Ford Motor : 2023 Annual Report Integrated Sustainability and Financial Report

Ford's purpose has always been bigger than building vehicles. We are driven by a desire to build a better world. One that is more equitable, inclusive, and sustainable. A world in which every person is free to move and pursue their dreams.

There is no easy formula for how to achieve these ambitious goals. It's a journey Ford has been on since our first sustainability report 25 years ago, requiring both courage and care, seeking to continually evolve while honoring what we have already built.

Today, we find ourselves at the intersection of Ford's unrivaled legacy - and its unbridled potential. Only Ford can claim this space. It's where we choose to compete, and where we know we will win.

In our following Integrated Report, we share the tremendous progress made in the past year. A lot has changed since our last report, but Ford has never shied away from change. Change demands innovation, problem-solving, and hard work: everything we do best. And with change comes opportunity.

We stand as excited for Ford's future as we are proud of its past. We are optimistic. Energized. Ready for whatever twists and turns await us on The Road to Better.

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In A Letter from Bill Ford and Jim Farley p.4

ESRS 2 BP-2. This report includes forward-looking statements. Forward-looking statements are based on expectations, forecasts, and assumptions by Ford management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated. For a discussion of these risks, uncertainties, and other factors please see "Item 1A. Risk Factors" in our Annual Report on Form10-K for the year ended December 31, 2023, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The Ford name, and all trademarks and logos displayed in this Report are owned or used under license by Ford. These trademarks include, but are not limited to, product brand names (for example, Ford, Lincoln, Motorcraft®), vehicle model names (for example, Mustang, Explorer, F-150), slogans (for example, Built Ford Tough), and logos and emblems. The unauthorized use of any trademark displayed in this Report is strictly prohibited.

With these diverse offerings, we remain focused on building a profitable and efficient EV business that can scale as demand grows. We're gaining valuable customer insights from our first-generation EVs. We know the transition to EVs won't be a straight line, but we can't lose sight of our goal: a healthy planet and business.

As always for Ford, we are focused on both what we build and how we build. We've continued to push ourselves on environmental quality, which includes conserving water, reducing waste, and transitioning our

Ford and our philanthropic arm, the Ford Fund, invested more than $73.7 million in charitable contributions toward its mission to partner with communities to help move people forward across key areas of impact: essential services, education for the future of work, entrepreneurship, and mobility. This year, we are celebrating 75 years of the Ford Fund and its impact in communities worldwide. Building on that commitment, Ford also launched a dedicated community engagement function to provide better lines of communication in communities where we have a manufacturing presence.

That kind of leadership has set us apart for more than 120 years. It is why we were the first in our industry,

25 years ago, to publish a sustainability report, which was recognized for its transparency. It is why we were among the first in our industry to fully integrate our financial, environmental, social, and governance performance into one consolidated report. And it's why we reorganized our auto business into three customer-focused segments designed to evolve with a changing world.

This values-led approach continues to guide us on the road to a more sustainable and equitable transportation future. And it requires us to be nimble and responsive as we deliver both what our customers want and what the planet needs.

It's clear to everyone at Ford that electric and software- defined vehicles will play an increasingly important role in our future. What's also true is that building our business for this future isn't going to be easy or quick. We believe we will successfully navigate this transition through two pursuits: by focusing on our customers, and by making decisions that improve the lives of our employees and everyone who relies on Ford.

Last year, our overall EV sales increased despite slowing adoption across the industry. We have strong product lineups in all three categories of vehicles - EVs, internal combustion engine vehicles, and hybrids. Hybrid sales rose 20% for the year. In 2024, we expect that percentage

growth to increase. In addition to building the bestselling gas and electric trucks in the U.S., Ford also produced the No. 1 and No. 2 best-selling hybrid trucks.

We expect our EV growth to continue this year with the launch of the all-new electric Explorer in Europe. And as EV prices come down, improving access to reliable fast charging is critical to help more customers confidently choose an EV. We're proud to have partnered with Tesla to ensure Ford customers were the first of any non-Tesla automaker to gain access to Tesla Superchargers across the U.S. and Canada, and we're giving customers the adapters they need to access the network for free.

There's also an interesting story about EV adoption when it comes to our commercial and government customers. These customers are increasingly going electric through Ford Pro, a nearly $60 billion, industry-leading business that is helping streamline their path to electrification. Our customers are discovering that EVs get the job done and save them money through lower total cost of ownership. In 2024, Ford Pro's commercial customers will have more EVs to choose from to support their unique needs and use cases, including an E-Transit with enhanced range.

Our support goes well beyond the products themselves. We are creating an ecosystem of software-enabled customer experiences and services to make our vehicles even more productive, while also improving their environmental performance.

company to carbon-free electricity. It's what our customers and our neighbors expect from Ford.

We have reduced the overall carbon footprint of our operations, including both manufacturing and non- manufacturing, by 47% between 2017 and 2023.

The U.S Department of Energy acknowledged Ford for achieving deep and sustained energy and greenhouse gas savings at 31 locations in the U.S., including all of our manufacturing facilities. Ford announced that our assembly plant in Cologne will be carbon neutral when production of the all-electric Explorer starts later this year, and we continued construction of BlueOval City in Tennessee. The assembly plant there will use the equivalent of carbon-free electricity from the day it opens. We also announced plans to build the country's first automaker-backed LFP battery plant, BlueOval Battery Park in Michigan, while protecting 245 acres along the Kalamazoo River.

Ford is leading our industry to secure raw materials directly from mining companies aligned with our sustainability goals, to scrutinize our battery supply chain and to acknowledge the rights of Indigenous Peoples. Lead the Charge, a consortium of advocacy organizations, ranked Ford No. 1 among global automakers for our efforts to deliver an equitable and sustainable supply chain.

Further, we strongly believe in rewarding our employees. In 2023, we offered a record contract for our more than 57,000 UAW-represented employees and their families in the U.S. The three-year agreement with Ford of Canada's Unifor-represented hourly employees provided significant wage increases and bonuses, and a number of major enhancements to support our future. For our U.S. salaried employees, we introduced new family- building benefits that cater to every unique journey

to parenthood. They are designed to help alleviate the financial burden and provide support to make the process easier to understand and navigate.

Our commitment to sustainability remains steadfast. We will continue taking the long view, investing in our people, our communities, and innovation on the road to a better and brighter future for everyone.

We invite you to explore this report for the details of our plans and our progress.

Bill Ford

Executive Chair

Jim Farley

President and Chief Executive Officer

Financial Highlights

ESRS 2 SBM-1

We delivered solid results in 2023, reflecting positive momentum from the Ford+ plan for growth and value creation.

Our global product lineup is popular with customers and generated revenue of $176 billion in 2023, up 11% for our second consecutive year of double-digit growth. Adjusted EBIT for the year was $10.4 billion, driven by the continued strength of Ford Pro and Ford Blue.

In our first full year of operating with three customer- centered auto segments, the strategy is paying off with increased focus, priority, accountability, and flexibility to quickly adapt to the changing needs of customers.

Ford Pro more than doubled its EBIT year over year to $7.2 billion, demonstrating the earnings power of an emerging growth company with high customer value, large competitive moats and progress creating recurring revenue streams - including software and a greater emphasis on services. Ford Blue grew revenue 8% year over year and was profitable in every region around the world in 2023. Both segments are benefiting from ongoing updates to Ford's product portfolio. By the end of this year, 60% of Ford Blue's gas and hybrid products will have been recently refreshed, including the upcoming launch of a new F-150.

Ford Model e, our startup electric vehicle (EV) business, grew both wholesales and revenue in 2023, 20% and 12%, respectively. The segment's EBIT loss of $4.7 billion reflected challenging market dynamics and strategic investments in our next-generation electric vehicles. We are building an EV business that is appealing to customers and profitable over the long term. To do that, we're reducing costs of our first-generation EVs that are in the market today and adjusting investments to match demand. Our goal is to ensure our next-generation products will be profitable within the first 12 months after they're launched.

Ford is well positioned to manage the transition of our products towards an electric future. In the meantime, our strategy and unique capability to offer customers more choices demonstrated their potential in 2023. In North America, we now sell gas, hybrid, and electric versions of our flagship F-150 pickup truck, all at high volumes. We had the number one internal combustion engine (ICE) vehicle (F-Series), hybrid (Maverick) and EV truck (F-150 Lightning) in the U.S. in 2023. Hybrid vehicles give customers exceptional value and Ford great opportunity for growth. We sold about 280,000 hybrids globally last year, up nearly 20% year over year, and expect growth to continue in 2024.

We are also pairing our popular retail and work vehicles with digitally enabled customer experiences and value- added services. We ended the year with 630,000 paid software subscribers, the majority of whom are using Ford Pro productivity tools like telematics and fleet management solutions, with gross margins over 50%. This is a cornerstone of Ford+ and a key differentiator for our brand.

We recently formed Ford Integrated Services, tasked with transforming customer experiences across our three segments by developing and delivering high-value,software-enabled services that help address some of our customers' greatest challenges. We are focused on the experiences around buying, driving, securing, servicing, and charging a Ford vehicle to build a simple, transparent, and always-on relationship with the customer.

2023 Financial Highlights

$176.2B 5.9%

ESRS 2 SBM-1

$4.3B $6.8B

$10.4B $2.01

Organizing our business around three distinct, customer- focused segments is a game changer for Ford. With Ford+, we're building a company that thrives at the intersection of hardware, software, and services, with higher growth, higher margins, greater capital efficiency, and less cyclicality."

John Lawler, Ford Chief Financial Officer

Our underlying business is solid and getting stronger. Profitability of our core business units - Ford Pro, Ford Model e and Ford Blue - improved EBIT by $2 billion, or 26%. Our free cash flow conversion rate was 65%, above the top end of our target range. We are benefiting from more disciplined capital allocation to our global footprint and portfolio of products and services.

Raising quality and lowering costs across Ford are high priorities in every part of our company. To do that, we are reimagining and restructuring our global industrial system - product development, cycle planning, supply chain, and manufacturing. Just months into the change, we are already seeing quality improvements, including in new-product launches. For example, against one measure - product quality after a vehicle has been in service for three months, which is correlated to long- term quality - Ford improved its performance 10% over the course of the year. Quality now factors into 70% of short-term incentive compensation to managers at Ford, helping to make the world-class performance and durability customers deserve everyone's responsibility.

Ford's operations outside North America continued their remarkable turnaround in 2023, marking the second straight profitable year and representing a significant reversal from an EBIT loss of about $2 billion in 2020. The improvement in these markets is the direct result of taking actions to create asset-light approaches. Their strength last year was accomplished with high-demand vehicles like the Everest SUV and Ranger midsize pickup.

Ford Credit remains a strategic asset, competitive advantage, and strong performer for Ford, generating EBT of $1.3 billion in 2023 as credit loss performance normalizes, but remains below our historical average. The business is retaining existing customers, winning new ones, and increasing revenue streams with an expanding range of digital services and products, like credit pre-qualification for retail customers and Ford Pro FinSimple and Insure for commercial customers.

Company-wide, Ford again generated robust adjusted free cash flow of $6.8 billion in 2023. Our balance sheet remains strong, with nearly $29 billion in cash and more than $46 billion in liquidity at the end of year.

As a result, we have considerable flexibility to make vital investments in Ford+, while also returning value to shareholders, targeting distributions of 40% to 50% of adjusted free cash flow. Last year, we returned 50% of our adjusted free cash flow to shareholders, at the high end of that range, through regular and special dividends. At the same time, the underlying strength of the Ford+ plan and cash generation contributed to Ford's credit ratings returning to investment grade in 2023.

We are poised for another solid year in 2024, with adjusted EBIT expected to be between $10 billion to $12 billion, benefiting from about $2 billion in anticipated cost savings in our industrial systems, and further progress in establishing recurring revenue streams.

2023 Sustainable Financing Framework Update

Ford's Sustainable Financing Framework - introduced in 2021 and a first for the American auto industry - is supporting the financing of our clean transportation projects and efforts to create positive social and environmental benefits as we move towards a carbon neutral transportation future.

In November 2021, Ford issued its first green bond under the framework, the largest such transaction by a U.S. corporation at the time, raising $2.5 billion. This was followed by a second Green Bond of $1.75 billion in August 2022.

By June 30, 2023, $4.21 billion, the total of the net proceeds of the two bonds, had been fully allocated to the design, development, and manufacture of the company's current EV lineup - the Mustang Mach-E,F-150 Lightning, and E-Transit - and EVs to be unveiled in the future, as well as other development activities that will benefit our entire EV portfolio.

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In the Sustainable Financing Report

In the Sustainable Financing Framework

Corporate Revolvers

Ford also has over $17 billion in revolving corporate credit facilities, which include key sustainability metrics that further align our financing actions with our commitment to operate a safe, sustainable, and successful business - including our electric vehicle and carbon neutrality goals.

Our corporate and supplemental revolvers each have three sustainability-linked key performance indicators (KPIs) that are tied to global manufacturing greenhouse gas emissions, manufacturing renewable energy, and Scope 3 passenger vehicle emissions in Europe.