Held-for-Sale Operations and Changes in Investments in Affiliates (Notes)

12 Months Ended

Dec. 31, 2020

HELD-FOR-SALE OPERATIONS AND CHANGES IN INVESTMENTS IN AFFILIATES

Automotive Segment

India. In the third quarter of 2019, we committed to a plan to sell specific net assets in our India Automotive operations. We entered into a definitive agreement to form a joint venture with Mahindra to sell certain India Automotive operations to the joint venture. Accordingly, we reported the assets and liabilities of these operations as held for sale for the year ended December 31, 2019, as follows (in millions):


	2019
Assets
Trade and other receivables, net	$	269
Inventories	208
Other assets, current	147
Net property	279
Other assets, non-current	10
Total assets of held-for-sale operations	913
Less: Intercompany asset balances	(228)
Automotive segment total assets of held-for-sale operations (a)	$	685

Liabilities
Payables	$	461
Other liabilities and deferred revenue, current	71
Automotive debt payable within one year	90
Other liabilities and deferred revenue, non-current	28
Total liabilities of held-for-sale operations	650
Less: Intercompany liability balances	(169)
Automotive segment total liabilities of held-for-sale operations (a)	$	481

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(a) As of December 31, 2019, intercompany items and transactions have been eliminated on the consolidated balance sheets. We have presented those balances in the table for informational purposes.

We recognized, in Cost of sales, pre-tax impairment charges of $804 million and $23 million during the years ended December 31, 2019 and 2020, respectively, to adjust the carrying value of the held-for-sale assets to fair value less cost to sell. The value is measured on a nonrecurring basis and categorized within Level 3 of the fair value hierarchy. We determined fair value using a market approach, estimated based on the negotiated value of the assets.

As a result of fundamental changes in global economic and business conditions during 2020, caused in part by the global pandemic, on December 31, 2020, we and Mahindra mutually determined that we will not complete the joint venture. Accordingly, at December 31, 2020, the assets and liabilities of our India Automotive operations have been reclassified and reported as held and used. Because the carrying value of the net assets approximated fair value at December 31, 2020, the pre-tax impairment charges recorded in 2019 and 2020 were not adjusted as a result of the reclassification to held and used.

Mobility Segment

On June 1, 2020, we completed a transaction with VW that reduced our ownership interest in the autonomous vehicle technology company Argo AI and resulted in Ford and VW holding equal interests in Argo AI, with the remaining interests consisting of incentive units and founders’ equity. The transaction involved us selling a portion of our Argo AI equity to VW for $500 million and VW making additional investments in Argo AI, including contributing its Autonomous Intelligent Driving company. As a result of the transaction, we deconsolidated Argo AI, remeasured our retained investment in Argo AI at fair value, and recognized a $3.5 billion gain in Other income/(loss), of which $2.9 billion related to our retained investment in Argo AI. We measured the fair value of Argo AI using the income approach. The significant assumptions used in the valuation included Argo AI’s projected long-term cash flows and related terminal value, discounted at a rate typically used for a company at Argo AI’s stage of development.

NOTE 22. HELD-FOR-SALE OPERATIONS AND CHANGES IN INVESTMENTS IN AFFILIATES (Continued)

Our retained investment in Argo AI immediately after the transaction consisted of an equity method investment of $2.4 billion and a preferred equity security investment of $400 million, reflected on our consolidated balance sheets in Equity in net assets of affiliated companies and Other assets, respectively. The difference between the fair value of our equity method investment and our share of the carrying value of Argo AI’s net assets primarily related to indefinite-lived assets. We also agreed to future funding of Argo AI of $600 million, subject to capital calls, which will increase our preferred equity investment. As of December 31, 2020, $507 million of the agreed future funding remains.

Ford Credit Segment

In the fourth quarter of 2019, Ford Credit committed to a plan to sell its operations in Forso, a wholly owned subsidiary of Ford Credit, that provided retail and dealer financing in Denmark, Finland, Norway, and Sweden. As a result, we classified the assets and liabilities of these operations as held for sale and recognized a pre-tax fair value impairment charge of $20 million, reported in Other income/(loss), net, in the fourth quarter of 2019.

The assets and liabilities of the Forso operations classified as held for sale for the year ended December 31, 2019 were as follows (in millions):


	December 31, 2019
Assets
Cash and cash equivalents	$	61
Ford Credit finance receivables, net, current	516
Trade and other receivables, net	8
Other assets, current	106
Ford Credit finance receivables, net, non-current	715
Net property	2
Deferred income taxes	9
Other assets, non-current	1
Total assets of held-for-sale operations	1,418
Less: Intercompany asset balances	(2)
Ford Credit segment total assets of held-for-sale operations (a)	$	1,416

Liabilities
Payables	$	34
Other liabilities and deferred revenue, current	8
Ford Credit long-term debt	1,254
Deferred income taxes	23
Total liabilities of held-for-sale operations	1,319
Less: Intercompany liability balances	(1,274)
Ford Credit segment total liabilities of held-for-sale operations (a)	$	45

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(a) As of December 31, 2019, intercompany items and transactions have been eliminated on the consolidated balance sheets. Upon closing, the buyer assumed the intercompany assets and liabilities. Accordingly, we have presented those balances in the table for informational purposes.

In the first quarter of 2020, Ford Credit completed the sale of Forso recognizing a pre-tax loss of $4 million, reported in Other income/(loss), net, and cash proceeds of $1.3 billion.