Ford Motor Company — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Comparisons are with Q1 2020 unless stated otherwise. Dollar amounts are U.S. dollars; “adjusted” measures are non-GAAP.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $36.2 billion | $34.3 billion |
| Net income/(loss), attributable to Ford | $3.262 billion | $(1.993) billion |
| Diluted EPS | $0.81 | $(0.50) |
| Net income/(loss) margin | 9.0% | (5.8)% |
| Company adjusted EBIT | $4.816 billion | $(0.632) billion |
| Adjusted EBIT margin | 13.3% | (1.8)% |
| Cash from operating activities | $4.492 billion | $(0.473) billion |
| Company adjusted free cash flow | $(0.396) billion | $(2.174) billion |
Revenue increased 6%. Management attributed the earnings improvement to Automotive and Ford Credit performance and Corporate Other, including a non-cash $902 million gain on Ford’s Rivian investment. Q1 included $401 million of pre-tax special-item charges, mainly global redesign activity.
Segments and operating trends
- Automotive: EBIT was $3.403 billion versus a $154 million loss; margin was 10.1%. Higher pricing, favorable mix, lower warranty expense and structural cost reductions more than offset lower volume. Wholesales declined 6% to 1.062 million units; the semiconductor shortage eliminated about 200,000 units, or 17% of planned Q1 production. Global market share fell 0.6 percentage points to 5.3%.
- Ford Credit: EBT was $962 million versus $30 million. The improvement reflected lower credit-loss provisioning and stronger off-lease auction results. Loss-to-receivables was 0.22%, down 40 basis points year over year. Net receivables were $127 billion, down 8%.
- Mobility: EBIT loss was $197 million, an $88 million improvement, reflecting continued strategic investment.
- Corporate Other: Profit was $648 million versus a $223 million loss, more than explained by the $902 million Rivian investment gain.
Liquidity, debt and balance sheet
- At March 31, Ford reported $21.8 billion of cash and cash equivalents, $24.3 billion of marketable securities and $0.2 billion of restricted cash, or about $46.3 billion combined.
- Company cash excluding Ford Credit was $31.3 billion; Company liquidity was $47.2 billion. Company debt excluding Ford Credit was $25.9 billion, up from $24.0 billion at year-end 2020; cash net of that debt was $5.5 billion.
- Ford Credit debt was $126.8 billion, down from $137.7 billion at year-end. Ford Credit reported $33.7 billion of net liquidity available for use and managed leverage of 7.3:1, below its 8:1–9:1 target range; it expected leverage to return to the target range later in 2021.
- Consolidated operating cash flow improved substantially, but adjusted free cash flow remained negative, reflecting working-capital and other timing effects, including inventory accumulation.
Outlook, risks and unusual items
- 2021 guidance, updated April 28, 2021: adjusted EBIT of $5.5–$6.5 billion; adjusted free cash flow of $0.5–$1.5 billion; capital spending of $6.0–$6.5 billion; pension contributions of $0.6–$0.8 billion. Ford expected Ford Credit EBT to improve versus 2020 and auction values to be higher.
- Ford estimated a semiconductor-related loss of about 1.1 million wholesale units for 2021 and an adjusted EBIT headwind of about $2.5 billion, net of recovery actions. It expected about 50% of planned Q2 production to be lost, with the second quarter the year’s trough; the shortage might not be fully resolved until 2022. Q2 adjusted free cash flow was expected to be significantly negative, while liquidity was expected to remain healthy.
- Ford expected $2.2–$2.7 billion of 2021 global redesign EBIT charges and $3.0–$3.5 billion of redesign cash effects. The company noted further restructuring could add to those amounts. Full-year cash spending on its global redesign was expected to reach about $5 billion through 2021.
- Other notable items include a $155 million gain from consolidating Getrag Ford Transmissions and an expected approximately $150 million gain from the April 1 sale of Ford Taiwan, to be recognized in Q2. Q1 inventory included completed vehicles awaiting semiconductor-related components and further review.
- Risks highlighted include semiconductor and other supplier disruptions, COVID-19 and economic uncertainty, vehicle defects and warranty costs, competition and demand for profitable vehicles, market and foreign-exchange volatility, access to funding, Ford Credit credit losses and lease residual values, pension obligations, and litigation or regulatory matters. Ford disclosed estimated reasonably possible losses of up to about $400 million beyond accruals for certain indirect tax and customs matters, and up to about $1 billion for material field-service and customer-satisfaction actions. It considered its overall risk of loss on the outstanding Brazilian tax assessments remote, but noted that required collateral could exceed $1 billion.
Important facts for investors to verify
- Whether semiconductor availability, production recovery and dealer inventory levels support the 2021 earnings and cash-flow guidance.
- How much Q1 profitability depended on unusually strong pricing, lower incentives, favorable auction values and the non-cash Rivian valuation gain.
- Whether negative adjusted free cash flow and inventory-related working-capital needs reverse as management expects.
- Ford Credit’s future credit losses, lease residual values, funding access and progress returning managed leverage to its target range.
- The eventual cash costs and timing of global redesign actions, and developments in warranty, litigation, tax and collateral exposures.