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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES 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 foreign currency exchange rates, certain commodity prices, and interest rates. To manage these risks, we enter into derivative and nonderivative contracts and have elected to apply hedge accounting to certain of these instruments. 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 QuarterFirst Half
Cash flow hedges
2025202620252026
Reclassified from AOCI to Cost of sales
Foreign currency exchange contracts (a)
$21 $9 $95 $(3)
Commodity contracts (b)
(1)59 10 87 
Fair value hedges
Interest rate contracts
Net interest settlements and accruals on hedging instruments
(44)(7)(92)(14)
Fair value changes on hedging instruments235 (187)564 (365)
Fair value changes on hedged debt(219)186 (543)356 
Cross-currency interest rate swap contracts
Net interest settlements and accruals on hedging instruments
(18)(14)(43)(26)
Fair value changes on hedging instruments358 (37)504 (240)
Fair value changes on hedged debt(339)29 (475)233 
Derivatives not designated as hedging instruments
Foreign currency exchange contracts (c)(69)(2)(9)(36)
Cross-currency interest rate swap contracts
246 16 348 (74)
Interest rate contracts(18)1 (63)92 
Commodity contracts11 (13)22 28 
Total$163 $40 $318 $38 
__________
(a)For the second quarter and first half of 2025, a $527 million loss and a $605 million loss, respectively, were reported in Other comprehensive income/(loss), net of tax. For the second quarter and first half of 2026, a $93 million gain and a $229 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax
(b)For the second quarter and first half of 2025, a $12 million gain and an $8 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax. For the second quarter and first half of 2026, a $38 million loss and a $40 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax.
(c)For the second quarter and first half of 2025, a $56 million gain and a $126 million gain, respectively, were reported in Cost of sales, and a $125 million loss and a $135 million loss, respectively, were reported in Other income/(loss), net. For the second quarter and first half of 2026, a $49 million loss and a $112 million loss, respectively, were reported in Cost of sales, and a $47 million gain and a $76 million gain, respectively, were reported in Other income/(loss), net.
NOTE 13. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

Derivative assets and liabilities are reported on our consolidated 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, 2025June 30, 2026
NotionalFair Value of
Assets		Fair Value of
Liabilities		NotionalFair Value of
Assets		Fair Value of
Liabilities
Cash flow hedges   
Foreign currency exchange contracts
$17,750 $98 $114 $14,383 $268 $100 
Commodity contracts940 122 — 1,049 84 15 
Fair value hedges
Interest rate contracts18,582 374 220 22,422 170 336 
Cross-currency interest rate swap contracts
4,158 383 5 6,330 234 72 
Derivatives not designated as hedging instruments
Foreign currency exchange contracts24,934 150 180 21,855 175 248 
Cross-currency interest rate swap contracts
7,121 379 28 5,406 204 13 
Interest rate contracts87,293 364 619 84,868 411 432 
Commodity contracts803 56 1 977 53 31 
Total derivative financial instruments, gross (a) (b)
$161,581 $1,926 $1,167 $157,290 $1,599 $1,247 
Current portion
$634 $643 $593 $788 
Non-current portion
1,292 524 1,006 459 
Total derivative financial instruments, gross
$1,926 $1,167 $1,599 $1,247 
__________
(a)At December 31, 2025 and June 30, 2026, we held collateral of $5 million and $4 million, respectively, and we posted collateral of $102 million and $90 million, respectively.
(b)At December 31, 2025 and June 30, 2026, the fair value of assets and liabilities available for counterparty netting was $814 million and $855 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

Nonderivative Hedging Instruments

In the first quarter of 2026, we designated a foreign-denominated debt issuance as a net investment hedge to manage the foreign currency risk of a portion of our investment in a foreign subsidiary with a non-U.S. dollar functional currency. The designated balance of $831 million at June 30, 2026 is reported in Ford Credit debt on our consolidated balance sheets. The cumulative foreign currency remeasurement gains and losses on the designated debt are recorded in Accumulated other comprehensive income/(loss), offsetting translation adjustments on the investment. Upon the sale or substantial liquidation of our investment in the foreign subsidiary, the gains and losses are reclassified to Other income/(loss), net. For the second quarter and first half of 2026, an $8 million gain and a $36 million gain, respectively, were recognized in Foreign currency translation, a component of Other comprehensive income/(loss), net of tax, and no amount was reclassified to income.