UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________

FORM 10-Q

(Mark One)

☑ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2021

or

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from ____________________ to ____________________

Commission file number 1-6368

Ford Motor Credit Company LLC

(Exact name of registrant as specified in its charter)

Delaware		38-1612444
(State of organization)		(I.R.S. employer identification no.)
One American Road
Dearborn,	Michigan	48126
(Address of principal executive offices)		(Zip Code)

(313) 322-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
0.623% Notes due June 28, 2023*	F/23E	New York Stock Exchange
1.355% Notes due February 7, 2025*	F/25I	New York Stock Exchange
4.125% Notes due on June 20, 2024*	F/24O	New York Stock Exchange
3.021% Notes due March 6, 2024*	F/24M	New York Stock Exchange
4.535% Notes due March 6, 2025*	F/25K	New York Stock Exchange
3.350% Notes due Nine Months or More from the Date of Issue due August 20, 2026	F/26N	New York Stock Exchange
1.514% Notes due February 17, 2023*	F/23G	New York Stock Exchange
2.386% Notes due February 17, 2026*	F/26AB	New York Stock Exchange
1.744% Notes due July 19, 2024*	F/24R	New York Stock Exchange
2.330% Notes due on November 25, 2025*	F/25L	New York Stock Exchange
3.683% Notes due on December 3, 2024*	F/24Q	New York Stock Exchange
3.250% Notes due September 15, 2025*	F/25M	New York Stock Exchange
2.748% Notes due on June 14, 2024*	F/24S	New York Stock Exchange
Floating Rate Notes due December 1, 2021*	F/21AQ	New York Stock Exchange
Floating Rate Notes due December 7, 2022*	F/22T	New York Stock Exchange
Floating Rate Notes due November 15, 2023*	F/23D	New York Stock Exchange
Floating Rate Notes due December 1, 2024*	F/24L	New York Stock Exchange
*Issued under Euro Medium Term Notes due Nine Months or More from The Date of Issue Program

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes  o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐     Non-accelerated filer þ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☑ No

All of the limited liability company interests in the registrant (“Shares”) are held by an affiliate of the registrant. None of the Shares are publicly traded.

REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

Exhibit Index begins on page 40

FORD MOTOR CREDIT COMPANY LLC

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended June 30, 2021

	Table of Contents	Page
	Part I. Financial Information
Item 1	Financial Statements	1
	Consolidated Income Statements	1
	Consolidated Statements of Comprehensive Income	1
	Consolidated Balance Sheets	2
	Consolidated Statements of Shareholder’s Interest	3
	Consolidated Statements of Cash Flows	4
	Notes to the Financial Statements	5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
	Recent Developments	25
	Definitions and Information Regarding Causal Factors	26
	Results of Operations	28
	Financing Shares and Contract Placement Volume	30
	Financial Condition	31
	Credit Risk	32
	Residual Risk	34
	Credit Ratings	35
	Funding and Liquidity	36
	Leverage	37
	Outlook	37
	Cautionary Note on Forward-Looking Statements	38
	Accounting Standards Issued But Not Yet Adopted	39
Item 3	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4	Controls and Procedures	39
	Part II. Other Information
Item 1	Legal Proceedings	40
Item 5	Other Information	40
Item 6	Exhibits	40
	Signature	41

i

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(in millions)

	For the periods ended June 30,
	2020		2021		2020		2021
	Second Quarter				First Half
	(unaudited)
Financing revenue
Operating leases	$	1,401	$	1,367	$	2,860	$	2,747
Retail financing	941		1,004		1,917		1,994
Dealer financing	341		187		826		473
Other financing	27		13		49		27
Total financing revenue	2,710		2,571		5,652		5,241
Depreciation on vehicles subject to operating leases	(990)		(191)		(2,042)		(759)
Interest expense	(839)		(680)		(1,823)		(1,484)
Net financing margin	881		1,700		1,787		2,998
Other revenue
Insurance premiums earned	34		17		81		44
Fee based revenue and other	49		53		92		73
Total financing margin and other revenue	964		1,770		1,960		3,115
Expenses
Operating expenses	305		322		667		665
Provision for credit losses (Note 4)	93		(166)		679		(206)
Insurance expenses	60		4		66		9
Total expenses	458		160		1,412		468
Other income / (loss), net (Note 11)	37		13		25		(62)
Income before income taxes	543		1,623		573		2,585
Provision for / (Benefit from) income taxes	67		(28)		103		89
Net income	$	476	$	1,651	$	470	$	2,496

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

	For the periods ended June 30,
	2020		2021		2020		2021
	Second Quarter				First Half
	(unaudited)
Net income	$	476	$	1,651	$	470	$	2,496
Other comprehensive income / (loss), net of tax
Foreign currency translation	87		108		(261)		7
Comprehensive income	$	563	$	1,759	$	209	$	2,503

The accompanying notes are part of the consolidated financial statements.

1

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions)

	December 31, 2020		June 30, 2021
	(unaudited)
ASSETS
Cash and cash equivalents (Note 3)	$	14,349	$	13,938
Marketable securities (Note 3)	4,860		2,055
Finance receivables, net
Retail installment contracts, dealer financing, and other financing	97,043		83,775
Finance leases	8,027		7,748
Total finance receivables, net of allowance for credit losses of $1,305 and $1,061 (Note 4)	105,070		91,523
Net investment in operating leases (Note 5)	26,655		26,237
Notes and accounts receivable from affiliated companies	853		433
Derivative financial instruments (Note 7)	2,601		1,786
Assets held-for-sale	36		9
Other assets (Note 8)	3,705		2,830
Total assets	$	158,129	$	138,811
LIABILITIES
Accounts payable
Customer deposits, dealer reserves, and other	$	1,087	$	1,026
Affiliated companies	490		591
Total accounts payable	1,577		1,617
Debt (Note 9)	137,677		121,005
Deferred income taxes	504		500
Derivative financial instruments (Note 7)	524		449
Other liabilities and deferred revenue (Note 8)	2,280		2,170
Total liabilities	142,562		125,741
SHAREHOLDER’S INTEREST
Shareholder’s interest	5,227		5,227
Accumulated other comprehensive income / (loss)	(478)		(471)
Retained earnings	10,818		8,314
Total shareholder’s interest	15,567		13,070
Total liabilities and shareholder’s interest	$	158,129	$	138,811

The following table includes assets to be used to settle the liabilities of the consolidated variable interest entities (“VIEs”).  These assets and liabilities are included in the consolidated balance sheets above.  

	December 31, 2020		June 30, 2021
	(unaudited)
ASSETS
Cash and cash equivalents	$	2,822	$	7,555
Finance receivables, net	51,472		44,157
Net investment in operating leases	12,794		8,426
Derivative financial instruments	—		5
LIABILITIES
Debt	$	46,770	$	39,861
Derivative financial instruments	56		19

The accompanying notes are part of the consolidated financial statements.

2

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S INTEREST

(in millions, unaudited)

	Shareholder’s Interest		Accumulated Other Comprehensive Income / (Loss)		Retained Earnings		Total Shareholder’s Interest
Balance at December 31, 2019	$	5,227	$	(850)	$	12,012	$	16,389
Adoption of accounting standards (Note 2)	—		—		(242)		(242)
Net income / (loss)	—		—		(6)		(6)
Other comprehensive income / (loss), net of tax	—		(348)		—		(348)
Distributions declared	—		—		(343)		(343)
Balance at March 31, 2020	$	5,227	$	(1,198)	$	11,421	$	15,450
Net income / (loss)	—		—		476		476
Other comprehensive income / (loss), net of tax	—		87		—		87
Distributions declared	—		—		(826)		(826)
Balance at June 30, 2020	$	5,227	$	(1,111)	$	11,071	$	15,187
Balance at December 31, 2020	$	5,227	$	(478)	$	10,818	$	15,567
Net income / (loss)	—		—		845		845
Other comprehensive income / (loss), net of tax	—		(101)		—		(101)
Distributions declared	—		—		(1,000)		(1,000)
Balance at March 31, 2021	$	5,227	$	(579)	$	10,663	$	15,311
Net income / (loss)	—		—		1,651		1,651
Other comprehensive income / (loss), net of tax	—		108		—		108
Distributions declared	—		—		(4,000)		(4,000)
Balance at June 30, 2021	$	5,227	$	(471)	$	8,314	$	13,070

The accompanying notes are part of the consolidated financial statements.

3

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	For the periods ended June 30,
	2020		2021
	First Half
	(unaudited)
Cash flows from operating activities
Net income	$	470	$	2,496
Adjustments to reconcile net income to net cash provided in operations
Provision for credit losses	679		(206)
Depreciation and amortization	2,436		1,116
Amortization of upfront interest supplements	(1,048)		(1,166)
Net change in finance and wholesale receivables held-for-sale	(74)		—
Net change in deferred income taxes	65		(81)
Net change in other assets	(27)		548
Net change in other liabilities	(383)		(69)
All other operating activities	(9)		76
Net cash provided by / (used in) operating activities	2,109		2,714
Cash flows from investing activities
Purchases of finance receivables	(20,424)		(17,194)
Principal collections of finance receivables	19,377		21,320
Purchases of operating lease vehicles	(5,063)		(5,943)
Proceeds from termination of operating lease vehicles	4,022		5,998
Net change in wholesale receivables and other short-duration receivables	9,953		10,565
Proceeds from sale of business	1,340		—
Purchases of marketable securities	(4,139)		(5,998)
Proceeds from sales and maturities of marketable securities	2,425		8,792
Settlements of derivatives	37		(47)
All other investing activities	(31)		(39)
Net cash provided by / (used in) investing activities	7,497		17,454
Cash flows from financing activities
Proceeds from issuances of long-term debt	20,146		9,388
Principal payments on long-term debt	(22,965)		(26,525)
Change in short-term debt, net	(1,668)		1,065
Cash distributions to parent	(1,169)		(5,000)
All other financing activities	(41)		(29)
Net cash provided by / (used in) financing activities	(5,697)		(21,101)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(174)		18
Net increase / (decrease) in cash, cash equivalents and restricted cash	$	3,735	$	(915)
Cash, cash equivalents and restricted cash at beginning of period (Note 3)	$	9,268	$	14,996
Net increase / (decrease) in cash, cash equivalents and restricted cash	3,735		(915)
Cash, cash equivalents and restricted cash at end of period (Note 3)	$	13,003	$	14,081

The accompanying notes are part of the consolidated financial statements.

4

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents

Footnote		Page
Note 1	Presentation	6
Note 2	Accounting Policies	6
Note 3	Cash, Cash Equivalents, and Marketable Securities	8
Note 4	Finance Receivables and Allowance for Credit Losses	9
Note 5	Net Investment in Operating Leases	13
Note 6	Transfers of Receivables and Variable Interest Entities	14
Note 7	Derivative Financial Instruments and Hedging Activities	17
Note 8	Other Assets and Other Liabilities and Deferred Revenue	19
Note 9	Debt	20
Note 10	Employee Separation and Restructuring Actions	20
Note 11	Other Income / (Loss)	21
Note 12	Segment Information	22
Note 13	Commitments and Contingencies	23

5

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION

Principles of Consolidation

The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) for interim financial information, and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, these unaudited financial statements include all adjustments considered necessary for a fair statement of the results of operations and financial condition for interim periods for Ford Motor Credit Company LLC, its consolidated subsidiaries, and its consolidated VIEs in which Ford Motor Credit Company LLC is the primary beneficiary (collectively referred to herein as “Ford Credit,” “we,” “our,” or “us”). Results for interim periods should not be considered indicative of results for any other interim period or for the full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K Report”). We are an indirect, wholly owned subsidiary of Ford Motor Company (“Ford”). We reclassify certain prior period amounts in our consolidated financial statements to conform to current year presentation.

NOTE 2. ACCOUNTING POLICIES

Adoption of New Accounting Standards

ASU 2019-12 - Simplifying the Accounting for Income Taxes. Effective January 1, 2021, we adopted the amendments in this ASU to simplify the accounting for income taxes. The only amendment that had a material effect on our financial statements clarified that an entity may elect, but is not required, to reflect an allocation of consolidated current and deferred tax expense for non-taxable legal entities that are treated as disregarded by taxing authorities in their separately issued financial statements.

With the adoption of the amendments, our financial statements no longer reflect an allocation of the Ford Motor Company consolidated United States current and deferred tax expense to us and certain of our United States subsidiaries that are treated as disregarded entities for United States tax purposes. These amendments reduce complexity in accounting for income taxes and better reflect our external obligations to tax authorities. Following the adoption, in April 2021, we entered into a Second Amended and Restated Tax Sharing Agreement with Ford.

6

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. ACCOUNTING POLICIES (Continued)

The effect of the retrospective adoption of this amendment on our consolidated income statement, balance sheet, and statement of cash flows was as follows (in millions):

	For the Period Ended June 30, 2020
	Second Quarter						First Half
	Previously Reported		Adjustments due to ASU 2019-12		As Revised		Previously Reported		Adjustments due to ASU 2019-12		As Revised
Income Statement
Provision for income taxes	$	136	$	(69)	$	67	$	145	$	(42)	$	103
Net income	407		69		476		428		42		470

	As of December 31, 2020
	Previously Reported		Adjustments due to ASU 2019-12		As Revised
Balance Sheet
Other assets	$	4,593	$	(888)	$	3,705
Deferred income taxes (a)	2,907		(2,403)		504
Other liabilities and deferred income	2,306		(26)		2,280
Accumulated other comprehensive income / (loss)	(413)		(65)		(478)
Retained earnings	9,212		1,606		10,818
	For the Period Ended June 30, 2020
	First Half
	Previously Reported		Adjustments due to ASU 2019-12		As Revised
Statement of Cash Flows
Cash flows from operating activities
Net income	$	428	$	42	$	470
Net change in deferred income taxes	(692)		757		65
Net change in other liabilities	(243)		(140)		(383)
All other operating activities	31		(40)		(9)
Cash flows from financing activities
Cash distributions to parent	(550)		(619)		(1,169)

_________

(a)Change reflects a reduction in U.S. deferred tax liabilities of $3.4 billion (primarily leasing transactions of $2.8 billion) and a reduction of U.S. deferred tax assets of $1.0 billion (primarily associated with foreign tax credit carryforwards of $0.7 billion).

Adoption of ASU 2019-12 also resulted in a revised impact of the cumulative effect of initially applying ASU 2016-13, Credit Losses – Measurement of Credit Losses on Financial Instruments. The adjustment to the January 1, 2020 opening balance of Retained earnings for the adoption of ASU 2016-13 was previously reported as $202 million, and adjustments due to ASU 2019-12 were $40 million. Accordingly, the revised amount is $242 million.

We also adopted the following ASUs during 2021, none of which had a material impact to our consolidated financial statements or financial statement disclosures:

ASU		Effective Date
2020-06	Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity	January 1, 2021
2021-01	Reference Rate Reform	January 1, 2021

7

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. ACCOUNTING POLICIES (Continued)

Accounting Standards Issued But Not Yet Adopted

The Company considers the applicability and impacts of all ASUs. ASUs were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial statements.

Provision for Income Taxes

For interim tax reporting, we estimate one single effective tax rate for subsidiaries that are subject to tax, which is applied to the year-to-date ordinary income / (loss). Tax effects of significant unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

With the adoption of ASU 2019-12, the effective tax rate at December 31, 2020 has changed retrospectively from 26.2% to 9.7% reflecting income tax no longer allocated to disregarded entities.

NOTE 3. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

The fair values of cash, cash equivalents, and marketable securities measured at fair value on a recurring basis were as follows (in millions):

	Fair Value Level	December 31, 2020		June 30, 2021
Cash and cash equivalents
United States government	1	$	3,255	$	416
United States government agencies	2	640		50
Non-United States government and agencies	2	717		242
Corporate debt	2	970		795
Total marketable securities classified as cash equivalents		5,582		1,503
Cash, time deposits, and money market funds		8,767		12,435
Total cash and cash equivalents		$	14,349	$	13,938
Marketable securities
United States government	1	$	1,082	$	550
United States government agencies	2	485		225
Non-United States government and agencies	2	2,693		718
Corporate debt	2	308		293
Other marketable securities	2	292		269
Total marketable securities		$	4,860	$	2,055

Cash, Cash Equivalents, and Restricted Cash 

Cash, cash equivalents, and restricted cash, as reported in the consolidated statements of cash flows, were as follows (in millions):

	December 31, 2020		June 30, 2021
Cash and cash equivalents	$	14,349	$	13,938
Restricted cash (a)	647		143
Total cash, cash equivalents, and restricted cash	$	14,996	$	14,081

__________

(a)Restricted cash is included in Other assets on our consolidated balance sheets and is primarily held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements. Restricted cash does not include required minimum balances or cash securing debt issued through securitization transactions.

8

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

We manage finance receivables as “consumer” and “non-consumer” portfolios. The receivables are generally secured by the vehicles, inventory, or other property being financed.

Finance receivables are recorded at the time of origination or purchase at fair value and are subsequently reported at amortized cost, net of any allowance for credit losses.

For all finance receivables, we define “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date.

Total Finance Receivables, Net

Total finance receivables, net were as follows (in millions):

	December 31, 2020		June 30, 2021
Consumer
Retail installment contracts, gross	$	73,726	$	70,533
Finance leases, gross	8,431		8,132
Retail financing, gross	82,157		78,665
Unearned interest supplements from Ford and affiliated companies	(3,987)		(3,358)
Consumer finance receivables	78,170		75,307
Non-Consumer
Dealer financing	26,517		15,700
Other financing	1,688		1,577
Non-Consumer finance receivables	28,205		17,277
Total recorded investment	$	106,375	$	92,584
Recorded investment in finance receivables	$	106,375	$	92,584
Allowance for credit losses	(1,305)		(1,061)
Total finance receivables, net	$	105,070	$	91,523
Net finance receivables subject to fair value (a)	$	97,043	$	83,775
Fair value (b)	98,630		85,335

__________

(a)Net finance receivables subject to fair value exclude finance leases. 

(b)The fair value of finance receivables is categorized within Level 3 of the fair value hierarchy.

Finance leases are comprised of sales-type and direct financing leases. Financing revenue from finance leases for the second quarter of 2020 and 2021 was $77 million and $88 million, respectively, and for the first half of 2020 and 2021 was $172 million and $178 million, respectively, and is included in Retail financing on the consolidated income statements.

At December 31, 2020 and June 30, 2021, accrued interest was $181 million and $134 million, respectively, which we report in Other assets on the consolidated balance sheets.

Included in the recorded investment in finance receivables were consumer and non-consumer receivables that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. See Note 6 for additional information.

9

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Credit Quality

Consumer Portfolio. Credit quality ratings for consumer receivables are based on our aging analysis. Consumer receivables credit quality ratings are as follows:

•Pass – current to 60 days past due;

•Special Mention – 61 to 120 days past due and in intensified collection status; and

•Substandard – greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged off, as measured using the fair value of collateral less costs to sell.

The credit quality analysis of consumer receivables at December 31, 2020 was as follows (in millions):

	Amortized Cost Basis by Origination Year
	Prior to 2016		2016		2017		2018		2019		2020		Total		Percent
Consumer
31-60 days past due	$	45	$	62	$	103	$	162	$	166	$	143	$	681	0.9	%
61-120 days past due	7		12		24		44		45		31		163		0.2
Greater than 120 days past due	11		6		7		8		7		2		41		—
Total past due	63		80		134		214		218		176		885		1.1
Current	782		2,519		6,656		13,725		20,856		32,747		77,285		98.9
Total	$	845	$	2,599	$	6,790	$	13,939	$	21,074	$	32,923	$	78,170	100.0	%

The credit quality analysis of consumer receivables at June 30, 2021 was as follows (in millions):

	Amortized Cost Basis by Origination Year
	Prior to 2017		2017		2018		2019		2020		2021		Total		Percent
Consumer
31-60 days past due	$	52	$	60	$	98	$	114	$	134	$	24	$	482	0.6	%
61-120 days past due	9		13		23		29		31		7		112		0.2
Greater than 120 days past due	13		7		9		10		8		—		47		0.1
Total past due	74		80		130		153		173		31		641		0.9
Current	1,747		4,423		9,967		16,798		28,259		13,472		74,666		99.1
Total	$	1,821	$	4,503	$	10,097	$	16,951	$	28,432	$	13,503	$	75,307	100.0	%

10

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Non-Consumer Portfolio. The credit quality of dealer financing receivables is evaluated based on our internal dealer risk rating analysis. We use a proprietary model to assign each dealer a risk rating. This model uses historical dealer performance data to identify key factors about a dealer that we consider most significant in predicting a dealer’s ability to meet its financial obligations. We also consider numerous other financial and qualitative factors of the dealer’s operations, including capitalization and leverage, liquidity and cash flow, profitability, and credit history with ourselves and other creditors.

Dealers are assigned to one of four groups according to risk ratings as follows:

•Group I – strong to superior financial metrics;

•Group II – fair to favorable financial metrics;

•Group III – marginal to weak financial metrics; and

•Group IV – poor financial metrics, including dealers classified as uncollectible.

The credit quality analysis of dealer financing receivables at December 31, 2020 was as follows (in millions):

	Amortized Cost Basis by Origination Year
	Dealer Loans
	Prior to 2016		2016		2017		2018		2019		2020		Total		Wholesale Loans		Total		Percent
Group I	$	503	$	129	$	110	$	188	$	70	$	248	$	1,248	$	18,769	$	20,017	75.5	%
Group II	38		20		11		35		3		87		194		4,680		4,874		18.4
Group III	9		—		3		19		3		35		69		1,464		1,533		5.8
Group IV	2		—		—		—		2		6		10		83		93		0.3
Total (a)	$	552	$	149	$	124	$	242	$	78	$	376	$	1,521	$	24,996	$	26,517	100.0	%

__________

(a)Total past due dealer financing receivables at December 31, 2020 were $99 million. 

The credit quality analysis of dealer financing receivables at June 30, 2021 was as follows (in millions):

	Amortized Cost Basis by Origination Year
	Dealer Loans
	Prior to 2017		2017		2018		2019		2020		2021		Total		Wholesale Loans		Total		Percent
Group I	$	530	$	87	$	178	$	52	$	115	$	175	$	1,137	$	10,665	$	11,802	75.2	%
Group II	15		7		33		3		15		96		169		2,806		2,975		18.9
Group III	17		1		5		2		3		35		63		797		860		5.5
Group IV	—		—		—		4		1		5		10		53		63		0.4
Total (a)	$	562	$	95	$	216	$	61	$	134	$	311	$	1,379	$	14,321	$	15,700	100.0	%

__________

(a)Total past due dealer financing receivables at June 30, 2021 were $56 million.

Non-Accrual of Revenue. The accrual of financing revenue is discontinued at the time a receivable is determined to be uncollectible or when it is 90 days past due. Accounts may be restored to accrual status only when a customer settles all past-due deficiency balances and future payments are reasonably assured. For receivables in non-accrual status, subsequent financing revenue is recognized only to the extent a payment is received. Payments are generally applied first to outstanding interest and then to the unpaid principal balance.

11

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Troubled Debt Restructuring (“TDR”). A restructuring of debt constitutes a TDR if a concession is granted to a debtor for economic or legal reasons related to the debtor’s financial difficulties that we otherwise would not consider. Consumer and non-consumer receivables that have a modified interest rate below market rate or that were modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code, except non-consumer receivables that are current with minimal risk of loss, are considered to be TDRs. We do not grant concessions on the principal balance of the receivables. If a receivable is modified in a reorganization proceeding, all payment requirements of the reorganization plan need to be met before remaining balances are forgiven.

Allowance for Credit Losses

The allowance for credit losses represents our estimate of the lifetime expected credit losses inherent in finance receivables as of the balance sheet date.

Adjustments to the allowance for credit losses are made by recording charges to the Provision for credit losses on our consolidated income statements. The uncollectible portion of a finance receivable is charged to the allowance for credit losses at the earlier of when an account is deemed to be uncollectible or when an account is 120 days delinquent, taking into consideration the financial condition of the customer or borrower, the value of the collateral, recourse to guarantors, and other factors.

Charge-offs on finance receivables include uncollected amounts related to principal, interest, late fees, and other allowable charges. Recoveries on finance receivables previously charged off as uncollectible are credited to the allowance for credit losses. In the event we repossess the collateral, the receivable is charged off and the collateral is recorded at its estimated fair value less costs to sell and reported in Other assets on our consolidated balance sheets.

An analysis of the allowance for credit losses related to finance receivables for the periods ended June 30 was as follows (in millions):

	Second Quarter 2020						First Half 2020
	Consumer		Non-Consumer		Total		Consumer		Non-Consumer		Total
Allowance for credit losses
Beginning balance	$	1,157	$	74	$	1,231	$	496	$	17	$	513
Adoption of ASU 2016-13 (a)	—		—		—		247		5		252
Charge-offs	(80)		—		(80)		(225)		(1)		(226)
Recoveries	33		1		34		76		3		79
Provision for credit losses	94		(1)		93		628		51		679
Other (b)	7		—		7		(11)		(1)		(12)
Ending balance	$	1,211	$	74	$	1,285	$	1,211	$	74	$	1,285

	Second Quarter 2021						First Half 2021
	Consumer		Non-Consumer		Total		Consumer		Non-Consumer		Total
Allowance for credit losses
Beginning balance	$	1,170	$	53	$	1,223	$	1,245	$	60	$	1,305
Charge-offs	(55)		(3)		(58)		(152)		(3)		(155)
Recoveries	55		2		57		108		5		113
Provision for credit losses	(154)		(12)		(166)		(184)		(22)		(206)
Other (b)	6		(1)		5		5		(1)		4
Ending balance	$	1,022	$	39	$	1,061	$	1,022	$	39	$	1,061

__________

(a)Cumulative pre-tax adjustments related to the adoption of ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments, were recorded in retained earnings as of January 1, 2020.

(b)Primarily represents amounts related to translation adjustments.

12

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

The allowance for credit losses considers the economic conditions attributable to the COVID-19 pandemic. The allowance reflects economic uncertainty and an expectation of continued higher unemployment, which increases the probability of default and loss given default rates used in our estimate of the lifetime expected credit losses for our consumer portfolio, especially in the United States.

During the second quarter and first half of 2021, the allowance for credit losses decreased $162 million and $244 million, respectively, primarily reflecting improvement in the economic outlook that caused us to lower our expectation of lifetime losses attributable to macroeconomic assumptions driven by COVID-19. Although net charge-offs remained low in the second quarter and first half ended June 30, 2021, due in part to government stimulus, changes in consumer spending behavior, and high vehicle collateral values, the impact of COVID-19 on future credit losses remains uncertain. We will continue to monitor economic trends and conditions and portfolio performance and will adjust the reserve accordingly.

NOTE 5. NET INVESTMENT IN OPERATING LEASES

Net investment in operating leases consists primarily of lease contracts for vehicles with individuals, daily rental companies, and fleet customers with terms of 60 months or less. Included in Net investment in operating leases are net investment in operating leases that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. See Note 6 for additional information.

Net investment in operating leases was as follows (in millions):

	December 31, 2020		June 30, 2021
Vehicles, at cost (a)	$	32,495	$	31,469
Accumulated depreciation	(5,840)		(5,232)
Net investment in operating leases	$	26,655	$	26,237

__________

(a)Includes interest supplements and residual support payments we receive on certain leasing transactions under agreements with Ford and affiliated companies, and other vehicle acquisition costs.

13

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. TRANSFERS OF RECEIVABLES AND VARIABLE INTEREST ENTITIES

We securitize finance receivables and net investment in operating leases through a variety of programs using amortizing, variable funding, and revolving structures. We also sell finance receivables in structured financing transactions. Due to the similarities between securitization and structured financing, we refer to structured financings as securitization transactions. Our securitization programs are targeted to institutional investors in both public and private transactions in capital markets primarily in the United States, Canada, the United Kingdom, Germany, and China.

The finance receivables sold for legal purposes and net investment in operating leases included in securitization transactions are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions. They are not available to pay our other obligations or the claims of our other creditors. The debt is the obligation of our consolidated securitization entities and not the obligation of Ford Credit or our other subsidiaries.

We use special purpose entities (“SPEs”) to issue asset-backed securities in our securitization transactions. We have deemed most of these special purpose entities to be VIEs of which we are the primary beneficiary, and therefore, are consolidated. The SPEs are established for the sole purpose of financing the securitized financial assets. The SPEs are generally financed through the issuance of notes or commercial paper into the public or private markets or directly with conduits.

We continue to recognize our financial assets related to our sales of receivables when the financial assets are sold to a consolidated VIE or a consolidated voting interest entity. We derecognize our financial assets when the financial assets are sold to a non-consolidated entity and we do not maintain control over the financial assets.

We have the power to direct significant activities of our special purpose entities when we have the ability to exercise discretion in the servicing of financial assets, issue additional debt, exercise a unilateral call option, add assets to revolving structures, or control investment decisions. We generally retain economic interests in the asset-backed securitization transactions, which are retained in the form of senior or subordinated interests, cash reserve accounts, residual interests, and servicing rights. For accounting purposes, we are precluded from recording the transfers of assets in securitization transactions as sales.

We have no obligation to repurchase or replace any securitized asset that subsequently becomes delinquent in payment or otherwise is in default, except when representations and warranties about the eligibility of the securitized assets are breached, or when certain changes are made to the underlying asset contracts. Securitization investors have no recourse to us or our other assets and have no right to require us to repurchase the investments. We generally have no obligation to provide liquidity or contribute cash or additional assets to the VIEs and do not guarantee any asset-backed securities. We may be required to support the performance of certain securitization transactions, however, by increasing cash reserves.

Certain of our securitization entities may enter into derivative transactions to mitigate interest rate exposure, primarily resulting from fixed-rate assets securing floating-rate debt. In certain instances, the counterparty enters into offsetting derivative transactions with us to mitigate its interest rate risk resulting from derivatives with our securitization entities. These related derivatives are not the obligations of our securitization entities. See Note 7 for additional information regarding derivatives.

14

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. TRANSFERS OF RECEIVABLES AND VARIABLE INTEREST ENTITIES (Continued)

Most of these securitization transactions utilize VIEs. The following tables show the assets and debt related to our securitization transactions that were included in our consolidated financial statements (in billions):

	December 31, 2020
	Cash and Cash Equivalents		Finance Receivables and Net Investment in Operating Leases (a)						Related Debt (c)
			Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses
VIE (b)
Retail financing	$	2.0	$	35.8	$	0.4	$	35.4	$	28.4
Wholesale financing	0.2		16.1		—		16.1		10.7
Finance receivables	2.2		51.9		0.4		51.5		39.1
Net investment in operating leases	0.6		12.8		—		12.8		7.7
Total VIE	$	2.8	$	64.7	$	0.4	$	64.3	$	46.8
Non-VIE
Retail financing	$	0.4	$	7.9	$	0.1	$	7.8	$	7.6
Wholesale financing	—		0.3		—		0.3		0.2
Finance receivables	0.4		8.2		0.1		8.1		7.8
Net investment in operating leases	—		—		—		—		—
Total Non-VIE	$	0.4	$	8.2	$	0.1	$	8.1	$	7.8
Total securitization transactions
Retail financing	$	2.4	$	43.7	$	0.5	$	43.2	$	36.0
Wholesale financing (d)	0.2		16.4		—		16.4		10.9
Finance receivables	2.6		60.1		0.5		59.6		46.9
Net investment in operating leases	0.6		12.8		—		12.8		7.7
Total securitization transactions	$	3.2	$	72.9	$	0.5	$	72.4	$	54.6

__________

(a)Unearned interest supplements and residual support are excluded from securitization transactions.

(b)Includes assets to be used to settle the liabilities of the consolidated VIEs.

(c)Includes unamortized discount and debt issuance costs.

(d)The global adjusted pool balance of the wholesale finance receivables included in the securitization trusts was $16.4 billion and the required pool balance was $14.1 billion. The global adjusted pool balance includes funds on deposit in the trust accounts. As of December 31, 2020, the adjusted pool balance was $2.3 billion higher than the required pool balance.

15

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. TRANSFERS OF RECEIVABLES AND VARIABLE INTEREST ENTITIES (Continued)

	June 30, 2021
	Cash and Cash Equivalents		Finance Receivables and Net Investment in Operating Leases (a)						Related Debt (c)
			Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses
VIE (b)
Retail financing	$	2.0	$	32.8	$	0.3	$	32.5	$	25.2
Wholesale financing	5.0		11.7		—		11.7		9.6
Finance receivables	7.0		44.5		0.3		44.2		34.8
Net investment in operating leases	0.6		8.4		—		8.4		5.1
Total VIE	$	7.6	$	52.9	$	0.3	$	52.6	$	39.9
Non-VIE
Retail financing	$	0.3	$	5.9	$	0.1	$	5.8	$	5.8
Wholesale financing	—		0.3		—		0.3		0.2
Finance receivables	0.3		6.2		0.1		6.1		6.0
Net investment in operating leases	—		—		—		—		—
Total Non-VIE	$	0.3	$	6.2	$	0.1	$	6.1	$	6.0
Total securitization transactions
Retail financing	$	2.3	$	38.7	$	0.4	$	38.3	$	31.0
Wholesale financing (d)	5.0		12.0		—		12.0		9.8
Finance receivables	7.3		50.7		0.4		50.3		40.8
Net investment in operating leases	0.6		8.4		—		8.4		5.1
Total securitization transactions	$	7.9	$	59.1	$	0.4	$	58.7	$	45.9

__________

(a)Unearned interest supplements and residual support are excluded from securitization transactions.

(b)Includes assets to be used to settle the liabilities of the consolidated VIEs.

(c)Includes unamortized discount and debt issuance cost.

(d)The global adjusted pool balance of the wholesale finance receivables included in the securitization trusts was $12.0 billion and the required pool balance was $12.0 billion. The global adjusted pool balance includes funds on deposit in the trust accounts.

16

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, our operations are exposed to global market risks, including the effect of changes in interest rates and foreign currency exchange rates. To manage these risks, we enter into highly effective derivative contracts. We have elected to apply hedge accounting to certain derivatives. Derivatives that are designated in hedging relationships are evaluated for effectiveness using regression analysis at the time they are designated and throughout the hedge period. Some derivatives do not qualify for hedge accounting; for others, we elect not to apply hedge accounting.

Income Effect of Derivative Financial Instruments

The gains / (losses), by hedge designation, reported in income for the periods ended June 30 were as follows (in millions):

	Second Quarter				First Half
	2020		2021		2020		2021
Fair value hedges
Interest rate contracts
Net interest settlements and accruals on hedging instruments	$	68	$	100	$	96	$	201
Fair value changes on hedging instruments	112		103		1,222		(538)
Fair value changes on hedged debt	(98)		(87)		(1,191)		503
Cross-currency interest rate swap contracts
Net interest settlements and accruals on hedging instruments	—		(1)		—		(4)
Fair value changes on hedging instruments	—		11		—		(39)
Fair value changes on hedged debt	—		(11)		—		33
Derivatives not designated as hedging instruments
Interest rate contracts	(12)		6		(86)		(25)
Foreign currency exchange contracts (a)	(41)		(44)		166		8
Cross-currency interest rate swap contracts	154		49		3		(196)
Total	$	183	$	126	$	210	$	(57)

__________

(a)Reflects forward contracts between us and an affiliated company.

17

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

Derivative assets and liabilities are reported on the balance sheets at fair value and are presented on a gross basis. The notional amounts of the derivative instruments do not necessarily represent amounts exchanged by the parties and are not a direct measure of our financial exposure. We also enter into master agreements with counterparties that may allow for netting of exposures in the event of default or breach of the counterparty agreement. Collateral represents cash received or paid under reciprocal arrangements that we have entered into with our derivative counterparties, which we do not use to offset our derivative assets and liabilities.

The fair value of our derivative instruments and the associated notional amounts were as follows (in millions):

	December 31, 2020						June 30, 2021
	Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities
Fair value hedges
Interest rate contracts	$	26,924	$	1,331	$	4	$	26,296	$	998	$	152
Cross-currency interest rate swap contracts	885		46		—		885		20		—
Derivatives not designated as hedging instruments
Interest rate contracts	70,318		663		439		56,754		381		249
Foreign currency exchange contracts	4,378		4		80		5,910		70		31
Cross-currency interest rate swap contracts	6,849		557		1		6,565		317		17
Total derivative financial instruments, gross (a) (b)	$	109,354	$	2,601	$	524	$	96,410	$	1,786	$	449

__________

(a)At December 31, 2020 and June 30, 2021, we held collateral of $9 million and $5 million, respectively, and we posted collateral of $96 million and $64 million, respectively.

(b)At December 31, 2020 and June 30, 2021, the fair value of assets and liabilities available for counterparty netting was $204 million and $332 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

18

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. OTHER ASSETS AND OTHER LIABILITIES AND DEFERRED REVENUE

Other assets and other liabilities and deferred revenue consist of various balance sheet items that are combined for financial statement presentation due to their respective materiality compared with other individual asset and liability items.

Other assets were as follows (in millions):

	December 31, 2020		June 30, 2021
Accrued interest and other non-finance receivables (a)	$	837	$	737
Prepaid reinsurance premiums and other reinsurance recoverables	708		733
Collateral held for resale, at net realizable value	675		362
Restricted cash	647		143
Property and equipment, net of accumulated depreciation (b)	219		219
Deferred charges - income taxes (a)	166		228
Investment in non-consolidated affiliates	132		143
Operating lease assets	98		85
Other	223		180
Total other assets (a)	$	3,705	$	2,830

__________

(a)Prior period amounts have been updated as a result of our adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 for additional information.

(b)Accumulated depreciation was $365 million and $382 million at December 31, 2020 and June 30, 2021, respectively.

Other liabilities and deferred revenue were as follows (in millions):

	December 31, 2020		June 30, 2021
Unearned insurance premiums and fees	$	822	$	848
Interest payable	857		654
Income tax and related interest (a) (b)	121		261
Operating lease liabilities	100		89
Deferred revenue	87		75
Other	293		243
Total other liabilities and deferred revenue (a)	$	2,280	$	2,170

__________

(a)Prior period amounts have been updated as a result of our adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 for additional information.

(b)Includes income tax and interest payable to affiliated companies of $16 million and $136 million at December 31, 2020 and June 30, 2021, respectively.

19

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. DEBT

Debt outstanding and interest rates were as follows (in millions):

					Interest Rates
	Debt				Average Contractual				Average Effective
	December 31, 2020		June 30, 2021		2020		2021		2020		2021
Short-term debt
Unsecured debt
Floating rate demand notes	$	6,458	$	8,007
Other short-term debt	3,940		3,848
Asset-backed debt (a)	1,031		703
Total short-term debt	11,429		12,558		1.5	%	1.2	%	1.6	%	1.2	%
Long-term debt
Unsecured debt
Notes payable within one year	17,185		14,100
Notes payable after one year	54,197		48,402
Asset-backed debt (a)
Notes payable within one year	21,345		17,220
Notes payable after one year	32,276		28,019
Unamortized (discount) / premium	30		33
Unamortized issuance costs	(252)		(232)
Fair value adjustments (b)	1,467		905
Total long-term debt	126,248		108,447		2.7	%	2.7	%	2.7	%	2.7	%
Total debt	$	137,677	$	121,005	2.6	%	2.5	%	2.6	%	2.5	%
Fair value of debt (c)	$	139,796	$	123,838

__________

(a)Asset-backed debt issued in securitizations is the obligation of the consolidated securitization entity that issued the debt and is payable only out of collections on the underlying securitized assets and related enhancements. This asset-backed debt is not the obligation of Ford Credit or our other subsidiaries.

(b)These adjustments are related to hedging activity and include discontinued hedging relationship adjustments of $299 million and $246 million at December 31, 2020 and June 30, 2021, respectively. The carrying value of hedged debt was $45.5 billion and $40.6 billion at December 31, 2020 and June 30, 2021, respectively.

(c)At December 31, 2020 and June 30, 2021, the fair value of debt includes $10.4 billion and $11.9 billion of short-term debt, respectively, carried at cost, which approximates fair value. All other debt is categorized within Level 2 of the fair value hierarchy.

NOTE 10. EMPLOYEE SEPARATION AND RESTRUCTURING ACTIONS

We record costs associated with voluntary separations at the time of employee acceptance, unless the acceptance requires explicit approval by Ford Credit. We record costs associated with involuntary separation programs when management has approved the plan for separation, the affected employees are identified, and it is unlikely that actions required to complete the separation plan will change significantly. Costs associated with benefits that are contingent on the employee continuing to provide service are accrued over the required service period.

South America. In June 2021, we announced that our subsidiaries in Brazil and Argentina had committed to a plan to cease originating receivables by the end of 2021 and would begin the process of selling or otherwise winding down operations in those markets. We recorded approximately $10 million in the first half of 2021 related to employee separation costs in Operating expenses, the majority of which will be paid in 2021.

Accumulated foreign currency translation losses associated with our investments in Brazil and Argentina included in Accumulated other comprehensive income / (loss) at June 30, 2021 were $435 million. We expect to reclassify these losses to income upon sale, transfer, or substantially complete liquidation of our investments, which may occur over multiple reporting periods.

20

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 11. OTHER INCOME / (LOSS)

Other income / (loss) consists of various line items that are combined on the consolidated income statements due to their respective materiality compared with other individual income and expense items.

The amounts included in Other income / (loss), net for the periods ended June 30 were as follows (in millions):

	Second Quarter				First Half
	2020		2021		2020		2021
Gains / (Losses) on derivatives	$	101	$	24	$	83	$	(241)
Currency revaluation gains / (losses)	(108)		(30)		(169)		153
Interest and investment income	27		15		90		13
Other	17		4		21		13
Total other income / (loss), net	$	37	$	13	$	25	$	(62)

21

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 12. SEGMENT INFORMATION

We conduct our financing operations directly and indirectly through our subsidiaries and affiliates. We offer substantially similar products and services throughout many different regions, subject to local legal restrictions and market conditions. In our consolidated financial statements, we have three reportable segments based on geographic regions: the United States and Canada, Europe, and All Other. Our All Other segment includes China, India, Mexico, Brazil, Argentina, and our joint venture in South Africa. Items excluded in assessing segment performance because they are managed at the corporate level, including market valuation adjustments to derivatives and exchange-rate fluctuations on foreign currency-denominated transactions, are reflected in Unallocated Other.

Key financial information for our business segments for the periods ended or at June 30 was as follows (in millions):

	United States and Canada		Europe		All Other		Total Segments		Unallocated Other (a)		Total
Second Quarter 2020
Total revenue	$	2,448	$	244	$	101	$	2,793	$	—	$	2,793
Income before income taxes	445		65		17		527		16		543
Depreciation on vehicles subject to operating leases	990		—		—		990		—		990
Interest expense	726		82		55		863		(24)		839
Provision for credit losses	76		14		3		93		—		93
Second Quarter 2021
Total revenue	$	2,295	$	238	$	108	$	2,641	$	—	$	2,641
Income before income taxes	1,466		81		22		1,569		54		1,623
Depreciation on vehicles subject to operating leases	184		7		—		191		—		191
Interest expense	600		72		51		723		(43)		680
Provision for credit losses	(165)		(6)		5		(166)		—		(166)
First Half 2020
Total revenue	$	5,079	$	525	$	221	$	5,825	$	—	$	5,825
Income before income taxes	467		82		24		573		—		573
Depreciation on vehicles subject to operating leases	2,029		13		—		2,042		—		2,042
Interest expense	1,571		172		120		1,863		(40)		1,823
Provision for credit losses	596		67		16		679		—		679
Net finance receivables and net investment in operating leases (b)	111,775		23,659		3,949		139,383		(9,080)		130,303
Total assets (c)	124,352		26,091		4,810		155,253		—		155,253
First Half 2021
Total revenue	$	4,679	$	479	$	200	$	5,358	$	—	$	5,358
Income before income taxes	2,462		147		7		2,616		(31)		2,585
Depreciation on vehicles subject to operating leases	746		13		—		759		—		759
Interest expense	1,238		152		107		1,497		(13)		1,484
Provision for credit losses	(217)		(7)		18		(206)		—		(206)
Net finance receivables and net investment in operating leases (b)	100,066		19,920		4,863		124,849		(7,089)		117,760
Total assets	111,149		22,226		5,436		138,811		—		138,811

__________

(a)Finance receivables, net and Net investment in operating leases includes unearned interest supplements and residual support, allowance for credit losses, and other (primarily accumulated supplemental depreciation).

(b)Excludes held-for-sale finance receivables.

(c)Amounts have been updated as a result of our adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 for additional information.

22

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 13. COMMITMENTS AND CONTINGENCIES

Commitments and contingencies primarily consist of guarantees and indemnifications as well as litigation and claims.

Guarantees and Indemnifications

Guarantees and indemnifications are recorded at fair value at their inception. For financial guarantees, subsequent to initial recognition, the guarantee liability is adjusted at each reporting period to reflect the current estimate of expected payments resulting from possible default events over the remaining life of the guarantee. The probability of default is applied to the expected exposure at the time of default less recoveries to determine the expected payments. Factors to consider when estimating the probability of default include the obligor’s financial position, forecasted economic environment, historical loss rates, and other communications. For non-financial guarantees, we regularly review our performance risk under these arrangements, and in the event it becomes probable we will be required to perform under a guarantee or indemnity, the amount of probable payment is recorded.

The maximum potential payments under these guarantees and limited indemnities totaled $153 million and $114 million at December 31, 2020 and June 30, 2021, respectively. Of these values, $62 million and $27 million at December 31, 2020 and June 30, 2021, respectively, were counter-guaranteed by Ford to us. There were no recorded liabilities related to guarantees and limited indemnities at December 31, 2020 or June 30, 2021.

In some cases, we have guaranteed debt and other financial obligations of outside third parties and unconsolidated affiliates, including Ford. Expiration dates vary, and guarantees will terminate on payment and / or cancellation of the underlying obligation. A payment by us would be triggered by the failure of the third party to fulfill its obligation covered by the guarantee. In some circumstances, we are entitled to recover from a third party amounts paid by us under the guarantee. However, our ability to enforce these rights is sometimes stayed until the guaranteed party is paid in full and may be limited in the event of insolvency of the third party or other circumstances.

In the ordinary course of business, we execute contracts involving indemnifications standard in the industry and indemnifications specific to a transaction. These indemnifications might include and are not limited to claims relating to any of the following: environmental, tax, and shareholder matters; intellectual property rights; governmental regulations and employment-related matters; dealer and other commercial contractual relationships; and financial matters, such as securitizations. Performance under these indemnities generally would be triggered by a breach of the contract brought by a counterparty or a third-party claim. While some of these indemnifications are limited in nature, many of them do not limit potential payment. Therefore, we are unable to estimate a maximum amount of future payments that could result from claims made under these unlimited indemnities.

23

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 13. COMMITMENTS AND CONTINGENCIES (Continued)

Litigation and Claims

Various legal actions, proceedings, and claims (generally, “matters”) are pending or may be instituted or asserted against us. These include, but are not limited to, matters arising out of governmental regulations; tax matters; alleged illegal acts resulting in fines or penalties; financial services; employment-related matters; dealer and other contractual relationships; personal injury matters; investor matters; and financial reporting matters. Certain of the pending legal actions are, or purport to be, class actions. Some of the matters involve or may involve claims for compensatory, punitive, or antitrust or other treble damages in very large amounts, sanctions, assessments, or other relief, which, if granted, would require very large expenditures.

The extent of our financial exposure to these matters is difficult to estimate. Many matters do not specify a dollar amount for damages, and many others specify only a jurisdictional minimum. To the extent an amount is asserted, our historical experience suggests that in most instances the amount asserted is not a reliable indicator of the ultimate outcome.

We accrue for matters when losses are deemed probable and reasonably estimable. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood that we will prevail, and the severity of any potential loss. We reevaluate and update our accruals as matters progress over time.

For nearly all matters where our historical experience with similar matters is of limited value (i.e., “non-pattern matters”), we evaluate the matters primarily based on the individual facts and circumstances. For non-pattern matters, we evaluate whether there is a reasonable possibility of a material loss in excess of any accrual that can be estimated. It is reasonably possible that some of the matters for which accruals have not been established could be decided unfavorably and could require us to pay damages or make other expenditures. On January 9, 2019, FCE received a decision from the Italian Competition Authority (“ICA”), which included an assessment of a fine against FCE in the amount of €42 million (equivalent to $49 million at June 30, 2021).  On March 8, 2019, FCE appealed the decision and the fine to the Italian administrative court, and on November 24, 2020, the Italian administrative court ruled in favor of FCE. On December 23, 2020, the ICA filed an appeal of the Italian administrative court’s decision to the Italian Council of State. While we have determined that an adverse outcome is not probable, the reasonably possible loss could be up to the fine amount.

As noted, the litigation process is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. Our assessments are based on our knowledge and experience, but the ultimate outcome of any matter could require payment substantially in excess of the amount that we have accrued and / or disclosed.

24

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Recent Developments

Semiconductor Chip Shortage

The automotive industry continues to face a significant shortage of semiconductors, which has presented challenges and production disruptions globally, including at Ford’s assembly plants. This shortage has led to lower dealer inventories of both new and used vehicles, resulting in lower non-consumer receivables and higher residual values, as discussed in more detail in the Financial Condition and Residual Risk sections in Item 2 of this Report. Based on the overall recovery rate we are seeing for the industry, we continue to believe the automotive semiconductor shortage may not be fully resolved until 2022. For additional information regarding the semiconductor shortage, see the “Recent Developments” section in Item 2 of Ford Motor Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.

Adoption of New Accounting Standards

Effective January 1, 2021, we adopted Accounting Standards Update ("ASU") 2019-12, which allows for the simplification of accounting for income taxes. As a result, ROE, net income, distributions, leverage, and equity have been updated in the prior comparator periods to reflect the update. This amendment will reduce our U.S. tax allocation and as a result we expect our net income and ROE to increase allowing us to support additional distributions to Ford. For additional information on the tax accounting change, see Note 2 of our Notes to the Financial Statements.

25

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Definitions and Information Regarding Causal Factors

In general, we measure year-over-year changes in EBT using the causal factors listed below:

•Volume and Mix – Volume and Mix are primarily reflected within Net financing margin on the consolidated income statements.

◦Volume primarily measures changes in net financing margin driven by changes in average managed receivables at prior period financing margin yield (defined below in financing margin) at prior period exchange rates. Volume changes are primarily driven by the volume of new and used vehicles sold and leased, the extent to which we purchase retail financing and operating lease contracts, the extent to which we provide wholesale financing, the sales price of the vehicles financed, the level of dealer inventories, Ford-sponsored special financing programs available exclusively through us, and the availability of cost-effective funding.

◦Mix primarily measures changes in net financing margin driven by period-over-period changes in the composition of our average managed receivables by product within each region.

•Financing Margin – Financing Margin is reflected within Net financing margin on the consolidated income statements.

◦Financing margin variance is the period-to-period change in financing margin yield multiplied by the present period average managed receivables at prior period exchange rates. This calculation is performed at the product and country level and then aggregated. Financing margin yield equals revenue, less interest expense and scheduled depreciation for the period, divided by average managed receivables for the same period.

◦Financing margin changes are driven by changes in revenue and interest expense. Changes in revenue are primarily driven by the level of market interest rates, cost assumptions in pricing, mix of business, and competitive environment. Changes in interest expense are primarily driven by the level of market interest rates, borrowing spreads, and asset-liability management.

•Credit Loss – Credit Loss is reflected within Provision for credit losses on the consolidated income statements.

◦Credit loss is the change in the provision for credit losses at prior period exchange rates. For analysis purposes, management splits the provision for credit losses into net charge-offs and the change in the allowance for credit losses.

◦Net charge-off changes are primarily driven by the number of repossessions, severity per repossession, and recoveries. Changes in the allowance for credit losses are primarily driven by changes in historical trends in credit losses and recoveries, changes in the composition and size of our present portfolio, changes in trends in historical used vehicle values, and changes in forward looking macroeconomic conditions. For additional information, refer to the “Critical Accounting Estimates - Allowance for Credit Losses” section of Item 7 of Part II of our 2020 Form 10-K Report.

•Lease Residual – Lease Residual is reflected within Depreciation on vehicles subject to operating leases on the consolidated income statements.

◦Lease residual measures changes to residual performance at prior period exchange rates. For analysis purposes, management splits residual performance primarily into residual gains and losses, and the change in accumulated supplemental depreciation.

◦Residual gain and loss changes are primarily driven by the number of vehicles returned to us and sold, and the difference between the auction value and the depreciated value (which includes both base and accumulated supplemental depreciation) of the vehicles sold. Changes in accumulated supplemental depreciation are primarily driven by changes in our estimate of the expected auction value at the end of the lease term and changes in our estimate of the number of vehicles that will be returned to us and sold. Depreciation on vehicles subject to operating leases reflects early termination losses on operating leases due to customer default events. For additional information, refer to the “Critical Accounting Estimates – Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 of Part II of our 2020 Form 10-K Report.

•Exchange – Reflects changes in EBT driven by the effects of converting functional currency income to U.S. dollars.

•Other – Primarily includes Operating expenses, Other revenue, Insurance expenses, and Other income / (Loss), net on the consolidated income statements at prior period exchange rates.

◦Changes in operating expenses are primarily driven by salaried personnel costs, facilities costs, and costs associated with the origination and servicing of customer contracts.

◦In general, other income / (loss) changes are primarily driven by changes in earnings related to market valuation adjustments to derivatives (primarily related to movements in interest rates), which are included in unallocated risk management, and other miscellaneous items.

26

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

In addition, the following definitions and calculations apply to the tables contained in Item 2 of this report:

•    Cash (as shown in the Funding and Liquidity and Leverage sections) – Cash and cash equivalents and Marketable securities reported on Ford Credit’s balance sheets, excluding amounts related to insurance activities.

•    Debt (as shown in the Key Metrics and Leverage tables) – Debt on Ford Credit’s balance sheets. Includes debt issued in securitizations and payable only out of collections on the underlying securitized assets and related enhancements. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions.

•    Earnings Before Taxes (“EBT”) – Reflects Income before income taxes as reported on our consolidated income statements.

•    Return on Equity (“ROE”) (as shown in the Key Metrics table) – Reflects return on equity calculated by annualizing net income for the period and dividing by monthly average equity for the period.

•Securitization and Restricted Cash (as shown in the Liquidity table) – Securitization cash is held for the benefit of the securitization investors (for example, a reserve fund). Restricted cash is primarily held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements.

•    Securitizations (as shown in the Public Term Funding Plan table) – Public securitization transactions, Rule 144A offerings sponsored by Ford Credit, and widely distributed offerings by Ford Credit Canada.

•    Term Asset-Backed Securities (as shown in the Funding Structure table) – Obligations issued in securitization transactions that are payable only out of collections on the underlying securitized assets and related enhancements.

•Total Net Receivables (as shown in the Key Metrics and Financial Condition tables) – Includes finance receivables (retail financing and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance sheets and are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations of Ford Credit or the claims of Ford Credit’s other creditors.

•    Unallocated Other (as shown in the Segment Results table) – Items excluded in assessing segment performance because they are managed at the corporate level, including market valuation adjustments to derivatives and exchange-rate fluctuations on foreign currency-denominated transactions.

27

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Results of Operations

Key Metrics

	Second Quarter									First Half
GAAP Financial Measures	2020			2021			H / (L)			2020			2021			H / (L)
Total Net Receivables ($B)	$	130.3		$	117.7		(10)		%	$	130.3		$	117.7		(10)		%
Loss-to-Receivables (bps) (a)	15			(7)			(22)			37			7			(30)
Auction values (b)	$	20,110		$	28,030		39		%	$	19,810		$	24,525		24		%
EBT ($M)	$	543		$	1,623		$	1,080		$	573		$	2,585		$	2,012
ROE (%) (c)	12.3		%	46.9		%	34.6 ppts			6.0		%	33.7		%	27.7 ppts
Other Balance Sheet Metrics
Debt ($B)										$	135.3		$	121.0		(11)		%
Net liquidity ($B)										$	32.3		$	33.0		(2)		%
Financial statement leverage (to 1) (c)										8.9			9.3			0.4

__________

(a)United States retail financing only.

(b)United States 36-month off-lease auction values at Q2 2021 mix and YTD amounts at 2021 YTD mix.

(c)Prior period amounts have been updated as a result of our adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 of our Notes to the Financial Statements for additional information.

Non-GAAP Financial Measures	June 30,  2020		June 30, 2021		H / (L)
Managed Receivables ($B) (a)	$	139.4	$	124.8	(10)	%
Managed Leverage (to 1) (b) (c)	7.7		8.0		0.3

__________

(a)See “Financial Condition” section for reconciliation to GAAP.

(b)See “Leverage” section for reconciliation to GAAP.

(c)Prior period amount has been updated as a result of our adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 of our Notes to the Financial Statements for additional information.

Second Quarter 2021 Compared with Second Quarter 2020

The following table shows the factors that contributed to the second quarter 2021 EBT (in millions):

Change in EBT by Causal Factor
Second quarter 2020 EBT	$	543
Volume / Mix	(30)
Financing margin	(22)
Credit loss	256
Lease residual	784
Exchange	21
Other	71
Second quarter 2021 EBT	$	1,623

Our second quarter 2021 EBT was $1,623 million, $1,080 million higher than a year ago, primarily reflecting favorable operating lease residual performance as well as the release of retail COVID-19 credit loss reserves. ROE was 46.9%, 34.6 percentage points higher than a year ago as a result of higher EBT. Total net receivables were $12.6 billion lower than a year ago, a 10% decline. The loss-to-receivables ratio remained at a low level in the second quarter, at negative 7 basis points, 22 basis points lower than a year ago. The negative LTR reflects historically low losses and strong net recoveries during the second quarter. Second quarter 2021 United States auction values were 39% higher than a year ago.

Our balance sheet is strong and inherently liquid reflecting cumulative debt maturities having a longer tenor than asset maturities. This means that we generate liquidity as our balance sheet size declines because of lower Ford volume. Managed receivables of $124.8 billion at quarter end were $14.6 billion lower year-over-year. At the end of the second quarter, we had $33.0 billion in net liquidity.

28

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Segment Results

Results of operations by segment and Unallocated Other for the periods ended June 30 are shown below (in millions):

	Second Quarter						First Half
	2020		2021		H / (L)		2020		2021		H / (L)
Results
United States and Canada segment	$	445	$	1,466	$	1,021	$	467	$	2,462	$	1,995
Europe segment	65		81		16		82		147		65
All Other segment	17		22		5		24		7		(17)
Total segments earnings before taxes	$	527	$	1,569	$	1,042	$	573	$	2,616	$	2,043
Unallocated other	16		54		38		—		(31)		(31)
Earnings before taxes	$	543	$	1,623	$	1,080	$	573	$	2,585	$	2,012
Taxes (a)	(67)		28		95		(103)		(89)		14
Net Income (a)	$	476	$	1,651	$	1,175	$	470	$	2,496	$	2,026

(a)Prior period amounts have been updated as a result of our adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 of our Notes to the Financial Statements for additional information.

For additional information, see Note 12 of our Notes to the Financial Statements.

United States and Canada Segment

The United States and Canada segment second quarter 2021 EBT of $1,466 million was $1,021 million higher than second quarter 2020, explained primarily by favorable operating lease residual performance and a reduction in the credit loss reserve in the second quarter of 2021. United States and Canada segment first half 2021 EBT of $2,462 million was $1,995 million higher than first half 2020, explained primarily by favorable operating lease residual performance, the non-recurrence of the first quarter 2020 increase to the credit loss reserve due to deterioration in macroeconomic conditions related to COVID-19, and reductions in the credit loss reserve in the first half of 2021.

Europe Segment

The Europe segment second quarter 2021 EBT of $81 million was $16 million higher than second quarter 2020, explained primarily by lower credit losses and reserves and non-recurrence of 2020 restructuring costs, partially offset by lower volume, reflecting the impact of the global semiconductor shortage on vehicle production and dealer inventory. The Europe segment first half 2021 EBT of $147 million was $65 million higher compared with first half 2020, explained primarily by the non-recurrence of a credit loss reserve increase due to COVID-19 and 2020 restructuring costs, partially offset by lower volume driven by the impact of COVID-19 and global semiconductor shortage on receivables.

All Other Segment

The All Other segment second quarter 2021 EBT of $22 million was $5 million higher than second quarter 2020. All Other segment first half EBT of $7 million was $17 million lower than first half 2020, explained primarily by restructuring costs.

Unallocated Other

Unallocated Other was a $54 million gain for second quarter 2021, a $38 million higher gain than second quarter 2020, reflecting favorable performance in market valuation adjustments to derivatives. Unallocated Other first half was a $31 million loss and $31 million lower compared to the first half of 2020, explained by unfavorable performance in market valuation adjustments to derivatives due to rising interest rates.

29

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Financing Shares and Contract Placement Volume

Our focus is on supporting Ford and Lincoln dealers and customers. This includes going to market with Ford and our dealers to support vehicle sales with financing products and marketing programs. Ford’s marketing programs may encourage or require Ford Credit financing and influence the financing choices customers make. As a result, our financing share, volume, and contract characteristics vary from period to period as Ford’s marketing programs change.

The following table shows our retail financing and operating lease share of new Ford and Lincoln brand sales, wholesale financing share of new Ford and Lincoln brand vehicles acquired by dealers (in percent), and contract placement volume for new and used vehicles (in thousands) in several key markets:

	Second Quarter				First Half
	2020		2021		2020		2021
Share of Ford and Lincoln Sales (a)
United States	77	%	47	%	67	%	47	%
Canada	63		74		63		68
United Kingdom	44		37		44		36
Germany	34		41		39		39
China	37		45		36		43
Wholesale Share
United States	73	%	71	%	74	%	72	%
Canada	42		9		45		11
United Kingdom	100		100		100		100
Germany	93		91		93		91
China	61		68		58		67
Contract Placement Volume - New and Used (000)
United States	297		187		502		383
Canada	25		37		48		62
United Kingdom	13		25		43		50
Germany	19		20		48		38
China	28		32		44		64

__________

(a)United States and Canada exclude Fleet sales, other markets include Fleet sales.

United States contract placement volumes in the second quarter of 2021 were lower than a year ago, reflecting decreased share. Canada contract placement volumes in the second quarter of 2021 were higher than a year ago, reflecting higher Ford sales and higher share. United Kingdom contract placement volume in the second quarter of 2021 was higher than a year ago, reflecting higher Ford sales. China contract placement volume in the second quarter of 2021 was higher than a year ago, primarily reflecting higher share.

30

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Financial Condition

Our receivables, including finance receivables and operating leases, were as follows (in billions):

	June 30, 2020		December 31, 2020		June 30, 2021
Net Receivables
United States and Canada Segment
Consumer financing	$	57.0	$	58.4	$	56.4
Non-Consumer financing	20.3		19.5		11.4
Net investment in operating leases	26.2		26.4		25.9
Total United States and Canada Segment	$	103.5	$	104.3	$	93.7
Europe Segment
Consumer financing	$	13.9	$	15.1	$	14.2
Non-Consumer financing	8.9		7.4		4.8
Net investment in operating leases	0.2		0.3		0.3
Total Europe Segment	$	23.0	$	22.8	$	19.3
All Other Segment
Consumer financing	$	2.8	$	3.4	$	3.7
Non-Consumer financing	1.0		1.2		1.0
Net investment in operating leases	—		—		—
Total Other Segment	$	3.8	$	4.6	$	4.7
Total net receivables	$	130.3	$	131.7	$	117.7
Managed Receivables
Total net receivables (GAAP)	$	130.3	$	131.7	$	117.7
Unearned interest supplements and residual support	6.5		6.5		5.4
Allowance for credit losses	1.3		1.3		1.1
Other, primarily accumulated supplemental depreciation	1.3		1.0		0.6
Total managed receivables (Non-GAAP)	$	139.4	$	140.5	$	124.8

At June 30, 2020, December 31, 2020, and June 30, 2021, total net receivables includes consumer receivables before allowance for credit losses of $42.1 billion, $43.7 billion, and $38.7 billion, respectively, and non-consumer receivables before allowance for credit losses of $17.8 billion, $16.4 billion, and $12.0 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. In addition, at June 30, 2020, December 31, 2020, and June 30, 2021, total net receivables includes net investment in operating leases of $14.5 billion, $12.8 billion, and $8.4 billion, respectively, that have been included in securitization transactions but continue to be reported in our consolidated financial statements. The receivables and net investment in operating leases are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations or the claims of our other creditors. We hold the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions. For additional information on our securitization transactions, refer to the “Securitization Transactions” and “On-Balance Sheet Arrangements” sections of Item 7 of Part II of our 2020 Form 10-K Report and Note 6 of our Notes to the Financial Statements for the period ended June 30, 2021.

Total net receivables at June 30, 2021 were $12.6 billion lower compared with June 30, 2020 and $14.0 billion lower compared with December 31, 2020, primarily reflecting lower wholesale receivables as a result of lower dealer inventories due to the semiconductor shortage.

Our operating lease portfolio was 22% of total net receivables at June 30, 2021. Leasing is an important product, and our leasing strategy balances sales, share, residuals, and long-term profitability. Operating leases in the United States and Canada represent 99% of our total operating lease portfolio.

31

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Credit Risk

Credit risk is the possibility of loss from a customer’s or dealer’s failure to make payments according to contract terms. Credit losses are a normal part of a lending business, and credit risk has a significant impact on our business. We manage the credit risk of our consumer (retail financing) and non-consumer (dealer financing) receivables to balance our level of risk and return using our consistent underwriting standards, effective proprietary scoring system (discussed below), and world-class servicing. The allowance for credit losses (also referred to as the credit loss reserve) represents our estimate of the expected credit losses inherent in our finance receivables for the lifetime of those receivables as of the balance sheet date. The allowance for credit losses is estimated using a combination of models and management judgment and is based on such factors as historical loss performance, portfolio quality, receivable levels, and forward-looking macroeconomic scenarios. The adequacy of our allowance for credit losses is assessed quarterly and the assumptions and models used in establishing the allowance are evaluated regularly.

Most of our charge-offs are related to retail financing. Net charge-offs are affected by the number of vehicle repossessions, the unpaid balance outstanding at the time of repossession, the auction price of repossessed vehicles, and other amounts owed. We also incur credit losses on our dealer financing, but default rates for these receivables historically have been substantially lower than those for retail financing.

In purchasing retail financing contracts, we use a proprietary scoring system that measures credit quality using information in the credit application, proposed contract terms, credit bureau data, and other information. After a proprietary risk score is generated, we decide whether to purchase a contract using a decision process based on a judgmental evaluation of the applicant, the credit application, the proposed contract terms, credit bureau information (e.g., FICO score), proprietary risk score, and other information. Our evaluation emphasizes the applicant’s ability to pay and creditworthiness focusing on payment, affordability, applicant credit history, and stability as key considerations. While FICO is a part of our scoring system, our models enable us to more effectively determine the probability that a customer will pay than using credit scores alone. When we originate business, our models project expected losses and we price accordingly. We ensure the business fits our risk appetite.

For additional information on our allowance for credit losses and the quality of our receivables, see Note 4 of our Notes to the Financial Statements.

United States Origination Metrics

The following table shows United States retail financing and operating lease average placement FICO and higher risk portfolio mix metrics. Also shown are extended term mix and United States retail financing average placement terms.

	Second Quarter				First Half
	2020		2021		2020		2021
Origination Metrics
Average placement FICO	743		747		741		748
Higher risk portfolio mix	6	%	5	%	6	%	6	%
Greater than or equal to 84 months placement mix	15	%	6	%	12	%	4	%
Average placement term (months)	71		63		70		64

Our second quarter 2021 average placement FICO score increased compared with the same period a year ago, and remained strong. We support customers across the credit spectrum. Our higher risk business, as classified at contract inception, represents 5% of our portfolio and has been stable for over 15 years.

During the second quarter of 2021, our average retail financing placement term decreased by eight months from a year ago. Retail financing contracts of 84 months and longer decreased from a year ago, and have returned to normal levels and continue to be a small part of our business. We remain focused on managing the trade cycle—building customer relationships and loyalty while offering financing products and terms customers want. Our origination and risk management processes deliver robust portfolio performance.

32

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

United States Retail Financing Credit Losses

The following table shows the primary drivers of credit losses in the United States retail financing business, which comprised 64% of our worldwide consumer finance receivables at June 30, 2021.

	Second Quarter						First Half
	2020			2021			2020			2021
Credit Loss Drivers
Over-60-Day delinquencies (excl. bankruptcies)	0.15		%	0.08		%	0.16		%	0.10		%
Repossessions (000)	3			3			10			8
Repossession ratio	0.52		%	0.63		%	0.88		%	0.78		%
Loss severity (000) (a)	$	10.9		$	7.9		$	11.1		$	9.2
Net charge-offs ($M)	$	19		$	(9)		$	92		$	19
LTR ratio (%) (b)	0.15		%	(0.07)		%	0.37		%	0.07		%

__________

(a)The expected difference between the amount a customer owes when the finance contract is charged off and the amount received, net of expenses, from selling the repossessed vehicle.

(b) Loss-to-Receivables (“LTR”) ratios are net charge-offs divided by average managed receivables.

Delinquencies and net charge-offs remained at low levels during the second quarter. The second quarter 2021 repossessions and repossession ratio were about the same as a year ago, when involuntary repossessions were temporarily suspended due to COVID-19. Our favorable LTR ratio and net charge-offs in the second quarter of 2021 reflect government stimulus, changes in consumer spending behavior, and high vehicle collateral values that contributed to historically low losses. The impact of COVID-19 has created significant volatility in the economy and the future impact on our retail credit losses remains uncertain.

Worldwide Credit Losses

The following table shows key metrics related to worldwide credit losses:

	Second Quarter						First Half
	2020			2021			2020			2021
Net charge-offs ($M)	$	45		$	1		$	146		$	42
LTR ratio (%)	0.17		%	—		%	0.27		%	0.08		%
Credit loss reserve ($M)	$	1,285		$	1,061		$	1,285		$	1,061
Reserve as percent of EOP Managed Receivables	1.18		%	1.10		%	1.18		%	1.10		%

Our worldwide credit loss metrics remain strong. Net charge-offs and the worldwide LTR ratio in the second quarter of 2021 improved from a year ago reflecting government stimulus in response to the COVID-19 pandemic and high vehicle collateral values.

Our credit loss reserve is based on such factors as historical loss performance, portfolio quality, receivables level, and forward-looking macroeconomic scenarios. The credit loss reserve was lower than a year ago. The credit loss reserve at June 30, 2021 considers the economic conditions attributable to COVID-19 and assumes that higher levels of retail delinquencies and charge-offs will occur in future periods as economic stimulus ends and rent and mortgage forbearance programs expire. The full impact of COVID-19 on our worldwide credit losses depends on future developments, such as the containment of the outbreak (including the success of vaccination programs and efficacy against new variants), resolution of macroeconomic uncertainty, and the extent to which our customers are able to utilize government relief and payment deferral programs. Our credit loss reserve reflects lifetime expected losses as of the balance sheet date and is adjusted accordingly based on our assessment of the portfolio and economic trends and conditions. During the second quarter of 2021 we reduced our reserve primarily due to improvements in the economic outlook that caused us to lower our expectation of lifetime losses attributable to COVID-19. See Note 4 of our Notes to the Financial Statements for more information.

33

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Residual Risk

Leasing is an important product that many customers want and value, and operating lease customers also are more likely to buy or lease another Ford or Lincoln vehicle. We manage our lease share with an enterprise view to support sales, protect residual values, and manage the trade cycle. Ford Credit and Ford work together under a leasing strategy that considers share, term, model mix, geography, and other factors.

We are exposed to residual risk on operating leases and similar balloon payment products where the customer may return the financed vehicle to us. Residual risk is the possibility that the amount we obtain from returned vehicles will be less than our estimate of the expected residual value for the vehicle. We estimate the expected residual value by evaluating recent auction values, return volumes for our leased vehicles, industry wide used vehicle prices, marketing incentive plans, and vehicle quality data. For operating leases, changes in expected residual values impact depreciation expense, which is recognized on a straight-line basis over the life of the lease.

For additional information on our residual risk on operating leases, refer to the “Critical Accounting Estimates – Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 of Part II of our 2020 Form 10-K Report.

United States Ford and Lincoln Brand Operating Leases

The following table shows share of Ford and Lincoln brand retail financing and operating lease sales, placement volume, and residual performance metrics for our United States operating lease portfolio, which represents 84% of our total net investment in operating leases at June 30, 2021.

	Second Quarter						First Half
	2020			2021			2020			2021
Lease Share of Retail Sales
Ford Credit	15		%	16		%	18		%	16		%
Industry (a)	25		%	25		%	28		%	26		%
Placement Volume (000)
24-Month	9			11			20			21
36-Month	36			37			74			78
39-Month / Other	7			9			28			20
Total	52			57			122			119
Residual Performance
Return rates	76		%	34		%	76		%	46		%
Return volume (000)	58			36			125			87
Off-lease auction values (b)	$	20,110		$	28,030		$	19,810		$	24,525

__________

(a)Source: J.D. Power PIN.

(b)36-month off-lease auction values; quarterly amounts at Q2 2021 mix and YTD amounts at 2021 YTD mix.

Our United States operating lease share of retail sales in the second quarter of 2021 was higher compared with a year ago and remains well below the industry average, reflecting the Ford sales mix. Our second quarter 2021 total lease placement volume was up compared with a year ago, primarily reflecting higher lease share and higher total industry volume, partially offset by lower Ford Credit share of total Ford retail sales.

Lease return volume and return rate in the second quarter of 2021 were down from a year ago, reflecting improved auction values, as a result of lower dealer inventories due to the semiconductor shortage. Our second quarter 2021 36-month off-lease auction values were up 39% year-over-year, and up 26% compared with first quarter 2021, reflecting continued strong demand for used vehicles including the impact of lower new vehicle production due to the semiconductor shortage.

34

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Credit Ratings

Our short-term and long-term debt is rated by four credit rating agencies designated as nationally recognized statistical rating organizations (“NRSROs”) by the United States Securities and Exchange Commission: DBRS, Fitch, Moody’s, and S&P.

In several markets, locally recognized rating agencies also rate us. A credit rating reflects an assessment by the rating agency of the credit risk associated with a corporate entity or particular securities issued by that entity. Rating agencies’ ratings of us are based on information provided by us and other sources. Credit ratings assigned to us from all of the NRSROs are closely associated with their opinions on Ford. Credit ratings are not recommendations to buy, sell, or hold securities and are subject to revision or withdrawal at any time by the assigning rating agency. Each rating agency may have different criteria for evaluating company risk and, therefore, ratings should be evaluated independently for each rating agency.

The following rating actions were taken by these NRSROs since the filing of our Quarterly Report on Form 10-Q the quarter ended March 31, 2021:

•On May 5, 2021, Fitch affirmed the credit rating for Ford Credit at BB+ and revised the outlook to stable, from negative.

•On May 17, 2021, DBRS affirmed the credit rating for Ford Credit at BB (high) and revised the outlook to stable, from negative.

The following table summarizes certain of the credit ratings and outlook presently assigned by these four NRSROs:

		NRSRO RATINGS
		Ford Credit						NRSROs
	Long-Term Senior Unsecured		Short -Term Unsecured		Outlook/Trend		Minimum Long-Term Investment Grade Rating
DBRS		BB (high)		R-4		Stable		BBB (low)
Fitch		BB+		B		Stable		BBB-
Moody’s		Ba2		NP		Stable		Baa3
S&P		BB+		B		Negative		BBB-

35

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Funding and Liquidity

We ended the second quarter of 2021 with $33.0 billion of liquidity. During the quarter, we completed $2 billion of public term funding.

Key elements of our funding strategy include:

•Maintain strong liquidity; continue to renew and expand committed ABS capacity

•Prudently access public markets

•Flexibility to increase ABS mix as needed; preserving assets and committed capacity

•Target managed leverage of 8:1 to 9:1

•Maintain self-liquidating balance sheet

Our liquidity profile continues to be diverse, robust, and focused on maintaining liquidity levels that meet our business and funding requirements. We regularly stress test our balance sheet and liquidity to ensure that we continue to meet our financial obligations through economic cycles.

The following table shows funding for our managed receivables (in billions):

Funding Structure	June 30, 2020			December 31, 2020			June 30, 2021
Term unsecured debt	$	74.8		$	76.6		$	67.1
Term asset-backed securities	54.5			54.6			45.9
Ford Interest Advantage / Deposits	5.9			6.5			8.0
Other (a)	6.1			5.7			6.0
Equity (a)	15.2			15.6			13.1
Adjustments for cash	(17.1)			(18.5)			(15.3)
Total Managed Receivables (b)	$	139.4		$	140.5		$	124.8
Securitized Funding as a percent of Managed Receivables	39.1		%	38.8		%	36.8		%

__________

(a)Prior period amounts have been updated as a result of our adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 of our Notes to the Financial Statements for additional information.

(b)Reconciliation to GAAP provided in the Financial Condition section.

Managed receivables of $124.8 billion as of June 30, 2021, were funded primarily with term unsecured debt and term asset-backed securities. Securitized funding as a percent of managed receivables was 36.8% at the end of the second quarter. The calendarization of the funding plan will result in quarterly fluctuations of the securitized funding percentage.

Public Term Funding Plan

The following table shows our issuances for full year 2019 and 2020, planned issuances for full year 2021, and our global public term funding issuances through July 27, 2021, excluding short-term funding programs (in billions):

	2019 Actual		2020 Actual		2021 Forecast	Through July 27
Unsecured	$	17	$	14	$ 5 - 8	$	2
Securitizations	14		13		8 - 10	5
Total public	$	31	$	27	$ 13 - 18	$	7

For 2021, we now project full year public term funding in the range of $13 billion to $18 billion. Public funding is significantly reduced, reflecting our smaller balance sheet. Through July 27, 2021, we have completed $7 billion of public term issuances.

Liquidity

We define gross liquidity as cash, cash equivalents, and marketable securities (excluding amounts related to insurance activities) and committed capacity (which includes our asset-backed facilities and unsecured credit facilities), less utilization of liquidity. Utilization of liquidity is the amount funded under our liquidity sources and also includes the cash required to support securitization transactions and restricted cash. Net liquidity available for use is defined as gross liquidity less certain adjustments as described below. While not included in available liquidity, these adjustments represent additional funding sources for future originations.

The following table shows our liquidity sources and utilization (in billions):

	June 30, 2020		December 31, 2020		June 30, 2021
Liquidity Sources
Cash	$	17.1	$	18.5	$	15.3
Committed asset-backed facilities	37.1		38.1		38.4
Other unsecured credit facilities	2.5		2.5		2.6
Total liquidity sources	$	56.7	$	59.1	$	56.3
Utilization of Liquidity
Securitization and restricted cash	$	(3.7)	$	(3.9)	$	(8.1)
Committed asset-backed facilities	(17.7)		(16.7)		(11.3)
Other unsecured credit facilities	(0.6)		(0.5)		(0.5)
Total utilization of liquidity	$	(22.0)	$	(21.1)	$	(19.9)
Gross liquidity	$	34.7	$	38.0	$	36.4
Asset-backed capacity in excess of eligible receivables and other adjustments	(2.4)		(2.6)		(3.4)
Net liquidity available for use	$	32.3	$	35.4	$	33.0

Our net liquidity available for use will fluctuate quarterly based on factors including near-term debt maturities, receivable growth and decline, and timing of funding transactions. At June 30, 2021, our net liquidity available for use was $33.0 billion, $2.4 billion lower than year-end 2020. At June 30, 2021, our liquidity sources including cash, committed asset-backed facilities, and unsecured credit facilities totaled $56.3 billion, down $2.8 billion from year-end 2020.

Cash.  At June 30, 2021, our Cash totaled $15.3 billion, compared with $18.5 billion at year-end 2020.  In the normal course of our funding activities, we may generate more proceeds than are required for our immediate funding needs.  These excess amounts are held primarily in highly liquid investments, which provide liquidity for our anticipated and unanticipated cash needs and give us flexibility in the use of our other funding programs. Our Cash primarily includes United States Department of Treasury obligations, federal agency securities, bank time deposits with investment-grade institutions, investment-grade commercial paper, debt obligations of a select group of non-U.S. governments, non-U.S. governmental agencies, supranational institutions, non-U.S. central banks, and money market funds that carry the highest possible ratings.

The average maturity of these investments ranges from approximately three to six months and is adjusted based on market conditions and liquidity needs.  We monitor our cash levels and average maturity on a daily basis.  Cash includes restricted cash and amounts to be used only to support our securitization transactions of $3.9 billion and $8.1 billion at December 31, 2020 and June 30, 2021, respectively. The increase is primarily due to cash required to support our United States wholesale trust as a result of the decline in the receivable balance.

Material Cash Requirements. Our material cash requirements include: (1) the purchase of retail financing and operating lease contracts from dealers and providing wholesale financing for dealers to finance new and used vehicles; and (2) debt repayments (for additional information on debt, see the ‘Balance Sheet Liquidity Profile” section below and the “Aggregate Contractual Obligations” section in Item 7 and Note 9 of the Notes to the Financial Statements in our 2020 Form 10-K Report). In addition, subject to approval by our Board of Directors, shareholder distributions may require the expenditure of a material amount of cash. Moreover, we may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, e.g. legal contingencies, uncertain tax positions, and other matters.

We plan to utilize our liquidity (as described above) and our cash flows from business operations to fund our material cash requirements.

Committed Capacity. At June 30, 2021, our committed capacity totaled $41.0 billion, compared with $40.6 billion at December 31, 2020. Our committed capacity is primarily comprised of committed ABS facilities from bank-sponsored commercial paper conduits and other financial institutions and committed unsecured credit facilities with financial institutions.

Committed Asset-Backed Facilities. We and our subsidiaries have entered into agreements with a number of bank-sponsored asset-backed commercial paper conduits and other financial institutions. Such counterparties are contractually committed, at our option, to purchase from us eligible retail financing receivables or to purchase or make advances under asset-backed securities backed by retail financing or wholesale finance receivables or operating leases for proceeds of up to $38.4 billion ($21.2 billion of retail financing, $4.8 billion of wholesale financing, and $12.4 billion of operating leases) at June 30, 2021. In the United States, we are able to obtain funding within two days of our unutilized capacity in some of our committed asset-backed facilities. These committed facilities have varying maturity dates, with $15.0 billion having maturities within the next twelve months and the remaining balance having maturities through first quarter 2024. We plan capacity renewals to protect our global funding needs and to optimize capacity utilization.

Our ability to obtain funding under these facilities is subject to having a sufficient amount of eligible assets as well as our ability to obtain interest rate hedging arrangements for certain facilities. At June 30, 2021, $11.3 billion of these commitments were in use and we had $4.0 billion of asset-backed capacity that was in excess of eligible receivables primarily due to the decline in wholesale asset balances. These facilities are free of material adverse change clauses, restrictive financial covenants (for example, debt-to-equity limitations and minimum net worth requirements), and generally, credit rating triggers that could limit our ability to obtain funding. However, the unused portion of these commitments may be terminated if the performance of the underlying assets deteriorates beyond specified levels. Based on our experience and knowledge as servicer of the related assets, we do not expect any of these commitments to be terminated due to such events.

As of June 30, 2021, Ford Bank GmbH (“Ford Bank”) had liquidity in the form of €78 million (equivalent to $93 million) of senior ABS notes eligible for collateral in the European Central Bank’s monetary policy programs.

Unsecured Credit Facilities. At June 30, 2021, we and our majority-owned subsidiaries had $2.6 billion of contractually committed unsecured credit facilities with financial institutions, including the FCE Credit Agreement and the Ford Bank Credit Agreement. At June 30, 2021, $2.1 billion was available for use.

FCE’s £780 million (equivalent to $1,082 million at June 30, 2021) syndicated credit facility (the “FCE Credit Agreement”) and Ford Bank’s €240 million (equivalent to $285 million at June 30, 2021) syndicated credit facility (the “Ford Bank Credit Agreement”) both mature in 2023, except for £95 million of the FCE Credit Agreement that matures in 2022. At June 30, 2021, all £780 million under the FCE Credit Agreement and all €240 million under the Ford Bank Credit Agreement were available for use.

Both the FCE Credit Agreement and Ford Bank Credit Agreement contain certain covenants, including an obligation for FCE and Ford Bank to maintain their ratio of regulatory capital to risk-weighted assets at no less than the applicable regulatory minimum. The FCE Credit Agreement requires the support agreement between FCE and Ford Credit to remain in effect (and enforced by FCE to ensure that its net worth is maintained at no less than $500 million). The Ford Bank Credit Agreement requires a guarantee of Ford Bank’s obligations under the agreement, provided by Ford Credit, to remain in effect.

Balance Sheet Liquidity Profile

We define our balance sheet liquidity profile as the cumulative maturities, including the impact of expected prepayments and allowance for credit losses of our finance receivables, investment in operating leases, and cash, less the cumulative debt maturities over upcoming annual periods. Our balance sheet is inherently liquid because of the short-term nature of our finance receivables, investment in operating leases, and cash. We ensure our cumulative debt maturities have a longer tenor than our cumulative asset maturities. This positive maturity profile is intended to provide additional liquidity after all of our assets have been funded and is in addition to liquidity available to protect for stress scenarios.

The following table shows our cumulative maturities for assets and total debt for the periods presented and unsecured long-term debt maturities in the individual periods presented (in billions):

	July - December 2021		2022		2023		2024 & Beyond
Balance Sheet Liquidity Profile
Assets (a)	$	47	$	81	$	107	$	138
Total debt (b)	36		65		84		120
Memo: Unsecured long-term debt maturities	6		14		11		31

__________

(a)Includes gross finance receivables less the allowance for credit losses, investment in operating leases net of accumulated depreciation, and cash. Amounts shown include the impact of expected prepayments.

(b)Excludes unamortized debt (discount) / premium, unamortized issuance costs, and fair value adjustments.

Maturities of investment in operating leases consist primarily of the portion of rental payments attributable to depreciation over the remaining life of the lease and the expected residual value at lease termination. Maturities of finance receivables and investment in operating leases in the table above include expected prepayments for our retail installment sale contracts and investment in operating leases. The table above also reflects adjustments to debt maturities to match the asset-backed debt maturities with the underlying asset maturities.

All wholesale securitization transactions and wholesale receivables are shown maturing in the next 12 months, even if the maturities extend beyond second quarter 2022. The retail securitization transactions under certain committed asset-backed facilities are assumed to amortize immediately rather than amortizing after the expiration of the commitment period. As of June 30, 2021, we had $138 billion of assets, $72 billion of which were unencumbered. For additional information on finance receivables, investment in operating leases, and debt, see Notes 4, 5, and 9 of our Notes to the Financial Statements.

Funding and Liquidity Risks

Our funding plan is subject to risks and uncertainties, many of which are beyond our control, including disruption in the capital markets, that could impact both unsecured debt and asset-backed securities issuance and the effects of regulatory changes on the financial markets. Refer to the “Funding and Liquidity Risks” section of Item 7 of Part II of our 2020 Form 10-K Report for more information.

36

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Leverage

We use leverage, or the debt-to-equity ratio, to make various business decisions, including evaluating and establishing pricing for finance receivable and operating lease financing, and assessing our capital structure. We refer to our shareholder’s interest as equity.

The following table shows the calculation of our financial statement leverage and managed leverage (in billions):

	June 30, 2020		December 31, 2020		June 30, 2021
Leverage Calculation
Debt	$	135.3	$	137.7	$	121.0
Adjustments for cash	(17.1)		(18.5)		(15.3)
Adjustments for derivative accounting	(1.8)		(1.5)		(0.9)
Total adjusted debt	$	116.4	$	117.7	$	104.8
Equity (a)	$	15.2	$	15.6	$	13.1
Adjustments for derivative accounting	—		0.1		0.1
Total adjusted equity (a)	$	15.2	$	15.7	$	13.2
Financial statement leverage (to 1) (GAAP) (a)	8.9		8.8		9.3
Managed leverage (to 1) (Non-GAAP) (a)	7.7		7.5		8.0

__________

(a)Prior period amounts have been updated as a result of our adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 of our Notes to the Financial Statements for additional information.

Note: Numbers may not sum due to rounding.

We plan our managed leverage by considering market conditions and the risk characteristics of our business. At June 30, 2021, our financial statement leverage was 9.3:1, and managed leverage was 8.0:1. We target managed leverage in the range of 8:1 to 9:1.

Outlook

For the full year, we expect EBT of about $4.2 billion. This amount excludes any impact from the potential reclassification of accumulated foreign currency translation losses to income related to our South America restructuring actions.

37

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Cautionary Note on Forward-Looking Statements

Statements included or incorporated by reference herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:

•Ford and Ford Credit’s financial condition and results of operations have been and may continue to be adversely affected by public health issues, including epidemics or pandemics such as COVID-19;

•Ford is highly dependent on its suppliers to deliver components in accordance with Ford’s production schedule, and a shortage of key components, such as semiconductors, can disrupt Ford’s production of vehicles;

•Ford’s long-term competitiveness depends on the successful execution of its Plan;

•Ford’s vehicles could be affected by defects that result in delays in new model launches, recall campaigns, or increased warranty costs;

•Ford may not realize the anticipated benefits of existing or pending strategic alliances, joint ventures, acquisitions, divestitures, or new business strategies;

•Operational systems, security systems, and vehicles could be affected by cyber incidents and other disruptions;

•Ford’s production, as well as Ford’s suppliers’ production, could be disrupted by labor issues, natural or man-made disasters, financial distress, production difficulties, or other factors;

•Ford’s ability to maintain a competitive cost structure could be affected by labor or other constraints;

•Ford’s ability to attract and retain talented, diverse, and highly skilled employees is critical to its success and competitiveness;

•Ford’s new and existing products and mobility services are subject to market acceptance and face significant competition from existing and new entrants in the automotive and mobility industries;

•Ford’s results are dependent on sales of larger, more profitable vehicles, particularly in the United States;

•With a global footprint, Ford’s results could be adversely affected by economic, geopolitical, protectionist trade policies, or other events, including tariffs;

•Industry sales volume in any of Ford’s key markets can be volatile and could decline if there is a financial crisis, recession, or significant geopolitical event;

•Ford may face increased price competition or a reduction in demand for its products resulting from industry excess capacity, currency fluctuations, competitive actions, or other factors;

•Fluctuations in commodity prices, foreign currency exchange rates, interest rates, and market value of Ford or Ford Credit’s investments can have a significant effect on results;

•Ford and Ford Credit’s access to debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts could be affected by credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors;

•Ford’s receipt of government incentives could be subject to reduction, termination, or clawback;

•Ford Credit could experience higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles;

•Economic and demographic experience for pension and other postretirement benefit plans (e.g., discount rates or investment returns) could be worse than Ford has assumed;

•Pension and other postretirement liabilities could adversely affect Ford’s liquidity and financial condition;

•Ford could experience unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, perceived environmental impacts, or otherwise;

•Ford may need to substantially modify its product plans to comply with safety, emissions, fuel economy, autonomous vehicle, and other regulations;

•Ford and Ford Credit could be affected by the continued development of more stringent privacy, data use, and data protection laws and regulations as well as consumers’ heightened expectations to safeguard their personal information; and

•Ford Credit could be subject to new or increased credit regulations, consumer protection regulations, or other regulations.

We cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized.  It is to be expected that there may be differences between projected and actual results.  Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. For additional discussion, see “Item 1A. Risk Factors” in our 2020 Form 10-K Report, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

38

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Accounting Standards Issued But Not Yet Adopted

None.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

In our Annual Report on Form 10-K for the year ended December 31, 2020, we discuss in greater detail our market risk, counterparty risk, credit risk, residual risk, liquidity risk, and operating risk.

To provide a quantitative measure of the sensitivity of our pre-tax cash flow to changes in interest rates, we use interest rate scenarios that assume a hypothetical, instantaneous increase or decrease of one percentage point in all interest rates across all maturities (a “parallel shift”), as well as a base case that assumes that all interest rates remain constant at existing levels. The differences in pre-tax cash flow between these scenarios and the base case over a 12 month period represent an estimate of the sensitivity of our pre-tax cash flow. Under this model, we estimate that at June 30, 2021, all else constant, such an increase in interest rates would decrease our pre-tax cash flow by $60 million over the next 12 months, compared with a decrease of $3 million at December 31, 2020. In reality, interest rate changes are rarely instantaneous or parallel and rates could move more or less than the one percentage point assumed in our analysis. As a result, the actual impact to pre-tax cash flow could be higher or lower than the results detailed above.

Transition from LIBOR to Alternative Reference Rates

We have been working to transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates. We have developed a total company inventory of affected financial instruments and contracts, have been working to transition legacy contracts linked to LIBOR to alternative reference rates, and intend to rely primarily on alternative reference rates for new contracts after 2021.

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Marion B. Harris, our President and Chief Executive Officer (“CEO”), and Brian E. Schaaf, our Chief Financial Officer (“CFO”) and Treasurer, have performed an evaluation of the Company’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of June 30, 2021, and each has concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by SEC rules and forms, and that such information is accumulated and communicated to the CEO and CFO to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting. During the second quarter of 2021, we began a multi-year implementation of a new global integrated enterprise resource planning (“I-ERP”) system, which will replace many of our existing core financial systems. Implementation of I-ERP began with the launch of our Canada market in May 2021 and is expected to progress in phased launches across remaining markets over the next several years. As the phased implementation of the I-ERP system advances, our internal processes, procedures, and controls will be refined as appropriate.

39

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings.

We have no legal proceedings arising under any federal, state, or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment, in which (i) a governmental authority is a party, and (ii) we believe there is the possibility of monetary sanctions (exclusive of interest and costs) in excess of $1 million.

ITEM 5. Other Information.

None.

ITEM 6. Exhibits.

Designation	Description	Method of Filing
Exhibit 31.1	Rule 15d-14(a) Certification of CEO.	Filed with this Report.
Exhibit 31.2	Rule 15d-14(a) Certification of CFO.	Filed with this Report.
Exhibit 32.1	Section 1350 Certification of CEO.	Furnished with this Report.
Exhibit 32.2	Section 1350 Certification of CFO.	Furnished with this Report.
Exhibit 101.INS	Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language (“Inline XBRL”).	*
Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document.	*
Exhibit 101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	*
Exhibit 101.LAB	XBRL Taxonomy Extension Label Linkbase Document.	*
Exhibit 101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.	*
Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.	*
Exhibit 104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).	*

__________

*Submitted electronically with this Report in accordance with the provisions of Regulation S-T.

Instruments defining the rights of holders of certain issues of long-term debt of Ford Credit have not been filed as exhibits to this Report because the authorized principal amount of any one of such issues does not exceed 10% of the total assets of Ford Credit. Ford Credit will furnish a copy of each such instrument to the SEC upon request.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, Ford Motor Credit Company LLC has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

FORD MOTOR CREDIT COMPANY LLC

By:	/s/ Brian E. Schaaf
	Brian E. Schaaf
	Chief Financial Officer and Treasurer
Date:	July 28, 2021

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