Ford and Ford Credit have experienced and could continue to experience unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, services, perceived environmental impacts, or otherwise. We spend substantial resources to comply with governmental safety regulations, mobile environmental regulatory obligations concerning our products and stationary source emissions regulations, operations, consumer and automotive financial regulations, labor and employment regulations and practices, and other standards, but we cannot ensure that have experienced employees, contractors, agents, or and other individuals affiliated with us will not violate violating such laws or regulations, regulations from time to time, which could at times has resulted in civil or criminal liability, and we cannot ensure that any such violations have not occurred or will not occur in the future, which may further result in civil or criminal liability. In addition, as discussed below under “Ford may need more fully elsewhere herein, the adoption of new regulations or executive orders, modifications to substantially modify its product plans existing regulations, changes to interpretations of those regulations, and facilities changes to comply with safety, emissions, fuel economy, autonomous driving technology, environmental, enforcement priorities and other regulations” and “Ford Credit could be subject to new or increased credit regulations, consumer protection regulations, or other regulations,” regulatory standards and interpretations may change directives of various governmental agencies, sometimes on short notice and notice, may impact our compliance status. Government investigations against Ford or Ford Credit have resulted in, and may in the future result in, fines, penalties, orders, or other resolutions, through litigation, administrative proceedings, settlement, or otherwise, which have in the past had, and could in the future have, an adverse impact on our financial condition, results of operations, or the operation of our business, including oversight by regulators or a government-appointed monitor. Moreover, compliance with governmental standards does not necessarily prevent individual or class action lawsuits, which can entail significant cost and risk. In certain circumstances, courts may permit civil actions even where our vehicles, services, and financial products comply with federal and/or other applicable law. Furthermore, simply responding to actual or threatened litigation or government investigations of our compliance with regulatory standards, whether related to our products, services, or business or commercial relationships, requires significant expenditures of time and other resources and may be disruptive to our operations. Litigation also is inherently uncertain, and we have in the past experienced, and could in the future experience, significant adverse results, including
Ford may need to substantially modify its product plans and facilities to respond to shifting consumer sentiment and competitive dynamics as a result of policy changes affecting, or otherwise to comply with with, safety, emissions, fuel economy, autonomous driving technology, environmental, and other regulations. The automotive industry is subject to regulations worldwide that govern product characteristics and that differ by global region, country, and sometimes within national boundaries. Regulators have enacted and are proposing standards to address concerns regarding the environment (including concerns about global climate change and air quality), vehicle safety, and energy independence, and the regulatory landscape can change on short notice. These regulations vary, but generally require that over time motor vehicles and engines emit less air pollution, including GHG emissions, oxides of nitrogen, hydrocarbons, carbon monoxide, and particulate matter, and there are associated increased reporting requirements. Similarly, we are making substantial investments in our facilities and revising our processes to not only comply with applicable regulations but also to make our operations more efficient and sustainable. As our suppliers make similar investments, any higher costs may be passed on to us. In the United States, legal and policy debates on environmental regulations are continuing, with a recent primary trend toward reducing GHG emissions and increasing vehicle electrification. However, different federal administrations have either sought to make standards more strict or to make them less strict, with one administration often replacing the regulations enacted by the last. Various third parties routinely seek judicial review of these federal regulatory and deregulatory efforts. In parallel, California continues to enact increasingly strict emissions standards and requirements for ZEVs (standards that some other states are adopting), and those actions are also the subject of legal challenges. Court rulings regarding regulatory actions by federal, California, and other state regulators create uncertainty and the potential for applicable regulatory standards to change quickly. In addition, many governments regulate local product content or impose import requirements with the aim of creating jobs, protecting domestic producers, and influencing the balance of payments.
Ford’s vehicles products have been and could continue to be affected by defects that result in recall campaigns, increased warranty costs, or delays in new model launches, and the time it takes to improve the quality of our vehicles products and services and reduce the costs associated therewith could continue to have an adverse effect on our business. Government safety standards require manufacturers to remedy defects related to vehicle safety through safety recall campaigns, and a manufacturer is obligated to recall vehicles if it determines that the vehicles do not comply with a safety standard. We may also be obligated to remedy defects or potentially recall our vehicles products due to defective components provided to us by our suppliers, arising from their quality issues or otherwise. NHTSA’s enforcement strategy has resulted in significant civil penalties being levied and the use of consent orders, including at Ford, requiring direct oversight by NHTSA of certain manufacturers’ safety processes, a trend that could continue. Should we or government safety regulators determine that a safety or other defect or a noncompliance exists with respect to certain of our vehicles prior to the start of production, the launch of such vehicle could be delayed until such defect is remedied. The cost of recall and customer satisfaction actions to remedy defects in vehicles that have been sold could be substantial, particularly if the actions relate to global platforms or involve defects that are identified years after production. For example, NHTSA and the automotive industry are currently engaged in a study of the safety of approximately 56 million Takata desiccated airbag inflators in the United States. Of these, approximately three and a half million of the inflators are in our vehicles. In addition, NHTSA is considering action related to 52 million vehicles containing inflators from ARC Automotive and Delphi Automotive in the United States. Ford has 2.5 million vehicles within this population. Should NHTSA determine that these inflators contain a safety defect, Ford and other manufacturers could potentially face significant incremental recall costs. Further, to the extent recall and customer satisfaction actions relate to defective components we receive from suppliers, our ability to recover from the suppliers may be limited by the suppliers’ financial condition.
We have announced Although we recently scaled back our intent EV investments to redeploy that capital to other areas of the business, we intend to continue making multi-billion dollar significant investments in electrification and software services. Our plans continue to include offering electrified versions of many of our vehicles, including the F-150 Lightning and E-Transit which vehicles as well as solely electric nameplates, although we introduced in recent years. We have observed lower than initially anticipated industrywide electric vehicle EV adoption rates. This trend Low EV adoption rates may continue, persist, including as a result of the regulatory framework in various markets shifting away from supporting the rapid adoption of electrified vehicles, if there is a vehicles (as was the case in the United States in 2025); any negative perception of our electrified vehicles or about electric vehicles EVs in general, if we are unable general; an inability to or are delayed delay in developing or embracing new technologies or processes, processes; or if consumers prefer our competitors’ vehicles, shifts in consumer preference. As a result, there has been, and there could be in the future be, an adverse impact on our financial condition or and results of operations. Further, as discussed below under “Ford may need to substantially modify its product plans and facilities to comply with safety, emissions, fuel economy, autonomous driving technology, environmental, and other regulations,” elsewhere herein, lower than planned market acceptance of our vehicles may impact our strategy to comply with fuel economy standards. standards in certain markets.
Moreover, compliance with governmental standards does not necessarily prevent individual or class action lawsuits, which can entail significant cost and risk, in addition to defending litigation and claims concerning instances of alleged non-compliance. In certain circumstances, courts may permit civil actions even where our products, services, and financial products comply with federal and/or other applicable law. Furthermore, simply responding to actual or threatened litigation, government investigations, subpoenas, or information requests concerning our compliance with regulatory standards, whether related to our products, services, or business or commercial relationships, requires significant expenditures of time and other resources and may be disruptive to our operations. Litigation also is inherently uncertain, and we have in the past experienced, and could in the future experience, significant adverse results, including compensatory and punitive damage awards, a disgorgement of profits or revenue, or injunctive relief, any of which could have an adverse effect on our financial condition, results of operations, or our business in general, particularly with larger jury verdicts becoming more prevalent. We may decide to settle a matter in anticipation of or during litigation, which may require a monetary or non-monetary payment, a change to our business practices (e.g., to undertake or cease a particular activity), or other remedies. However, a settlement on acceptable terms may not always be feasible. Furthermore, regulatory investigations and litigation, including class actions, are becoming more prevalent in some international markets, potentially leading to increasing fines, damage awards, and settlement costs. While we have an insurance program that provides coverage for certain claims, it may not be sufficient to cover the losses incurred. In addition, adverse publicity surrounding an allegation, litigation, or investigation, even if there is no merit to the matter, may cause significant reputational harm or create a negative public perception of our products and services, which could have a significant adverse effect on our sales.
Failure to develop and deploy secure digital services that appeal to customers customers, retain existing subscribers, and grow our subscription rates could have a negative impact on Ford’s business. A growing part of our business involves connectivity, digital and physical services, and integrated software services, and we are devoting significant resources to develop this business. Further, we have announced our plans and expectations to grow subscription rates and for integrated services to become a larger portion of our revenue and earnings. earnings by offering new and differentiated products, retaining existing subscribers, and growing subscription rates with new customers. If we do not develop, deliver, and make available standardized technologies that customers can easily adopt and use, fail to generate sufficient demand for our integrated software and digital services, or if customers do not opt to activate the modems in our vehicles, which would hinder our ability to offer and sell such services, we may not grow revenue in line with the costs we are investing or achieve profitability on our increasingly digitally-connected products. For additional Shifting public policy regarding data privacy and the effects of artificial intelligence has caused and may in the future cause us to incur substantial costs to modify our operations or business practices, reduce consumers’ willingness to engage with our offerings, or cause delays or lapses in the availability of our products or services in various jurisdictions. We must convince prospective users of the benefits of our subscription services and our existing users of the continued value thereof. This depends in large part on our ability to offer exceptional services, competitive pricing, integrated functionality, and a satisfying user experience. Further discussion on the of risks associated with market acceptance of our services, see below under “Ford’s new services and existing products and digital, software, and physical services are subject to market acceptance and face significant competition from existing and new entrants in the automotive and digital and software services industries, and Ford’s reputation may be harmed based on positions it takes or if it evolving regulatory landscape is unable to achieve the initiatives it has announced.” provided elsewhere herein.
Operational information systems, security systems, vehicles, products, and services could be affected by cybersecurity incidents, ransomware attacks, and other disruptions and impact Ford, Ford Credit, their suppliers, and dealers. We rely on information technology networks and information systems, including in-vehicle systems and mobile devices, some of which are managed by suppliers, some of which are provided by third-party service providers, and some of which ultimately rely on other services provided to these third parties by unaffiliated service providers, to process, transmit, and store electronic information that is important to the operation of our business, our vehicles, and the services we offer. Despite devoting significant resources to our cybersecurity program, we are at risk for interruptions, outages, and compromises of: (i) operational information systems (including business, financial, accounting, product development, consumer receivables, data processing, or manufacturing processes); (ii) facility security systems; and/or (iii) in-vehicle systems or mobile devices, whether caused by a ransomware or other cybersecurity incident, security breach, or other reason (e.g., a natural disaster, fire, acts of terrorism or war, or an overburdened infrastructure system). Additionally, any outage, security breach, misconfiguration, or loss of data within networks and systems managed by or reliant on the products and services of unaffiliated third parties could lead to similar compromises. Such incidents could materially disrupt operational information systems; result in loss or unwilling publication of trade secrets or other proprietary or competitively sensitive information; compromise the privacy of personal information of consumers, employees, or others; jeopardize the security of our facilities; disrupt or degrade service or our operations; affect the performance of in-vehicle systems or services we offer; and/or impact the safety of our vehicles. This risk exposure rises as we continue to develop and produce vehicles with increased connectivity. Moreover, we, our suppliers, service providers, and dealers have been the target of cybersecurity incidents and such threats are continuing and evolving, which may cause cybersecurity incidents to be more difficult to detect for periods of time. Our networks and in-vehicle systems, sharing similar architectures, could also be impacted by, or a cybersecurity incident may result from, the negligence or misconduct of insiders or third parties who have access to our networks and systems. We employ capabilities, processes, and other security measures we believe are reasonably designed to detect, reduce, and mitigate the risk of cybersecurity incidents, and have requirements for our suppliers and service providers to do the same; however, we may not be aware of all vulnerabilities or might not accurately assess the risks of incidents, and such preventative measures cannot provide absolute security and may not be sufficient in all circumstances or mitigate all potential risks, including potential production disruption or the loss or disclosure of sensitive information. Moreover, a cybersecurity incident could harm our reputation, cause customers to lose trust in our security measures, and/or subject us to regulatory actions or litigation, which may result in fines, penalties, judgments, or injunctions, and a cybersecurity incident involving us or one of our suppliers or service providers could impact our production, internal operations, business strategy, results of operations, financial condition, or our ability to deliver products and services to our customers.
With a global footprint and supply chain, Ford’s results and operations have been and could continue to be adversely affected by economic or geopolitical developments, including protectionist trade policies such as tariffs, or other events. Because of the interconnectedness of the global economy, the challenges of a pandemic, financial crisis, crises, economic downturn downturns or recession recessions (including reduced consumer spending), pandemics, natural disaster, war, disasters, wars, social unrest, geopolitical crises, or other significant events in one area of the world market can have an immediate and material adverse impact on other markets around where Ford operates. Unprecedented trade policy (including tariffs) in the world. In particular, China United States and foreign governments’ reactions limit our ability to conduct effective long-term planning and make capital allocation decisions. The continued strain in U.S.-China relations presents unique risks to U.S. automakers due to the strain in U.S.-China relations, automakers, as does China’s unique regulatory landscape, the level of integration with key components in our global supply chain, the limited availability of various components and materials (including certain rare earth minerals and related products from China), and the rapid development of the Chinese electric vehicle EV industry, with Chinese electric electrified vehicle manufacturers exporting their products to some key markets in which we operate.
