Morningstar DBRS Confirms Ford Motor Company at BBB (low), Stable Trend

DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating and long-term debt credit ratings of Ford Motor Company (Ford or the Company) at BBB (low). Concurrently, Morningstar DBRS confirmed the short- and long-term debt credit ratings of Ford Motor Credit Company LLC (Ford Credit) and its subsidiary, Ford Credit Canada Company, at R-2 (low) and BBB (low), respectively. The trend on all ratings is Stable.

KEY CREDIT RATING CONSIDERATIONS
The credit rating confirmations reflect Ford's sound comprehensive business risk assessment (CBRA) as a major global automotive original equipment manufacturer (OEM) with a solid position in its local U.S. market. Moreover, reflecting Ford's conservative financial policy and solid balance sheet, in addition to rather favourable industry conditions over the past several years, Ford's credit metrics and comprehensive financial risk assessment (CFRA) remain at levels that provide some cushion in the context of the currently assigned credit ratings.

CREDIT RATING DRIVERS
Consistent with the Stable trend, Morningstar DBRS expects the Company's credit ratings to remain constant over the near term. Taking into consideration ongoing sizable costs and investment requirements facing the Company, positive credit rating actions are rather unlikely. Conversely, significantly weaker earnings amid these high investments¿resulting in sizable negative free cash flow generation and thereby adversely affecting credit metrics¿could have credit negative rating implications, although this is somewhat mitigated by Ford's conservative financial policy.

EARNINGS OUTLOOK
Morningstar DBRS notes that Ford, as with several other global automotive OEMs, has suspended its 2025 outlook, citing uncertainty related to the tariff environment. While Morningstar DBRS estimates the Company's 2025 earnings performance to meaningfully soften year over year (YOY), Ford nonetheless is expected to remain significantly profitable.

Morningstar DBRS notes that the Trump administration's trade policies that increased tariffs globally significantly affect Ford, with the United States representing its key sales market. The Company has publicly estimated that its gross exposure to the changing tariffs could approximate $2.5 billion, although this amount could be reduced by roughly $1 billion through implemented countermeasures. Morningstar DBRS notes that Ford's proportionate U.S. production is higher vis-à-vis its immediate peers, placing the Company in a slightly favourable position.

FINANCIAL OUTLOOK
Consistent with the earnings outlook, Morningstar DBRS anticipates Ford's cash flow from operations to moderate significantly YOY. Amid ongoing substantial capital expenditures (estimated to range from essentially constant to slightly higher levels YOY) and dividend payments, Morningstar DBRS expects Ford's free cash flow to approach breakeven to moderately negative levels, although for the time being this remains readily offset by the Company's strong cash balances.

CREDIT RATING RATIONALE
Comprehensive Business Risk Assessment (CBRA): BBBL
Ford's CBRA reflects its position as a major global automotive OEM with a solid position in its core U.S. market. The Company's market position is bolstered by its leading position in the light- and medium-truck segments, as evidenced by very strong sales of its F-Series full-size pickup trucks. High unit margins on these vehicles render the F-Series an important and quite stable contributor to automotive earnings. The Company's brands are well established globally, with the core Ford brand being among the world's strongest mainstream automotive brands. Ford's overall brand strength is, however, somewhat undermined by the relative underperformance of its Lincoln brand in the luxury automotive segment. We note that Lincoln made some progress in 2024, with vehicle sales increasing 24% YOY (albeit still representing less than 10% of the Company's total sales). While Ford has a sales presence across several major automotive markets, the Company is highly dependent on North America for both revenues and earnings.

Regarding tightening emissions standards and the progressive electrification of its vehicle fleet, the Company appears to be reasonably positioned. Consistent with several of its peers, Ford has elected to postpone certain electric vehicle (EV) models (amid slowing momentum globally in the adoption of EVs) and is instead placing increased focus on hybrid models. (The Company remains committed to EVs, targeting an affordable EV platform that would enable it to attain positive EBIT within the first 12 months of launch for new models.) Despite this, associated expenditures over the medium term remain substantial. Finally, Ford has faced quality concerns and increasing warranty costs over the past several years, although the Company appears to be making progress in this regard with Ford attaining significant YOY gains in the J.D. Power Initial Quality Study.

Comprehensive Financial Risk Assessment (CFRA): AL/BBBH
Ford's CFRA incorporates its conservative financial policy and solid balance sheet, bolstered by firm earnings and cash flow generation over the past several years amid rather favourable automotive industry conditions. As such, notwithstanding an anticipated moderation in operating performance in line with increasing industry headwinds, exacerbated by uncertainties associated with ongoing tariff developments, Morningstar DBRS expects Ford's credit metrics to persist at levels providing moderate cushion in the context of the current credit ratings.

Intrinsic Assessment (IA): BBBL
The IA is based on the CFRA and CBRA. Taking into consideration peer comparisons, in addition to limited earnings visibility over the near term, Morningstar DBRS places Ford's IA at the lower end of the IA range.

Additional Considerations: None
Ford's credit ratings include no further negative or positive adjustments because of additional considerations.

Further details on the Issuer's Intrinsic Assessment can be found at https://dbrs.morningstar.com/research/455237.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
ESG Considerations had a relevant effect on the credit analysis.

Environmental (E) Factors
The following Environmental factors had a relevant effect on the credit analysis: Morningstar DBRS considered that the Environmental factor, specifically costs relating to carbon and greenhouse gas emissions represent a relevant factor since Ford's products are subject to a wide range of regulatory scrutiny relating to (among other factors) greenhouse gas emissions and fuel efficiency. In the event that Ford cannot comply with applicable regulations, significant penalties and reputational harm could result. Although the E factor results in additional costs for Ford, these are suitably absorbed by the Company's solid financial profile and therefore do not result in any change in the credit ratings or trends assigned to the Company.

There were no Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196

Notes:
All figures are in U.S. dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Companies in Manufacturing and Production Industries (February 3, 2025)
https://dbrs.morningstar.com/research/447185

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodology has also been applied:
-- Morningstar DBRS Criteria: Approach to ESG Factors in Credit Ratings (May 16, 2025)
https://dbrs.morningstar.com/research/454196

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed credit ratings:

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

Lead Analyst: Robert Streda, Senior Vice President
Rating Committee Chair: Anke Rindermann, Managing Director
Initial Rating Date: April 1, 1976

Information regarding Morningstar DBRS ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info@dbrsmorningstar.com.

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