Ford Motor Company — 2019 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2019; filed February 5, 2020. The filing also reports fourth-quarter results. Ford designs, manufactures, markets, and finances Ford and Lincoln vehicles globally through its Automotive, Mobility, and Ford Credit businesses.
Financial performance
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | $155.9 billion | $160.3 billion |
| Net income attributable to Ford | $47 million | $3.677 billion |
| Diluted EPS | $0.01 | $0.92 |
| Company adjusted EBIT (non-GAAP) | $6.379 billion | $7.002 billion |
| Adjusted EBIT margin (non-GAAP) | 4.1% | 4.4% |
| Operating cash flow (consolidated) | $17.639 billion | $15.022 billion |
| Company adjusted free cash flow (non-GAAP) | $2.785 billion | $2.781 billion |
Ford reported a $640 million pre-tax loss and a $724 million income tax benefit; the reported effective tax rate was 113.1%, versus an adjusted effective tax rate of 11.2%. Total assets were $258.5 billion and total equity was $33.2 billion at year-end.
Automotive revenue was $143.6 billion and segment EBIT was $4.926 billion, down $496 million year over year; EBIT margin declined to 3.4% from 3.7%. Mobility reported a $1.186 billion EBIT loss, while Ford Credit EBT rose to $2.998 billion from $2.627 billion.
Liquidity, debt, and operations
- Company cash, excluding Ford Credit, was $22.3 billion; Company liquidity was $35.4 billion, including available committed credit lines. Cash net of Company debt was $7.0 billion.
- Company debt excluding Ford Credit was $15.3 billion, including $14.7 billion of Automotive debt. Ford Credit debt was $140.0 billion; its net liquidity available for use was $33.1 billion and managed leverage was 8.9:1.
- Global vehicle wholesales fell to 5.386 million from 5.982 million; global market share declined to 6.0% from 6.3%. Revenue fell 3% (1% excluding exchange effects).
- Ford paid $0.60 per share in 2019 dividends. Management stated its intention to continue a $0.15 quarterly dividend, subject to Board approval and available funds.
Material changes and unusual items
- Net income fell $3.630 billion year over year, largely reflecting $5.999 billion of pre-tax special-item charges, compared with $1.429 billion in 2018. Charges included $3.181 billion for global redesign and $2.545 billion of pension and OPEB losses.
- Global redesign actions included restructuring or exiting operations in several markets, including South American heavy trucks and Russian passenger cars; Ford also planned to close its Bridgend, U.K. plant in 2020. Ford agreed to sell specified India operations into a Mahindra-controlled joint venture, recognized an $804 million impairment, and expected the transaction to close in mid-2020.
- Automotive EBIT was pressured by lower volume, higher material and warranty costs, unfavorable exchange, and UAW contract costs; higher net pricing partly offset these effects. China and South America wholesales declined, while Europe’s EBIT loss narrowed.
- Ford Credit EBT improved on lease residual, credit-loss, and derivatives performance. Net receivables declined to $142 billion from $146 billion.
- Consolidated fourth-quarter 2019 revenue was $39.715 billion and Ford-attributable net loss was $1.672 billion. The quarter included $2.2 billion of pension and OPEB remeasurement losses and redesign charges.
Outlook, risks, and contingencies
Ford’s February 4, 2020 guidance for 2020 was adjusted EBIT of $5.6–$6.6 billion, adjusted EPS of $0.94–$1.20, adjusted free cash flow of $2.4–$3.4 billion, capital spending of $6.8–$7.3 billion, and pension contributions of $0.6–$0.8 billion. Management expected at least nominal Automotive growth, lower Ford Credit EBT, and a modest increase in Mobility investment. Ford forecast auction values about 5% lower than 2019 at constant mix. Guidance assumed no material change in economic conditions and explicitly excluded coronavirus effects.
- Key business exposures include vehicle demand and product mix, especially demand for larger profitable trucks and utilities; intense competition and industry overcapacity; warranty and recall costs; labor and supplier disruptions; tariffs, currencies, commodity prices, and interest rates; and execution of restructuring and strategic investments.
- Regulatory uncertainty around emissions, fuel economy, and ZEV requirements may increase costs or complicate product plans. Ford disclosed a U.S. emissions-certification concern involving road-load estimates and testing, voluntarily reported it to regulators, and said the Department of Justice had opened a criminal investigation. Ford stated the matter did not involve defeat devices; the outcome and potential financial impact were uncertain.
- Other disclosed matters include Brazilian tax assessments, a disputed Transit Connect customs ruling, an Italian competition-authority fine of €42 million under appeal, and Takata airbag litigation. Ford estimated reasonably possible losses above accruals for indirect tax and customs matters of up to about $500 million; it could not estimate potential loss from the emissions matter. Asbestos exposure and other litigation remain difficult to quantify.
- Global pension plans were underfunded by $6.8 billion and OPEB funded status was negative $6.1 billion at year-end. Ford cited lower discount rates as a key pension risk and expected $600–$800 million of funded-plan contributions in 2020, plus about $300 million of payments for unfunded plans.
- PwC issued an unqualified opinion on the financial statements and internal controls; management also concluded internal control over financial reporting was effective.
Investor verification priorities
- Reconcile the $47 million GAAP net income with $6.379 billion of adjusted EBIT and assess which special items may recur.
- Track progress, cash costs, and realized savings from global redesign, including the India sale and other planned exits.
- Monitor Automotive volumes, market share, warranty accruals, pricing, and North American profitability.
- Review Ford Credit credit quality, lease residuals, funding access, liquidity, and leverage; assess the expected impact of the 2020 credit-loss accounting adoption, which Ford estimated would increase its allowance by about $250 million.
- Follow the emissions-certification investigation, customs and tax disputes, pension/OPEB assumptions, and the assumptions and exclusions underlying 2020 guidance, particularly coronavirus exposure.