FORD MOTOR COMPANY ANNUAL REPORT ON FORM 10-K

Navigating Turbulent Times: Ford’s Financial Performance in 2024

Ford Motor Company faced a challenging business environment in 2024, navigating a range of economic and industry factors that impacted its financial results. Despite these headwinds, the automaker reported solid performance, with net income attributable to Ford reaching $5.9 billion for the year.

Trade Policy Tensions One of the key issues affecting Ford was the ongoing trade policy landscape. Governments around the world have implemented or intensified barriers to imports, such as tariffs, which can have a significant negative impact on manufacturers based in other markets. The announcement of substantial new tariffs on imports to the United States from Canada, Mexico, and China in early 2025 could have a major adverse effect on Ford and the broader automotive industry if implemented and sustained long-term.

Supply Chain Disruptions Ford continued to see improved supply chain resilience in 2024, but production constraints due to capacity and labor shortages remained a challenge as the company adjusted its production mix. The potential impact of the new tariffs on the supply chain is a concern, as they could further disrupt Ford’s ability to source critical components.

Currency Volatility Globally, central banks have begun shifting monetary policy, leading to unpredictable movements in exchange rates. This currency volatility can directly impact Ford’s financial flows and the pricing of vehicles exported to overseas markets. In some regions, governments heavily influence exchange rates, adding to the uncertainty.

Pricing Pressure Despite elevated vehicle pricing over the past year, Ford has already observed some declines in new and used vehicle prices as auto production recovers from semiconductor shortages. Intense competition and excess industry capacity are likely to put downward pressure on prices, contributing to a challenging pricing environment.

Electric Vehicle Market Dynamics Ford continues to invest in its electric vehicle (EV) strategy, but has observed lower-than-anticipated industry-wide EV adoption rates and near-term pricing pressures. This has led the company to adjust its spending, production, and product launch plans to better match the pace of EV adoption. Policy changes, such as the reduction or elimination of EV incentives, could further slow the transition to electric vehicles.

Commodity and Energy Prices Prices for commodities and energy remain volatile, with the net impact being higher material costs for Ford and its suppliers. To secure critical raw materials for EV production, Ford has entered into multi-year sourcing agreements, which could expose the company to risks associated with lower future demand.

Vehicle Profitability Ford’s financial results depend on the profitability of the vehicles it sells, which can vary significantly by vehicle line. Larger vehicles tend to be more profitable, while government regulations aimed at reducing emissions and increasing fuel efficiency may increase vehicle costs and dampen margins.

Inflation and Interest Rates Lingering impacts of inflation, including higher energy prices, freight premiums, and other operating costs, continue to pressure Ford’s business. Interest rates have increased significantly, which could drive a higher cost of capital for the company. At Ford Credit, rising rates may impact its ability to offer financing at competitive rates.

Segment Performance

Ford Blue Ford Blue, the company’s traditional vehicle business, saw a 2% decrease in wholesale volumes in 2024, driven by the end of production for some smaller models. Revenue was flat year-over-year, as favorable pricing in South America was offset by unfavorable currency exchange. EBIT declined by $2.2 billion, primarily due to unfavorable exchange, adverse mix, and higher costs.

Ford Model e Ford’s electric vehicle business, Ford Model e, experienced a 9% decrease in wholesale volumes in 2024, reflecting lower Mustang Mach-E and F-150 Lightning sales due to competitive pressures. Revenue declined 35%, and the EBIT loss widened by $375 million, driven by lower pricing amid industry competition and partially offset by lower costs.

Ford Pro Ford Pro, the company’s commercial and fleet business, saw a 9% increase in wholesale volumes, driven by higher sales of Super Duty and Transit vehicles. Revenue grew 15%, and EBIT improved by $1.8 billion, reflecting favorable market factors, though higher costs were a partial offset.

Ford Credit Ford Credit, the company’s financing arm, reported a $1.6 billion EBIT, an increase of $323 million from the prior year. This was driven by higher financing margin and favorable volume and mix, partially offset by higher operating lease depreciation and retail credit losses.

Looking Ahead For 2025, Ford expects adjusted EBIT in the range of $7.0 billion to $8.5 billion and adjusted free cash flow of $3.5 billion to $4.5 billion. The company anticipates:

• Ford Pro EBIT of $7.5 billion to $8.0 billion, reflecting continued strength in its commercial and fleet business
• Ford Blue EBIT of $3.5 billion to $4.0 billion, with lower wholesales and exchange rate pressures, partially offset by cost efficiencies
• Ford Model e EBIT loss of $5.0 billion to $5.5 billion, as pricing pressure and ongoing investments in new products are only partially offset by cost improvements
• Ford Credit EBT of about $2.0 billion

The outlook assumes a U.S. industry sales range of 16.0 million to 16.5 million units and lower pricing across the industry as inventory levels normalize. Ford also expects to achieve at least $1.0 billion in net cost reductions.

However, the potential implementation and sustained application of the new tariffs on imports to the United States could have a significant adverse effect on Ford’s earnings, an impact the company is still assessing.

Navigating Challenges, Investing for the Future Ford faced a range of headwinds in 2024, from trade policy tensions and supply chain disruptions to pricing pressures and electric vehicle market dynamics. Despite these challenges, the company reported solid financial performance, with net income reaching $5.9 billion.

The automaker’s diversified business model, with strong performances from its Ford Pro and Ford Blue segments, helped offset the challenges in its Ford Model e electric vehicle unit. Ford Credit also contributed positively to the company’s overall results.

Looking ahead, Ford is cautiously optimistic, providing guidance for 2025 that reflects its expectations for continued strength in its commercial and fleet operations, while anticipating ongoing pressures in its traditional and electric vehicle businesses. The company’s ability to navigate the evolving industry landscape and execute on its strategic initiatives will be crucial in the years to come.

Ultimately, Ford’s financial performance in 2024 demonstrates its resilience in the face of significant market volatility. By investing in its future, including its electric vehicle capabilities, and maintaining a disciplined approach to cost management, the company is positioning itself to weather the current storm and capitalize on emerging opportunities in the rapidly changing automotive industry.