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Share-Based Compensation
 12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement, Noncash Expense [Abstract]  
Share-based Payment Arrangement [Text Block] SHARE-BASED COMPENSATION

Under our Long-Term Incentive Plans, we may issue restricted stock units (“RSUs”), restricted stock shares (“RSSs”), and stock options. RSUs and RSSs consist of time-based and performance-based awards. The number of shares that may be granted in any year is limited to 2% of our issued and outstanding Common Stock as of December 31 of the prior calendar year. The limit may be increased up to 3% in any year, with a corresponding reduction in shares available for grants in future years. Granted RSUs generally cliff vest or ratably vest over a three-year service period. Performance-based RSUs have two components: one based on internal financial performance metrics, and the other based on total shareholder return relative to an industrial and automotive peer group. At the time of vesting, RSU awards are net settled (shares are withheld to cover the employee tax obligation).
NOTE 6.  SHARE-BASED COMPENSATION (Continued)

The fair value of both the time-based and the internal performance metrics portion of the performance-based RSUs and RSSs is determined using the closing price of our Common Stock at grant date. The weighted average per unit grant date fair value for the years ended December 31, 2017, 2018, and 2019 was $12.37, $9.89, and $8.99, respectively.

The fair value of time-based RSUs and RSSs is expensed over the shorter of the vesting period, using the graded vesting method, or the time period an employee becomes eligible to retain the award at retirement. The fair value of performance-based RSUs and RSSs is expensed over the shorter of the performance or required service periods based on the best available estimate of the number of shares expected to vest as measured against the performance metrics. Changes in estimates are recorded as a cumulative adjustment in the period of change. We have elected to recognize forfeitures as an adjustment to compensation expense for all RSUs and RSSs in the same period as the forfeitures occur. Expense is recorded in Selling, administrative, and other expenses.

The fair value of vested RSUs and RSSs as well as the compensation cost for the years ended December 31 was as follows (in millions):
 
2017
 
2018
 
2019
Fair value of vested shares
$
175

 
$
187

 
$
231

Compensation cost (a)
193

 
162

 
190


__________
(a)
Net of tax benefit of $52 million, $29 million, and $38 million in 2017, 2018, and 2019, respectively.

As of December 31, 2019, there was approximately $101 million in unrecognized compensation cost related to non-vested RSUs and RSSs.  This expense will be recognized over a weighted average period of 1.8 years.

The performance-based RSUs granted in March 2017, 2018, and 2019 include a relative Total Shareholder Return (“TSR”) metric. We estimate the fair value of the TSR component of the performance-based RSUs using a Monte Carlo simulation. Inputs and assumptions used to calculate the fair value at grant date were as follows:
 
2017
 
2018
 
2019
Fair value per stock award
$
12.44

 
$
9.03

 
$
9.66

Grant date stock price
12.66

 
10.40

 
8.81

Assumptions:
 
 
 
 
 
Ford’s stock price expected volatility (a)
23.4
%
 
22.9
%
 
24.1
%
Expected average volatility of peer companies (a)
26.0

 
25.4

 
25.8

Risk-free interest rate
1.57

 
2.46

 
2.57

Dividend yield
4.74

 
             N/A
 
             N/A
__________
(a)
Expected volatility based on three years of daily closing share price changes ending on the grant date.

During 2019, activity for RSUs and RSSs was as follows (in millions, except for weighted average fair value):
 
Shares
 
Weighted-
Average Fair Value
Outstanding, beginning of year
64.1

 
$
10.80

Granted (a)
31.2

 
8.99

Vested (a)
(20.0
)
 
11.56

Forfeited
(6.0
)
 
12.24

Outstanding, end of year (b)
69.3

 
9.90


__________
(a)
Includes shares awarded to non-employee directors.
(b)
Excludes 848,168 non-employee director shares that were vested, but unissued at December 31, 2019.

Stock Options

As of March 31, 2017, all of our outstanding stock options were fully vested. The last of our outstanding stock options will expire in July 2024, if not exercised sooner. We measure the fair value of our stock options using the Black-Scholes option-pricing model and record expense in Selling, administrative, and other expenses.