Edgar Filing: FORD MOTOR CO

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q



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

	For the quarterly period ended March 31, 2019

or

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

	For the transition period from __________ to __________

	Commission file number 1-3950

Ford Motor Company

(Exact name of Registrant as specified in its charter)



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

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

313-322-3000

(Registrant’s telephone number, including area code)

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

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

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

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. o

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

As of April 19, 2019, Ford had outstanding 3,918,693,825 shares of Common Stock and 70,852,076 shares of Class B Stock.

Exhibit Index begins on page

FORD MOTOR COMPANY

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended March 31, 2019



	Table of Contents	Page
	Part I - Financial Information
Item 1	Financial Statements	1
	Consolidated Income Statement	1
	Consolidated Statement of Comprehensive Income	1
	Consolidated Balance Sheet	2
	Condensed Consolidated Statement of Cash Flows	3
	Consolidated Statement of Equity	4
	Notes to the Financial Statements	5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
	Overview	31
	Results of Operations	33
	Automotive Segment	35
	Mobility Segment	45
	Ford Credit Segment	46
	Corporate Other	49
	Interest on Debt	49
	Special Items	49
	Taxes	49
	Liquidity and Capital Resources	50
	Credit Ratings	59
	Outlook	60
	Non-GAAP Financial Measure Reconciliations	61
	Supplemental Information	64
	Cautionary Note on Forward-Looking Statements	68
	Accounting Standards Issued But Not Yet Adopted	69
Item 3	Quantitative and Qualitative Disclosures About Market Risk	69
Item 4	Controls and Procedures	69

	Part II - Other Information
Item 1	Legal Proceedings	70
Item 6	Exhibits	70
	Signature	71

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENT

(in millions, except per share amounts)



	For the periods ended March 31,
	2018		2019
	First Quarter
	(unaudited)
Revenues
Automotive	$	39,012	$	37,239
Ford Credit	2,943		3,097
Mobility	4		6
Total revenues (Note 3)	41,959		40,342

Costs and expenses
Cost of sales	35,753		33,942
Selling, administrative, and other expenses	2,747		2,843
Ford Credit interest, operating, and other expenses	2,338		2,355
Total costs and expenses	40,838		39,140

Interest expense on Automotive debt	275		231
Interest expense on Other debt	14		14

Other income/(loss), net (Note 4)	863		628
Equity in net income of affiliated companies	224		25
Income before income taxes	1,919		1,610
Provision for/(Benefit from) income taxes	174		427
Net income	1,745		1,183
Less: Income/(Loss) attributable to noncontrolling interests	9		37
Net income attributable to Ford Motor Company	$	1,736	$	1,146

EARNINGS PER SHARE ATTRIBUTABLE TO FORD MOTOR COMPANY COMMON AND CLASS B STOCK (Note 6)
Basic income	$	0.44	$	0.29
Diluted income	0.43		0.29

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)



	For the periods ended March 31,
	2018			2019
	First Quarter
	(unaudited)
Net income	$	1,745		$	1,183
Other comprehensive income/(loss), net of tax (Note 20)
Foreign currency translation	295			243
Marketable securities	(47		)	63
Derivative instruments	33			(446		)
Pension and other postretirement benefits	8			5
Total other comprehensive income/(loss), net of tax	289			(135		)
Comprehensive income	2,034			1,048
Less: Comprehensive income/(loss) attributable to noncontrolling interests	8			37
Comprehensive income attributable to Ford Motor Company	$	2,026		$	1,011

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)



	December 31, 2018			March 31, 2019
	(unaudited)
ASSETS
Cash and cash equivalents (Note 7)	$	16,718		$	20,848
Marketable securities (Note 7)	17,233			16,882
Ford Credit finance receivables, net (Note 8)	54,353			55,444
Trade and other receivables, less allowances of $94 and $98	11,195			12,016
Inventories (Note 10)	11,220			12,333
Other assets	3,930			3,672
Total current assets	114,649			121,195

Ford Credit finance receivables, net (Note 8)	55,544			54,332
Net investment in operating leases (Note 11)	29,119			29,229
Net property	36,178			36,145
Equity in net assets of affiliated companies	2,709			2,605
Deferred income taxes	10,412			10,316
Other assets	7,929			9,459
Total assets	$	256,540		$	263,281
LIABILITIES
Payables	$	21,520		$	23,325
Other liabilities and deferred revenue (Note 13)	20,556			21,364
Automotive debt payable within one year (Note 16)	2,314			2,523
Ford Credit debt payable within one year (Note 16)	51,179			51,895
Other debt payable within one year (Note 16)	—			130
Total current liabilities	95,569			99,237
Other liabilities and deferred revenue (Note 13)	23,588			24,216
Automotive long-term debt (Note 16)	11,233			11,087
Ford Credit long-term debt (Note 16)	88,887			91,055
Other long-term debt (Note 16)	600			470
Deferred income taxes	597			647
Total liabilities	220,474			226,712

Redeemable noncontrolling interest (Note 19)	100			135

EQUITY
Common Stock, par value $.01 per share (4,011 million shares issued of 6 billion authorized)	40			40
Class B Stock, par value $.01 per share (71 million shares issued of 530 million authorized)	1			1
Capital in excess of par value of stock	22,006			22,026
Retained earnings	22,668			23,226
Accumulated other comprehensive income/(loss) (Note 20)	(7,366		)	(7,501		)
Treasury stock	(1,417		)	(1,394		)
Total equity attributable to Ford Motor Company	35,932			36,398
Equity attributable to noncontrolling interests	34			36
Total equity	35,966			36,434
Total liabilities and equity	$	256,540		$	263,281



The following table includes assets to be used to settle liabilities of the consolidated variable interest entities (“VIEs”). These assets and liabilities are included in the consolidated balance sheet above.
	December 31, 2018		March 31, 2019
	(unaudited)
ASSETS
Cash and cash equivalents	$	2,728	$	2,990
Ford Credit finance receivables, net	58,662		60,745
Net investment in operating leases	16,332		16,013
Other assets	27		14
LIABILITIES
Other liabilities and deferred revenue	$	24	$	45
Debt	53,269		52,248

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)



	For the periods ended March 31,
	2018			2019
	First Quarter
	(unaudited)
Cash flows from operating activities
Net cash provided by/(used in) operating activities	$	3,514		$	3,544

Cash flows from investing activities
Capital spending	(1,779		)	(1,633		)
Acquisitions of finance receivables and operating leases	(15,683		)	(12,595		)
Collections of finance receivables and operating leases	12,956			12,336
Purchases of marketable and other securities	(7,867		)	(3,923		)
Sales and maturities of marketable and other securities	6,040			4,441
Settlements of derivatives	(61		)	(14		)
Other	(150		)	54
Net cash provided by/(used in) investing activities	(6,544		)	(1,334		)

Cash flows from financing activities
Cash payments for dividends and dividend equivalents	(1,113		)	(597		)
Purchases of common stock	(89		)	—
Net changes in short-term debt	(909		)	420
Proceeds from issuance of long-term debt	16,953			15,411
Principal payments on long-term debt	(12,360		)	(13,277		)
Other	(68		)	(84		)
Net cash provided by/(used in) financing activities	2,414			1,873

Effect of exchange rate changes on cash, cash equivalents, and restricted cash	115			29

Net increase/(decrease) in cash, cash equivalents, and restricted cash	$	(501	)	$	4,112

Cash, cash equivalents, and restricted cash at January 1 (Note 7)	$	18,638		$	16,907
Net increase/(decrease) in cash, cash equivalents, and restricted cash	(501		)	4,112
Cash, cash equivalents, and restricted cash at March 31 (Note 7)	$	18,137		$	21,019

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EQUITY

(in millions, unaudited)



	Equity Attributable to Ford Motor Company
	Capital Stock		Cap. in Excess of Par Value of Stock			Retained Earnings			Accumulated Other Comprehensive Income/(Loss) (Note 20)			Treasury Stock			Total			Equity Attributable to Non-controlling Interests			Total Equity
Balance at December 31, 2017	$	41	$	21,843		$	21,906		$	(6,959	)	$	(1,253	)	$	35,578		$	28		$	35,606
Net income	—		—			1,736			—			—			1,736			9			1,745
Other comprehensive income/(loss), net of tax	—		—			—			290			—			290			(1		)	289
Common stock issued (including share-based compensation impacts)	—		(2		)	—			—			—			(2		)	—			(2		)
Treasury stock/other	—		—			—			—			(89		)	(89		)	—			(89		)
Cash dividends declared (a)	—		—			(1,113		)	—			—			(1,113		)	—			(1,113		)
Balance at March 31, 2018	$	41	$	21,841		$	22,529		$	(6,669	)	$	(1,342	)	$	36,400		$	36		$	36,436

Balance at December 31, 2018	$	41	$	22,006		$	22,668		$	(7,366	)	$	(1,417	)	$	35,932		$	34		$	35,966
Adoption of accounting standards	—		—			13			—			—			13			—			13
Net income	—		—			1,146			—			—			1,146			37			1,183
Other comprehensive income/(loss), net of tax	—		—			—			(135		)	—			(135		)	—			(135		)
Common stock issued (including share-based compensation impacts)	—		20			—			—			—			20			—			20
Treasury stock/other	—		—			—			—			23			23			(35		)	(12		)
Dividends and dividend equivalents declared (a)	—		—			(601		)	—			—			(601		)	—			(601		)
Balance at March 31, 2019	$	41	$	22,026		$	23,226		$	(7,501	)	$	(1,394	)	$	36,398		$	36		$	36,434

(a) We declared dividends of Common and Class B Stock of $0.28 and $0.15 per share in the first quarter of 2018 and 2019, respectively.

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents



Footnote		Page
Note 1	Presentation	6
Note 2	New Accounting Standards	6
Note 3	Revenue	8
Note 4	Other Income/(Loss)	9
Note 5	Income Taxes	9
Note 6	Capital Stock and Earnings Per Share	9
Note 7	Cash, Cash Equivalents, and Marketable Securities	10
Note 8	Ford Credit Finance Receivables	13
Note 9	Ford Credit Allowance for Credit Losses	16
Note 10	Inventories	17
Note 11	Net Investment in Operating Leases	17
Note 12	Goodwill	17
Note 13	Other Liabilities and Deferred Revenue	18
Note 14	Retirement Benefits	19
Note 15	Lease Commitments	19
Note 16	Debt	22
Note 17	Derivative Financial Instruments and Hedging Activities	23
Note 18	Employee Separation Actions and Exit and Disposal Activities	25
Note 19	Redeemable Noncontrolling Interest	26
Note 20	Accumulated Other Comprehensive Income/(Loss)	26
Note 21	Commitments and Contingencies	27
Note 22	Segment Information	29

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION

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

In the opinion of management, these unaudited financial statements reflect a fair statement of our results of operations and financial condition for the periods, and at the dates, presented. The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K Report”). We reclassified certain prior year amounts in our consolidated financial statements to conform to the current year presentation.

Change in Accounting

As of January 1, 2019, we changed our accounting method for reporting early termination losses related to customer defaults on Ford Credit’s vehicles subject to operating leases. Previously, we presented the early termination loss reserve on operating leases due to customer default events as part of the allowance for credit losses within Net investment in operating leases. We now consider the effects of operating lease early terminations when determining depreciation estimates, which are included as part of accumulated depreciation within Net investment in operating leases. We believe this change in accounting method is preferable as the characterization of these changes are better reflected as depreciation.

We have retrospectively applied this change in accounting method to all prior periods. At December 31, 2018, this reclassification increased accumulated depreciation and decreased allowance for credit losses by $78 million within Net investment in operating leases. This change had no impact on our consolidated income statement, consolidated balance sheet or Net cash provided by/(used in) operating activities in the consolidated statement of cash flows for the interim periods presented.

NOTE 2. NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards

Accounting Standards Update (“ASU”) 2016-02, Leases. On January 1, 2019, we adopted Accounting Standards Codification 842 and all the related amendments (“new lease standard”) using the modified retrospective method. We recognized the cumulative effect of initially applying the new lease standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the lease accounting standard in effect for those periods. We do not expect the adoption of the new lease standard to have a material impact to our net income on an ongoing basis.

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. NEW ACCOUNTING STANDARDS (Continued)

The cumulative effect of the changes made to our consolidated balance sheet at January 1, 2019, for the adoption of ASU 2016-02, Leases, was as follows (in millions):



	Balance at December 31, 2018		Adjustments due to ASU 2016-02			Balance at January 1, 2019
Balance sheet
Assets
Other assets, current	$	3,930	$	(8	)	$	3,922
Other assets, non-current	7,929		1,324			9,253
Deferred income taxes	10,412		(4		)	10,408
Liabilities
Other liabilities and deferred revenue, current	20,556		316			20,872
Other liabilities and deferred revenue, non-current	23,588		983			24,571
Equity
Retained earnings	22,668		13			22,681

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



ASU		Effective Date
2018-17	Targeted Improvements to Related Party Guidance for Variable Interest Entities	January 1, 2019
2018-16	Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes	January 1, 2019
2018-13	Fair Value Measurement - Changes to the Disclosure Requirements for Fair Value Measurement	January 1, 2019
2018-08	Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made	January 1, 2019
2018-07	Stock Compensation - Improvements to Nonemployee Share-Based Payment Accounting	January 1, 2019
2018-02	Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (a)	January 1, 2019

__________

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

Accounting Standards Issued But Not Yet Adopted

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

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

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. REVENUE

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



	First Quarter 2018
	Automotive		Mobility		Ford Credit		Consolidated
Vehicles, parts, and accessories	$	37,417	$	—	$	—	$	37,417
Used vehicles	928		—		—		928
Extended service contracts	329		—		—		329
Other revenue	219		4		55		278
Revenues from sales and services	38,893		4		55		38,952

Leasing income	119		—		1,415		1,534
Financing income	—		—		1,432		1,432
Insurance income	—		—		41		41
Total revenues	$	39,012	$	4	$	2,943	$	41,959

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

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

The amount of consideration we receive and revenue we recognize on our vehicles, parts, and accessories varies with changes in marketing incentives and returns we offer to our customers and their customers. As a result of changes in our estimate of marketing incentives, we recorded a decrease related to revenue recognized in prior periods of $718 million and $481 million in the first quarter of 2018 and 2019, respectively.

We sell separately-priced service contracts that extend mechanical and maintenance coverages beyond our base warranty agreements to vehicle owners (“extended service contracts”). At December 31, 2017 and December 31, 2018, $3.8 billion and $4 billion, respectively, of unearned revenue associated with outstanding contracts was reported in Other liabilities and deferred revenue. We recognized $298 million and $305 million of the unearned amounts as revenue during the first quarter of 2018 and 2019, respectively. At March 31, 2019, the unearned amount was $4 billion. We expect to recognize approximately $900 million of the unearned amount in the remainder of 2019, $1.1 billion in 2020, and $2 billion thereafter.

Amounts paid to dealers to obtain these contracts are deferred and recorded as Other assets. We had a balance of $247 million and $256 million in deferred costs as of December 31, 2018 and March 31, 2019, respectively, and recognized $18 million and $19 million of amortization during the first quarter of 2018 and 2019, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. OTHER INCOME/(LOSS)

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



	First Quarter
	2018			2019
Net periodic pension and other postretirement employee benefits (OPEB) income/(cost), excluding service cost	$	477		$	272
Investment-related interest income	146			203
Interest income/(expense) on income taxes	1			(20		)
Realized and unrealized gains/(losses) on cash equivalents, marketable securities, and other securities	(5		)	67
Gains/(Losses) on changes in investments in affiliates	58			3
Royalty income	143			84
Other	43			19
Total	$	863		$	628

NOTE 5. INCOME TAXES

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

NOTE 6. CAPITAL STOCK AND EARNINGS PER SHARE

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

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



	First Quarter
	2018		2019
Basic and Diluted Income Attributable to Ford Motor Company
Basic income	$	1,736	$	1,146
Diluted income	1,736		1,146

Basic and Diluted Shares
Basic shares (average shares outstanding)	3,974		3,973
Net dilutive options, unvested restricted stock units, and unvested restricted stock shares	23		24
Diluted shares	3,997		3,997

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. 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):



		December 31, 2018
	Fair Value Level	Automotive		Mobility		Ford Credit		Consolidated
Cash and cash equivalents
U.S. government	1	$	220	$	—	$	139	$	359
U.S. government agencies	2	496		—		25		521
Non-U.S. government and agencies	2	169		—		114		283
Corporate debt	2	174		—		884		1,058
Total marketable securities classified as cash equivalents		1,059		—		1,162		2,221
Cash, time deposits, and money market funds		5,999		53		8,445		14,497
Total cash and cash equivalents		$	7,058	$	53	$	9,607	$	16,718

Marketable securities
U.S. government	1	$	3,014	$	—	$	289	$	3,303
U.S. government agencies	2	1,953		—		65		2,018
Non-U.S. government and agencies	2	4,674		—		610		5,284
Corporate debt	2	5,614		—		198		5,812
Equities (a)	1	424		—		—		424
Other marketable securities	2	246		—		146		392
Total marketable securities		$	15,925	$	—	$	1,308	$	17,233

Restricted cash		$	16	$	33	$	140	$	189

		March 31, 2019
	Fair Value Level	Automotive		Mobility		Ford Credit		Consolidated
Cash and cash equivalents
U.S. government	1	$	1,044	$	—	$	1,112	$	2,156
U.S. government agencies	2	325		—		599		924
Non-U.S. government and agencies	2	658		—		394		1,052
Corporate debt	2	484		—		639		1,123
Total marketable securities classified as cash equivalents		2,511		—		2,744		5,255
Cash, time deposits, and money market funds		6,481		123		8,989		15,593
Total cash and cash equivalents		$	8,992	$	123	$	11,733	$	20,848

Marketable securities
U.S. government	1	$	2,769	$	—	$	241	$	3,010
U.S. government agencies	2	1,940		—		40		1,980
Non-U.S. government and agencies	2	4,219		—		803		5,022
Corporate debt	2	5,375		—		556		5,931
Equities (a)	1	478		—		—		478
Other marketable securities	2	255		—		206		461
Total marketable securities		$	15,036	$	—	$	1,846	$	16,882

Restricted cash		$	6	$	44	$	121	$	171

__________

(a) Net unrealized gains/losses on equities were a $25 million gain and a $54 million gain at December 31, 2018 and March 31, 2019, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

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



	December 31, 2018
										Fair Value of Securities with Contractual Maturities
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Within 1 Year		After 1 Year through 5 Years		After 5 Years
Automotive
U.S. government	$	2,933	$	5	$	(10	)	$	2,928	$	1,714	$	1,214	$	—
U.S. government agencies	1,920		—		(18		)	1,902		797		1,087		18
Non-U.S. government and agencies	3,841		4		(37		)	3,808		194		3,614		—
Corporate debt	4,010		3		(33		)	3,980		1,148		2,830		2
Other marketable securities	207		—		—			207		1		134		72
Total	$	12,911	$	12	$	(98	)	$	12,825	$	3,854	$	8,879	$	92

	March 31, 2019
										Fair Value of Securities with Contractual Maturities
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Within 1 Year		After 1 Year through 5 Years		After 5 Years
Automotive
U.S. government	$	2,914	$	7	$	(5	)	$	2,916	$	1,884	$	1,027	$	5
U.S. government agencies	1,972		1		(10		)	1,963		1,106		851		6
Non-U.S. government and agencies	3,639		8		(17		)	3,630		362		3,263		5
Corporate debt	5,154		21		(9		)	5,166		2,199		2,964		3
Other marketable securities	212		1		—			213		1		135		77
Total	$	13,891	$	38	$	(41	)	$	13,888	$	5,552	$	8,240	$	96

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



	First Quarter
	2018		2019
Automotive
Sales proceeds	$	1,339	$	1,142
Gross realized gains	—		2
Gross realized losses	6		5

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

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

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



	December 31, 2018
	Less than 1 year					1 Year or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

Automotive
U.S. government	$	199	$	(1	)	$	1,637	$	(9	)	$	1,836	$	(10	)
U.S. government agencies	193		(1		)	1,596		(17		)	1,789		(18		)
Non-U.S. government and agencies	341		(1		)	2,445		(36		)	2,786		(37		)
Corporate debt	1,816		(16		)	856		(17		)	2,672		(33		)
Other marketable securities	125		—			—		—			125		—
Total	$	2,674	$	(19	)	$	6,534	$	(79	)	$	9,208	$	(98	)

	March 31, 2019
	Less than 1 year					1 Year or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Automotive
U.S. government	$	324	$	—		$	685	$	(5	)	$	1,009	$	(5	)
U.S. government agencies	90		—			1,524		(10		)	1,614		(10		)
Non-U.S. government and agencies	25		—			2,171		(17		)	2,196		(17		)
Corporate debt	233		(1		)	1,110		(8		)	1,343		(9		)
Other marketable securities	22		—			48		—			70		—
Total	$	694	$	(1	)	$	5,538	$	(40	)	$	6,232	$	(41	)

During the first quarter of 2018 and 2019, we did not recognize any other-than-temporary impairment loss.

Cash, Cash Equivalents, and Restricted Cash

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



	December 31, 2018		March 31, 2019
Cash and cash equivalents	$	16,718	$	20,848
Restricted cash (a)	189		171
Total cash, cash equivalents, and restricted cash	$	16,907	$	21,019

__________


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

Other Securities

We have investments in entities for which we do not have the ability to exercise significant influence and fair values are not readily available. We have elected to record these investments at cost (less impairment, if any), adjusted for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We report the carrying value of these investments in Other assets in the non-current assets section of our consolidated balance sheet. These investments were $250 million and $233 million at December 31, 2018 and March 31, 2019, respectively. In the first quarter of 2019, there there were no material adjustments to the fair values of these investments held at March 31, 2019.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. FORD CREDIT FINANCE RECEIVABLES

Ford Credit manages finance receivables as “consumer” and “non-consumer” portfolios. The receivables are generally secured by the vehicles, inventory, or other property being financed. Finance receivables, net were as follows (in millions):



	December 31, 2018			March 31, 2019
Consumer
Retail installment contracts, gross	$	70,874		$	69,258
Finance leases, gross	8,748			9,011
Retail financing, gross	79,622			78,269
Unearned interest supplements	(3,508		)	(3,478		)
Consumer finance receivables	76,114			74,791
Non-Consumer
Dealer financing	34,372			35,498
Non-Consumer finance receivables	34,372			35,498
Total recorded investment	$	110,486		$	110,289

Recorded investment in finance receivables	$	110,486		$	110,289
Allowance for credit losses	(589		)	(513		)
Finance receivables, net	$	109,897		$	109,776

Current portion	$	54,353		$	55,444
Non-current portion	55,544			54,332
Finance receivables, net	$	109,897		$	109,776

Net finance receivables subject to fair value (a)	$	101,471		$	101,122
Fair value (b)	100,877			100,823

__________


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


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

Ford Credit’s finance leases are comprised of sales-type and direct financing leases. Ford Credit offers finance leases to individuals, leasing companies, government entities, daily rental companies, and fleet customers. These financings include primarily lease plans for terms of 24 to 60 months. Financing revenue from finance leases was $95 million and $92 million for the periods ended March 31, 2018 and 2019, respectively, and is included in Ford Credit revenues on the consolidated income statement.

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



	March 31, 2019
Within one year	$	2,064
After one year and within two years	1,955
After two years and within three years	1,646
After three years and within four years	691
After four years and within five years	124
After five years	2
Total future cash payments	6,482
Less: Present value discount	(315		)
Finance lease receivables	$	6,167

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. FORD CREDIT FINANCE RECEIVABLES (Continued)

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



	March 31, 2019
Finance lease receivables	$	6,167
Unguaranteed residual assets	2,713
Initial direct costs	131
Finance leases, gross	9,011
Unearned interest supplements from Ford and affiliated companies	(340		)
Allowance for credit losses	(17		)
Finance leases, net	$	8,654

At December 31, 2018 and March 31, 2019, accrued uncollected interest was $264 million and $274 million, respectively, which is reported in Other assets in the current assets section of our consolidated balance sheet.

Included in the recorded investment in finance receivables at December 31, 2018 and March 31, 2019, were consumer receivables of $40.7 billion and $43.2 billion, respectively, and non-consumer receivables of $25.7 billion and $26.3 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. The receivables are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations or the claims of Ford Credit’s other creditors. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions.

Aging

For all finance receivables, Ford Credit defines “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date. The recorded investment of consumer receivables greater than 90 days past due and still accruing interest was $20 million at December 31, 2018. At March 31, 2019, there were no balances greater than 90 days past due that are still accruing interest.

The aging analysis of Ford Credit’s finance receivables balances was as follows (in millions):



	December 31, 2018		March 31, 2019
Consumer
31-60 days past due	$	859	$	563
61-90 days past due	123		82
91-120 days past due	39		34
Greater than 120 days past due	39		40
Total past due	1,060		719
Current	75,054		74,072
Consumer finance receivables	76,114		74,791
Non-Consumer
Total past due	76		81
Current	34,296		35,417
Non-Consumer finance receivables	34,372		35,498
Total recorded investment	$	110,486	$	110,289

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. FORD CREDIT FINANCE RECEIVABLES (Continued)

Credit Quality

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


•	Pass – current to 60 days past due;


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


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

Non-Consumer Portfolio. 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 was as follows (in millions):



	December 31, 2018		March 31, 2019
Dealer Financing
Group I	$	27,032	$	28,097
Group II	5,635		5,744
Group III	1,576		1,533
Group IV	129		124
Total recorded investment	$	34,372	$	35,498

Impaired Receivables. Impaired consumer receivables include accounts that have been rewritten or modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code that are considered to be Troubled Debt Restructurings (“TDRs”), as well as all accounts greater than 120 days past due. Impaired non-consumer receivables represent accounts with dealers that have weak or poor financial metrics or dealer financing that has been modified in TDRs. The recorded investment of consumer receivables that were impaired at December 31, 2018 and March 31, 2019 was $370 million and $359 million, or 0.5% and 0.5% of consumer receivables, respectively. The recorded investment of non-consumer receivables that were impaired at December 31, 2018 and March 31, 2019 was $129 million and $124 million, or 0.4% and 0.3% of non-consumer receivables, respectively. Impaired finance receivables are evaluated both collectively and specifically.

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. FORD CREDIT ALLOWANCE FOR CREDIT LOSSES

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



	First Quarter 2018
	Consumer			Non-Consumer			Total
Allowance for credit losses
Beginning balance	$	582		$	15		$	597
Charge-offs	(131		)	(2		)	(133		)
Recoveries	39			1			40
Provision for credit losses	92			2			94
Other	2			—			2
Ending balance	$	584		$	16		$	600

Analysis of ending balance of allowance for credit losses
Collective impairment allowance	$	563		$	15		$	578
Specific impairment allowance	21			1			22
Ending balance	584			16			600

Analysis of ending balance of finance receivables
Collectively evaluated for impairment	$	75,846		$	36,067		$	111,913
Specifically evaluated for impairment	380			108			488
Recorded investment	76,226			36,175			112,401

Ending balance, net of allowance for credit losses	$	75,642		$	36,159		$	111,801



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

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

Analysis of ending balance of finance receivables
Collectively evaluated for impairment	$	74,432		$	35,374		$	109,806
Specifically evaluated for impairment	359			124			483
Recorded investment	74,791			35,498			110,289

Ending balance, net of allowance for credit losses	$	74,295		$	35,481		$	109,776

Item 1. Financial Statements (Continued)

FORD MOTOR COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. INVENTORIES

Inventories were as follows (in millions):



	December 31, 2018		March 31, 2019
Raw materials, work-in-process, and supplies	$	4,536	$	4,653
Finished products	6,684		7,680
Total inventories	$	11,220	$	12,333

NOTE 11. NET INVESTMENT IN OPERATING LEASES

Net investment in operating leases consist primarily of lease contracts for vehicles with individuals, daily rental

companies, government entities, and fleet customers. Assets subject to operating leases are depreciated using the

straight-line method over the term of the lease to reduce the asset to its estimated residual value. Estimated residual

values are based on assumptions for used vehicle prices at lease termination and the number of vehicles that are

expected to be returned.

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



	December 31, 2018			March 31, 2019
Automotive Segment
Vehicles, net of depreciation	$	1,705		$	1,656
Ford Credit Segment
Vehicles and other equipment, at cost (a)	33,557			33,551
Accumulated depreciation	(6,143		)	(5,978		)
Total Ford Credit Segment	27,414			27,573
Total	$	29,119		$	29,229

__________

(a)

Includes Ford Credit’s operating lease assets of $16.3 billion and $16 billion at December 31, 2018 and March 31, 2019, respectively, which have been included in certain lease securitization transactions. These net investments in operating leases are available only for payment of the debt or other obligations issued or arising in the securitization transactions; they are not available to pay other obligations or the claims of other creditors.

Ford Credit Segment

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



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

The amounts contractually due on our operating leases at March 31, 2019 were as follows (in millions):

Within one year

After one year and within two years

After two years and within three years

After three years and within four years

After four years and within five years

Total