loss)										Comprehensive income/(loss)	$	437	$	304	$	1,258	$	632

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions)


		December 31, 2021		June 30, 2022			December 31, 2022		June 30, 2023
		(unaudited)					(unaudited)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents (Note 3)	Cash and cash equivalents (Note 3)	$	10,963	$	6,298	Cash and cash equivalents (Note 3)	$	10,393	$	11,461
Marketable securities (Note 3)	Marketable securities (Note 3)	2,173		2,186		Marketable securities (Note 3)	1,493		1,606
Finance receivables, net	Finance receivables, net					Finance receivables, net
Retail installment contracts, dealer financing, and other financing	Retail installment contracts, dealer financing, and other financing	85,347		85,873		Retail installment contracts, dealer financing, and other financing	94,090		98,566
Finance leases	Finance leases	7,003		6,346		Finance leases	6,423		6,868
Total finance receivables, net of allowance for credit losses of $925 and $763 (Note 4)		92,350		92,219
Total finance receivables, net of allowance for credit losses of $845 and $873 (Note 4)						Total finance receivables, net of allowance for credit losses of $845 and $873 (Note 4)	100,513		105,434
Net investment in operating leases (Note 5)	Net investment in operating leases (Note 5)	25,167		23,408		Net investment in operating leases (Note 5)	21,821		20,640
Notes and accounts receivable from affiliated companies	Notes and accounts receivable from affiliated companies	703		907		Notes and accounts receivable from affiliated companies	793		948
Derivative financial instruments (Note 7)	Derivative financial instruments (Note 7)	1,065		748		Derivative financial instruments (Note 7)	987		1,054

Other assets (Note 8)	Other assets (Note 8)	2,524		2,484		Other assets (Note 8)	2,576		2,647
Total assets	Total assets	$	134,945	$	128,250	Total assets	$	138,576	$	143,790

LIABILITIES	LIABILITIES					LIABILITIES
Accounts payable	Accounts payable					Accounts payable
Customer deposits, dealer reserves, and other	Customer deposits, dealer reserves, and other	$	1,051	$	1,135	Customer deposits, dealer reserves, and other	$	1,097	$	1,038
Affiliated companies	Affiliated companies	425		601		Affiliated companies	581		489
Total accounts payable	Total accounts payable	1,476		1,736		Total accounts payable	1,678		1,527
Debt (Note 9)	Debt (Note 9)	117,717		109,461		Debt (Note 9)	119,039		123,657
Deferred income taxes	Deferred income taxes	676		885		Deferred income taxes	921		968
Derivative financial instruments (Note 7)	Derivative financial instruments (Note 7)	512		2,208		Derivative financial instruments (Note 7)	3,026		2,876
Other liabilities and deferred revenue (Note 8)	Other liabilities and deferred revenue (Note 8)	2,166		1,987		Other liabilities and deferred revenue (Note 8)	2,035		2,253
Total liabilities	Total liabilities	122,547		116,277		Total liabilities	126,699		131,281

SHAREHOLDER’S INTEREST	SHAREHOLDER’S INTEREST					SHAREHOLDER’S INTEREST
Shareholder’s interest	Shareholder’s interest	5,227		5,166		Shareholder’s interest	5,166		5,166
Accumulated other comprehensive income/(loss)	Accumulated other comprehensive income/(loss)	(690)		(905)		Accumulated other comprehensive income/(loss)	(1,017)		(911)
Retained earnings	Retained earnings	7,839		7,712		Retained earnings	7,728		8,254
Shareholder’s interest attributable to Ford Motor Credit Company	Shareholder’s interest attributable to Ford Motor Credit Company	12,376		11,973		Shareholder’s interest attributable to Ford Motor Credit Company	11,877		12,509
Shareholder’s interest attributable to noncontrolling interests	Shareholder’s interest attributable to noncontrolling interests	22		—		Shareholder’s interest attributable to noncontrolling interests	—		—
Total shareholder’s interest	Total shareholder’s interest	12,398		11,973		Total shareholder’s interest	11,877		12,509
Total liabilities and shareholder’s interest	Total liabilities and shareholder’s interest	$	134,945	$	128,250	Total liabilities and shareholder’s interest	$	138,576	$	143,790

The following table includes assets to be used to settle the liabilities of the consolidated variable interest entities (“VIEs”). These assets and liabilities are included in the consolidated balance sheets above.


		December 31, 2021		June 30, 2022			December 31, 2022		June 30, 2023
		(unaudited)					(unaudited)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	3,407	$	2,284	Cash and cash equivalents	$	2,274	$	2,421
Finance receivables, net	Finance receivables, net	43,001		43,162		Finance receivables, net	49,142		52,504
Net investment in operating leases	Net investment in operating leases	7,540		10,494		Net investment in operating leases	12,545		8,929
Derivative financial instruments	Derivative financial instruments	39		199		Derivative financial instruments	264		279

LIABILITIES	LIABILITIES					LIABILITIES
Debt	Debt	$	38,274	$	41,072	Debt	$	45,451	$	47,891
Derivative financial instruments	Derivative financial instruments	6		—		Derivative financial instruments	2		—

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S INTEREST

(in millions, unaudited)


		Shareholder’s Interest		Accumulated Other Comprehensive Income/(Loss)		Retained Earnings		Total Shareholder’s Interest		Shareholder’s Interest Attributable to Non-controlling Interests		Total Shareholder’s Interest
Balance at December 31, 2020		$	5,227	$	(478)	$	10,818	$	15,567	$	—	$	15,567
Net income/(loss)		—		—		845		845		—		845
Other comprehensive income/(loss), net of tax		—		(101)		—		(101)		—		(101)
Distributions declared		—		—		(1,000)		(1,000)		—		(1,000)
Balance at March 31, 2021		$	5,227	$	(579)	$	10,663	$	15,311	$	—	$	15,311

Net income/(loss)		—		—		1,651		1,651		—		1,651
Other comprehensive income/(loss), net of tax		—		108		—		108		—		108
Distributions declared		—		—		(4,000)		(4,000)		—		(4,000)
Balance at June 30, 2021		$	5,227	$	(471)	$	8,314	$	13,070	$	—	$	13,070
															Shareholder’s Interest		Accumulated Other Comprehensive Income/(Loss)		Retained Earnings		Total Shareholder’s Interest		Shareholder’s Interest Attributable to Non-controlling Interests		Total Shareholder’s Interest
Balance at December 31, 2021	Balance at December 31, 2021	$	5,227	$	(690)	$	7,839	$	12,376	$	22	$	12,398	Balance at December 31, 2021	$	5,227	$	(690)	$	7,839	$	12,376	$	22	$	12,398
Net income/(loss)	Net income/(loss)	—		—		669		669		—		669		Net income/(loss)	—		—		669		669		—		669
Other comprehensive income/(loss), net of tax	Other comprehensive income/(loss), net of tax	—		152		—		152		—		152		Other comprehensive income/(loss), net of tax	—		152		—		152		—		152
Distributions declared	Distributions declared	—		—		(1,000)		(1,000)		—		(1,000)		Distributions declared	—		—		(1,000)		(1,000)		—		(1,000)
Other (Note 10)	Other (Note 10)	(61)		—		—		(61)		(22)		(83)		Other (Note 10)	(61)		—		—		(61)		(22)		(83)
Balance at March 31, 2022	Balance at March 31, 2022	$	5,166	$	(538)	$	7,508	$	12,136	$	—	$	12,136	Balance at March 31, 2022	5,166		(538)		7,508		12,136		—		12,136

Net income/(loss)	Net income/(loss)	—		—		804		804		—		804		Net income/(loss)	—		—		804		804		—		804
Other comprehensive income/(loss), net of tax	Other comprehensive income/(loss), net of tax	—		(367)		—		(367)		—		(367)		Other comprehensive income/(loss), net of tax	—		(367)		—		(367)		—		(367)
Distributions declared	Distributions declared	—		—		(600)		(600)		—		(600)		Distributions declared	—		—		(600)		(600)		—		(600)
Balance at June 30, 2022	Balance at June 30, 2022	$	5,166	$	(905)	$	7,712	$	11,973	$	—	$	11,973	Balance at June 30, 2022	$	5,166	$	(905)	$	7,712	$	11,973	$	—	$	11,973

Balance at December 31, 2022														Balance at December 31, 2022	$	5,166	$	(1,017)	$	7,728	$	11,877	$	—	$	11,877
Net income/(loss)														Net income/(loss)	—		—		240		240		—		240
Other comprehensive income/(loss), net of tax														Other comprehensive income/(loss), net of tax	—		88		—		88		—		88
Distributions declared														Distributions declared	—		—		—		—		—		—
Balance at March 31, 2023														Balance at March 31, 2023	5,166		(929)		7,968		12,205		—		12,205
Net income/(loss)														Net income/(loss)	—		—		286		286		—		286
Other comprehensive income/(loss), net of tax														Other comprehensive income/(loss), net of tax	—		18		—		18		—		18
Distributions declared														Distributions declared	—		—		—		—		—		—
Balance at June 30, 2023														Balance at June 30, 2023	$	5,166	$	(911)	$	8,254	$	12,509	$	—	$	12,509

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


		For the periods ended June 30,					For the periods ended June 30,
		2021		2022			2022		2023
		First Half					First Half
		(unaudited)					(unaudited)
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income	Net income	$	2,496	$	1,473	Net income	$	1,473	$	526
Provision for/(benefit from) credit losses		(206)		(120)
Provision for/(Benefit from) credit losses						Provision for/(Benefit from) credit losses	(120)		117
Depreciation and amortization	Depreciation and amortization	1,116		1,395		Depreciation and amortization	1,395		1,407
Amortization of upfront interest supplements	Amortization of upfront interest supplements	(1,166)		(987)		Amortization of upfront interest supplements	(987)		(842)
Net change in deferred income taxes	Net change in deferred income taxes	(81)		192		Net change in deferred income taxes	192		13
Net change in other assets	Net change in other assets	548		(521)		Net change in other assets	(521)		(188)
Net change in other liabilities	Net change in other liabilities	(69)		369		Net change in other liabilities	369		32
All other operating activities	All other operating activities	76		126		All other operating activities	126		(21)
Net cash provided by/(used in) operating activities	Net cash provided by/(used in) operating activities	2,714		1,927		Net cash provided by/(used in) operating activities	1,927		1,044

Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Purchases of finance receivables	Purchases of finance receivables	(17,194)		(15,513)		Purchases of finance receivables	(15,513)		(20,432)
Principal collections of finance receivables	Principal collections of finance receivables	21,320		19,135		Principal collections of finance receivables	19,135		18,196
Purchases of operating lease vehicles	Purchases of operating lease vehicles	(5,943)		(4,515)		Purchases of operating lease vehicles	(4,515)		(4,373)
Proceeds from termination of operating lease vehicles	Proceeds from termination of operating lease vehicles	5,998		5,207		Proceeds from termination of operating lease vehicles	5,207		4,555
Net change in wholesale receivables and other short-duration receivables	Net change in wholesale receivables and other short-duration receivables	10,565		(4,613)		Net change in wholesale receivables and other short-duration receivables	(4,613)		(1,497)
Purchases of marketable securities		(5,998)		(2,683)
Proceeds from sales and maturities of marketable securities		8,792		2,606
Purchases of marketable securities and other investments						Purchases of marketable securities and other investments	(2,683)		(1,696)
Proceeds from sales and maturities of marketable securities and other investments						Proceeds from sales and maturities of marketable securities and other investments	2,606		1,610
Settlements of derivatives	Settlements of derivatives	(47)		128		Settlements of derivatives	128		(52)
All other investing activities	All other investing activities	(39)		(85)		All other investing activities	(85)		(36)
Net cash provided by/(used in) investing activities	Net cash provided by/(used in) investing activities	17,454		(333)		Net cash provided by/(used in) investing activities	(333)		(3,725)

Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Proceeds from issuances of long-term debt	Proceeds from issuances of long-term debt	9,388		17,924		Proceeds from issuances of long-term debt	17,924		26,401
Payments of long-term debt	Payments of long-term debt	(26,525)		(22,089)		Payments of long-term debt	(22,089)		(22,075)
Net change in short-term debt	Net change in short-term debt	1,065		(237)		Net change in short-term debt	(237)		(554)
Cash distributions to parent	Cash distributions to parent	(5,000)		(1,600)		Cash distributions to parent	(1,600)		—
All other financing activities	All other financing activities	(29)		(48)		All other financing activities	(48)		(96)
Net cash provided by/(used in) financing activities	Net cash provided by/(used in) financing activities	(21,101)		(6,050)		Net cash provided by/(used in) financing activities	(6,050)		3,676

Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	18		(229)		Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(229)		77

Net increase/(decrease) in cash, cash equivalents and restricted cash	Net increase/(decrease) in cash, cash equivalents and restricted cash	$	(915)	$	(4,685)	Net increase/(decrease) in cash, cash equivalents and restricted cash	$	(4,685)	$	1,072

Cash, cash equivalents, and restricted cash at beginning of period (Note 3)	Cash, cash equivalents, and restricted cash at beginning of period (Note 3)	$	14,996	$	11,091	Cash, cash equivalents, and restricted cash at beginning of period (Note 3)	$	11,091	$	10,520
Net increase/(decrease) in cash, cash equivalents, and restricted cash	Net increase/(decrease) in cash, cash equivalents, and restricted cash	(915)		(4,685)		Net increase/(decrease) in cash, cash equivalents, and restricted cash	(4,685)		1,072
Cash, cash equivalents, and restricted cash at end of period (Note 3)	Cash, cash equivalents, and restricted cash at end of period (Note 3)	$	14,081	$	6,406	Cash, cash equivalents, and restricted cash at end of period (Note 3)	$	6,406	$	11,592

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents


Footnote		Page
Note 1	Presentation	6
Note 2	Accounting Policies	6
Note 3	Cash, Cash Equivalents, and Marketable Securities	7
Note 4	Finance Receivables and Allowance for Credit Losses	78
Note 5	Net Investment in Operating Leases	1113
Note 6	Transfers of Receivables and Variable Interest Entities	1213
Note 7	Derivative Financial Instruments and Hedging Activities	1516
Note 8	Other Assets and Other Liabilities and Deferred Revenue	1718
Note 9	Debt	1819


Note 10	Restructuring Actions	1920
Note 11	Other Income/(Loss)~~, Net~~	1920

Note 12	Segment Information	2021

Note 13	Commitments and Contingencies	2123

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION

Principles of Consolidation

~~The~~For purposes of this report, “Ford Credit,” the “Company,” “we,” “our,” “us,” or similar references mean Ford Motor Credit Company LLC, our consolidated subsidiaries, and our consolidated VIEs of which we are the primary beneficiary, unless the context requires otherwise. We are an indirect, wholly owned subsidiary of Ford Motor Company (“Ford”). Our consolidated financial statements ~~have been prepared~~are presented in ~~conformity~~accordance with U.S. generally accepted accounting principles ~~in the United States~~ (“GAAP”) for interim financial information, ~~and~~ instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X. We reclassified certain prior year amounts in our consolidated financial statements to conform to the current year presentation.

In the opinion of management, these unaudited financial statements include all adjustments, ~~considered~~consisting of only normal recurring adjustments, necessary for a fair statement of ~~the~~our results of operations and financial condition for ~~interim~~the periods, ~~for Ford Motor Credit Company LLC, its consolidated subsidiaries,~~ and ~~its consolidated VIEs in which Ford Motor Credit Company LLC is~~at the ~~primary beneficiary (collectively referred to herein as “Ford Credit,” “we,” “our,” or “us”). Results~~dates, presented. The results for interim periods ~~should~~are not ~~be considered~~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, ~~2021~~2022 (“~~2021~~2022 Form 10-K Report”). We are an indirect, wholly owned subsidiary of Ford Motor Company (“Ford”). We reclassify certain prior period amounts in our consolidated financial statements to conform to current year presentation.

NOTE 2. ACCOUNTING POLICIES

Adoption of New Accounting Standards

Accounting Standards Update (“ASU”) 2022-02, Financial Instruments – Credit Losses, Troubled Debt Restructurings and Vintage Disclosures. Effective January 1, 2023, we adopted the new standard, which eliminates the troubled debt recognition and measurement guidance and requires disclosure of current-period gross charge-offs by year of origination (vintage disclosure).Adoption of the new standard did not have a material impact to our consolidated financial statements or financial statement disclosures.

We also adopted the following ~~Accounting Standards Updates (“ASUs”)~~ASUs during ~~2022,~~2023, none of which had a material impact to our consolidated financial statements or financial statement disclosures:


ASU		Effective Date
~~2021-05~~2022-01	~~Lessors - Certain Leases with Variable Lease Payments~~Derivatives and Hedging – Fair Value Hedging – Portfolio Layer Hedging	January 1, ~~2022~~2023
~~2021-08~~2022-03	~~Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers~~Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions	January 1, ~~2022~~2023
~~2021-10~~2018-12	~~Government Assistance: Disclosures by Business Entities about Government Assistance~~Targeted Improvements to the Accounting for Long Duration Contracts (and related amendments)	January 1, ~~2022~~2023

Accounting Standards Issued But Not Yet Adopted

~~ASU 2022-02, Financial Instruments - Credit Losses, Troubled Debt Restructurings and Vintage Disclosures.~~ ~~In March 2022, the Financial Accounting Standards Board (“FASB”)~~ASUs issued a new accounting standard that eliminates the troubled debt recognition and measurement guidance. The new standard requires that an entity apply the loan refinancing and restructuring guidance in ASC 310 to all loan modifications and/or receivable modifications. It also enhances disclosure requirements for certain refinancings and restructurings by creditors when a borrower is experiencing financial difficulty and requires disclosure of current-period gross charge-offs by year of origination in the vintage disclosure. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. We are assessing the effect of the new standard on our financial statements and disclosures.

~~The Company considers the applicability and impacts of all ASUs. All other ASUs~~but not yet adopted were assessed and determined to be ~~either~~ not applicable or are not expected to have a material impact on our consolidated financial statements or financial statement disclosures.

Provision for Income Taxes

For interim tax reporting, we estimate one single effective tax rate for subsidiaries that are subject to tax, which is applied to the year-to-date ordinary income/(loss). Tax effects of significant unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

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


		Fair Value Level	December 31, 2021		June 30, 2022			Fair Value Level	December 31, 2022		June 30, 2023
Cash and cash equivalents	Cash and cash equivalents						Cash and cash equivalents
United States government	United States government	1	$	711	$	40	United States government	1	$	1,045	$	1,252
United States government agencies	United States government agencies	2	240		—		United States government agencies	2	150		650
Non-United States government and agencies	Non-United States government and agencies	2	152		382		Non-United States government and agencies	2	199		441
Corporate debt	Corporate debt	2	940		630		Corporate debt	2	792		756
Total marketable securities classified as cash equivalents	Total marketable securities classified as cash equivalents		2,043		1,052		Total marketable securities classified as cash equivalents		2,186		3,099
Cash, time deposits, and money market funds	Cash, time deposits, and money market funds		8,920		5,246		Cash, time deposits, and money market funds		8,207		8,362
Total cash and cash equivalents	Total cash and cash equivalents		$	10,963	$	6,298	Total cash and cash equivalents		$	10,393	$	11,461

Marketable securities	Marketable securities						Marketable securities
United States government	United States government	1	$	864	$	325	United States government	1	$	187	$	281
United States government agencies	United States government agencies	2	75		223		United States government agencies	2	221		319
Non-United States government and agencies	Non-United States government and agencies	2	697		1,184		Non-United States government and agencies	2	658		577
Corporate debt	Corporate debt	2	304		274		Corporate debt	2	266		271
Other marketable securities	Other marketable securities	2	233		180		Other marketable securities	2	161		158
Total marketable securities	Total marketable securities		$	2,173	$	2,186	Total marketable securities		$	1,493	$	1,606

Cash, Cash Equivalents, and Restricted Cash

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


		December 31, 2021		June 30, 2022			December 31, 2022		June 30, 2023
Cash and cash equivalents	Cash and cash equivalents	$	10,963	$	6,298	Cash and cash equivalents	$	10,393	$	11,461
Restricted cash (a)	Restricted cash (a)	128		108		Restricted cash (a)	127		131
Total cash, cash equivalents, and restricted cash	Total cash, cash equivalents, and restricted cash	$	11,091	$	6,406	Total cash, cash equivalents, and restricted cash	$	10,520	$	11,592

__________

(a)Restricted cash is included in Other assets on our consolidated balance sheets and is primarily held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements. Restricted cash does not include required minimum balances or cash securing debt issued through securitization transactions.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

We manage 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, we define “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date.

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

~~FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)~~

Total Finance Receivables, Net

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


		December 31, 2021		June 30, 2022			December 31, 2022		June 30, 2023
Consumer	Consumer					Consumer
Retail installment contracts, gross	Retail installment contracts, gross	$	69,247	$	65,219	Retail installment contracts, gross	$	67,043	$	70,023
Finance leases, gross	Finance leases, gross	7,318		6,647		Finance leases, gross	6,765		7,256
Retail financing, gross	Retail financing, gross	76,565		71,866		Retail financing, gross	73,808		77,279
Unearned interest supplements from Ford and affiliated companies	Unearned interest supplements from Ford and affiliated companies	(3,020)		(2,535)		Unearned interest supplements from Ford and affiliated companies	(2,305)		(2,721)
Consumer finance receivables	Consumer finance receivables	73,545		69,331		Consumer finance receivables	71,503		74,558

Non-Consumer	Non-Consumer					Non-Consumer
Dealer financing	Dealer financing	18,197		21,995		Dealer financing	28,408		30,060
Other financing	Other financing	1,533		1,656		Other financing	1,447		1,689
Non-Consumer finance receivables	Non-Consumer finance receivables	19,730		23,651		Non-Consumer finance receivables	29,855		31,749
Total recorded investment	Total recorded investment	$	93,275	$	92,982	Total recorded investment	$	101,358	$	106,307

Recorded investment in finance receivables	Recorded investment in finance receivables	$	93,275	$	92,982	Recorded investment in finance receivables	$	101,358	$	106,307
Allowance for credit losses	Allowance for credit losses	(925)		(763)		Allowance for credit losses	(845)		(873)
Total finance receivables, net	Total finance receivables, net	$	92,350	$	92,219	Total finance receivables, net	$	100,513	$	105,434

Net finance receivables subject to fair value (a)	Net finance receivables subject to fair value (a)	$	85,347	$	85,873	Net finance receivables subject to fair value (a)	$	94,090	$	98,566
Fair value (b)	Fair value (b)	86,199		84,220		Fair value (b)	91,410		96,233

__________

(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.

Finance leases are comprised of sales-type and direct financing leases. Financing revenue from finance leases for the second quarter of ~~2021~~2022 and ~~2022~~2023 was ~~$88~~$73 million and ~~$73~~$91 million, respectively, and for the first half of ~~2021~~2022 and ~~2022~~2023 was ~~$178~~$150 million and ~~$150~~$174 million, respectively, and is included in Retail financing on our consolidated income statements.

At December 31, ~~2021~~2022 and June 30, ~~2022,~~2023, accrued interest was ~~$125~~$187 million and ~~$119~~$219 million, respectively, which we report in Other assets on our consolidated balance sheets.

Included in the recorded investment in finance receivables were consumer and non-consumer receivables that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. See Note 6 for additional information.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Credit Quality

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

•Pass – current to 60 days past due;

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

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

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

~~FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)~~

The credit quality analysis of consumer receivables at December 31, ~~2021~~2022 was as follows (in millions):


		Amortized Cost Basis by Origination Year																	Amortized Cost Basis by Origination Year
		Prior to 2017		2017		2018		2019		2020		2021		Total		Percent			Prior to 2018		2018		2019		2020		2021		2022		Total		Percent
Consumer	Consumer																	Consumer
31-60 days past due	31-60 days past due	$	39	$	52	$	98	$	120	$	186	$	91	$	586	0.8	%	31-60 days past due	$	41	$	60	$	91	$	181	$	150	$	126	$	649	0.9	%
61-120 days past due	61-120 days past due	7		10		20		29		40		21		127		0.2		61-120 days past due	9		12		20		39		40		29		149		0.2
Greater than 120 days past due	Greater than 120 days past due	10		6		6		9		11		1		43		—		Greater than 120 days past due	9		4		5		7		7		6		38		0.1
Total past due	Total past due	56		68		124		158		237		113		756		1.0		Total past due	59		76		116		227		197		161		836		1.2
Current	Current	812		2,608		6,568		12,717		22,730		27,354		72,789		99.0		Current	883		2,564		6,149		13,864		18,382		28,825		70,667		98.8
Total	Total	$	868	$	2,676	$	6,692	$	12,875	$	22,967	$	27,467	$	73,545	100.0	%	Total	$	942	$	2,640	$	6,265	$	14,091	$	18,579	$	28,986	$	71,503	100.0	%

The credit quality analysis of consumer receivables at June 30, ~~2022~~2023 was as follows (in millions):


		Amortized Cost Basis by Origination Year																	Amortized Cost Basis by Origination Year
		Prior to 2018		2018		2019		2020		2021		2022		Total		Percent			Prior to 2019		2019		2020		2021		2022		2023		Total		Percent
Consumer	Consumer																	Consumer
31-60 days past due	31-60 days past due	$	57	$	68	$	91	$	170	$	113	$	30	$	529	0.8	%	31-60 days past due	$	61	$	62	$	141	$	127	$	156	$	45	$	592	0.8	%
61-120 days past due	61-120 days past due	11		15		23		36		31		7		123		0.2		61-120 days past due	11		13		32		34		44		13		147		0.2
Greater than 120 days past due	Greater than 120 days past due	13		5		8		7		6		1		40		—		Greater than 120 days past due	10		4		8		9		9		1		41		—
Total past due	Total past due	81		88		122		213		150		38		692		1.0		Total past due	82		79		181		170		209		59		780		1.0
Current	Current	1,838		4,249		8,916		17,720		22,552		13,364		68,639		99.0		Current	1,860		4,093		10,446		14,679		24,613		18,087		73,778		99.0
Total	Total	$	1,919	$	4,337	$	9,038	$	17,933	$	22,702	$	13,402	$	69,331	100.0	%	Total	$	1,942	$	4,172	$	10,627	$	14,849	$	24,822	$	18,146	$	74,558	100.0	%
Gross charge-offs																		Gross charge-offs	$	27	$	20	$	37	$	40	$	48	$	2	$	174

Non-Consumer Portfolio. The credit quality of dealer financing receivables is evaluated based on our internal dealer risk rating analysis. We use 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 we consider most significant in predicting a dealer’s ability to meet its financial obligations. We also consider numerous other financial and qualitative factors of the dealer’s operations, including capitalization and leverage, liquidity and cash flow, profitability, and credit history with ourselves and other creditors.

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.

~~The credit quality analysis of dealer financing receivables at December 31, 2021 was as follows (in millions):~~

Amortized Cost Basis by Origination Year
Dealer Loans
Prior to 2017 2017 2018 2019 2020 2021 Total Wholesale Loans Total Percent
Group I $ 391 $ 68 $ 151 $ 45 $ 109 $ 345 $ 1,109 $ 13,670 $ 14,779 81.2 %
Group II 11 7 26 2 4 54 104 2,689 2,793 15.3
Group III 8 — 1 — 1 20 30 529 559 3.1
Group IV — — 4 — — 6 10 56 66 0.4
Total (a) $ 410 $ 75 $ 182 $ 47 $ 114 $ 425 $ 1,253 $ 16,944 $ 18,197 100.0 %

~~__________~~

~~(a)Total past due dealer financing receivables at December 31, 2021 were $62 million.~~

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES ~~(Continued)~~(Continued)

The credit quality analysis of dealer financing receivables at December 31, 2022 was as follows (in millions):


	Amortized Cost Basis by Origination Year
	Dealer Loans
	Prior to 2018		2018		2019		2020		2021		2022		Total		Wholesale Loans		Total		Percent
Group I	$	402	$	148	$	35	$	67	$	185	$	224	$	1,061	$	24,242	$	25,303	89.1	%
Group II	2		21		—		5		2		42		72		2,751		2,823		9.9
Group III	—		—		—		—		—		10		10		233		243		0.9
Group IV	—		—		1		—		—		3		4		35		39		0.1
Total (a)	$	404	$	169	$	36	$	72	$	187	$	279	$	1,147	$	27,261	$	28,408	100.0	%

__________

(a)Total past due dealer financing receivables at December 31, 2022 were $9 million.

The credit quality analysis of dealer financing receivables at June 30, ~~2022~~2023 was as follows (in millions):


		Amortized Cost Basis by Origination Year																					Amortized Cost Basis by Origination Year
		Dealer Loans																					Dealer Loans
		Prior to 2018		2018		2019		2020		2021		2022		Total		Wholesale Loans		Total		Percent			Prior to 2019		2019		2020		2021		2022		2023		Total		Wholesale Loans		Total		Percent
Group I	Group I	$	452	$	155	$	40	$	65	$	225	$	144	$	1,081	$	18,089	$	19,170	87.2	%	Group I	$	520	$	32	$	67	$	165	$	83	$	264	$	1,131	$	25,989	$	27,120	90.2	%
Group II	Group II	7		22		1		5		10		43		88		2,353		2,441		11.1		Group II	2		—		1		2		3		57		65		2,504		2,569		8.5
Group III	Group III	—		—		—		—		4		10		14		331		345		1.6		Group III	—		—		1		—		1		6		8		301		309		1.1
Group IV	Group IV	—		2		—		1		2		2		7		32		39		0.1		Group IV	—		1		—		—		—		3		4		58		62		0.2
Total (a)	Total (a)	$	459	$	179	$	41	$	71	$	241	$	199	$	1,190	$	20,805	$	21,995	100.0	%	Total (a)	$	522	$	33	$	69	$	167	$	87	$	330	$	1,208	$	28,852	$	30,060	100.0	%
Gross charge-offs																						Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

__________

(a)Total past due dealer financing receivables at June 30, ~~2022~~2023 were $8$4 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”).~~ Loan Modifications.~~A restructuring of debt constitutes a TDR if we grant a concession to a debtor for economic or legal reasons related to the debtor’s financial difficulties that we otherwise would not consider.~~ Consumer and non-consumer receivables that have a modified interest rate ~~below market rate~~ and/or a term extension (including receivables that were modified in reorganization proceedings pursuant to the U.S. Bankruptcy ~~Code, except non-consumer receivables that~~Code) are ~~current with minimal risk of loss, are~~typically considered to be ~~TDRs.~~loan modifications. We do not grant ~~concessions on~~modifications to the principal balance of ~~the~~our 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.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

During the collection process, we may offer a term extension to a customer experiencing financial difficulty. During the extension period, finance charges continue to accrue. If the customer's financial difficulty is not temporary, but we believe the customer is willing and able to repay their loan at a lower payment amount, we may offer to modify the interest rate and/or extend the term in order to lower the scheduled monthly payment. In those cases, the outstanding balance generally remains unchanged. The use of interest rate modifications and term extensions helps us mitigate financial loss. Term extensions may assist in cases where we believe the customer will recover from short-term financial difficulty and resume regularly scheduled payments. Before offering an interest rate modification or term extension, we evaluate and take into account the capacity of the customer to meet the revised payment terms. Although the granting of an extension could delay the eventual charge-off of a receivable, we are typically able to repossess and sell the related collateral, thereby mitigating the loss. The effect of most loan modifications made to borrowers experiencing financial difficulty is included in the historical trends used to measure the allowance for credit losses. A loan modification that improves the delinquency status of a borrower reduces the probability of default, which results in a lower allowance for credit losses. At June 30, 2023, an insignificant portion of our total finance receivables portfolio had been granted a loan modification and these modifications are generally treated as a continuation of the existing loan.

Allowance for Credit Losses

The allowance for credit losses represents our estimate of the lifetime expected credit losses inherent in finance receivables as of the balance sheet date. The adequacy of the allowance for credit losses is assessed quarterly.

Adjustments to the allowance for credit losses are made by recording charges to the Provision for/(~~benefit~~Benefit from) credit losses on our consolidated income statements. The uncollectible portion of a finance 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 we repossess 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 sheets.

1011

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES ~~(Continued)~~(Continued)

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

Second Quarter 2021 First Half 2021
Consumer Non-Consumer Total Consumer Non-Consumer Total
Allowance for credit losses
Beginning balance $ 1,170 $ 53 $ 1,223 $ 1,245 $ 60 $ 1,305
Charge-offs (55) (3) (58) (152) (3) (155)
Recoveries 55 2 57 108 5 113
Provision for/(benefit from) credit losses (154) (12) (166) (184) (22) (206)
Other (a) 6 (1) 5 5 (1) 4
Ending balance $ 1,022 $ 39 $ 1,061 $ 1,022 $ 39 $ 1,061


		Second Quarter 2022						First Half 2022							Second Quarter 2022						Second Quarter 2023
		Consumer		Non-Consumer		Total		Consumer		Non-Consumer		Total			Consumer		Non-Consumer		Total		Consumer		Non-Consumer		Total
Allowance for credit losses	Allowance for credit losses													Allowance for credit losses
Beginning balance	Beginning balance	$	826	$	19	$	845	$	903	$	22	$	925	Beginning balance	$	826	$	19	$	845	$	863	$	7	$	870
Charge-offs	Charge-offs	(61)		(1)		(62)		(123)		(1)		(124)		Charge-offs	(61)		(1)		(62)		(78)		—		(78)
Recoveries	Recoveries	44		1		45		87		2		89		Recoveries	44		1		45		38		—		38
Provision for/(benefit from) credit losses		(48)		(8)		(56)		(107)		(13)		(120)
Provision for/(Benefit from) credit losses														Provision for/(Benefit from) credit losses	(48)		(8)		(56)		40		—		40
Other (a)	Other (a)	(7)		(2)		(9)		(6)		(1)		(7)		Other (a)	(7)		(2)		(9)		3		—		3
Ending balance	Ending balance	$	754	$	9	$	763	$	754	$	9	$	763	Ending balance	$	754	$	9	$	763	$	866	$	7	$	873

															First Half 2022						First Half 2023
															Consumer		Non-Consumer		Total		Consumer		Non-Consumer		Total

Allowance for credit losses														Allowance for credit losses
Beginning balance														Beginning balance	$	903	$	22	$	925	$	838	$	7	$	845
Charge-offs														Charge-offs	(123)		(1)		(124)		(174)		—		(174)
Recoveries														Recoveries	87		2		89		76		1		77
Provision for/(Benefit from) credit losses														Provision for/(Benefit from) credit losses	(107)		(13)		(120)		118		(1)		117
Other (a)														Other (a)	(6)		(1)		(7)		8		—		8
Ending balance														Ending balance	$	754	$	9	$	763	$	866	$	7	$	873

__________

(a)Primarily represents amounts related to translation adjustments.

During the second quarter and first half of ~~2022,~~2023, the allowance for credit losses ~~decreased $82~~increased $3 million and ~~$162~~$28 million, respectively, ~~primarily due to our current expectation that COVID-related losses have been avoided. Although net~~driven by an increase in finance receivables. Net charge-offs ~~remained~~increased from a year ago, reflecting normalization from extraordinarily low ~~in the second quarter and first half of 2022, due in part to high vehicle auction values, the~~levels. The impact of ~~rising~~higher inflation ~~high energy prices,~~ and higher interest rates on future credit losses remains uncertain. We will continue to monitor economic trends and conditions and portfolio performance and will adjust the reserve accordingly.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 5. NET INVESTMENT IN OPERATING LEASES

Net investment in operating leases consists primarily of lease contracts for vehicles with individuals, daily rental companies, and fleet customers with terms of 60 months or less. Included in Net investment in operating leases are net investment in operating leases that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. See Note 6 for additional information.

Net investment in operating leases was as follows (in millions):


		December 31, 2021		June 30, 2022			December 31, 2022		June 30, 2023
Vehicles, at cost (a)	Vehicles, at cost (a)	$	29,982	$	27,883	Vehicles, at cost (a)	$	26,055	$	24,657
Accumulated depreciation	Accumulated depreciation	(4,815)		(4,475)		Accumulated depreciation	(4,234)		(4,017)
Net investment in operating leases	Net investment in operating leases	$	25,167	$	23,408	Net investment in operating leases	$	21,821	$	20,640

__________

(a)Includes interest supplements and residual support payments we receive on certain leasing transactions under agreements with Ford and affiliated companies, and other vehicle acquisition costs.

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

~~FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

NOTE 6. TRANSFERS OF RECEIVABLES AND VARIABLE INTEREST ENTITIES

We securitize finance receivables and net investment in operating leases through a variety of programs using amortizing, variable funding, and revolving structures. We also sell finance receivables, or pledge them as collateral in certain transactions outside of the United States, in other types of structured financing transactions. Due to the similarities between securitization and structured financing, we refer to structured financings as securitization transactions. Our securitization programs are targeted to institutional investors in both public and private transactions in capital markets primarily in the United States, Canada, Germany, Italy, the United Kingdom, ~~Germany,~~ and China.

The finance receivables sold for legal purposes and net investment in operating leases included in securitization transactions 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 our other obligations or the claims of our other creditors. The debt is the obligation of our consolidated securitization entities and not the obligation of Ford Credit or our other subsidiaries. We hold 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.

We use special purpose entities (“SPEs”) to issue asset-backed securities in our securitization transactions. We have deemed most of these SPEs to be VIEs of which we are the primary beneficiary, and therefore, are consolidated. The SPEs are established for the sole purpose of financing the securitized financial assets. The SPEs are generally financed through the issuance of notes or commercial paper into the public or private markets or directly with conduits.

We continue to recognize our financial assets related to our sales of receivables when the financial assets are sold to a consolidated VIE or a consolidated voting interest entity. We derecognize our financial assets when the financial assets are sold to a non-consolidated entity and we do not maintain control over the financial assets.

We have the power to direct significant activities of our SPEs when we have the ability to exercise discretion in the servicing of financial assets, issue additional debt, exercise a unilateral call option, add assets to revolving structures, or control investment decisions. We generally retain a portion of the economic interests in the asset-backed securitization transactions, which could be retained in the form of a portion of the senior interests, the subordinated interests, cash reserve accounts, residual interests, and servicing rights. The transfers of assets in our securitization transactions do not qualify for accounting sale treatment.

From time to time in Europe, we may retain all of the economic interests in some of our public asset-backed securitization transactions. The most senior retained notes are held as, or with the intent to become, eligible collateral to access central bank liquidity facilities in Europe. In addition, we regularly pledge receivables that are not securitized as eligible collateral for these facilities. In accordance with applicable regulatory guidance, the underlying assets in these transactions are considered unencumbered if they are not being used as security for a central bank funding. At December 31, 2021 and June 30, 2022, the value of unencumbered assets related to these transactions was $0.9 billion and $0.5 billion, respectively.

We have no obligation to repurchase or replace any securitized asset that subsequently becomes delinquent in payment or otherwise is in default, except when representations and warranties about the eligibility of the securitized assets are breached, or when certain changes are made to the underlying asset contracts. Securitization investors have no recourse to us or our other assets and have no right to require us to repurchase the investments. We generally have no obligation to provide liquidity or contribute cash or additional assets to the VIEs and do not guarantee any asset-backed securities. We may be required to support the performance of certain securitization transactions, however, by increasing cash reserves.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. TRANSFERS OF RECEIVABLES AND VARIABLE INTEREST ENTITIES (Continued)

Certain of our securitization entities may enter into derivative transactions to mitigate interest rate exposure, primarily resulting from fixed-rate assets securing floating-rate debt. In certain instances, the counterparty enters into offsetting derivative transactions with us to mitigate its interest rate risk resulting from derivatives with our securitization entities. These related derivatives are not the obligations of our securitization entities. See Note 7 for additional information regarding the accounting for derivatives.

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

~~FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 6. TRANSFERS OF RECEIVABLES AND VARIABLE INTEREST ENTITIES~~ ~~(Continued)~~

Most of these securitization transactions utilize VIEs. The following tables show the assets and debt related to our securitization transactions that were included in our consolidated financial statements (in billions):


		December 31, 2021											December 31, 2022
		Cash and Cash Equivalents		Finance Receivables and Net Investment in Operating Leases (a)						Related Debt (c)			Cash and Cash Equivalents		Finance Receivables and Net Investment in Operating Leases (a)						Related Debt (c)
				Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses							Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses
VIE (b)	VIE (b)											VIE (b)
Retail financing	Retail financing	$	1.7	$	31.6	$	0.3	$	31.3	$	24.5	Retail financing	$	1.5	$	31.7	$	0.3	$	31.4	$	26.6
Wholesale financing	Wholesale financing	1.3		11.7		—		11.7		8.7		Wholesale financing	0.2		17.7		—		17.7		10.6
Finance receivables	Finance receivables	3.0		43.3		0.3		43.0		33.2		Finance receivables	1.7		49.4		0.3		49.1		37.2
Net investment in operating leases	Net investment in operating leases	0.4		7.5		—		7.5		5.1		Net investment in operating leases	0.6		12.5		—		12.5		8.2
Total VIE	Total VIE	$	3.4	$	50.8	$	0.3	$	50.5	$	38.3	Total VIE	$	2.3	$	61.9	$	0.3	$	61.6	$	45.4

Non-VIE	Non-VIE											Non-VIE
Retail financing	Retail financing	$	0.4	$	7.4	$	0.1	$	7.3	$	6.9	Retail financing	$	0.5	$	12.2	$	0.2	$	12.0	$	10.7
Wholesale financing	Wholesale financing	—		0.3		—		0.3		0.2		Wholesale financing	—		0.5		—		0.5		0.3
Finance receivables	Finance receivables	0.4		7.7		0.1		7.6		7.1		Finance receivables	0.5		12.7		0.2		12.5		11.0
Net investment in operating leases	Net investment in operating leases	—		—		—		—		—		Net investment in operating leases	—		—		—		—		—
Total Non-VIE	Total Non-VIE	$	0.4	$	7.7	$	0.1	$	7.6	$	7.1	Total Non-VIE	$	0.5	$	12.7	$	0.2	$	12.5	$	11.0

Total securitization transactions	Total securitization transactions											Total securitization transactions
Retail financing	Retail financing	$	2.1	$	39.0	$	0.4	$	38.6	$	31.4	Retail financing	$	2.0	$	43.9	$	0.5	$	43.4	$	37.3
Wholesale financing	Wholesale financing	1.3		12.0		—		12.0		8.9		Wholesale financing	0.2		18.2		—		18.2		10.9
Finance receivables	Finance receivables	3.4		51.0		0.4		50.6		40.3		Finance receivables	2.2		62.1		0.5		61.6		48.2
Net investment in operating leases	Net investment in operating leases	0.4		7.5		—		7.5		5.1		Net investment in operating leases	0.6		12.5		—		12.5		8.2
Total securitization transactions	Total securitization transactions	$	3.8	$	58.5	$	0.4	$	58.1	$	45.4	Total securitization transactions	$	2.8	$	74.6	$	0.5	$	74.1	$	56.4

__________

(a)Unearned interest supplements and residual support are excluded from securitization transactions.

(b)Includes assets to be used to settle the liabilities of the consolidated VIEs.

(c)Includes unamortized discount and debt issuance costs.

1314

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. TRANSFERS OF RECEIVABLES AND VARIABLE INTEREST ENTITIES (Continued)

June 30, 2022
Cash and Cash Equivalents Finance Receivables and Net Investment in Operating Leases (a) Related Debt
(c)
Before Allowance
for Credit Losses Allowance for
Credit Losses After Allowance
for Credit Losses
VIE (b)
Retail financing $ 1.6 $ 30.1 $ 0.2 $ 29.9 $ 25.4
Wholesale financing 0.1 13.3 — 13.3 8.6
Finance receivables 1.7 43.4 0.2 43.2 34.0
Net investment in operating leases 0.6 10.5 — 10.5 7.1
Total VIE $ 2.3 $ 53.9 $ 0.2 $ 53.7 $ 41.1
Non-VIE
Retail financing $ 0.3 $ 6.4 $ 0.1 $ 6.3 $ 5.8
Wholesale financing — 0.3 — 0.3 0.2
Finance receivables 0.3 6.7 0.1 6.6 6.0
Net investment in operating leases — — — — —
Total Non-VIE $ 0.3 $ 6.7 $ 0.1 $ 6.6 $ 6.0
Total securitization transactions
Retail financing $ 1.9 $ 36.5 $ 0.3 $ 36.2 $ 31.2
Wholesale financing 0.1 13.6 — 13.6 8.8
Finance receivables 2.0 50.1 0.3 49.8 40.0
Net investment in operating leases 0.6 10.5 — 10.5 7.1
Total securitization transactions $ 2.6 $ 60.6 $ 0.3 $ 60.3 $ 47.1


	June 30, 2023
	Cash and Cash Equivalents		Finance Receivables and Net Investment in Operating Leases (a)						Related Debt (c)
			Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses
VIE (b)
Retail financing	$	1.7	$	35.1	$	0.3	$	34.8	$	29.4
Wholesale financing	0.3		17.7		—		17.7		12.2
Finance receivables	2.0		52.8		0.3		52.5		41.6
Net investment in operating leases	0.4		8.9		—		8.9		6.3
Total VIE	$	2.4	$	61.7	$	0.3	$	61.4	$	47.9

Non-VIE
Retail financing	$	0.4	$	8.5	$	0.1	$	8.4	$	7.4
Wholesale financing	—		0.6		—		0.6		0.3
Finance receivables	0.4		9.1		0.1		9.0		7.7
Net investment in operating leases	—		—		—		—		—
Total Non-VIE	$	0.4	$	9.1	$	0.1	$	9.0	$	7.7

Total securitization transactions
Retail financing	$	2.1	$	43.6	$	0.4	$	43.2	$	36.8
Wholesale financing	0.3		18.3		—		18.3		12.5
Finance receivables	2.4		61.9		0.4		61.5		49.3
Net investment in operating leases	0.4		8.9		—		8.9		6.3
Total securitization transactions	$	2.8	$	70.8	$	0.4	$	70.4	$	55.6

__________

(a)Unearned interest supplements and residual support are excluded from securitization transactions.

(b)Includes assets to be used to settle the liabilities of the consolidated VIEs.

(c)Includes unamortized discount and debt issuance cost.

1415

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. 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 interest rates and foreign currency exchange rates. To manage these risks, we enter into highly effective derivative contracts. We have elected to apply hedge accounting to certain derivatives. Derivatives that are designated in hedging relationships are evaluated for effectiveness using regression analysis at the time they are designated and throughout the hedge period. Some derivatives do not qualify for hedge accounting; for others, we elect not to apply hedge accounting.

Income Effect of Derivative Financial Instruments

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


		Second Quarter				First Half					Second Quarter				First Half
		2021		2022		2021		2022			2022		2023		2022		2023
Fair value hedges	Fair value hedges									Fair value hedges
Interest rate contracts	Interest rate contracts									Interest rate contracts
Net interest settlements and accruals on hedging instruments	Net interest settlements and accruals on hedging instruments	$	100	$	25	$	201	$	101	Net interest settlements and accruals on hedging instruments	$	25	$	(130)	$	101	$	(270)
Fair value changes on hedging instruments	Fair value changes on hedging instruments	103		(336)		(538)		(1,322)		Fair value changes on hedging instruments	(336)		(316)		(1,322)		(66)
Fair value changes on hedged debt	Fair value changes on hedged debt	(87)		385		503		1,376		Fair value changes on hedged debt	385		292		1,376		13
Cross-currency interest rate swap contracts	Cross-currency interest rate swap contracts									Cross-currency interest rate swap contracts
Net interest settlements and accruals on hedging instruments	Net interest settlements and accruals on hedging instruments	(1)		(6)		(4)		(9)		Net interest settlements and accruals on hedging instruments	(6)		(19)		(9)		(33)
Fair value changes on hedging instruments	Fair value changes on hedging instruments	11		(61)		(39)		(98)		Fair value changes on hedging instruments	(61)		(24)		(98)		(2)
Fair value changes on hedged debt	Fair value changes on hedged debt	(11)		65		33		106		Fair value changes on hedged debt	65		22		106		3
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments									Derivatives not designated as hedging instruments
Interest rate contracts	Interest rate contracts	6		89		(25)		212		Interest rate contracts	89		109		212		97
Foreign currency exchange contracts (a)	Foreign currency exchange contracts (a)	(44)		27		8		25		Foreign currency exchange contracts (a)	27		(7)		25		(29)
Cross-currency interest rate swap contracts	Cross-currency interest rate swap contracts	49		(443)		(196)		(670)		Cross-currency interest rate swap contracts	(443)		(60)		(670)		25
Total	Total	$	126	$	(255)	$	(57)	$	(279)	Total	$	(255)	$	(133)	$	(279)	$	(262)

__________

(a)Reflects forward contracts between us and an affiliated company.

1516

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

Derivative assets and liabilities are reported on the balance 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, 2021						June 30, 2022							December 31, 2022						June 30, 2023
		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
Fair value hedges	Fair value hedges													Fair value hedges
Interest rate contracts	Interest rate contracts	$	23,893	$	544	$	274	$	19,711	$	—	$	1,100	Interest rate contracts	$	16,883	$	—	$	1,653	$	16,454	$	—	$	1,266
Cross-currency interest rate swap contracts	Cross-currency interest rate swap contracts	885		—		49		884		—		135		Cross-currency interest rate swap contracts	885		—		161		2,078		5		145
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments													Derivatives not designated as hedging instruments
Interest rate contracts	Interest rate contracts	50,060		338		126		44,788		651		259		Interest rate contracts	63,210		931		483		64,142		938		908
Foreign currency exchange contracts(a)	Foreign currency exchange contracts(a)	4,407		66		2		4,454		66		24		Foreign currency exchange contracts(a)	4,219		41		76		10,400		57		81
Cross-currency interest rate swap contracts	Cross-currency interest rate swap contracts	6,533		117		61		6,633		31		690		Cross-currency interest rate swap contracts	6,635		15		653		6,416		54		476
Total derivative financial instruments, gross (a) (b)		$	85,778	$	1,065	$	512	$	76,470	$	748	$	2,208
Total derivative financial instruments, gross (b) (c)														Total derivative financial instruments, gross (b) (c)	$	91,832	$	987	$	3,026	$	99,490	$	1,054	$	2,876

__________

(a)Includes forward contracts between us and an affiliated company, including offsetting forward contracts with our consolidated entities, totaling $5.8 billion in notional amounts and $33.7 million in both assets and liabilities at June 30, 2023.

(b)At December 31, ~~2021~~2022 and June 30, ~~2022,~~2023, we held collateral of ~~$26~~$210 million and ~~$147~~$174 million, respectively, and we posted collateral of ~~$71~~$193 million and ~~$115~~$220 million, respectively.

~~(b)~~(c)At December 31, ~~2021~~2022 and June 30, ~~2022,~~2023, the fair value of assets and liabilities available for counterparty netting was ~~$415~~$166 million and ~~$161~~$279 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

1617

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. OTHER ASSETS AND OTHER LIABILITIES AND DEFERRED REVENUE

Other assets and other liabilities and deferred revenue consist of various balance sheet items that are combined for financial statement presentation due to their respective materiality compared with other individual asset and liability items.

Other assets were as follows (in millions):


		December 31, 2021		June 30, 2022			December 31, 2022		June 30, 2023
Prepaid reinsurance premiums and other reinsurance recoverables	Prepaid reinsurance premiums and other reinsurance recoverables	$	743	$	761	Prepaid reinsurance premiums and other reinsurance recoverables	$	779	$	798
Accrued interest and other non-finance receivables	Accrued interest and other non-finance receivables	584		563		Accrued interest and other non-finance receivables	576		544
Property and equipment, net of accumulated depreciation (a)	Property and equipment, net of accumulated depreciation (a)	224		220		Property and equipment, net of accumulated depreciation (a)	233		253
Collateral held for resale, at net realizable value						Collateral held for resale, at net realizable value	233		233
Deferred charges - income taxes	Deferred charges - income taxes	190		216		Deferred charges - income taxes	158		175
Collateral held for resale, at net realizable value		258		186
Investment in non-consolidated affiliates	Investment in non-consolidated affiliates	133		152		Investment in non-consolidated affiliates	177		163
Restricted cash	Restricted cash	128		108		Restricted cash	127		131
Operating lease assets	Operating lease assets	76		67		Operating lease assets	64		60
Other	Other	188		211		Other	229		290
Total other assets	Total other assets	$	2,524	$	2,484	Total other assets	$	2,576	$	2,647

__________

(a)Accumulated depreciation was ~~$397~~$415 million and ~~$404~~$438 million at December 31, ~~2021~~2022 and June 30, ~~2022,~~2023, respectively.

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


		December 31, 2021		June 30, 2022			December 31, 2022		June 30, 2023
Unearned insurance premiums and fees	Unearned insurance premiums and fees	$	857	$	874	Unearned insurance premiums and fees	$	891	$	910
Interest payable	Interest payable	667		544		Interest payable	683		797
Income tax and related interest (a)	Income tax and related interest (a)	229		262		Income tax and related interest (a)	115		191
Operating lease liabilities	Operating lease liabilities	78		69		Operating lease liabilities	66		63
Deferred revenue		62		24
Other	Other	273		214		Other	280		292
Total other liabilities and deferred revenue	Total other liabilities and deferred revenue	$	2,166	$	1,987	Total other liabilities and deferred revenue	$	2,035	$	2,253

__________

(a)Includes income tax and interest payable to affiliated companies of ~~$101~~$36 million and ~~$155~~$109 million at December 31, ~~2021~~2022 and June 30, ~~2022,~~2023, respectively.

1718

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. DEBT

Debt outstanding and interest rates were as follows (in millions):


						Interest Rates													Interest Rates
		Debt				Average Contractual				Average Effective					Debt				Average Contractual				Average Effective
		December 31, 2021		June 30, 2022		2021		2022		2021		2022			December 31, 2022		June 30, 2023		2022		2023		2022		2023
Short-term debt	Short-term debt													Short-term debt
Unsecured debt	Unsecured debt													Unsecured debt
Floating rate demand notes	Floating rate demand notes	$	9,400	$	9,386									Floating rate demand notes	$	10,303	$	10,779
Other short-term debt	Other short-term debt	4,701		3,781										Other short-term debt	6,515		5,302
Asset-backed debt (a)	Asset-backed debt (a)	709		762										Asset-backed debt (a)	2,806		3,324
Total short-term debt	Total short-term debt	14,810		13,929		1.2	%	1.8	%	1.3	%	1.8	%	Total short-term debt	19,624		19,405		3.8	%	4.7	%	3.8	%	4.8	%
Long-term debt	Long-term debt													Long-term debt
Unsecured debt	Unsecured debt													Unsecured debt
Notes payable within one year	Notes payable within one year	13,660		10,471										Notes payable within one year	7,980		9,447
Notes payable after one year	Notes payable after one year	44,337		39,999										Notes payable after one year	39,620		44,377
Asset-backed debt (a)	Asset-backed debt (a)													Asset-backed debt (a)
Notes payable within one year	Notes payable within one year	18,049		17,884										Notes payable within one year	21,839		20,077
Notes payable after one year	Notes payable after one year	26,654		28,472										Notes payable after one year	31,840		32,280
Unamortized (discount)/premium	Unamortized (discount)/premium	29		25										Unamortized (discount)/premium	23		15
Unamortized issuance costs	Unamortized issuance costs	(212)		(210)										Unamortized issuance costs	(197)		(246)
Fair value adjustments (b)	Fair value adjustments (b)	390		(1,109)										Fair value adjustments (b)	(1,690)		(1,698)
Total long-term debt	Total long-term debt	102,907		95,532		2.6	%	2.7	%	2.6	%	2.7	%	Total long-term debt	99,415		104,252		3.6	%	4.3	%	3.6	%	4.3	%
Total debt	Total debt	$	117,717	$	109,461	2.4	%	2.6	%	2.4	%	2.6	%	Total debt	$	119,039	$	123,657	3.6	%	4.3	%	3.6	%	4.3	%

Fair value of debt (c)	Fair value of debt (c)	$	120,204	$	106,884									Fair value of debt (c)	$	117,214	$	122,954

__________

(a)Asset-backed debt issued in securitizations is the obligation of the consolidated securitization entity that issued the debt and is payable only out of collections on the underlying securitized assets and related enhancements. This asset-backed debt is not the obligation of Ford Credit or our other subsidiaries.

(b)These adjustments are related to hedging activity and include discontinued hedging relationship adjustments of ~~$257~~$31 million and ~~$179~~$(339) million at December 31, ~~2021~~2022 and June 30, ~~2022,~~2023, respectively. The carrying value of hedged debt was ~~$37.5~~$33.3 billion and ~~$33.4~~$38.0 billion at December 31, ~~2021~~2022 and June 30, ~~2022,~~2023, respectively.

(c)At December 31, ~~2021~~2022 and June 30, ~~2022,~~2023, the fair value of debt includes ~~$14.1~~$16.9 billion and ~~$13.2~~$16.2 billion of short-term debt, respectively, carried at cost, which approximates fair value. All other debt is categorized within Level 2 of the fair value hierarchy.

~~2022 Debt Extinguishment~~

Pursuant to our June 2022 cash tender offer, we repurchased approximately $3 billion principal amount of our public unsecured debt securities for an aggregate cost of approximately $3 billion (including transaction costs and accrued and unpaid interest payments for such tendered securities). As a result of these transactions, we recorded a pre-tax gain of $16.6 million (net of unamortized discounts, premiums, fees, and fair value adjustments) in ~~Other income/(loss), net~~ ~~in the second quarter of 2022.~~

1819

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. RESTRUCTURING ACTIONS

In June 2021, we announced that our subsidiaries in Brazil and Argentina would cease originating receivables and wind down operations. During the fourth quarter of 2021, we completed the sale of our wholesale and dealer receivables portfolio in Brazil and ceased originations of wholesale and dealer receivables in Argentina. In the second quarter and first half of 2022, we liquidated three of our investments in Brazil and reclassified accumulated foreign currency translation losses of $36 million and $155 million, respectively, to Other income/(loss), net ~~upon the liquidation of three of our investments in Brazil.~~.

In December 2021, we received a capital contribution from a subsidiary of Ford in exchange for a minority interest share in one of our Argentina-based subsidiaries. As a result, we recorded $22 million in Shareholder’s interest attributable to noncontrolling interests on our consolidated balance sheets. During the first quarter of 2022, we reacquired Ford’s minority interest share and, in exchange, transferred assets associated with an Argentina-based subsidiary to Ford. In addition, during the first quarter of 2022, we sold our shares in a second Argentina-based subsidiary to Ford. The difference between the carrying value of the net assets transferred and sold to Ford and the consideration received from Ford was $61 million, reported as a reduction to Shareholder’s interest. As a result of the transfer and sale, Ford Credit reclassified $75 million of accumulated foreign currency translation losses to net income, included in Other income/(loss), net.

Accumulated foreign currency translation losses associated with our remaining investments in Brazil and Argentina included in Accumulated other comprehensive income/(loss) at June 30, ~~2022~~2023 were $223 million. We expect to reclassify these losses to income upon substantially complete liquidation of our investments, which may occur over multiple reporting periods. Although the timing for the completion of these actions is uncertain, we expect the majority of losses to be recognized in 2024 or later.

We continue to review our global businesses and may take additional restructuring actions to improve our cost structure and competitiveness.

NOTE 11. OTHER INCOME/(LOSS)

Other income/(loss) consists of various line items that are combined on the consolidated income statements due to their respective materiality compared with other individual income and expense items.

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


		Second Quarter				First Half					Second Quarter				First Half
		2021		2022		2021		2022			2022		2023		2022		2023
Gains/(Losses) on derivatives		$	24	$	(383)	$	(241)	$	(506)
Interest and investment income (a)										Interest and investment income (a)	$	1	$	108	$	(4)	$	243
Currency revaluation gains/(losses)	Currency revaluation gains/(losses)	(30)		417		153		569		Currency revaluation gains/(losses)	417		(23)		569		(132)
Interest and investment income (a)		15		1		13		(4)
Gains/(Losses) on changes in investments in affiliates (b)		—		(36)		1		(231)
Gains/(losses) on derivatives										Gains/(losses) on derivatives	(383)		33		(506)		101
Gains/(losses) on changes in investments in affiliates (b)										Gains/(losses) on changes in investments in affiliates (b)	(36)		—		(231)		—
Other	Other	4		22		12		24		Other	22		8		24		14
Total other income/(loss), net	Total other income/(loss), net	$	13	$	21	$	(62)	$	(148)	Total other income/(loss), net	$	21	$	126	$	(148)	$	226

__________

(a)Includes ~~a $20~~impairment losses of non-consolidated investments of $9 million ~~unrealized gain for an observable price event on a non-consolidated investment~~ in the ~~first~~second quarter of ~~2022.~~2023.

(b)Includes 2022 losses related to our restructuring in South America described in Note 10.

1920

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 12. SEGMENT INFORMATION

We conduct our financing operations directly and indirectly through our subsidiaries and affiliates. We offer substantially similar products and services throughout many different regions, subject to local legal restrictions and market conditions. ~~In our consolidated financial statements, we have three reportable~~Our segments ~~based on geographic regions:~~are: the United States and Canada, Europe, and All Other. Our All Other segment includes China, India, Mexico, Brazil, Argentina, and our joint venture in South Africa. ~~Items excluded in assessing segment~~

We measure the performance ~~because they are managed at the corporate level, including~~of our segments primarily on an income before income taxes basis, after excluding market valuation adjustments to derivatives and exchange-rate fluctuations on foreign currency-denominated transactions, which are reflected in Unallocated Other. ~~Effective for~~These adjustments are excluded when assessing our segment performance because they are carried out at the ~~first~~corporate level.

Beginning in the third quarter of 2022, consistent with how our Chief Operating Decision Maker assesses performance of the segments and makes decisions about resource allocations, we changed the measurements used in allocating interest and governance expenses among the operating segments. Prior period amounts have ~~eliminated~~been adjusted retrospectively to reflect the ~~use of non-GAAP measures and now present receivables on a net basis.~~foregoing changes.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 12. SEGMENT INFORMATION (Continued)

Key financial information for our business segments for the periods ended or at June 30 was as follows (in millions):

United States and Canada Europe All Other Total
Segments Unallocated Other (a) Total
Second Quarter 2021
Total revenue $ 2,295 $ 238 $ 108 $ 2,641 $ — $ 2,641
Income before income taxes 1,466 81 22 1,569 54 1,623
Depreciation on vehicles subject to operating leases 184 7 — 191 — 191
Interest expense 600 72 51 723 (43) 680
Provision for credit losses (165) (6) 5 (166) — (166)
Second Quarter 2022
Total revenue $ 2,029 $ 221 $ 98 $ 2,348 $ — $ 2,348
Income before income taxes 698 97 (17) 778 125 903
Depreciation on vehicles subject to operating leases 559 (10) — 549 — 549
Interest expense 632 57 53 742 (85) 657
Provision for credit losses (57) (2) 3 (56) — (56)
First Half 2021
Total revenue $ 4,679 $ 479 $ 200 $ 5,358 $ — $ 5,358
Income before income taxes 2,462 147 7 2,616 (31) 2,585
Depreciation on vehicles subject to operating leases 746 13 — 759 — 759
Interest expense 1,238 152 107 1,497 (13) 1,484
Provision for credit losses (217) (7) 18 (206) — (206)
Net finance receivables and net investment in operating leases (a) (b) 93,783 19,305 4,672 117,760 — 117,760
Total assets 111,149 22,226 5,436 138,811 — 138,811
First Half 2022
Total revenue $ 4,058 $ 416 $ 200 $ 4,674 $ — $ 4,674
Income before income taxes 1,481 166 (191) 1,456 201 1,657
Depreciation on vehicles subject to operating leases 1,085 (21) — 1,064 — 1,064
Interest expense 1,174 112 111 1,397 (129) 1,268
Provision for credit losses (124) (5) 9 (120) — (120)
Net finance receivables and net investment in operating leases (a) (b) 94,291 16,212 5,124 115,627 — 115,627
Total assets 103,289 19,158 5,803 128,250 — 128,250

~~__________~~

~~(a)Excludes held-for-sale finance receivables.~~

~~(b)Prior periods have been restated to display net receivables in lieu of the non-GAAP measure of managed receivables.~~


	United States and Canada		Europe		All Other		Total Segments		Unallocated Other		Total
Second Quarter 2022
Total revenue	$	2,029	$	221	$	98	$	2,348	$	—	$	2,348
Income before income taxes	680		106		(8)		778		125		903
Depreciation on vehicles subject to operating leases	559		(10)		—		549		—		549
Interest expense	648		48		46		742		(85)		657
Provision for/(Benefit from) credit losses	(57)		(2)		3		(56)		—		(56)

Second Quarter 2023
Total revenue	$	2,305	$	344	$	106	$	2,755	$	—	$	2,755
Income before income taxes	271		113		27		411		(30)		381
Depreciation on vehicles subject to operating leases	551		4		—		555		—		555
Interest expense	1,258		162		57		1,477		53		1,530
Provision for/(Benefit from) credit losses	36		(2)		6		40		—		40

First Half 2022
Total revenue	$	4,058	$	416	$	200	$	4,674	$	—	$	4,674
Income before income taxes	1,446		182		(172)		1,456		201		1,657
Depreciation on vehicles subject to operating leases	1,085		(21)		—		1,064		—		1,064
Interest expense	1,206		96		94		1,396		(128)		1,268
Provision for/(Benefit from) credit losses	(124)		(5)		9		(120)		—		(120)
Net finance receivables and net investment in operating leases	94,291		16,212		5,124		115,627		—		115,627
Total assets	103,289		19,158		5,803		128,250		—		128,250

First Half 2023
Total revenue	$	4,475	$	628	$	208	$	5,311	$	—	$	5,311
Income before income taxes	544		191		49		784		(100)		684
Depreciation on vehicles subject to operating leases	1,108		6		—		1,114		—		1,114
Interest expense	2,453		292		108		2,853		69		2,922
Provision for/(Benefit from) credit losses	99		2		16		117		—		117
Net finance receivables and net investment in operating leases	100,626		20,546		4,902		126,074		—		126,074
Total assets	114,114		24,245		5,431		143,790		—		143,790

2022

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 13. COMMITMENTS AND CONTINGENCIES

Commitments and contingencies primarily consist of guarantees and indemnifications as well as litigation and claims.

Guarantees and Indemnifications

Guarantees and indemnifications are recorded at fair value at their inception. For financial guarantees, 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. For non-financial guarantees, 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 under these guarantees and limited indemnities totaled ~~$102~~$83 million and ~~$92~~$44 million at December 31, ~~2021~~2022 and June 30, ~~2022,~~2023, respectively. Of these values, ~~$19 million and~~ $17 million at both December 31, ~~2021~~2022 and June 30, ~~2022, respectively,~~2023, were counter-guaranteed by Ford to us. There were no recorded liabilities related to guarantees and limited indemnities at December 31, ~~2021~~2022 or June 30, ~~2022.~~2023.

In some cases, we have guaranteed debt and other financial obligations of outside third parties and unconsolidated affiliates, including Ford. Expiration dates vary, and guarantees will terminate on payment and/or cancellation of the underlying obligation. A payment by us would be triggered by the failure of the 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.

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

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 governmental regulations; tax matters; alleged illegal acts resulting in fines or penalties; financial services; employment-related matters; dealer and other contractual relationships; personal injury matters; 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, sanctions, 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.

2123

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 13. COMMITMENTS AND CONTINGENCIES (Continued)

For nearly all matters where our historical experience with similar matters is of 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. It is reasonably possible that some of the matters for which accruals have not been established could be decided unfavorably and could require us to pay damages or make other expenditures. We do not reasonably expect, based on our analysis, that such matters would have a material effect on future financial statements for a particular year, although such an outcome is possible.

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.

2224

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

~~Recent Developments~~

~~COVID-19 and Supplier Disruptions~~

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. Recent outbreaks in certain regions continue to cause intermittent COVID-19-related disruptions in Ford’s supply chain and local manufacturing operations. Ford also continues to face supplier disruptions due to the semiconductor shortage. Further, actions taken by Russia in Ukraine have impacted and could further impact Ford’s suppliers, particularly its lower tier suppliers, as well as Ford’s operations in Europe. For additional information regarding the impact of supplier disruptions, see the “Key Trends and Economic Factors Affecting Ford and the Automotive Industry” section in Item 7 of Ford Motor Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as supplemented by Item 2 of Ford Motor Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.

~~Inflation~~

We are seeing a near-term impact on our business due to inflationary pressure, and inflation has continued to accelerate in the wake of Russia’s invasion of Ukraine. Inflation in the United States rose by 9.1% on an annual basis in June, and U.K. inflation rose 9.4% over the same period, both representing 40-year highs. Surging energy prices drove the inflation rate for the euro zone 8.6% higher on an annual basis in June. Interest rates, notably mature market government bond yields, remain low by historical standards but are rising as central banks around the world tighten monetary policy in response to inflation pressures, while government deficits and debt remain at high levels in many major markets.~~The eventual implications of higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital during our plan period.~~

~~Reporting Changes~~

Effective with the first quarter of 2022, we no longer review our business performance on a managed basis. Accordingly, we will no longer include managed receivables or managed leverage in our periodic reports.

~~Industrial Bank Application~~

On July 22, 2022, we filed an application with the Federal Deposit Insurance Corporation (“FDIC”) and Utah Department of Financial Institutions for an FDIC-insured Utah state chartered industrial bank, Ford Credit Bank (the “Bank”). The Bank’s business plan proposes offering automotive financing products with an emphasis on electric vehicles and non-vehicle assets including charging stations. The Bank’s deposit products will include competitive, consumer-centered savings accounts and certificates of deposit. The Bank will operate as a wholly owned subsidiary of Ford Credit.

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

Definitions and Information Regarding Causal Factors

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

•Volume and Mix – Volume and Mix are primarily reflected within Net financing margin on the consolidated income statements.

◦Volume primarily measures changes in net financing margin driven by changes in average net receivables excluding the allowance for credit losses at prior period financing margin yield (defined below in financing margin) at prior period exchange rates. Volume changes are primarily driven by the volume of new and used vehicles sold and leased, the extent to which we purchase retail financing and operating lease contracts, the extent to which we provide wholesale financing, the sales price of the vehicles financed, the level of dealer inventories, Ford-sponsored special financing programs available exclusively through us, 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 our average net receivables excluding the allowance for credit losses by product within each region.

•Financing Margin – Financing Margin is reflected within Net financing margin on the consolidated income statements.

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

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

•Credit Loss – Credit Loss is reflected within Provision for/(~~benefit~~Benefit from) credit losses on the consolidated income statements.

◦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 our present portfolio, changes in trends in historical used vehicle values, and changes in forward looking macroeconomic conditions. For additional information, refer to the “Critical Accounting Estimates - Allowance for Credit Losses” section of Item 7 of Part II of our ~~2021~~2022 Form 10-K Report.

•Lease Residual – Lease Residual is reflected within Depreciation on vehicles subject to operating leases on the consolidated income statements.

◦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 us 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 our estimate of the expected auction value at the end of the lease term and changes in our estimate of the number of vehicles that will be returned to us and sold. Depreciation on vehicles subject to operating leases ~~reflects~~includes early termination losses on operating leases due to customer default events. For additional information, refer to the “Critical Accounting Estimates – Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 of Part II of our ~~2021~~2022 Form 10-K Report.

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

2425

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

•Other – Primarily includes Operating expenses, Other revenue, Insurance expenses, and Other income/(Loss), net on the consolidated income statements at prior period exchange rates.

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

◦In general, other income/(loss) changes are primarily driven by changes in earnings related to market valuation adjustments to derivatives (primarily related to movements in interest rates), which are included in unallocated risk management, and other miscellaneous items.

In addition, the following definitions and calculations apply to the charts contained in Item 2 of this Report:

• Cash (as shown in the Funding and Liquidity section) – Cash and cash equivalents and Marketable securities reported on Ford Credit’s balance sheets, excluding amounts related to insurance activities.

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

• Earnings Before Taxes (“EBT”) – Reflects Income before income taxes as reported on our consolidated income statements.

•Loss-to-Receivables (“LTR”) Ratio (as shown in Credit Loss tables) – LTR ratio is calculated using net charge-offs divided by average finance receivables, excluding unearned interest supplements and the allowance for credit losses.

• Reserve as a % of EOP Receivables Ratio (as shown in the Credit Loss tables) – The reserve as a percentage of EOP receivables ratio is calculated as the credit loss reserve amount, divided by end of period finance receivables, excluding unearned interest supplements and the allowance for credit losses.

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

•Securitization and Restricted Cash (as shown in the Liquidity table) – Securitization cash is held for the benefit of the securitization investors (for example, a reserve fund). Restricted cash primarily includes cash held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements.

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

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

•Total Net Receivables (as shown in the Key Metrics and Financial Condition tables) – Includes finance receivables (retail financing and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance sheets and are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations of Ford Credit or the claims of Ford Credit’s other creditors.

• Unallocated Other (as shown in the Segment Results table) – Items excluded in assessing segment performance because they are managed at the corporate level, including market valuation adjustments to derivatives and exchange-rate fluctuations on foreign currency-denominated transactions.

2526

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

Results of Operations

Key Metrics


		Second Quarter									First Half										Second Quarter									First Half
GAAP Financial Measures	GAAP Financial Measures	2021			2022			H / (L)			2021			2022			H / (L)			GAAP Financial Measures	2022			2023			H / (L)			2022			2023			H / (L)
Total Net Receivables ($B)	Total Net Receivables ($B)	$	117.7		$	115.6		(2)		%	$	117.7		$	115.6		(2)		%	Total Net Receivables ($B)	$	115.6		$	126.1		9		%	$	115.6		$	126.1		9		%
Loss-to-Receivables (bps) (a)	Loss-to-Receivables (bps) (a)	(7)			5			12			7			7			—			Loss-to-Receivables (bps) (a)	5			21			16			7			28			21
Auction values (b)	Auction values (b)	$	29,040		$	31,445		8		%	$	25,580		$	30,780		20		%	Auction values (b)	$	34,620		$	31,830		(8)		%	$	34,485		$	31,445		(9)		%
EBT ($M)	EBT ($M)	$	1,623		$	903		$	(720)		$	2,585		$	1,657		$	(928)		EBT ($M)	$	903		$	381		$	(522)		$	1,657		$	684		$	(973)
ROE (%)	ROE (%)	46.9		%	26.4		%	(20.5) ppts			33.7		%	24.0		%	(9.7) ppts			ROE (%)	26.4		%	9.3		%	(17.1) ppts			24.0		%	8.7		%	(15.3) ppts

Other Balance Sheet Metrics	Other Balance Sheet Metrics																			Other Balance Sheet Metrics
Debt ($B)	Debt ($B)										$	121.0		$	109.5		(10)		%	Debt ($B)										$	109.5		$	123.7		13		%
Net liquidity ($B)	Net liquidity ($B)										$	33.0		$	25.0		(24)		%	Net liquidity ($B)										$	25.0		$	28.8		15		%
Financial statement leverage (to 1)	Financial statement leverage (to 1)										9.3			9.1			(0.2)			Financial statement leverage (to 1)										9.1			9.9			0.8

__________

(a)United States retail financing only.

(b)United States 36-month off-lease second quarter auction values at Q2 ~~2022~~2023 mix and YTD amounts at ~~2022~~2023 YTD mix.

Second Quarter ~~2022~~2023 Compared with Second Quarter ~~2021~~2022

The following table shows the factors that contributed to ~~the~~ second quarter ~~2022~~2023 EBT (in millions):

Change in EBT by Causal Factor

Second quarter ~~2021~~2022 EBT

~~1,623~~903

Volume / Mix

~~(77)~~47

Financing margin

~~(113)~~(196)

Credit loss

~~(109)~~(96)

Lease residual

~~(428)~~(112)

Exchange

~~(17)~~(1)

Other

24 (164)

Second quarter ~~2022~~2023 EBT

~~903~~381

Our second quarter ~~2022~~2023 EBT of $381 million was ~~$903 million, $720~~$522 million lower than a year ago, explained primarily ~~reflecting lower lease residual gains driven~~ by lower ~~lease return volume, unfavorable changes in net~~ financing margin ~~lower volume~~ due to ~~supply constraints on new vehicle production, and lower~~higher borrowing costs, the non-recurrence of prior year credit loss reserve releases ~~partially offset by positive~~and higher credit losses, unfavorable lease residual performance, and unfavorable market valuation adjustments to derivatives ~~(which is included~~(included in Other). ROE was ~~26.4%~~9.3%, ~~20.5~~17.1 percentage points lower than a year ago, driven by lower net income. Total net receivables were ~~$2.1~~$126.1 billion, ~~lower~~$10.5 billion or 9% higher than a year ago, ~~a 2% decline, primarily~~ reflecting ~~lower volume due to supply constraints~~the impact of increased non-consumer financing and ~~lower Ford Credit share, and exchange,~~consumer financing, partially offset by ~~an increase in wholesale receivables.~~fewer operating leases. The U.S. LTR ratio remained at a low level in the second quarter of ~~2022,~~2023, at ~~five~~21 basis points, ~~12 basis points~~though higher than a year ~~ago. Second quarter 2022~~ago as losses begin to normalize from historic lows. U.S. auction values in the second quarter of 2023 were ~~8% higher than~~lower compared to a year ago. Our balance sheet is strong and inherently liquid, reflecting cumulative debt maturities having a longer tenor than asset maturities. This means that we generate liquidity as our balance sheet size declines because of lower Ford volume. At the end of the second quarter of 2023, we had ~~$25.0~~$28.8 billion in net liquidity.

2627

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

Segment Results

Results of operations by segment and Unallocated Other for the periods ended June 30 are shown below (in millions):


		Second Quarter						First Half							Second Quarter						First Half
		2021		2022		H / (L)		2021		2022		H / (L)			2022		2023		H / (L)		2022		2023		H / (L)
Results(a)	Results(a)													Results(a)
United States and Canada segment	United States and Canada segment	$	1,466	$	698	$	(768)	$	2,462	$	1,481	$	(981)	United States and Canada segment	$	680	$	271	$	(409)	$	1,446	$	544	$	(902)
Europe segment	Europe segment	81		97		16		147		166		19		Europe segment	106		113		7		182		191		9
All Other segment	All Other segment	22		(17)		(39)		7		(191)		(198)		All Other segment	(8)		27		35		(172)		49		221
Total segments earnings before taxes	Total segments earnings before taxes	$	1,569	$	778	$	(791)	$	2,616	$	1,456	$	(1,160)	Total segments earnings before taxes	$	778	$	411	$	(367)	$	1,456	$	784	$	(672)
Unallocated other	Unallocated other	54		125		71		(31)		201		232		Unallocated other	125		(30)		(155)		201		(100)		(301)
Earnings before taxes	Earnings before taxes	$	1,623	$	903	$	(720)	$	2,585	$	1,657	$	(928)	Earnings before taxes	$	903	$	381	$	(522)	$	1,657	$	684	$	(973)
Provision for/(benefit from) income taxes		(28)		99		127		89		184		95
Provision for/(Benefit from) income taxes														Provision for/(Benefit from) income taxes	99		95		(4)		184		158		(26)
Net Income	Net Income	$	1,651	$	804	$	(847)	$	2,496	$	1,473	$	(1,023)	Net Income	$	804	$	286	$	(518)	$	1,473	$	526	$	(947)

__________

(a)Beginning in the third quarter of 2022, there were changes in the allocation of interest and governance expenses among the operating segments. Prior periods have been adjusted retrospectively to reflect these changes.

For additional information, see Note 12 of our Notes to the Financial Statements.

United States and Canada Segment

The United States and Canada segment second quarter ~~2022~~2023 EBT of ~~$698~~$271 million was ~~$768~~$409 million lower than second quarter ~~2021,~~2022. The United States and Canada segment first half 2023 EBT of $544 million was $902 million lower than first half 2022. Both are explained primarily by ~~lower lease residual gains driven by lower lease return volume,~~ unfavorable ~~changes in~~ net financing margin, ~~lower~~lease residual performance, non-recurrence of credit loss reserve releases, and lower volume driven by supply constraints and lower Ford Credit share. United States and Canada Segment first half 2022 EBT of $1,481 million was $981 million lower than first half 2021, explained primarily by lower lease residual gains driven by lower lease return volume, unfavorable changes in net financing margin, lowerhigher credit ~~loss reserve releases, and lower volume driven by supply constraints and lower Ford Credit share.~~losses.

Europe Segment

The Europe segment second quarter ~~2022~~2023 EBT of ~~$97~~$113 million was ~~$16~~$7 million higher than second quarter ~~2021, explained primarily by favorable used vehicle values, offset partially by lower volume reflecting supply constraints on new vehicle production.~~2022. The Europe segment first half ~~2022~~2023 EBT of ~~$166~~$191 million was ~~$19~~$9 million higher ~~compared with~~than first half ~~2021,~~2022. Both are explained ~~primarily~~ by favorable ~~used vehicle values,~~changes in volume and net financing margin, partially offset ~~partially~~ by ~~lower volume driven by supply constraints.~~the non-recurrence of residual gains.

All Other Segment

The All Other segment second quarter ~~2022~~2023 EBT ~~loss~~ of ~~$17~~$27 million was ~~$39~~$35 million ~~lower~~higher than second quarter ~~2021, explained primarily by our exit from Brazil, which resulted in losses of $36 million being recognized in the second quarter of~~ 2022. The All Other segment first half ~~2022~~2023 EBT ~~loss~~ of ~~$191~~$49 million was ~~$198~~$221 million ~~lower~~higher than first half ~~2021,~~2022. Both are explained primarily by ~~our exit from Brazil and Argentina, which resulted in losses~~the non-recurrence of ~~$230 million being recognized in the first half of 2022.~~ South America restructuring losses.

For additional information on our restructuring in South America, refer to Note 10 of our Notes to the Financial Statements.

Unallocated Other

Unallocated Other was a ~~$125~~$30 million ~~gain~~loss for second quarter ~~2022,~~2023, a ~~$71~~$155 million ~~improvement~~deterioration from second quarter ~~2021, reflecting positive~~2022. Unallocated Other was a $100 million loss for first half 2023, a $301 million deterioration from first half 2022. Both reflect the unfavorable market valuation adjustments ~~on derivatives. Unallocated Other first half EBT of $201 million was $232 million~~to derivatives due to higher ~~than first half 2021, reflecting positive market valuation adjustments on derivatives.~~

interest rates.

2728

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

Financing Shares and Contract Placement Volume

Our focus is on supporting Ford and Lincoln dealers and customers. This includes going to market with Ford and our dealers to support vehicle sales with financing products and marketing programs. Ford’s marketing programs may encourage or require Ford Credit financing and influence the financing choices customers make. As a result, our financing share, volume, and contract characteristics vary from period to period as Ford’s marketing programs change.

The following table shows our retail financing and operating lease share of new Ford and Lincoln brand sales, wholesale financing share of new Ford and Lincoln brand vehicles acquired by dealers (in percent), and contract placement volume for new and used vehicles (in thousands) in several key markets:


		Second Quarter				First Half					Second Quarter				First Half
		2021		2022		2021		2022			2022		2023		2022		2023
Share of Ford and Lincoln Sales (a)	Share of Ford and Lincoln Sales (a)									Share of Ford and Lincoln Sales (a)
United States	United States	47	%	37	%	47	%	40	%	United States	37	%	51	%	40	%	49	%
Canada	Canada	74		68		68		65		Canada	68		67		65		71
United Kingdom	United Kingdom	37		35		36		35		United Kingdom	35		35		35		34
Germany	Germany	41		38		39		35		Germany	38		32		35		31
China	China	45		45		43		44		China	45		39		44		41

Wholesale Share	Wholesale Share									Wholesale Share
United States	United States	71	%	73	%	72	%	73	%	United States	73	%	71	%	73	%	71	%
Canada		9		7		11		8
United Kingdom	United Kingdom	100		100		100		100		United Kingdom	100		100		100		100
Germany	Germany	91		87		91		90		Germany	87		89		90		87
China	China	68		70		67		67		China	70		71		67		71

Contract Placement Volume - New and Used (000)	Contract Placement Volume - New and Used (000)									Contract Placement Volume - New and Used (000)
United States	United States	187		150		383		312		United States	150		211		312		397
Canada	Canada	37		38		62		58		Canada	38		29		58		57
United Kingdom	United Kingdom	25		24		50		46		United Kingdom	24		23		46		46
Germany	Germany	20		15		38		29		Germany	15		13		29		27
China	China	32		30		64		60		China	30		25		60		47

__________

(a)United States and Canada exclude Fleet sales, other markets include Fleet sales.

InUnited States contract placement volumes in the second quarter of ~~2022,~~2023 were higher than a year ago, reflecting higher Ford Credit share and Ford deliveries. Canada contract placement volumes in ~~all~~the second quarter of ~~our key markets other than Canada~~2023 were lower than a year ago, ~~primarily~~ reflecting lower Ford Credit ~~financing~~share and Ford deliveries. United Kingdom contract placement volumes in the second quarter of 2023 were relatively flat year over year. Germany contract placement volumes in the second quarter of 2023 were lower compared to a year ago, reflecting lower Ford deliveries and Ford Credit share. China contract placement volumes in the second quarter of 2023 were lower than a year ago, reflecting lower Ford deliveries and Ford Credit share.

2829

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

Financial Condition

Our receivables, including finance receivables and operating leases, were as follows (in billions):


		June 30, 2021		December 31, 2021		June 30, 2022			June 30, 2022		December 31, 2022		June 30, 2023
Net Receivables	Net Receivables							Net Receivables
United States and Canada Segment	United States and Canada Segment							United States and Canada Segment
Consumer financing	Consumer financing	$	56.4	$	55.6	$	53.5	Consumer financing	$	53.5	$	55.8	$	58.8
Non-Consumer financing	Non-Consumer financing	11.4		13.7		17.5		Non-Consumer financing	17.5		21.4		21.4
Net investment in operating leases	Net investment in operating leases	25.9		25.0		23.3		Net investment in operating leases	23.3		21.7		20.5
Total United States and Canada Segment	Total United States and Canada Segment	$	93.7	$	94.3	$	94.3	Total United States and Canada Segment	$	94.3	$	98.9	$	100.7

Europe Segment	Europe Segment							Europe Segment
Consumer financing	Consumer financing	$	14.2	$	12.7	$	11.1	Consumer financing	$	11.1	$	11.0	$	11.3
Non-Consumer financing	Non-Consumer financing	4.8		4.7		5.0		Non-Consumer financing	5.0		7.3		9.0
Net investment in operating leases	Net investment in operating leases	0.3		0.2		0.1		Net investment in operating leases	0.1		0.1		0.2
Total Europe Segment	Total Europe Segment	$	19.3	$	17.6	$	16.2	Total Europe Segment	$	16.2	$	18.4	$	20.5

All Other Segment	All Other Segment							All Other Segment
Consumer financing	Consumer financing	$	3.7	$	4.3	$	4.0	Consumer financing	$	4.0	$	3.9	$	3.6
Non-Consumer financing	Non-Consumer financing	1.0		1.3		1.1		Non-Consumer financing	1.1		1.1		1.3
Net investment in operating leases	Net investment in operating leases	—		—		—		Net investment in operating leases	—		—		—
Total Other Segment	Total Other Segment	$	4.7	$	5.6	$	5.1	Total Other Segment	$	5.1	$	5.0	$	4.9

Total net receivables	Total net receivables	$	117.7	$	117.5	$	115.6	Total net receivables	$	115.6	$	122.3	$	126.1

At June 30, ~~2021,~~2022, December 31, ~~2021,~~2022, and June 30, ~~2022,~~2023, total net receivables includes consumer receivables before allowance for credit losses of ~~$38.7~~$36.5 billion, ~~$39.0~~$43.9 billion, and ~~$36.5~~$43.6 billion, respectively, and non-consumer receivables before allowance for credit losses of ~~$12.0~~$13.6 billion, ~~$12.0~~$18.2 billion, and ~~$13.6~~$18.3 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. In addition, at June 30, ~~2021,~~2022, December 31, ~~2021,~~2022, and June 30, ~~2022,~~2023, total net receivables includes net investment in operating leases of ~~$8.4~~$10.5 billion, ~~$7.5~~$12.5 billion, and ~~$10.5~~$8.9 billion, respectively, that have been included in securitization transactions but continue to be reported in our consolidated financial statements. The receivables and net investment in operating leases 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 our other creditors. We hold 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. For additional information on our securitization transactions, refer to the “Securitization Transactions” and “On-Balance Sheet Arrangements” sections of Item 7 of Part II of our ~~2021~~2022 Form 10-K Report and Note 6 of our Notes to the Financial Statements herein.

Total net receivables at June 30, ~~2022~~2023 were ~~$2.1~~$10.5 billion ~~lower~~and $3.8 billion higher compared with June 30, ~~2021~~2022 and ~~$1.9 billion lower compared with~~ December 31, ~~2021, primarily reflecting~~2022, respectively, resulting from higher non-consumer and consumer financing, offset partially by lower ~~volume due to supply constraints and lower Ford Credit share, and exchange, partially offset by an increase in wholesale receivables.~~operating leases.

Our operating lease portfolio was ~~20%~~16% of total net receivables at June 30, ~~2022.~~2023. Leasing is an important product, and our leasing strategy balances sales, share, residuals, and long-term profitability. Operating leases in the United States and Canada represent ~~over~~ 99% of our total operating lease portfolio.

2930

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

Credit Risk

Credit risk is the possibility of loss from a customer’s or dealer’s failure to make payments according to contract terms. Credit losses are a normal part of a lending business, and credit risk has a significant impact on our business. We manage the credit risk of our consumer (retail financing) and non-consumer (dealer financing) receivables to balance our level of risk and return using our consistent underwriting standards, effective proprietary scoring system (discussed below), and world-class servicing. The allowance for credit losses (also referred to as the credit loss reserve) represents our estimate of the expected credit losses inherent in our finance receivables for the lifetime of those receivables as of the balance sheet date. The allowance for credit losses is estimated using a combination of models and management judgment and is based on such factors as historical loss performance, portfolio quality, receivable levels, and forward-looking macroeconomic scenarios. The adequacy of our allowance for credit losses is assessed quarterly and the assumptions and models used in establishing the allowance are evaluated regularly.

Most of our charge-offs are related to retail financing. Net charge-offs are affected by the number of vehicle repossessions, the unpaid balance outstanding at the time of repossession, the auction price of repossessed vehicles, and other amounts owed. We also incur credit losses on our dealer financing, but default rates for these receivables historically have been substantially lower than those for retail financing.

In purchasing retail financing contracts, we use a proprietary scoring system that measures credit quality using information from sources including the credit application, proposed contract terms, credit bureau data, and other information. After a proprietary risk score is generated, we decide whether to purchase a contract using a decision process based on a judgmental evaluation of the applicant, the credit application, the proposed contract terms, credit bureau information (e.g., FICO score), proprietary risk score, and other information. Our evaluation emphasizes the applicant’s ability to pay and the applicant’s creditworthiness with a focus on payment, affordability, applicant credit history, and stability as key considerations. While FICO is a part of our scoring system, our models enable us to more effectively determine the probability that a customer will pay than using credit scores alone. When we originate business, our models project expected losses and we price accordingly. We ensure the business fits our risk appetite.

For additional information on our allowance for credit losses and the quality of our receivables, see Note 4 of our Notes to the Financial Statements.

United States Origination Metrics

The following table shows United States retail financing and operating lease average placement FICO and higher risk portfolio mix metrics. Also shown are extended term mix and United States retail financing average placement terms.


		Second Quarter				First Half					Second Quarter				First Half
		2021		2022		2021		2022			2022		2023		2022		2023
Origination Metrics	Origination Metrics									Origination Metrics
Average placement FICO	Average placement FICO	747		748		748		749		Average placement FICO	748		757		749		754
Higher risk portfolio mix	Higher risk portfolio mix	5	%	5	%	6	%	5	%	Higher risk portfolio mix	5	%	4	%	5	%	4	%
Greater than or equal to 84 months placement mix	Greater than or equal to 84 months placement mix	6	%	6	%	4	%	5	%	Greater than or equal to 84 months placement mix	6	%	9	%	5	%	8	%
Average placement term (months)	Average placement term (months)	63		62		64		62		Average placement term (months)	62		62		62		62

Our second quarter ~~2022~~2023 average placement FICO score increased compared with the same period a year ago, and ~~remained~~remains strong. We support customers across the credit spectrum. Our higher risk business, as classified at contract inception, represents 5%4% of our portfolio and has been stable for over 15 years.

During the second quarter of ~~2022,~~2023, our average retail financing placement term ~~decreased by one month~~remains unchanged from a year ago. Retail financing contracts of 84 months and longer ~~remained flat~~increased compared to a year ago and continue to be a small part of our business. We remain focused on managing the trade ~~cycle—~~cycle – building customer relationships and loyalty while offering financing products and terms that customers want. Our origination and risk management processes deliver robust portfolio performance.

3031

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

United States Retail Financing Credit Losses

The following table shows the primary drivers of credit losses in the United States retail financing business, which comprised ~~66%~~69% of our worldwide consumer finance receivables at June 30, ~~2022.~~2023.


		Second Quarter						First Half							Second Quarter						First Half
		2021			2022			2021			2022				2022			2023			2022			2023
Credit Loss Drivers	Credit Loss Drivers													Credit Loss Drivers
Over-60-Day delinquencies (excl. bankruptcies)	Over-60-Day delinquencies (excl. bankruptcies)	0.08		%	0.14		%	0.10		%	0.14		%	Over-60-Day delinquencies (excl. bankruptcies)	0.14		%	0.15		%	0.14		%	0.16		%
Repossessions (000)	Repossessions (000)	3			3			8			7			Repossessions (000)	3			4			7			8
Repossession ratio	Repossession ratio	0.63		%	0.69		%	0.78		%	0.71		%	Repossession ratio	0.69		%	0.75		%	0.71		%	0.79		%
Loss severity (000) (a)	Loss severity (000) (a)	$	7.9		$	7.9		$	9.2		$	8.0		Loss severity (000) (a)	$	7.9		$	10.9		$	8.0		$	10.7
Net charge-offs ($M)	Net charge-offs ($M)	$	(9)		$	6		$	19		$	16		Net charge-offs ($M)	$	6		$	27		$	16		$	71
LTR ratio (%) (b)	LTR ratio (%) (b)	(0.07)		%	0.05		%	0.07		%	0.07		%	LTR ratio (%) (b)	0.05		%	0.21		%	0.07		%	0.28		%

__________

(a)The expected difference between the amount a customer owes when the finance contract is charged off and the amount received, net of expenses, from selling the repossessed vehicle.

(b)See Definitions and Information Regarding Causal Factors section for calculation.

Delinquencies ~~and~~have normalized to pre-pandemic levels. While increasing from a year ago, repossessions, net charge-offs, ~~remained at~~and LTR ratio continue to be low ~~levels during the second quarter. During the second quarter of 2022, repossessions and loss~~by historical standards. Loss severity ~~were flat compared to a year ago. Second quarter 2022 delinquencies and repossession ratio~~ increased from a year ago and ~~are gradually~~is beginning to normalize from historically low levels. Our LTR ratio and net charge-offs for the second quarter of 2022 continue to be low, reflecting high used vehicle auction values that contributed to the low losses. The macroeconomic outlook has improved since the onset of the COVID-19 pandemic, andWhile credit performance has remained ~~strong. However, rising~~strong, high inflation and interest rates have caused ~~further~~ economic uncertainty and ~~the future~~could have an unfavorable impact on our future retail credit ~~losses remains uncertain.~~losses.

Worldwide Credit Losses

The following table shows key metrics related to worldwide credit losses:


		Second Quarter						First Half							Second Quarter						First Half
		2021			2022			2021			2022				2022			2023			2022			2023
Net charge-offs ($M)	Net charge-offs ($M)	$	1		$	17		$	42		$	35		Net charge-offs ($M)	$	17		$	40		$	35		$	97
LTR ratio (%) (a)	LTR ratio (%) (a)	—		%	0.07		%	0.08		%	0.07		%	LTR ratio (%) (a)	0.07		%	0.15		%	0.07		%	0.19		%
Credit loss reserve ($M)	Credit loss reserve ($M)	$	1,061		$	763		$	1,061		$	763		Credit loss reserve ($M)	$	763		$	873		$	763		$	873
Reserve as percent of EOP Receivables (a)	Reserve as percent of EOP Receivables (a)	1.10		%	0.80		%	1.10		%	0.80		%	Reserve as percent of EOP Receivables (a)	0.80		%	0.80		%	0.80		%	0.80		%

__________

(a)See Definitions and Information Regarding Causal Factors section for calculation.

Our worldwide credit loss metrics remain strong.Net charge-offs and the worldwide LTR ratio in the second quarter of ~~2022 continue to be~~2023 increased from a year ago reflecting normalization from extraordinary low levels. Our credit loss reserve is higher than a year ago, primarily reflecting the impact of ~~high used vehicle auction values.~~higher receivable balances.

Our credit loss reserve is based on such factors as historical loss performance, portfolio quality, receivables level, and forward-looking macroeconomic scenarios. The credit loss reserve and reserve as a percent of end of period receivables were both lower than a year ago, reflecting low net charge-offs and our current expectation that COVID-related losses have been avoided. Our credit loss reserve reflects lifetime expected losses as of the balance sheet date and is adjusted accordingly based on our assessment of the portfolio and economic trends and conditions. ~~The~~Our credit loss reserve at June 30, ~~2022~~2023 considers a range of potential scenarios that include the economic ~~impact~~uncertainty of ~~rising~~higher inflation ~~high energy prices,~~ and ~~higher~~ interest rates. See Note 4 of our Notes to the Financial Statements for more information.

3132

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

Residual Risk

Leasing is an important product that many customers want and value, and operating lease customers also are more likely to buy or lease another Ford or Lincoln vehicle. We manage our lease share with an enterprise view to support sales, protect residual values, and manage the trade cycle. Ford Credit and Ford work together under a leasing strategy that considers share, term, model mix, geography, and other factors.

We are exposed to residual risk on operating leases and similar balloon payment products where the customer may return the financed vehicle to us. Residual risk is the possibility that the amount we obtain from returned vehicles will be less than our estimate of the expected residual value for the vehicle. We estimate the expected residual value by evaluating recent auction values, return volumes for our leased vehicles, industry wide used vehicle prices, marketing incentive plans, and vehicle quality data. For operating leases, changes in expected residual values impact depreciation expense, which is recognized on a straight-line basis over the life of the lease.

For additional information on our residual risk on operating leases, refer to the “Critical Accounting Estimates – Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 of Part II of our ~~2021~~2022 Form 10-K Report.

United States Ford and Lincoln Brand Operating Leases

The following table shows share of Ford and Lincoln brand retail financing and operating lease sales, placement volume, and residual performance metrics for our United States operating lease portfolio, which represents ~~81%~~78% of our total net investment in operating leases at June 30, ~~2022.~~2023.


		Second Quarter						First Half							Second Quarter						First Half
		2021			2022			2021			2022				2022			2023			2022			2023
Lease Share of Retail Sales	Lease Share of Retail Sales													Lease Share of Retail Sales
Ford Credit	Ford Credit	16		%	13		%	16		%	13		%	Ford Credit	13		%	12		%	13		%	11		%
Industry (a)	Industry (a)	25		%	17		%	26		%	18		%	Industry (a)	17		%	20		%	18		%	20		%

Placement Volume (000)	Placement Volume (000)													Placement Volume (000)
24-Month	24-Month	11			13			21			25			24-Month	13			8			25			15
36-Month	36-Month	37			25			78			49			36-Month	25			27			49			44
39-Month / Other	39-Month / Other	9			8			20			16			39-Month / Other	8			9			16			22
Total	Total	57			46			119			90			Total	46			44			90			81

Residual Performance	Residual Performance													Residual Performance
Return rates	Return rates	34		%	9		%	46		%	10		%	Return rates	9		%	19		%	10		%	21		%
Return volume (000)	Return volume (000)	36			9			87			18			Return volume (000)	9			14			18			30
Off-lease auction values (b)	Off-lease auction values (b)	$	29,040		$	31,445		$	25,580		$	30,780		Off-lease auction values (b)	$	34,620		$	31,830		$	34,485		$	31,445

__________

(a)Source: J.D. Power PIN.

(b)36-month off-lease auction values; quarterly amounts at Q2 ~~2022~~2023 mix; first half amounts at first half ~~2022~~2023 mix.

Our United States operating lease share of retail sales in the second quarter of ~~2022~~2023 was lower compared with a year ago and remains below the industry ~~average, reflecting the Ford sales mix.~~average. Our second quarter ~~2022~~2023 total lease placement volume was down compared with a year ago, reflecting lower ~~total industry volume, lower Ford retail deliveries, and lower~~ Ford Credit lease share of Ford retail sales.

Lease return volume and return rate in the second quarter of ~~2022~~2023 were ~~down~~up from a year ago, reflecting ~~improved~~lower auction values. Our second quarter ~~2022~~2023 36-month off-lease auction values were up 8% ~~year-over-year, reflecting continued strong demand for~~lower year-over-year. Industry auction values are expected to decline as the supply of new and used vehicles ~~including the impact of lower new vehicle production due~~improves. We expect return rates to ~~supply constraints.~~increase as auction values decline.

3233

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 United States Securities and Exchange Commission (“SEC”): 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 assigned to us from all of the NRSROs are closely associated with their opinions on Ford. 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 Quarterly Report on Form 10-Q ~~Report~~ for the quarter ended March 31, ~~2022:~~2023:

•On ~~May 2, 2022, Fitch affirmed~~June 14, 2023, DBRS upgraded the credit ratings for Ford ~~Credit at BB+~~Credit’s long-term senior unsecured debt to BBB (low) from BB (high), upgraded the credit ratings for short-term unsecured debt to R-2 (low) from R-4, and revised the outlook to

~~positive,~~ stable from ~~stable.~~positive.

•On ~~May 17, 2022, DBRS affirmed~~July 13, 2023, Moody’s upgraded the credit ratings for Ford ~~Credit at BB (high) and revised the outlook~~Credit’s long-term senior unsecured debt to

~~positive,~~ Ba1 from ~~stable.~~Ba2 with a stable outlook.

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

NRSRO RATINGS

Ford Credit

NRSROs

Long-Term Senior Unsecured

Short -Term Unsecured

Outlook/Trend

Minimum
Long-Term Investment Grade Rating

DBRS

~~BB (high)~~BBB (low)

~~R-4~~R-2 (low)

~~Positive~~Stable

BBB (low)

Fitch

BB+

Positive

BBB-

Moody’s

~~Ba2~~Ba1

Stable

Baa3

S&P

BB+

Positive

BBB-

3334

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

Funding and Liquidity

We remain well capitalized with a strong balance sheet and funding diversified across platforms and markets. We saw sequential improvement in liquidity and securitized funding mix during the quarter, and ended the second quarter of ~~2022~~2023 with ~~$25~~$28.8 billion of ~~liquidity. During the quarter, we completed $4.4~~liquidity, up $7.8 billion from year-end. We continue to have robust access to capital markets, completing $18 billion of public term ~~funding.~~issuances through July 26, 2023.

Key elements of our funding strategy include:

•Maintain strong ~~liquidity;~~liquidity and funding diversity;

•Prudently access public markets;

•Continue ~~growth of~~to leverage retail ~~deposits~~deposit funding in Europe;

•Flexibility to increase ABS mix as needed; preserving assets and committed capacity;

•Target financial statement leverage of 9:1 to 10:1; and

•Maintain self-liquidating balance sheet.

Our liquidity profile continues to be diverse, robust, and focused on maintaining liquidity levels that meet our business and funding requirements. We regularly stress test our balance sheet and liquidity to ensure that we ~~can~~ continue to meet our financial obligations through economic cycles.

The following table shows funding for our net receivables (in billions):


Funding Structure	Funding Structure	June 30, 2021			December 31, 2021			June 30, 2022			Funding Structure	June 30, 2022			December 31, 2022			June 30, 2023
Term unsecured debt	Term unsecured debt	$	63.8		$	59.4		$	49.9		Term unsecured debt	$	49.9		$	48.3		$	52.2
Term asset-backed securities	Term asset-backed securities	45.9			45.4			47.1			Term asset-backed securities	47.1			56.4			55.6
Ford Interest Advantage / Retail Deposits		11.3			12.9			12.5
Retail Deposits / Ford Interest Advantage											Retail Deposits / Ford Interest Advantage	12.5			14.3			15.9
Other	Other	(1.1)			(0.2)			1.9			Other	1.9			2.6			2.3
Equity	Equity	13.1			12.4			12.0			Equity	12.0			11.9			12.5
Adjustments for cash	Adjustments for cash	(15.3)			(12.4)			(7.8)			Adjustments for cash	(7.8)			(11.2)			(12.4)
Total Net Receivables	Total Net Receivables	$	117.7		$	117.5		$	115.6		Total Net Receivables	$	115.6		$	122.3		$	126.1

Securitized Funding as a percent of Total Debt	Securitized Funding as a percent of Total Debt	37.9		%	38.5		%	43.0		%	Securitized Funding as a percent of Total Debt	43.0		%	47.4		%	45.0		%

Net receivables of ~~$115.6~~$126.1 billion as of June 30, ~~2022,~~2023, were funded primarily with term unsecured debt and term asset-backed securities. Securitized funding as a percent of total debt was ~~43.0% at the end~~45.0% as of ~~the second quarter of 2022.~~June 30, 2023.

Public Term Funding Plan

The following table shows our issuances for full year ~~2020~~2021 and ~~2021,~~2022, planned issuances for full year ~~2022,~~2023, and our global public term funding issuances through July 26, ~~2022,~~2023, excluding short-term funding programs (in billions):


		2020 Actual		2021 Actual		2022 Forecast	Through July 26			2021 Actual		2022 Actual		2023 Forecast	Through July 26
Unsecured	Unsecured	$	14	$	5	4-7	$	4	Unsecured	$	5	$	6	$ 11 - 14	$	9
Securitizations	Securitizations	13		9		8-10	6		Securitizations	9		10		12 - 14	9
Total public	Total public	$	27	$	14	12-17	$	10	Total public	$	14	$	16	$ 23 - 28	$	18

For ~~2022,~~2023, we ~~now~~ project full year public term funding in the range of ~~$12~~$23 billion to ~~$17~~$28 billion. ~~Through July 26, 2022, we have completed $10 billion of public term issuances.~~

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

Liquidity

We define gross liquidity as cash, cash equivalents, and marketable securities (excluding amounts related to insurance activities) and committed capacity (which includes our asset-backed facilities and unsecured credit facilities), less utilization of liquidity. Utilization of liquidity is the amount funded under our liquidity sources and also includes the cash required to support securitization transactions and restricted cash. Net liquidity available for use is defined as gross liquidity ~~less~~plus certain adjustments as described ~~below. While not included~~ in ~~available liquidity, these adjustments represent additional funding sources for future originations.~~the table below.

The following table shows our liquidity sources and utilization (in billions):


		June 30, 2021		December 31, 2021		June 30, 2022			June 30, 2022		December 31, 2022		June 30, 2023
Liquidity Sources	Liquidity Sources							Liquidity Sources
Cash	Cash	$	15.3	$	12.4	$	7.8	Cash	$	7.8	$	11.2	$	12.4
Committed asset-backed facilities	Committed asset-backed facilities	38.4		37.1		34.3		Committed asset-backed facilities	34.3		37.4		42.3
Other unsecured credit facilities	Other unsecured credit facilities	2.6		2.7		2.5		Other unsecured credit facilities	2.5		2.3		2.6
Total liquidity sources	Total liquidity sources	$	56.3	$	52.2	$	44.6	Total liquidity sources	$	44.6	$	50.9	$	57.3

Utilization of Liquidity	Utilization of Liquidity							Utilization of Liquidity
Securitization and restricted cash	Securitization and restricted cash	$	(8.1)	$	(3.9)	$	(2.7)	Securitization and restricted cash	$	(2.7)	$	(2.9)	$	(2.9)
Committed asset-backed facilities	Committed asset-backed facilities	(11.3)		(12.5)		(15.3)		Committed asset-backed facilities	(15.3)		(26.6)		(23.1)
Other unsecured credit facilities	Other unsecured credit facilities	(0.5)		(1.0)		(0.5)		Other unsecured credit facilities	(0.5)		(0.8)		(1.2)
Total utilization of liquidity	Total utilization of liquidity	$	(19.9)	$	(17.4)	$	(18.5)	Total utilization of liquidity	$	(18.5)	$	(30.3)	$	(27.2)

Gross liquidity	Gross liquidity	$	36.4	$	34.8	$	26.1	Gross liquidity	$	26.1	$	20.6	$	30.1
Asset-backed capacity in excess of eligible receivables and other adjustments	Asset-backed capacity in excess of eligible receivables and other adjustments	(3.4)		(2.8)		(1.1)		Asset-backed capacity in excess of eligible receivables and other adjustments	(1.1)		0.4		(1.3)
Net liquidity available for use	Net liquidity available for use	$	33.0	$	32.0	$	25.0	Net liquidity available for use	$	25.0	$	21.0	$	28.8

Our net liquidity available for use will fluctuate quarterly based on factors including near-term debt maturities, receivable growth and decline, and timing of funding transactions. ~~In June 2022, we used excess liquidity to repurchase approximately $3 billion of our public unsecured debt securities maturing in 2023, reducing interest expense and near-term maturities.~~ At June 30, ~~2022,~~2023, our net liquidity available for use was ~~$25.0~~$28.8 billion, ~~$7.0~~$7.8 billion ~~lower~~higher than year-end ~~2021.~~2022, reflecting strong access to public funding markets and the addition of $4.9 billion in committed asset-backed capacity. At June 30, ~~2022,~~2023, our liquidity sources totaled ~~$44.6~~$57.3 billion, ~~down $7.6~~up $6.4 billion from year-end ~~2021.~~2022.

Cash. At June 30, ~~2022,~~2023, our ~~Cash~~cash totaled ~~$7.8~~$12.4 billion, compared with ~~$12.4~~$11.2 billion at year-end ~~2021.~~2022. In the normal course of our funding activities, we may generate more proceeds than are required for our immediate funding needs. These excess amounts are held primarily in highly liquid investments, which provide liquidity for our anticipated and unanticipated cash needs and give us flexibility in the use of our other funding programs. Our ~~Cash~~cash primarily includes United States Department of Treasury obligations, federal agency securities, bank time deposits with investment-grade institutions, investment-grade commercial paper, debt obligations of a select group of non-U.S. governments, non-U.S. governmental agencies, supranational institutions, non-U.S. central banks, and money market funds that carry the highest possible ratings.

The average maturity of these investments ranges from approximately three to six months and is adjusted based on market conditions and liquidity needs. We monitor our cash levels and average maturity on a daily basis. Cash includes restricted cash and amounts to be used only to support our securitization transactions of ~~$3.9 billion and $2.7~~$2.9 billion at both December 31, ~~2021~~2022 and June 30, ~~2022, respectively.~~2023.

Material Cash Requirements. Our material cash requirements include: (1) the purchase of retail financing and operating lease contracts from dealers and providing wholesale financing for dealers to finance new and used vehicles; and (2) debt repayments (for additional information on debt, see the ~~“Balance Sheet Liquidity Profile” section below and the~~ “Aggregate Contractual Obligations” table in Item 7 and Note 9 of the Notes to the Financial Statements in our ~~2021~~2022 Form 10-K Report). In addition, subject to approval by our Board of Directors, shareholder distributions may require the expenditure of a material amount of cash. Moreover, we may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, e.g., legal contingencies, uncertain tax positions, and other matters.

We plan to utilize our liquidity (as described above) and our cash flows from business operations to fund our material cash requirements.

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

Committed Capacity. At June 30, ~~2022,~~2023, our committed capacity totaled ~~$36.8~~$44.9 billion, compared with ~~$39.8~~$39.7 billion at December 31, ~~2021.~~2022. Our committed capacity is primarily comprised of committed ABS facilities from bank-sponsored commercial paper conduits and other financial institutions and committed unsecured credit facilities with financial institutions.

Committed Asset-Backed Facilities. We and our subsidiaries have entered into agreements with a number of bank-sponsored asset-backed commercial paper conduits and other financial institutions. Such counterparties are contractually committed, at our option, to purchase from us eligible retail financing receivables or to purchase or make advances under asset-backed securities backed by retail financing or wholesale finance receivables or operating leases for proceeds of up to ~~$34.3~~$42.3 billion ($~~19.2~~25.3 billion of retail financing, ~~$3.2~~$8.7 billion of operating leases, and $8.3 billion of wholesale ~~financing, and $11.9 billion of operating leases)~~financing) at June 30, ~~2022.~~2023. In the United States, we are able to obtain funding within two days of our unutilized capacity in some of our committed asset-backed facilities. These committed facilities have varying maturity dates, with ~~$13.2~~$18.2 billion having maturities within the next twelve months and the remaining balance having maturities through third quarter ~~of 2024.~~2025. We plan capacity renewals to protect our global funding needs and to optimize capacity utilization.

Our ability to obtain funding under these facilities is subject to having a sufficient amount of eligible assets as well as our ability to obtain interest rate hedging arrangements for certain facilities. At June 30, ~~2022, $15.3~~2023, $23.1 billion of these commitments were in use and we had ~~$1.6~~$1.8 billion of asset-backed capacity that was in excess of eligible ~~receivables primarily due to the decline in lease asset balances.~~receivables. These programs are free of material adverse change clauses, restrictive financial covenants (for example, debt-to-equity limitations and minimum net worth requirements), and generally, credit rating triggers that could limit our ability to obtain funding. However, the unused portion of these commitments may be terminated if the performance of the underlying assets deteriorates beyond specified levels. Based on our experience and knowledge as servicer of the related assets, we do not expect any of these programs to be terminated due to such events.

As of June 30, ~~2022,~~2023, Ford Bank GmbH (“Ford Bank”) had liquidity of ~~€306~~€297 million (equivalent to ~~$318~~$322 million) ~~and FCE Bank plc (“FCE”) had liquidity~~ in the form ~~of £77 million (equivalent to $93 million)~~ of eligible collateral available for use in the monetary policy programs of the European Central ~~Bank and Bank of England, respectively.~~Bank.

Unsecured Credit Facilities. At June 30, ~~2022,~~2023, we and our majority-owned subsidiaries had ~~$2.5~~$2.6 billion of contractually committed unsecured credit facilities with financial institutions, including the FCE Credit Agreement and the Ford Bank Credit Agreement. At June 30, ~~2022, $2.0~~2023, $1.4 billion was available for use.

At June 30, ~~2022, £440~~2023, £49 million (equivalent to ~~$533~~$62 million) was available for use under ~~FCE’s £690~~FCE Bank plc’s (“FCE”) £685 million (equivalent to ~~$836~~$866 million) syndicated credit facility (the “FCE Credit Agreement”) and all ~~€240~~€210 million (equivalent to ~~$250~~$228 million) was available for use under Ford Bank’s syndicated credit facility (the “Ford Bank Credit Agreement”). ~~Effective July 22, 2022, FCE and Ford Bank extended the maturity dates of~~Both the FCE Credit Agreement and Ford Bank Credit Agreement ~~to 2025 with total commitments under each agreement of £685 million and €210 million~~, ~~respectively.~~mature in 2026.

Both the FCE Credit Agreement and Ford Bank Credit Agreement contain certain covenants, including an obligation for FCE and Ford Bank to maintain their ratio of regulatory capital to risk-weighted assets at no less than the applicable regulatory minimum. The FCE Credit Agreement requires the support agreement between FCE and Ford Credit to remain in effect (and enforced by FCE to ensure that its net worth is maintained at no less than $500 million). The Ford Bank Credit Agreement requires a guarantee of Ford Bank’s obligations under the agreement, provided by Ford Credit, to remain in effect. In addition, both the FCE Credit Agreement and the Ford Bank Credit Agreement include certain sustainability-linked targets, pursuant to which the applicable margin may be adjusted if Ford Motor Company achieves, or fails to achieve, the specified targets related to global manufacturing facility greenhouse gas emissions, renewable electricity consumption, and Ford Europe CO2 tailpipe emissions.

~~Balance Sheet Liquidity Profile~~

~~We define our balance sheet liquidity profile as~~Ford is party to, and Ford Credit is a designated subsidiary borrower under a 364-Day Revolving Credit Agreement, under which the ~~cumulative maturities, including the impact~~lenders thereto provided $1.8 billion of expected prepayments and allowance for credit losses, of our finance receivables, investment in operating leases, and cash, less the cumulative debt maturities over upcoming annual periods. Our balance sheet is inherently liquid because of the short-term nature of our finance receivables, investment in operating leases, and cash. We ensure our cumulative debt maturities have a longer tenor than our cumulative asset maturities. This positive maturity profile is intended to provide additional liquidity after all of our assets have been funded and is in addition to liquidity available to protect for stress scenarios.

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

July - December 2022 2023 2024 2025 & Beyond
Balance Sheet Liquidity Profile
Assets (a) $ 46 $ 75 $ 98 $ 127
Total debt (b) 36 61 79 111
Memo: Unsecured long-term debt maturities 6 8 11 26

~~__________~~

~~(a)~~Includes gross finance receivables less the allowance for credit losses, investment in operating leases net of accumulated depreciation, and cash. 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 our retail installment sale contracts and investment in operating leases. The table above also reflects adjustments to debt maturities to match the asset-backed debt maturities with the underlying asset maturities.

~~All wholesale securitization transactions and wholesale receivables are shown~~commitments maturing in the next 12 months, even if the maturities extend beyond second quarter 2023. 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 ofon April 24, 2024 (the “364-Day Revolving Credit Agreement”). At June 30, 2022, we had $127 billion of assets, $65 billion of which were unencumbered. For additional information on finance receivables, investment in operating leases, and debt, see Notes 4, 5, and 9 of our Notes to2023, the ~~Financial Statements.~~364-Day Revolving Credit Agreement was not utilized by Ford Credit.

Funding and Liquidity Risks

Our funding plan is subject to risks and uncertainties, many of which are beyond our control, including disruption in the capital markets, that could impact both unsecured debt and asset-backed securities issuance and the effects of regulatory changes on the financial markets. Refer to the “Funding and Liquidity Risks” section of Item 7 of Part II of our ~~2021~~2022 Form 10-K Report for more information.

3437

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

Leverage

We use 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 our capital structure. We refer to our shareholder’s interest as equity.

The following table shows the calculation of our financial statement leverage (in billions):


		June 30, 2021		December 31, 2021		June 30, 2022			June 30, 2022		December 31, 2022		June 30, 2023
Leverage Calculation	Leverage Calculation							Leverage Calculation
Debt	Debt	$	121.0	$	117.7	$	109.5	Debt	$	109.5	$	119.0	$	123.7
Equity	Equity	$	13.1	$	12.4	$	12.0	Equity	$	12.0	$	11.9	$	12.5
Financial statement leverage (to 1)	Financial statement leverage (to 1)	9.3		9.5		9.1		Financial statement leverage (to 1)	9.1		10.0		9.9

We plan our leverage by considering market conditions and the risk characteristics of our business. At June 30, ~~2022,~~2023, our financial statement leverage was ~~9.1:1, at~~9.9:1. We target financial statement leverage in the ~~lower end~~range of ~~our~~ 9:1 to 10:~~1 target range.~~1.

Outlook

~~For the~~We continue to expect full year ~~we expect~~2023 EBT ofto be about $3 billion before charges related to our exit of South America. Our guidance reflects primarily lower credit loss reserve releases, fewer returned off-lease vehicles, and more normalized credit losses. We also expect auction values to remain strong but to decline in the second half of the year as the supply of new vehicles improves.$1.3 billion.

3538

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

Cautionary Note on Forward-Looking Statements

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

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

•Ford is highly dependent on its suppliers to deliver components in accordance with Ford’s production schedule and specifications, and a shortage of or inability to acquire key components, such as semiconductors, or raw materials, such as lithium, cobalt, nickel, graphite, and manganese, can disrupt Ford’s production of vehicles;

•To facilitate access to the raw materials necessary for the production of electric vehicles, Ford has entered into, and expects to continue to enter into, multi-year commitments to raw material suppliers that subject Ford to risks associated with lower future demand for such materials as well as costs that fluctuate and are difficult to accurately forecast;

•Ford’s long-term competitiveness depends on the successful execution of Ford+;

•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, restructurings, or new business strategies;

•Operational systems, security systems, vehicles, and services could be affected by cyber incidents, ransomware attacks, and other ~~disruptions;~~disruptions and impact Ford and Ford Credit as well as their suppliers and dealers;

•Ford’s production, as well as Ford’s suppliers’ production, and/or the ability to deliver products to consumers could be disrupted by labor issues, natural or man-made disasters, adverse effects of climate change, financial distress, production difficulties, capacity limitations, 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 digital, software, and physical ~~services, and mobility~~ services are subject to market acceptance and face significant competition from existing and new entrants in the automotive ~~mobility,~~ and digital and software services ~~industries;~~industries and its reputation may be harmed if it is unable to achieve the initiatives it has announced;

•Ford’s ~~near-term~~ 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 or geopolitical developments, including protectionist trade policies such as tariffs, or other ~~events, including tariffs;~~events;

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

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

•Inflationary pressure and fluctuations in commodity and energy prices, foreign currency exchange rates, interest rates, and market value of Ford or Ford Credit’s investments, including marketable securities, can have a significant effect on results;

•Ford 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;

•The impact of government incentives on Ford’s business could be significant, and 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 and Ford Credit could experience unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, services, perceived environmental impacts, or otherwise;

•Ford may need to substantially modify its product plans and facilities to comply with safety, emissions, fuel economy, autonomous ~~vehicle,~~driving technology, environmental, and other regulations;

•Ford and Ford Credit could be affected by the continued development of more stringent privacy, data use, and data protection laws and regulations as well as consumers’ heightened expectations to safeguard their personal information; and

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

3639

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

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 ~~2021~~2022 Form 10-K Report, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Accounting Standards Issued But Not Yet Adopted

~~ASUs 2022-01 and 2022-03 were assessed and are not expected to have~~For a ~~material impact to our financial statements and disclosures. We are presently assessing the impact~~discussion of ~~ASU 2022-02. For additional information,~~recent accounting standards, see Note 2 of our Notes to the Financial Statements.


~~ASU~~		~~Effective Date (a)~~
~~2022-01~~	~~Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method~~	~~January 1, 2023~~
~~2022-02~~	~~Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures~~	~~January 1, 2023~~
~~2022-03~~	~~Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions~~	~~January 1, 2024~~

~~__________~~

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

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

In our ~~2021~~2022 Form 10-K Report, we discuss in greater detail our market risk, counterparty risk, credit risk, residual risk, liquidity risk, and operating risk.

To provide a quantitative measure of the sensitivity of our pre-tax cash flow to changes in interest rates, we use 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. Maturing assets and liabilities are also instantaneously reinvested, capturing 100% of any hypothetical change in interest rates. 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 our pre-tax cash flow. Under this model, we estimate that at June 30, ~~2022,~~2023, all else constant, such an increase in interest rates would ~~decrease~~increase our pre-tax cash flow by ~~$27~~$117 million over the next 12 months, compared with ~~a decrease~~an increase of ~~$76~~$127 million at December 31, ~~2021.~~2022. In reality, new assets and liabilities may not immediately capture changes in interest rates, and interest rate changes are rarely instantaneous, parallel, or ~~parallel and rates could~~ move ~~more or less than~~exactly the one percentage point assumed in our 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. Marion B. Harris, our President and Chief Executive Officer (“CEO”), and ~~Brian E. Schaaf,~~Eliane S. Okamura, our ~~Executive Vice President,~~ Chief Financial Officer (“CFO”), Treasurer and Executive Vice President, Strategy, have performed an evaluation of the Company’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of June 30, ~~2022,~~2023, 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~~As previously reported, in ~~internal control~~2021 we began a multi-year implementation of a new global integrated enterprise resource planning (“I-ERP”) system to replace a number of our existing core financial systems. Implementation of I-ERP began with the launch of our Canada market in May 2021, and implementation is progressing in phased launches across our remaining markets over ~~financial reporting~~the next several years. In May 2023, I-ERP was launched in the rest of North America. Additionally, a new general ledger system was launched globally. Our processes, procedures, and controls continue to be refined as appropriate during the ~~quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.~~

phased implementation of the I-ERP system.

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PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings.

We have no legal proceedings arising under any federal, state, or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment, in which (i) a governmental authority is a party, and (ii) we believe there is the possibility of monetary sanctions (exclusive of interest and costs) in excess of $1 million.

ITEM 5. Other Information.

None.

ITEM 6. Exhibits.

Designation

Description

Method of Filing

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 in accordance with the provisions of Regulation S-T.

Instruments defining the rights of holders of certain issues of long-term debt of Ford Credit have not been filed as exhibits to this Report because the authorized principal amount of any one of such issues does not exceed 10% of the total assets of Ford Credit. Ford Credit will furnish a copy of each such instrument to the SEC upon request.

3841

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, Ford Motor Credit Company LLC has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

FORD MOTOR CREDIT COMPANY LLC


By:			/s/ ~~Brian E. Schaaf~~Eliane S. Okamura
			~~Brian E. Schaaf~~Eliane S. Okamura
			Chief Financial Officer, Treasurer, and
			Executive Vice President, ~~Chief Financial Officer,~~
			~~Treasurer, and~~ Strategy

Date:			July 27, ~~2022~~2023

3942


	Second Quarter 2021						First Half 2021
	Consumer		Non-Consumer		Total		Consumer		Non-Consumer		Total
Allowance for credit losses
Beginning balance	$	1,170	$	53	$	1,223	$	1,245	$	60	$	1,305
Charge-offs	(55)		(3)		(58)		(152)		(3)		(155)
Recoveries	55		2		57		108		5		113
Provision for/(benefit from) credit losses	(154)		(12)		(166)		(184)		(22)		(206)
Other (a)	6		(1)		5		5		(1)		4
Ending balance	$	1,022	$	39	$	1,061	$	1,022	$	39	$	1,061


	July - December 2022		2023		2024		2025 & Beyond
Balance Sheet Liquidity Profile
Assets (a)	$	46	$	75	$	98	$	127
Total debt (b)	36		61		79		111
Memo: Unsecured long-term debt maturities	6		8		11		26