Share-Based Compensation (Notes)

12 Months Ended

Dec. 31, 2023

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 can be based on internal financial performance metrics or total shareholder return relative to a peer group or a combination of the two metrics. At the time of vest, RSU awards are net settled (i.e., shares are withheld to cover the employee tax obligation). Stock options ratably vest over a three-year service period and expire ten years from the grant date.

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. For awards that include a market condition, we measure the fair value using a Monte Carlo simulation. The weighted average per unit grant date fair value for the years ended December 31, 2021, 2022, and 2023 was $13.02, $15.63, and $12.98, respectively.

Time-based RSUs generally have a graded vesting feature whereby one-third of each grant vests after the first anniversary of the grant date, one-third after the second anniversary, and one-third after the third anniversary. The graded vesting method recognizes expense over the service period for each separately-vesting tranche, which results in accelerated recognition of expense. The fair value of time-based RSUs, RSSs, and stock options is expensed over the shorter of each separate 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 when it is probable and estimable as measured against the performance metrics over the shorter of the performance or required service periods. We measure the fair value of our stock options on the date of grant using either the Black-Scholes option-pricing model (for options without a market condition) or a Monte Carlo simulation (for options with a market condition). We have elected to recognize forfeitures as an adjustment to compensation expense for all RSUs, RSSs, and stock options in the same period as the forfeitures occur. Expense is recorded in Selling, administrative, and other expenses.

Restricted Stock Units and Restricted Stock Shares

The fair value of vested RSUs and RSSs as well as the compensation cost for the years ended December 31 were as follows (in millions):

	2021		2022		2023
Fair value of vested shares	$	217	$	252	$	303
Compensation cost (a)	229		223		356

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(a)    Net of tax benefit of $74 million, $113 million, and $104 million in 2021, 2022, and 2023, respectively.

As of December 31, 2023, there was approximately $372 million in unrecognized compensation cost related to non-vested RSUs.  This expense will be recognized over a weighted average period of 1.9 years.

The performance-based RSUs granted in March 2021, 2022, and 2023 include a relative Total Shareholder Return (“TSR”) metric. Inputs and assumptions used to calculate the fair value at grant date through a Monte Carlo simulation were as follows:

	2021			2022			2023
Fair value per stock award	$	13.45		$	18.10		$	18.57
Grant date stock price	11.93			16.85			13.08
Assumptions:
Ford’s stock price expected volatility (a)	39.9		%	44.8		%	49.5		%
Expected average volatility of peer companies (a)	39.6			39.6			49.6
Risk-free interest rate	0.32			1.62			4.57

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

NOTE 6.  SHARE-BASED COMPENSATION (Continued)

During 2023, 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	63.9	$	12.90
Granted (a)	54.8	12.98
Vested (a)	(27.2)	11.11
Forfeited	(10.9)	10.62
Outstanding, end of year (b)	80.6	13.86

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(a)Includes shares awarded to non-employee directors.

(b)Excludes 1,225,297 non-employee director shares that were vested but unissued at December 31, 2023.

Stock Options

Activity related to stock options for 2023 was as follows:

	Shares (millions)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (millions)
Outstanding, beginning of period	10.1	$	10.84
Granted	—	—
Exercised (a)	(1.3)	11.90
Forfeited (including expirations)	(0.4)	12.75
Outstanding, end of period	8.4	10.60
Exercisable, end of period	8.4	10.60		3.73	$	26.8
Options expected to vest	—	—		—	—

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(a)Exercised at option prices ranging from $6.19 to $12.75 during 2023.

We received approximately $16 million in proceeds with an equivalent of about $18 million in new issues used to settle the exercised options. For options exercised during the year ended December 31, 2023, the difference between the fair value of the Common Stock issued and the respective exercise price was $2 million. Compensation cost for stock options for the year ended December 31, 2023 was $0. As of December 31, 2023, there was no unrecognized compensation cost related to non-vested stock options. During 2023, no new stock options were granted.