v3.26.1
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
 3 Months Ended
Mar. 31, 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 March 31 were as follows (in millions):
 First Quarter
Cash flow hedges
20252026
Reclassified from AOCI to Cost of sales
Foreign currency exchange contracts (a)
$74 $(12)
Commodity contracts (b)
11 28 
Fair value hedges
Interest rate contracts
Net interest settlements and accruals on hedging instruments
(48)(7)
Fair value changes on hedging instruments329 (178)
Fair value changes on hedged debt(324)170 
Cross-currency interest rate swap contracts
Net interest settlements and accruals on hedging instruments
(25)(12)
Fair value changes on hedging instruments146 (203)
Fair value changes on hedged debt(136)204 
Derivatives not designated as hedging instruments
Foreign currency exchange contracts (c)60 (34)
Cross-currency interest rate swap contracts
102 (90)
Interest rate contracts(45)91 
Commodity contracts11 41 
Total$155 $(2)
__________
(a)For the first quarter of 2025 and 2026, a $78 million loss and a $136 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax.
(b)For the first quarter of 2025 and 2026, a $4 million loss and a $78 million gain, respectively, were reported in Other comprehensive income/(loss), net of tax.
(c)For the first quarter of 2025 and 2026, a $70 million gain and a $63 million loss, respectively, were reported in Cost of sales, and a $10 million loss and a $29 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, 2025March 31, 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 $16,384 $174 $64 
Commodity contracts940 122 — 995 167 7 
Fair value hedges
Interest rate contracts18,582 374 220 21,437 225 244 
Cross-currency interest rate swap contracts
4,158 383 5 5,050 247 69 
Derivatives not designated as hedging instruments
Foreign currency exchange contracts24,934 150 180 24,848 130 256 
Cross-currency interest rate swap contracts
7,121 379 28 5,912 238 33 
Interest rate contracts87,293 364 619 88,018 439 470 
Commodity contracts803 56 1 909 91 4 
Total derivative financial instruments, gross (a) (b)
$161,581 $1,926 $1,167 $163,553 $1,711 $1,147 
Current portion
$634 $643 $682 $748 
Non-current portion
1,292 524 1,029 399 
Total derivative financial instruments, gross
$1,926 $1,167 $1,711 $1,147 
__________
(a)At December 31, 2025 and March 31, 2026, we held collateral of $5 million and $4 million, respectively, and we posted collateral of $102 million and $111 million, respectively.
(b)At December 31, 2025 and March 31, 2026, the fair value of assets and liabilities available for counterparty netting was $814 million and $843 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 non-U.S. dollar functional currency. The designated balance of $839 million at March 31, 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 first quarter of 2026, a $28 million gain was recognized in Foreign currency translation, a component of Other comprehensive income/(loss), net of tax, and no amount was reclassified to income.