Ford 2004 Annual Report Download - page 32

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3 0
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Ford Asia Pacific and Africa/Mazda Segment
Ford Asia Pacific and Africa. The improvement in earnings primarily reflected favorable changes in currency exchange rates,
higher vehicle unit sales and positive net pricing.
Mazda. The improvement in earnings primarily reflected our share of Mazda’s improved operating results.
Other Automotive
The improvement in loss primarily reflected the non-recurrence of a charge in 2002 related to the sale of non-core businesses,
primarily Kwik-Fit Holdings Ltd.
FINANCIAL SERVICES SECTOR RESULTS OF OPERATIONS
2004 COMPARED WITH 2003
Details of the full year Financial Services sector Income/(loss) before income taxes for 2004 and 2003 are shown below
(in millions):
Ford Credit
The increase in income before income taxes of $1,475 million primarily reflected improved credit loss performance and
improved leasing results. The improved credit loss performance primarily resulted from fewer repossessions and a lower
average loss per repossession. The improvement in leasing results primarily reflected higher used vehicle prices and a reduction
in the percentage of vehicles returned to Ford Credit at lease termination.
Ford Credit reviews its business performance from several perspectives, including:
• On-balance sheet basis - includes the receivables Ford Credit owns and receivables sold for legal purposes that remain on
Ford Credit’s balance sheet;
• Securitized off-balance sheet basis - includes receivables sold in securitization transactions that are not reflected on Ford
Credit’s balance sheet;
• Managed basis - includes on-balance sheet and securitized off-balance sheet receivables that Ford Credit continues to
service; and
• Serviced basis - includes managed receivables and receivables sold in whole-loan sale transactions where Ford Credit retains
no interest in the sold receivables, but which it continues to service.
Ford Credit analyzes its financial performance primarily on an on-balance sheet and managed basis. It retains interests in
receivables sold in off-balance sheet securitizations, and with respect to subordinated retained interests, has credit risk. As
a result, it evaluates credit losses, receivables and leverage on a managed basis as well as on an on-balance sheet basis.
In contrast, Ford Credit does not have the same financial interest in the performance of receivables sold in whole-loan sale
transactions, and as a result it generally reviews the performance of the serviced portfolio only to evaluate the effectiveness
of its origination and collection activities. To evaluate the performance of these activities, Ford Credit monitors a number of
measures, such as repossession statistics, losses on repossessions and the number of bankruptcy filings.
Income/(Loss)
Before Income Taxes
2004 2003
2004
Over/
(Under)
2003
Ford Credit $ 4,431 $ 2,956 $ 1,475
Hertz* 493 228 265
Other Financial Services 84 63 21
Total Financial Services sector $ 5,008 $ 3,247 $ 1,761
* Includes amortization expense related to intangibles recognized upon consolidation of Hertz.