Ford Motor Company — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed February 3, 2022. This is an annual report, not a separate fourth-quarter filing. Figures are in U.S. dollars unless noted.
Business context
Ford designs, manufactures, markets, and finances Ford and Lincoln vehicles globally. Its reportable segments are Automotive, Mobility, and Ford Credit. The company’s Ford+ strategy targets growth in electrification, connected services, and mobility. Semiconductor shortages constrained 2021 production and dealer inventories.
Financial results and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $136.3 billion | $127.1 billion |
| Net income (loss) attributable to Ford | $17.9 billion | $(1.3) billion |
| Diluted EPS | $4.45 | $(0.32) |
| Adjusted EBIT (non-GAAP) | $10.0 billion | $2.5 billion |
| Adjusted EBIT margin (non-GAAP) | 7.3% | 2.0% |
| Cash from operating activities | $15.8 billion | $24.3 billion |
| Adjusted free cash flow (non-GAAP) | $4.6 billion | $1.3 billion |
The substantial GAAP profit reflected $9.6 billion of pre-tax special-item gains, principally Rivian investment gains and pension/OPEB remeasurement gains. These were partly offset by global redesign costs and a $1.7 billion loss on debt extinguishment. The $9.1 billion gain on equity investments included a large Rivian mark-to-market gain; it is not equivalent to recurring operating earnings. The 2021 tax benefit was $130 million, including benefits from deferred tax asset recognition and valuation-allowance reversals.
Automotive revenue rose 9% to $126.2 billion while wholesales fell 6% to 3.942 million units. Automotive EBIT increased to $7.4 billion from $1.7 billion, aided by higher pricing, richer mix, lower warranty expense, and stronger currencies; lower volume and higher commodity costs were offsets. North America generated $7.4 billion EBIT (8.4% margin). South America and Europe remained loss-making; China also reported a loss. Ford Credit EBT rose to $4.7 billion from $2.6 billion, driven primarily by lease residual performance and lower credit-loss provisions.
Company cash excluding Ford Credit was $36.5 billion and liquidity was $52.4 billion at year-end; cash excluding the $10.6 billion Rivian marketable-security position was $26.0 billion. Company debt excluding Ford Credit was $20.4 billion, down from $24.0 billion; cash net of that debt was $16.1 billion. Consolidated cash, cash equivalents, marketable securities, and restricted cash totaled $49.8 billion. Ford Credit had $32.0 billion of net liquidity available for use, $117.7 billion of debt, and managed leverage of 8.4:1 (within its 8:1–9:1 target).
Global pension plans were underfunded by $0.3 billion at year-end, an improvement of $6.4 billion; funded plans were overfunded by $5.8 billion, while unfunded plans were underfunded by $6.1 billion. OPEB funded status was a $6.0 billion shortfall.
Changes versus 2020
- Revenue increased 7%; adjusted EBIT rose $7.5 billion, reflecting a strong recovery in Automotive and higher Ford Credit earnings.
- Net income improved by $19.2 billion, but the comparison is heavily affected by 2021 investment and pension gains and 2020’s pandemic-era loss.
- Operating cash flow declined $8.5 billion, despite higher adjusted free cash flow; Ford cited adverse working capital, including a $1.8 billion inventory cash use, and lower Ford Credit operating cash flow.
- Automotive wholesales declined by 245,000 units amid semiconductor-related production constraints. Global market share fell from 5.8% to 5.1%.
- Ford reinstated a $0.10 quarterly dividend in the fourth quarter of 2021. No public share-repurchase program purchases were reported for the quarter.
Outlook, risks, and unusual items
Ford’s 2022 guidance, issued February 3, 2022, was adjusted EBIT of $11.5–$12.5 billion, adjusted free cash flow of $5.5–$6.5 billion, and capital spending of $7–$8 billion. It expected wholesales to rise about 10%–15%, continued fluid supply constraints, a strong but dynamic pricing environment, inflationary pressure, and commodity costs $1.5–$2.0 billion above 2021. Ford expected $1.8–$2.4 billion of global redesign EBIT charges and $2.0–$2.5 billion of related cash effects; Ford Credit EBT was expected to remain strong but be lower than 2021.
- Operations and strategy: Semiconductor and other supplier shortages, COVID-19 disruptions, commodity inflation, labor constraints, and execution of Ford+ could affect production, margins, and investment returns. Ford expects continued multi-billion-dollar investment in electrification and mobility.
- Contingencies: U.S. Customs assessed a $1.3 billion penalty plus $181 million of additional duties and interest concerning Transit Connect imports; Ford intends to contest the assessment. The company disclosed up to about $1.7 billion of reasonably possible loss in excess of accruals for material indirect-tax and customs matters. Separately, Brazilian tax assessments could require collateral exceeding $1 billion, potentially including cash, although Ford assessed its overall loss risk as remote.
- Other risks: Warranty/field-service accruals were $8.45 billion; estimated reasonably possible costs above accruals for material field actions and customer satisfaction actions were up to about $1 billion. Ford also highlighted residual-value and credit-loss risks at Ford Credit, regulatory and emissions requirements, cyber and privacy threats, and volatile investment and foreign-exchange values.
- Unusual items: Ford’s $10.6 billion Rivian position was marked at $103.69 per share at year-end; the filing notes a price of $64.32 on February 2, 2022. Ford repurchased or redeemed $7.6 billion principal amount of higher-coupon debt for an aggregate cost of $9.3 billion. Ford also continued manufacturing exits in Brazil and India.
PwC gave unqualified opinions on the financial statements and internal control over financial reporting. The audit identified critical audit matters involving Ford Credit’s consumer credit-loss allowance and the U.S. warranty and field-service accrual.
Most important facts for investors to verify
- How much of reported net income and EPS reflects Rivian valuation gains, pension remeasurement, and tax benefits rather than recurring operations; review adjusted-to-GAAP reconciliations.
- Whether semiconductor availability, dealer inventory recovery, pricing, and commodity inflation support the 2022 volume and margin assumptions.
- The Rivian share value and its effect on reported cash, liquidity, and future earnings volatility.
- Progress and cash costs of global redesign, including Brazil and India exits, and the expected 2022 charges and payments.
- Developments in the disputed Customs penalty and other tax/customs exposures, including any collateral or cash-payment requirements.
- Ford Credit’s credit-loss and lease-residual assumptions, liquidity, leverage, and funding access as used-vehicle values and interest rates change.