Chief Financial Officer at Ford Motor
Thank you, Jim. Now in the face of continued industry-wide semiconductor constraints, we stayed focused on our plan, strengthening our portfolio and investing in opportunities fundamental to growth and value creation. We delivered a solid quarter with $3 billion in adjusted company EBIT and a margin of 8.4%. Free cash flow of $7.7 billion was as we expected, up sharply on a sequential basis, driven by the positive working capital effects from higher wholesales in EBIT. We ended the quarter with strong cash and liquidity at over $31 billion and $47 billion respectively.
Now across our automotive business, our playbook remained consistent as we optimize production for customer orders, new launches in our most profitable vehicles. And as expected, on a sequential basis, our wholesales improved dramatically as chip supply for Ford improved. We also remain disciplined with incentive spending and mix management, which on a year-over-year basis, more than offset chip-related declines in volume.
Ford Credit delivered another solid quarter with $1.1 billion in EBT as auction values continued to remain strong and credit losses continue at near-record lows. For the fourth quarter, we're assuming a sequential increase in wholesales. We also expect continued healthy mix and net pricing and solid results from Ford Credit, although not as strong as the third quarter. Headwinds include inflationary impacts on commodities and freight, and we also expect planned sequential increases in our Ford+ modernization investments, including customer experience and IT.
Now let me share with you some highlights from the quarter before I turn to guidance, capital allocation and our preliminary view of 2022. With improved chip supply, North America wholesales increased sequentially by 67% as the team prioritized launches, customer orders and high margin units, while reducing the number of vehicles built, but waiting for chips. Demand remained strong for our exciting vehicles. The order bank we are building paid off in the third quarter, representing 28% of our retail sales in the third quarter and reaching a high of 31% in September. And our overall customer orders increased over 50% from the second quarter to more than 100,000 orders, excluding Bronco. With a 10.1% EBIT margin in the quarter, North America is now at a 9% margin year-to-date, just 100 basis points shy of our 2023 target of 10%.
South America marked its eighth consecutive quarter of year-over-year improvement in EBIT, and the business run rate is now approaching breakeven. The region also launched its new commercial vehicle organization with the introduction of the new transit, which is manufactured in Uruguay. This transit is the first light commercial van to market in Brazil that includes connectivity as a standard feature.
In Europe, the underlying trajectory of our business continues to strengthen, though the adverse impact from chips has masked this improvement. In the third quarter, the business lost about 50,000 units, which would have had a substantial favorable impact on EBIT. Our leadership, as the number one commercial vehicle brand, continued in the quarter along with an extremely robust order bank.
In China, Lincoln continues to perform well, extending its success in the most profitable segment, Luxury. With retail sales up 24% year-over-year, in fact, Lincoln has doubled its share of the China luxury market over the past 18 months. Our newly created BEV organization opened its first 13 direct-to-consumer Ford Select city stores with a total of 25 expected to open by year end.
In IMG, our leadership team in India made the difficult decision to end manufacturing following accumulated operating losses of more than $2 billion over the past 10 years. Going forward, we will focus on importing iconic vehicles including EVs, and overall, IMG had a solid quarter capitalizing on our strengths, including Ranger.
Now as Jim highlighted, the underlying strength of our business supports increasing our adjusted EBIT guidance for 2021 to between $10.5 billion and $11.5 billion, and that's despite a lower than anticipated improvement in chip availability in the second half of the year. Consistent with our adjusted EBIT guidance through this year, our updated guidance for 2021 includes the $900 million non-cash gain on our investment in Rivian in our first quarter adjusted results.
So let me spend a minute on Rivian. Now in the event that Rivian completes its IPO, we will record any gain on our investment in any subsequent adjustments as special items. Accordingly, we will recast the $900 million non-cash gain from adjusted EBIT in the first quarter to a special item. If Rivian completes their IPO in the fourth quarter, we will make this change when we report our fourth quarter earnings on February 3, 2022.
Our guidance for 2021 adjusted free cash flow is unchanged at $4 billion to $5 billion, reflecting the higher EBIT, but less favorable improvement in working capital and timing differences. Now this is due to lower than anticipated volume than previously assumed in the back half of the quarter, and that's as a result of chip constraints. We do expect free cash flow to increase with higher production and the associated improvement in supplier payables and other timing differences.
So now let me turn to capital allocation, which again, is the foundation of our value creation framework. Our capital allocation discipline is driving a strong core business and balance sheet that provides the flexibility to invest in new growth opportunities as we deliver our Ford+ plan. Ultimately, it ensures we return value to our shareholders, both in the form of a higher share price and dividends.
Today, we announced the reinstatement of our dividend. Our board has approved restarting a regular quarterly dividend of $0.10 per share in the fourth quarter of 2021. Importantly, the dividend reflects our confidence in the improving run rate of the business and our ability to fund all of our calls on capital including the growing investment in electrification and the trajectory of our Ford+ plan. The dividend was also sized to ensure we maintain appropriate optionality to manage continued uncertainties in the external environment.
To give you a better sense of our calls on capital between 2020 and 2025, we expect total capital expenditures of about $40 billion to $45 billion or a run rate of roughly $7 billion per year. Now over the same time, we expect to invest over $30 billion in BEVs. And of the investment in BEVs, about 50% is capex, 25% is expense and 25% is direct investments. And these numbers, they will be dynamic and we are confident we have ample financial flexibility to increase our investments even if BEV adoption further accelerates.
Now let me share with you our early thinking about 2022, a year which like this one, is likely to experience some industry crossroads that could drive a range of outcomes. Now we typically don't talk about the upcoming year this soon, and we're not yet prepared to give financial guidance, but we do want to share how we're thinking about next year given the dynamic operating environment.
Ford's underlying strengths give me great confidence we can build on our results in 2021. First, our portfolio of products and services is exceptional, and we have a significant amount of new products coming to market spanning our iconic high volume nameplate. Second, our industrial base gives us significant optionality as the adoption of electric vehicles accelerates. Third, driven by the chip shortage of roughly 4 million in wholesales we are likely to deliver this year, fall significantly below our capacity. And based on our current assessment, we believe our wholesales to be up about 10% in 2022, but that number is very dynamic and changes almost weekly. And fourth, the effects of our global redesign, which is largely completed are now evident and substantial. We have drastically derisked and rationalized our global footprint and product lineup, vastly improving our earnings and cash generation power in the process.
Now for headwinds next year, it's difficult to predict the interplay between semiconductor-related constraints, volume and pricing, and this will continue to remain dynamic. For 2021, we expect commodities to be up $3 billion to $3.5 billion and they could be up another $1.5 billion in 2022, largely driven by steel and aluminum similar to this year. There will also likely be other inflationary costs, but it's too early to size that right now.
Ford Credit is likely to be lower as strong auction values will be moderated by a smaller inventory of vehicles and lower lease and return rates. And lastly, we're obviously going to continue to invest in our Ford+ plan for growth and value creation. And this includes, in customer-facing technology, connectivity, our always on relationships with customers and electrification. And of course, we believe the long-term payback from those investments will be substantial.
Now that wraps up our prepared remarks. And if you perceive that the upfront portion of these calls is becoming more efficient, well, you're right. And that's a function of us being very specific with you and our team about what's truly important and our confidence in executing effectively against those things and reporting accordingly. We'll use the balance of the time to hear and address what's on your minds. Thank you.