Ford Motor Company — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Comparisons are with Q1 2022 unless stated otherwise. Ford introduced a new segment reporting structure in 2023—Ford Blue, Model e, Pro, Next and Ford Credit—and retrospectively adjusted prior-period segment data.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $41.5B | $34.5B |
| Operating income | $2.1B | $1.3B |
| Net income attributable to Ford | $1.8B | $(3.1)B |
| GAAP diluted EPS | $0.44 | $(0.78) |
| Adjusted EBIT (non-GAAP) | $3.4B | $2.3B |
| Adjusted EBIT margin (non-GAAP) | 8.1% | 6.7% |
| Net income margin | 4.2% | (9.0)% |
| Operating cash flow | $2.8B | $(1.1)B |
| Adjusted free cash flow (non-GAAP) | $0.7B | $(0.6)B |
Revenue rose 20%. Ford attributed the $4.9B improvement in net income mainly to the non-recurrence of a large Rivian investment mark-to-market loss from Q1 2022 and stronger Ford Blue and Ford Pro results. Adjusted EBIT increased $1.1B, with higher Blue and Pro earnings and a smaller Ford Next loss partly offset by weaker Model e, Ford Credit and Corporate Other results. Adjusted diluted EPS was $0.63 versus $0.38.
Segment results
- Ford Blue: Revenue $25.1B; EBIT $2.6B; margin 10.4%. EBIT increased $1.3B, supported by volume, mix and pricing, partly offset by inflation, currency effects and higher warranty costs.
- Ford Model e: Revenue $707M; EBIT loss $722M versus a $380M loss. Lower wholesales, engineering and investment spending, and inflation weighed on results; Mach-E plant downtime affected volume.
- Ford Pro: Revenue $13.2B; EBIT $1.4B; margin 10.3%. EBIT increased $875M, mainly on higher pricing and wholesales, partly offset by costs, launch expenses and warranty costs.
- Ford Next: EBIT loss $44M, an improvement of $198M. The segment is focused on incubating and launching vehicle-adjacent businesses.
- Ford Credit: EBT $303M versus $928M. Lower financing margins from higher borrowing costs, higher credit losses, weaker lease residual performance and market valuation effects were cited. Net receivables were $123.8B, up about 6% year over year.
Cash, debt and liquidity
- Cash and cash equivalents were $22.1B and marketable securities $17.4B at March 31; cash, equivalents and restricted cash totaled $22.4B, down $3.0B from year-end 2022.
- Company cash excluding Ford Credit was $28.7B; Company liquidity was $46.2B, versus $32.3B and $48.0B, respectively, at year-end. Ford’s stated cash target is at least $20B.
- Company debt excluding Ford Credit was $19.7B. Ford Credit debt was $119.6B; consolidated debt was approximately $139.3B. Ford Credit debt primarily funds its finance receivables and is separate from Ford’s non-Credit debt.
- Capital spending was $1.8B. Working capital used $1.2B, chiefly reflecting higher inventory. The company paid $3.2B in dividends, including regular and supplemental dividends.
- Total assets were $256.8B, total liabilities $214.6B and total equity $42.2B at quarter-end. Inventory increased to $16.2B from $14.1B at year-end, reflecting higher in-transit and in-plant inventory.
Outlook, risks and unusual items
- 2023 guidance: Adjusted EBIT $9B–$11B; adjusted free cash flow about $6B; capital spending $8B–$9B; Ford Credit EBT about $1.3B. Segment expectations: Blue about $7B EBIT, Model e about a $3B loss and Pro about $6B EBIT.
- Management cited potential tailwinds from improving supply, higher industry volumes, the Super Duty launch and lower materials costs; headwinds include economic uncertainty, rising customer incentives, currency effects, lower past-service pension income and growth investments.
- Q1 pre-tax special-item charges were $912M, mainly $667M of restructuring charges in Europe and China, plus $159M of pension remeasurement and settlement losses. Ford estimated 2023 restructuring charges of $1.5B–$2B.
- Ford estimated reasonably possible losses in excess of accruals of up to about $2B for certain indirect tax, customs and regulatory matters, and up to about $700M for material field-service and customer-satisfaction actions. Outcomes may differ from estimates.
- Brazil tax assessments remain under appeal; Ford described overall loss risk as remote, but said required collateral could exceed $1B and might include cash. A New Jersey environmental case related to the Ringwood site continues; the court denied Ford’s motion to dismiss.
- Other disclosed risks include supply and raw-material availability and commitments, vehicle defects and warranty expense, EV investment execution and demand, inflation and interest rates, foreign exchange, credit losses and lease residual values, capital-market access, cyber incidents, labor disruptions, regulation, and litigation. Ford Credit’s allowance for credit losses rose $25M in Q1; management said the future effects of inflation and higher rates on losses remain uncertain.
- Ford reported no credit-rating actions since its 2022 Form 10-K. Its ratings shown in the filing are below investment grade, with positive outlooks at several agencies and stable outlooks at Moody’s.
Most important facts for investors to verify
- Whether Ford can deliver the full-year adjusted EBIT and free-cash-flow guidance, particularly as pricing and incentives evolve.
- Ford Model e’s path to reduce its losses while funding product launches, capacity and EV-related commitments.
- Ford Pro and Blue volume, pricing, warranty expense and cost trends, including the impact of supply recovery and new-product launches.
- Ford Credit’s funding costs, credit-loss normalization, auction values, lease residual performance and liquidity.
- Restructuring cash costs, warranty accrual adequacy, and the outcomes and potential collateral requirements of material legal and tax matters.
- Cash conversion and capital needs, including planned $8B–$9B capital spending, pension contributions and raw-material commitments.
Adjusted EBIT, adjusted free cash flow, adjusted EPS and adjusted ROIC are non-GAAP measures; Ford cautions that they supplement, and do not replace, GAAP results.