FORD CREDIT EARNS $556 MILLION IN THE SECOND QUARTER OF 2010*
DEARBORN, Mich., July 23, 2010 – Ford Motor Credit Company reported net income of $556 million in the second quarter of 2010, an increase of $143 million from earnings of $413 million a year earlier. On a pre-tax basis, Ford Credit earned $888 million in the second quarter, compared with $646 million in the previous year. On a pre-tax basis, Ford Credit earned $1.7 billion in the first half of 2010, compared with $610 million in the first half of 2009.
The increase in pre-tax earnings was more than explained by a lower provision for credit losses and lower depreciation expense for leased vehicles due to higher auction values. These factors were offset partially by the non-recurrence of net gains related to unhedged currency exposure from cross-border intercompany lending and lower volume.
“Economic indicators are mixed, but overall continue to trend upward,” Chairman and CEO Mike Bannister said. “More favorable external conditions, combined with our own strong and consistent originations and servicing practices, continued to drive positive results in the second quarter. We are anticipating strong results for the full year.”
On June 30, 2010, Ford Credit’s on-balance sheet net receivables totaled $85 billion, compared with $93 billion at year-end 2009. Managed receivables were $87 billion on June 30, 2010, down from $95 billion on December 31, 2009. The lower receivables primarily reflected the transition of Jaguar, Land Rover, Mazda, and Volvo financing to other finance providers, lower industry and financing volumes in 2009 and 2010 compared with prior years, and changes in currency exchange rates.
On June 30, 2010, managed leverage was 6.6 to 1. On June 30, 2010, Ford Credit paid $1.3 billion in cash to the UAW Retiree Medical Benefits Trust to settle a portion of the outstanding principal amount of Note A held by the trust and immediately transferred to Ford Motor Company the portion of Note A that it purchased from the trust to satisfy $1.3 billion of intercompany tax liabilities it owed to Ford Motor Company.
Ford Credit now expects full year 2010 profits to be higher than its 2009 profits. The second half of 2010 will be lower than the first half because Ford Credit expects smaller improvements in the provision for credit losses and depreciation expense for leased vehicles compared with the improvements during the first half. For full year 2011, Ford Credit expects to continue to be solidly profitable but at a lower level than in 2010 primarily reflecting the non-recurrence of lower depreciation expense for leased vehicles and the non-recurrence of credit loss reserve reductions of the same magnitude as 2010.
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Ford Motor Credit Company LLC is one of the world’s largest automotive finance companies and has provided dealer and customer financing to support the sale of Ford Motor Company products since 1959. Ford Credit is an indirect, wholly owned subsidiary of Ford. For more information, visit www.fordcredit.com.
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- The financial results discussed herein are presented on a preliminary basis; final data will be included in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.
Cautionary Statement Regarding 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:
- Further declines in industry sales volume, particularly in the United States or Europe, due to financial crisis, recession, geo-political events or other factors;
- Decline in Ford’s market share;
- Continued or increased price competition for Ford vehicles resulting from industry overcapacity, currency fluctuations or other factors;
- An increase in or acceleration of market shift beyond Ford’s current planning assumptions from sales of trucks, medium- and large-sized utilities, or other more profitable vehicles, particularly in the United States;
- A return to elevated gasoline prices, as well as the potential for volatile prices or reduced availability;
- Lower-than-anticipated market acceptance of new or existing Ford products;
- Adverse effects from the bankruptcy, insolvency, or government-funded restructuring of, change in ownership or control of, or alliances entered into by a major competitor;
- Economic distress of suppliers may require Ford to provide substantial financial support or take other measures to ensure supplies of components or materials and could increase Ford’s costs, affect Ford’s liquidity, or cause production disruptions;
- Work stoppages at Ford or supplier facilities or other interruptions of production;
- Single-source supply of components or materials;
- Restriction on use of tax attributes from tax law “ownership change”;
- The discovery of defects in Ford vehicles resulting in delays in new model launches, recall campaigns or increased warranty costs;
- Increased safety, emissions, fuel economy or other regulation resulting in higher costs, cash expenditures and/or sales restrictions;
- Unusual or significant litigation or governmental investigations arising out of alleged defects in Ford products, perceived environmental impacts, or otherwise;
- A change in Ford’s requirements for parts or materials where it has entered into long-term supply arrangements that commit it to purchase minimum or fixed quantities of certain parts or materials, or to pay a minimum amount to the seller (“take-or-pay contracts”);
- Adverse effects on Ford’s results from a decrease in or cessation of government incentives related to capital investments;
- Adverse effects on Ford’s operations resulting from certain geo-political or other events;
- Substantial levels of indebtedness adversely affecting Ford’s financial condition or preventing Ford from fulfilling its debt obligations (which may grow because Ford is able to incur substantially more debt, including additional secured debt);
Ford Credit Related:
- A prolonged disruption of the debt and securitization markets;
- Inability to access debt, securitization or derivative markets around the world at competitive rates or in sufficient amounts due to credit rating downgrades, market volatility, market disruption , regulatory requirements or otherwise;
- Inability to obtain competitive funding;
- Higher-than-expected credit losses;
- Adverse effects from the government-supported restructuring of, change in ownership or control of, or alliances entered into by a major competitor;
- Increased competition from banks or other financial institutions seeking to increase their share of retail installment financing Ford vehicles;
- Collection and servicing problems related to our finance receivables and net investment in operating leases;
- Lower-than-anticipated residual values or higher-than-expected return volumes for leased vehicles;
- New or increased credit, consumer or data protection or other laws and regulations resulting in higher costs and/or additional financing restrictions;
- Changes in Ford’s operations or changes in Ford’s marketing programs could result in a decline in our financing volumes;
- Fluctuations in foreign currency exchange rates and interest rates;
- Failure of financial institutions to fulfill commitments under committed credit and liquidity facilities;
- Labor or other constraints on Ford’s or our ability to restructure its or our business;
- Substantial pension and postretirement healthcare and life insurance liabilities impairing Ford’s or our liquidity or financial condition; and
- Worse-than-assumed economic and demographic experience for postretirement benefit plans (e.g., discount rates or investment returns).
We cannot be certain that any expectations, forecasts, or assumptions made by management in preparing these forward-looking statements will prove accurate, or that any projections 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 statements, whether as a result of new information, future events, or otherwise. For additional discussion of these risk factors, see Item 1A of Part I of our 2009 10-K Report and Item 1A of Part I of Ford’s 2009 10-K Report.