Ford Motor Company — Q3 2022 Form 10-Q
Reporting period: Quarter ended September 30, 2022. Unless noted otherwise, figures are in U.S. dollars. Ford reports Automotive, Mobility, and Ford Credit segments.
Financial performance
| Metric | Q3 2022 | Q3 2021 | First nine months 2022 | First nine months 2021 |
|---|---|---|---|---|
| Revenue | $39.4B | $35.7B | $114.1B | $98.7B |
| Net income/(loss) attributable to Ford | $(827)M | $1.8B | $(3.3)B | $5.7B |
| Diluted GAAP EPS | $(0.21) | $0.45 | $(0.81) | $1.40 |
| Adjusted EBIT (non-GAAP) | $1.8B | $3.0B | $7.9B | $8.0B |
| Adjusted EBIT margin (non-GAAP) | 4.6% | 8.4% | 6.9% | 8.1% |
| Operating cash flow | $3.8B | $7.0B | $5.7B | $12.3B |
| Adjusted free cash flow (non-GAAP) | $3.6B | $7.8B | $6.6B | $2.3B |
Q3 revenue rose 10% year over year, but Ford reported a GAAP loss, primarily reflecting a $2.7B pre-tax Argo AI impairment. Q3 also included a $646M Rivian investment gain; the first nine months included a $7.3B Rivian investment loss. Adjusted EBIT excludes special items and is a non-GAAP measure.
Automotive Q3 EBIT was $1.7B, down $758M year over year; higher net pricing and wholesales were more than offset by inflationary costs, unfavorable mix, and currency effects. Ford Credit Q3 EBT was $599M, down $478M, mainly due to lower lease residual gains, weaker financing margin, and lower credit-loss reserve releases. Mobility reported a $244M EBIT loss.
Balance sheet and liquidity
- At September 30, 2022, Ford had $21.5B of cash and cash equivalents and $18.6B of marketable securities. Company cash excluding Ford Credit was $32.0B; Company liquidity was $49.2B, including available committed credit lines.
- Company debt excluding Ford Credit was $20.3B, and Company cash net of that debt was $11.8B. Ford Credit debt was $108.0B. Ford Credit reported $20.9B of net liquidity available for use and 9.4:1 financial-statement leverage.
- Consolidated total equity was $42.1B, down $6.5B from December 31, 2021; equity attributable to Ford was $42.1B, down $6.4B.
- Inventory increased to $15.2B from $12.1B at year-end. It included about 40,000 completed vehicles awaiting components and additional quality review.
- Ford’s global pension plans showed a $1.2B overfunded status; OPEB remained underfunded by $5.8B.
Changes, outlook, and key risks
- Compared with Q3 2021, adjusted EBIT fell $1.2B and adjusted EBIT margin declined 3.8 percentage points. Ford cited inflation, including $1.3B in inflation-related supplier payments, as well as mix and currency pressures. Wholesales increased 7%.
- First-nine-month operating cash flow fell $6.6B year over year, while adjusted free cash flow increased $4.4B. Working-capital movements, inventory, Ford Credit distributions, and other timing items affected cash generation.
- Ford reaffirmed its October 26, 2022 full-year guidance: adjusted EBIT about $11.5B; adjusted free cash flow $9.5B–$10.0B; capital spending about $6.5B; Ford Credit EBT about $2.7B; and pension contributions about $0.6B. Management expected approximately 10% year-over-year growth in wholesale shipments.
- Guidance assumes no further supply-chain deterioration, continued strong demand and pricing, about $9B of high commodity and broad-based inflationary costs, strong but lower auction values, higher borrowing costs, and a strong U.S. dollar. Additional restructuring could increase charges and cash effects beyond guidance.
- Ford reported semiconductor and other supplier disruptions, inflation and volatile commodity and energy prices, rising interest rates, and effects of the Russia-Ukraine conflict. Management noted uncertainty about the effect of inflation, energy prices, and higher rates on future Ford Credit losses.
- Ford and Volkswagen began exiting joint L4 autonomous-vehicle development through Argo AI; Ford announced Argo planned to wind down operations. The impairment reduced Ford’s Argo investment carrying value to $64M. Ford said it would redirect investment toward advanced L2/L3 systems.
- Ford cited up to about $2B of reasonably possible loss in excess of accruals for material indirect-tax, customs, and regulatory matters, and up to about $700M of reasonably possible warranty and field-service costs above accruals. A Georgia jury awarded $1.7B in punitive damages against Ford in the Hill case, in addition to $16.8M apportioned to Ford; Ford filed post-trial motions seeking a new trial.
- On October 26, Ford announced a share repurchase authorization of up to 35M shares to offset dilution from share-based compensation.
Important facts for investors to verify
- Whether supply constraints ease and Ford can meet shipment, pricing, and full-year adjusted EBIT and free-cash-flow guidance assumptions.
- How persistent material, freight, energy, and supplier-inflation costs affect Automotive margins and cash flow.
- Rivian investment valuation movements and the final costs or obligations related to Argo AI’s wind-down.
- Ford Credit’s credit losses, lease residual values, funding costs, and liquidity as interest rates and economic conditions change.
- Developments and potential financial exposure in the Hill litigation, tax assessments, and other disclosed contingencies.