DEARBORN, Mich., Jan. 29 /PRNewswire-FirstCall/ -- Ford Motor Credit Company reported a net loss of $1.5 billion in 2008, a decrease of $2.3 billion from net income of $775 million a year earlier. On a pre-tax basis, Ford Motor Credit reported a loss of $2.6 billion in 2008, including the second quarter 2008 impairment charge of $2.1 billion for North America operating leases, compared with earnings of $1.2 billion in the previous year. The decrease in full year pre-tax earnings is more than explained by the impairment charge, a higher provision for credit losses, and higher depreciation expense for leased vehicles.
In the fourth quarter of 2008, Ford Motor Credit's net loss was $228 million, down $414 million from a year earlier. On a pre-tax basis, Ford Motor Credit reported a loss of $372 million in the fourth quarter, compared with earnings of $263 million in the previous year. The decrease in fourth quarter pre-tax earnings primarily reflected a higher provision for credit losses, higher net losses related to market valuation adjustments to derivatives, lower volume, and lower financing margin. Lower operating costs were largely offset by other expenses.
"The drastic and rapid deterioration in the economy, credit markets and auto sales in 2008 brought unprecedented challenges to Ford Motor Credit. The historic decline in used-vehicle auction prices across the industry affected our North American lease portfolio and led to a second quarter impairment," Chairman and CEO Mike Bannister said. "Tough external challenges are expected in 2009. However, we will continue to manage our business through consistent and sound risk management, lending and servicing practices."
On December 31, 2008, Ford Motor Credit's on-balance sheet net receivables totaled $116 billion, compared with $141 billion at year-end 2007. Managed receivables were $118 billion on December 31, 2008, down from $147 billion on December 31, 2007. The lower receivables primarily reflected lower North America receivables, changes in currency exchange rates, the impact of divestitures and alternative business arrangements, and the second quarter 2008 impairment charge for North America operating leases.
Ford Motor Credit also is restructuring its U.S. operations to meet changing business conditions, including lower auto sales and the planned reduction in Jaguar, Land Rover and Mazda receivables, and to maintain a competitive cost structure. The restructuring will affect servicing, sales and central operations and eliminate about 1,200 staff and agency positions, or about 20 percent. The reductions will occur in 2009 through attrition, retirements and involuntary separations.
Ford Motor Credit Company LLC is one of the world's largest automotive finance companies and has supported the sale of Ford Motor Company products since 1959. Ford Motor Credit is an indirect, wholly owned subsidiary of Ford. It provides automotive financing for Ford, Lincoln, Mercury and Volvo dealers and customers. More information can be found at http://www.fordcredit.com and at Ford Motor Credit's investor center, http://www.fordcredit.com/investorcenter/.
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* The financial results discussed herein are presented on a preliminary basis; final data will be included in our Annual Report on Form 10-K for the year ended December 31, 2008.
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FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
PRELIMINARY
CONSOLIDATED STATEMENT OF INCOME
For the Periods Ended December 31, 2008 and 2007
(in millions)
Fourth Quarter Full Year
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
(Unaudited) (Unaudited)
Financing revenue
Operating leases $ 1,519 $ 1,680 $ 6,519 $ 6,343
Retail 766 895 3,270 3,475
Interest supplements and other
support costs earned from
affiliated companies 1,092 1,214 4,774 4,592
Wholesale 381 525 1,721 2,132
Other 30 41 133 174
-------- -------- -------- --------
Total financing revenue 3,788 4,355 16,417 16,716
Depreciation on vehicles subject
to operating leases (1,542) (1,667) (9,019) (6,188)
Interest expense (1,853) (2,166) (7,634) (8,630)
-------- -------- -------- --------
Net financing margin 393 522 (236) 1,898
Other revenue
Investment and other income
related to sales of receivables 13 83 199 391
Insurance premiums earned, net 30 39 140 169
Other income, net 112 398 758 1,362
-------- -------- -------- --------
Total financing margin and
other revenue 548 1,042 861 3,820
Expenses
Operating expenses 387 478 1,548 1,929
Provision for credit losses 520 287 1,769 588
Insurance expenses 13 14 103 88
-------- ---------------- --------
Total expenses 920 779 3,420 2,605
-------- -------- -------- --------
Income/(Loss) before income taxes (372) 263 (2,559) 1,215
Provision for/(Benefit from)
income taxes (144) 83 (1,014) 446
-------- -------- -------- --------
Income/(Loss) before minority
interests (228) 180 (1,545) 769
Minority interests in net income
of subsidiaries - 0 0 0
-------- -------- -------- --------
Income/(Loss) from continuing
operations (228) 180 (1,545) 769
Gain on disposal of discontinued
operations - 6 9 6
-------- -------- -------- --------
Net income/(loss) $ (228) $ 186 $ (1,536) $ 775
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FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
PRELIMINARY
CONSOLIDATED BALANCE SHEET
(in millions)
December 31,
-------------------------
2008 2007
---------- ----------
(Unaudited)
ASSETS
Cash and cash equivalents $ 15,473 $ 14,137
Marketable securities 8,606 3,155
Finance receivables, net 93,331 111,468
Net investment in operating leases 22,506 29,663
Retained interest in securitized assets 92 653
Notes and accounts receivable from
affiliated companies 1,047 906
Derivative financial instruments 3,791 2,811
Assets of held-for-sale operations 214 -
Other assets5,067 6,230
---------- ----------
Total assets $ 150,127 $ 169,023
========== ==========
LIABILITIES AND SHAREHOLDER'S INTEREST
Liabilities
Accounts payable
Customer deposits, dealer reserves and
other $ 1,781 $ 1,837
Affiliated companies 1,015 2,308
---------- ----------
Total accounts payable 2,796 4,145
Debt 126,458 139,411
Deferred income taxes 2,668 5,380
Derivative financial instruments 2,145 1,376
Liabilities of held-for-sale operations 56 -
Other liabilities and deferred income 5,438 5,314
---------- ----------
Total liabilities 139,561 155,626
Minority interests in net assets of subsidiaries 0 3
Shareholder's interest
Shareholder's interest 5,149 5,149
Accumulated other comprehensive income 432 1,730
Retained earnings 4,985 6,515
---------- ----------
Total shareholder's interest 10,566 13,394
---------- ----------
Total liabilities and shareholder's
interest $ 150,127 $ 169,023
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FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
OPERATING HIGHLIGHTS
Fourth Quarter Full Year
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Financing Shares
United States
Financingshare - Ford, Lincoln and
Mercury
Retail installment and lease 34% 32% 39% 38%
Wholesale 78 78 77 78
Europe
Financing share - Ford
Retail installment and lease 30% 27% 28% 26%
Wholesale 98 96 98 96
Contract Volume - New and used
retail/lease (in thousands)
North America segment
United States 179 248 1,043 1,256
Canada 27 38 149 186
-------- -------- -------- --------
Total North America segment 206 286 1,192 1,442
International segment
Europe 125 155 629 696
Other international 24 48 129 207
-------- -------- -------- --------
Total International segment 149 203 758 903
-------- -------- -------- --------
Total contract volume 355 489 1,950 2,345
======== ======== ======== ========
Borrowing Cost Rate* 5.8% 6.2% 5.6% 6.1%
Charge-offs (in millions)
On-Balance Sheet Receivables
Retail installment and lease $ 332 $ 220 $ 1,089 $ 608
Wholesale 19 (8) 29 17
Other 13 4 17 7
-------- -------- -------- --------
Total charge-offs - on-
balance sheet receivables $ 364 $ 216 $ 1,135 $ 632
======== ======== ======== ========
Total loss-to-receivables ratio 1.18% 0.61% 0.84% 0.46%
Managed Receivables**
Retail installment and lease $ 334 $ 237 $ 1,120 $ 673
Wholesale 19 (8) 29 17
Other 13 4 17 7
-------- -------- ----------------
Total charge-offs - managed
receivables $ 366 $ 233 $ 1,166 $ 697
======== ======== ======== ========
Total loss-to-receivables ratio 1.18% 0.62% 0.84% 0.47%
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* On-balance sheet debt includes the effects of derivatives and facility
fees.
** See Appendix for additional information.
FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES
APPENDIX
In evaluating Ford Motor Credit's financial performance, Ford Motor Credit management uses financial measures based on Generally Accepted Accounting Principles ("GAAP"), as well as financial measures that include adjustments from GAAP. Included below are brief definitions of key terms, information about the impact of on-balance sheet securitization and a reconciliation of non-GAAP measures to GAAP:
-- Managed receivables: receivables reported on Ford Motor Credit's
balance sheet, excluding unearned interest supplements related to
finance receivables, and receivables Ford Motor Credit sold in off-
balance sheet securitizations and continues to service
-- Charge-offs on managed receivables: charge-offs associated with
receivables reported on Ford Motor Credit's balance sheet and charge-
offs associated with receivables that Ford Motor Credit sold in off-
balance sheet securitizations and continues to service
-- Equity: shareholder's interest reported on Ford Motor Credit's balance
sheet
IMPACT OF ON-BALANCE SHEET SECURITIZATION: Finance receivables (retail and wholesale) and net investment in operating leases reported on Ford Motor Credit's balance sheet include assets included in securitizations that do not qualify for accounting sale treatment. These assets are available only for repayment of the debt or other obligations issued or arising in the securitization transactions; they are not available to pay the other obligations of Ford Motor Credit or the claims of Ford Motor Credit's other creditors until the associated debt or other obligations are satisfied. Debt reported on Ford Motor Credit's balance sheet includes obligations issued or arising in securitizations that are payable only out of collections on the underlying securitized assets and related enhancements.
RECONCILIATION OF NON-GAAP MEASURES TO GAAP:
Managed Leverage Calculation December 31, December 31,
2008 2007
-------- --------
(in billions)
Total debt $ 126.5 $ 139.4
Securitized off-balance sheet receivables
outstanding 0.6 6.0
Retained interest in securitized off-balance
sheet receivables (0.1) (0.7)
Adjustments for cash, cash equivalents and
marketable securities* (23.6) (16.7)
Adjustments for hedge accounting** (0.4) 0.0
-------- --------
Total adjusted debt $ 103.0 $ 128.0
======== ========
Total equity (including minority interest) $ 10.6 $ 13.4
Adjustments for hedge accounting** (0.2) (0.3)
-------- --------
Total adjusted equity $ 10.4 $ 13.1
======== ========
Managed leverage (to 1) = Total adjusted
debt / Total adjusted equity 9.9 9.8
Memo: Financial statement leverage (to 1) =
Total debt / Total equity 12.0 10.4
Net Finance Receivables and Operating Leases December 31, December 31,
2008 2007
-------- --------
On-Balance Sheet Receivables (in billions)
Retail installment$ 65.5 $ 74.2
Wholesale 27.7 34.8
Other finance receivables 2.8 3.4
Unearned interest supplements (1.3) -
Allowance for credit losses (1.4) (1.0)
-------- --------
Finance receivables, net 93.3 111.4
Net investment in operating leases 22.5 29.7
-------- --------
Total net finance receivables and operating
leases $ 115.8 $ 141.1
======== ========
Off-Balance Sheet Receivables - Retail $ 0.6 $ 6.0
Managed Receivables
Retail installment $ 66.1 $ 80.2
Wholesale 27.7 34.8
Other finance receivables 2.8 3.4
Unearned interest supplements - -
Allowance for credit losses (1.4) (1.0)
-------- --------
Finance receivables, net 95.2 117.4
Net investment in operating leases 22.5 29.7
-------- --------
Total net finance receivables and operating
leases $ 117.7 $ 147.1
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* Excludes marketable securities related to insurance activities.
** Primarily related to market valuation adjustments to derivatives due to
movements in interest rates.
Ford Motor Credit Company