Ford Motor Company — Q2 2022 Form 10-Q
Reporting period: Quarter and first half ended June 30, 2022. Amounts are U.S. dollars; financial statement figures are generally in millions unless noted. Ford reports Automotive, Mobility, and Ford Credit segments.
Financial performance and position
| Metric | Q2 2022 | First half 2022 |
|---|---|---|
| Revenue | $40.2 billion, up 50% year over year | $74.7 billion, up 19% |
| Net income attributable to Ford | $667 million, versus $561 million | Loss of $2.44 billion, versus income of $3.82 billion |
| Diluted GAAP EPS | $0.16, versus $0.14 | Loss of $0.61, versus earnings of $0.95 |
| Adjusted EBIT (non-GAAP) | $3.72 billion, versus $1.05 billion | $6.05 billion, versus $4.97 billion |
| Adjusted EBIT margin (non-GAAP) | 9.3%, versus 3.9% | 8.1%, versus 7.9% |
| Operating cash flow (GAAP) | $2.95 billion, versus $756 million | $1.86 billion, versus $5.25 billion |
| Adjusted free cash flow (non-GAAP) | $3.6 billion, versus negative $5.1 billion | $3.0 billion, versus negative $5.5 billion |
Q2 Automotive EBIT was $3.32 billion (8.8% margin), led by North America’s $3.27 billion EBIT and 11.3% margin. Ford Credit EBT was $939 million, down $684 million year over year; Mobility reported a $221 million EBIT loss. Q2 results benefited from increased wholesales and pricing, while material, commodity, and freight inflation were headwinds.
The first-half GAAP loss chiefly reflected an $7.9 billion pre-tax loss on Ford’s Rivian investment, recorded in other income/loss. Q2 included a $2.4 billion Rivian loss. Excluding special items, first-half adjusted EBIT was $6.05 billion.
At June 30, consolidated assets were $245.8 billion and equity was $44.2 billion. Company debt excluding Ford Credit was $19.4 billion; Ford Credit debt was $109.5 billion. Ford reported $28.7 billion in Company cash and $45.1 billion in Company liquidity, excluding Ford Credit. Ford Credit separately reported $25.0 billion of net liquidity and 9.1:1 financial-statement leverage. Company cash net of Company debt was $9.4 billion.
Consolidated cash, cash equivalents, and marketable securities totaled $36.7 billion, with an additional $0.6 billion of restricted cash. Inventories were $14.0 billion, up from $12.1 billion at year-end; approximately 18,000 completed vehicles were awaiting components, primarily semiconductors. The warranty and field-service accrual was $8.6 billion.
Material changes versus prior comparable periods
- Q2 revenue and Automotive wholesales increased substantially year over year, with wholesales up 35%, as supply constraints eased and production of Bronco and Maverick ramped up.
- Q2 net income attributable to Ford rose by $106 million, while adjusted EBIT increased by $2.67 billion. The GAAP result included the Rivian investment loss; adjusted EBIT excludes special items.
- First-half net income swung to a $2.44 billion loss, principally because of the Rivian investment mark-to-market loss, compared with prior-year income of $3.82 billion.
- Ford Credit EBT declined year over year, mainly because of lower lease residual gains, weaker financing margin, lower volumes, and smaller credit-loss reserve releases.
- Company cash declined from $36.5 billion at year-end 2021 to $28.7 billion; Company liquidity declined from $52.4 billion to $45.1 billion. Ford attributed much of the cash change to investment-related losses, including Rivian, and other cash uses.
Guidance, outlook, risks, and unusual items
Ford affirmed its 2022 outlook: adjusted EBIT of $11.5–$12.5 billion; adjusted free cash flow of $5.5–$6.5 billion; capital spending of about $7.0 billion; Ford Credit EBT of about $3 billion; pension contributions of $0.6–$0.7 billion; global redesign EBIT charges of about $1.5 billion; and redesign cash effects of $1.0–$1.5 billion. These are non-GAAP or management outlook measures where indicated; Ford did not provide comparable GAAP guidance.
Guidance assumes 10%–15% growth in 2022 wholesales versus 2021 and continued improvement in semiconductor availability. Other assumptions include strong demand and pricing, approximately $4 billion of commodity headwinds, and about $3 billion of broad-based inflationary pressures. Ford expected lower Ford Credit earnings and anticipated auction values to remain strong but decline in the second half as new-vehicle supply improved.
- Operating and market risks: semiconductor and other supplier disruptions, COVID-related interruptions, the Russia-Ukraine conflict, commodity and energy costs, inflation, foreign exchange, rising interest rates, and possible recession or weaker demand.
- Credit and residual-value risks: Ford Credit noted uncertainty about the effects of inflation, energy prices, and higher interest rates on future losses. Used-vehicle auction values were elevated; Ford expected them to ease as vehicle supply recovered.
- Contingencies: Ford estimated reasonably possible losses above accruals of up to about $2 billion for material indirect-tax, customs, and regulatory matters, and up to about $700 million for material field-service and customer-satisfaction actions. Ford also reported substantial Brazilian tax assessments, characterized its overall loss risk as remote, and noted that required collateral could exceed $1 billion.
- Restructuring and investment: Ford estimated about $1.5 billion of 2022 redesign charges and said additional actions could add charges or cash effects. It planned up to $6.6 billion of capital contributions to the BlueOval SK battery joint venture over five years; the JV was formed July 13, after quarter-end.
- Subsequent event: Ford completed the sale of Ford Romania to Ford Otosan on July 1, 2022; deconsolidation was expected in Q3.
Management stated that disclosure controls and procedures were effective as of June 30, 2022, with no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- How much of the reported earnings and cash-flow picture reflects ongoing operations versus Rivian valuation changes and other special items; review the non-GAAP reconciliations.
- Whether semiconductor availability, production, wholesales, and pricing support the full-year guidance assumptions.
- Whether inflation and commodity costs exceed the stated assumptions, and whether Ford can offset them through pricing, mix, and cost actions.
- Ford Credit’s future credit losses, lease-return volumes, residual values, funding access, and liquidity as interest rates and used-vehicle values change.
- Potential cash needs from redesign actions, EV and battery investments, warranty actions, litigation and tax matters, and the completion and accounting effects of post-quarter transactions.