01—Abstract
Summary
Summary of the 10-K filed February 3, 2023. Cited figures are marked; the original filing is the authoritative source.
Ford Motor Company's 2022 Form 10-K shows a year of sharp divergence between headline GAAP results and underlying operating performance.
Revenue rose 16% to $158.1 billiona and Automotive segment EBIT improved $2.3 billion to $9.7 billion, driven by higher net pricing and wholesales (up 7% to 4.23 million units). However, reported net income swung to a loss of $1.98 billion (diluted EPS of -$0.49), compared with $17.9 billion of net income in 2021, largely because of $12.2 billion of pre-tax special items, including a $7.4 billion mark-to-market loss on the Rivian stake and a $2.7 billion impairment of the Argo AI investment. Company adjusted EBIT was $10.4 billion (6.6% margin), and adjusted EPS was $1.88, so investors focused on operating trends are seeing a healthier picture than the GAAP figures suggest.
Cash generation and balance sheet items were mixed. Operating cash flow fell to $6.9 billionb, but Company adjusted free cash flow rose to $9.1 billion, helped by working capital and Ford Credit distributions. Company cash declined to $32.3 billion and liquidity to $48.0 billion.
Ford Credit's EBT fell 44% to $2.7 billionc on lower lease residual performance, financing margin and credit loss reserve releases, and its financial statement leverage reached 10:1, at the top of its target range. Capital spending was $6.5 billion, with 2023 guidance of $8 to $9 billion.
Looking ahead, 2023 guidance calls for adjusted EBIT of $9 to $11 billiond and adjusted free cash flow of about $6 billion, reflecting expected U.S. and European recessions, higher industry incentives, a roughly $1.4 billion decline in Ford Credit EBT, and about $2 billion lower pension income. Management also highlighted the Super Duty launch and supply chain improvement as tailwinds, and noted the upcoming UAW contract negotiation and a $1.7 billion punitive damages verdict in the Hill case (under post-trial motion) and a $1.3 billion CBP penalty, which remain significant legal overhangs.
02—Key points
Key Highlights
- Revenue up 16% to $158.1 billion; Automotive revenue up 18% on higher wholesales (4.23 million units, +7%) and net pricing
- GAAP net loss of $1.98 billion (EPS -$0.49) versus $17.9 billion net income in 2021, driven by $12.2 billion of pre-tax special items (Rivian mark-to-market loss of $7.4 billion, Argo AI impairment of $2.7 billion)
- Company adjusted EBIT of $10.4 billion (6.6% margin) and adjusted EPS of $1.88, both up year over year; Automotive segment EBIT rose to $9.7 billion
- Company adjusted free cash flow of $9.1 billion, up $4.5 billion, while GAAP operating cash flow fell to $6.9 billion
- Ford Credit EBT declined to $2.7 billion (from $4.7 billion) with financial statement leverage at 10:1; Ford Credit guides to about $1.3 billion EBT in 2023
- 2023 guidance: adjusted EBIT of $9-11 billion, adjusted free cash flow of about $6 billion, and capital spending of $8-9 billion; dividend raised with a $0.65 supplemental dividend declared in February 2023
- Major legal exposures include a $1.7 billion punitive damages verdict (Hill v. Ford, under post-trial motion), a $1.3 billion CBP penalty plus $181 million in duties (Transit Connect), and Brazilian tax assessments that could require collateral above $1 billion
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2022, Ford Motor Co lost $0.01.
- Revenue$158.06B100.0%
- Cost of revenue−$134.40B85.0%
- Gross profit$23.66B15.0%
- Operating costs−$17.38B11.0%
- Operating income$6.28B4.0%
- Interest, other & tax−$8.26B5.2%
- Net income−$1.98B1.3%
Where FY2022 revenue went
$158.06B- Cost of revenue: $134.40B, 85% of revenue
- Operating income: $6.28B, 4.0% of revenue
- R&D: $7.80B, 4.9% of revenue
- SG&A: $10.89B, 6.9% of revenue
Kept 4.0% as operating incomeOperating income $6.28B · 4.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 3, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $158.06B$136.34B | +15.9% |
| Cost of Revenue | $134.40B$114.65B | +17.2% |
| Gross Profit | $23.66B$21.69B | +9.1% |
| R&D Expenses | $7.80B$7.60B | +2.6% |
| SG&A Expenses | $10.89B$11.91B | −8.6% |
| Operating Expenses | $151.78B$131.82B | +15.1% |
| Operating Income | $6.28B$4.52B | +38.8% |
| Interest Expense | $4.59B$4.59B | 0.0% |
| Net Income | -$1.98B$17.91B | −111.1% |
| EPS (Basic) | $-0.49$4.49 | −110.9% |
| EPS (Diluted) | $-0.49$4.45 | −111.0% |
| Shares Outstanding (Basic) | 4.01B3.99B | +0.6% |
| Shares Outstanding (Diluted) | 4.01B4.03B | −0.5% |
05—Questions
Frequently Asked Questions
Why did Ford report a net loss in 2022 when operating results improved?
The net loss of $1.98 billion was driven mainly by non-operating special items totaling $12.2 billion pre-tax. These included a $7.4 billion mark-to-market loss on the Rivian stake and a $2.7 billion impairment of the Argo AI investment, plus global redesign costs and pension settlement losses. Excluding special items, Ford reported adjusted EBIT of $10.4 billion, up from $10.0 billion in 2021.
How is Ford's cash position and liquidity trending?
Company cash fell to $32.3 billion from $36.5 billion, and liquidity declined to $48.0 billion from $52.4 billion. Shareholder distributions were $2.5 billion, and the company funded $6.5 billion of capital spending and a Rivian share sale brought in about $3 billion. The company targets a minimum Company cash balance of $20 billion plus additional liquidity.
What drove the decline in Ford Credit's earnings?
Ford Credit EBT fell $2.06 billion to $2.66 billion, mainly due to a $907 million unfavorable change in lease residuals (fewer residual reserve releases and lower return rates), $600 million lower financing margin, and $348 million higher credit losses. The company expects Ford Credit EBT to decline further to about $1.3 billion in 2023.
What are the main risks and headwinds for 2023?
Management cites an expected mild U.S. recession and moderate European recession, higher industry incentives as supply and demand rebalance, a strong dollar, about $2 billion lower past service pension income, and Ford Credit earnings declines. Other risks include ongoing semiconductor and raw material shortages, the EV transition's cost and volume uncertainty, a new UAW contract negotiation, and a range of litigation and regulatory matters.
06—Continue