Business context and reporting period
Ford Motor Company’s Form 10-K covers the fiscal year ended December 31, 2023; it is an annual report, not a standalone fourth-quarter report. Ford reported under its new 2023 structure: Ford Blue (ICE and hybrid vehicles), Ford Model e (EVs and software), Ford Pro (commercial vehicles and services), Ford Next (emerging businesses), and Ford Credit (vehicle financing and leasing). Ford wholesaled approximately 4.413 million vehicles worldwide, up from 4.231 million in 2022.
Financial and operating performance
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $176.2 billion | $158.1 billion |
| Net income/(loss) attributable to Ford | $4.347 billion | $(1.981) billion |
| Diluted EPS | $1.08 | $(0.49) |
| Company adjusted EBIT (non-GAAP) | $10.416 billion | $10.415 billion |
| Net income margin | 2.5% | (1.3)% |
| Adjusted EBIT margin (non-GAAP) | 5.9% | 6.6% |
| Operating cash flow | $14.9 billion | $6.9 billion |
| Company adjusted free cash flow (non-GAAP) | $6.8 billion | $9.1 billion |
Revenue increased 11%, while adjusted EBIT was essentially flat and adjusted free cash flow declined. Operating cash flow improved, primarily reflecting higher net income. Capital spending was $8.2 billion, up from $6.9 billion.
- Ford Blue: Revenue was $101.9 billion and EBIT $7.462 billion, up from $94.8 billion and $6.847 billion. Higher volume, mix, and pricing helped; warranty, material, structural, labor, and currency costs partly offset gains.
- Ford Model e: Revenue rose to $5.897 billion from $5.253 billion, but EBIT loss widened to $4.701 billion from $2.133 billion. Pricing pressure, battery and material costs, capacity, and engineering spending contributed. Ford also reported about $0.7 billion of 2023 EV-related charges.
- Ford Pro: Revenue increased to $58.1 billion from $48.9 billion; EBIT rose to $7.222 billion from $3.222 billion, with margin increasing to 12.4% from 6.6%. Pricing, volume, and lower commodity costs were key contributors.
- Ford Credit: EBT was $1.331 billion, down from $2.657 billion. Net receivables rose 9% to $133 billion; U.S. retail loss-to-receivables increased to 35 basis points from 14, and U.S. 36-month off-lease auction values fell 7%.
Liquidity, debt, and balance sheet
At year-end, Ford excluding Ford Credit reported $28.8 billion of cash and $46.4 billion of liquidity, including available committed credit lines; cash net of debt was $8.9 billion. Company debt excluding Ford Credit was $19.9 billion, roughly unchanged year over year. Ford Credit reported $129.3 billion of debt, $25.7 billion of net liquidity available for use, and 9.7:1 financial-statement leverage. Ford’s worldwide defined-benefit pension plans were underfunded by $2.3 billion, compared with $0.2 billion in 2022.
Material changes, outlook, and notable items
Ford’s net income improved from a 2022 loss, largely because 2022 included substantial nonrecurring investment losses, including the Rivian mark-to-market loss and Argo impairment. In 2023, Ford recorded $5.147 billion of pre-tax special-item charges, mainly pension and OPEB remeasurement losses, restructuring in Europe and China, and a Transit Connect customs matter. These items distinguish reported earnings from adjusted EBIT.
Management’s 2024 guidance, issued February 6, 2024, is adjusted EBIT of $10–$12 billion, adjusted free cash flow of $6–$7 billion, capital spending of $8–$9.5 billion, and Ford Credit EBT of about $1.5 billion. Segment outlook: Ford Pro EBIT $8–$9 billion; Ford Blue $7–$7.5 billion; Ford Model e loss $5–$5.5 billion. Assumptions include U.S. industry sales of 16–16.5 million vehicles, lower industry pricing as supply normalizes, no repeat of the UAW strike, and $2 billion of cost-reduction benefits to offset higher labor and product-refresh costs.
- Management cited improving supply conditions but ongoing supplier labor and production issues, price moderation, inflation, and volatile commodity, currency, and interest-rate conditions.
- UAW and Unifor contracts ratified in 2023 increase labor costs; Ford recorded about $400 million for union ratification bonuses. Management estimated about $1 billion of restructuring charges in 2024.
- EV demand and pricing have been below expectations. Ford’s long-term raw-material offtake agreements expose it to minimum-purchase and price risks; disclosed estimated purchase obligations and contingent obligations through 2035 were about $4.5 billion and $8 billion, respectively, subject to conditions and forecast changes.
- Significant legal matters include a $1.7 billion punitive-damages award in the Hill product-liability case, which Ford is appealing; a $1.3 billion CBP penalty plus $181 million of additional duties in the Transit Connect customs matter, which Ford contests; and Brazilian tax assessments that could require collateral exceeding $1 billion. Ford said its overall risk of loss on the Brazilian matters is remote. The filing estimates reasonably possible loss above accruals for material indirect tax and customs matters of up to about $1.4 billion in aggregate.
- The warranty and field-service-action accrual was $11.504 billion at year-end; estimated reasonably possible costs above accruals for material field actions and customer-satisfaction actions were up to about $1.3 billion in aggregate.
- The filing reports no cybersecurity threats in 2023 that materially affected, or were reasonably likely to materially affect, the business. The auditor issued unqualified opinions on the financial statements and internal controls; management also concluded internal controls were effective.
Investor verification points
- Reconcile GAAP net income and cash flows with management’s non-GAAP adjusted EBIT and adjusted free cash flow, including the treatment of special items and Ford Credit cash flows.
- Track Ford Model e losses, EV pricing and demand, supplier commitments, battery capacity utilization, and progress against 2024 guidance.
- Assess whether Ford Pro’s elevated 2023 margins and pricing can be sustained as vehicle supply and industry pricing normalize.
- Monitor Ford Credit credit losses, used-vehicle auction values, financing margins, liquidity, and leverage as interest rates and consumer conditions change.
- Review outcomes and potential cash effects of the Hill appeal, Transit Connect customs dispute, Brazilian tax matters, warranty claims, and restructuring actions.
- Confirm delivery of planned cost reductions, capital spending, free cash flow, and pension contributions; management expected about $1 billion of pension contributions in 2024.