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Ford Motor Company Annual Report 2005 46 Ford Motor Company Annual Report 2005 47
Managementʼs Discussion and Analysis of Financial
Condition and Results of Operations
At December 31, 2005 and 2004, the total outstanding principal amount of receivables sold by Ford Credit in off-balance sheet
securitizations was $18.0 billion and $35.6 billion, respectively. At December 31, 2005 and 2004, Ford Creditʼs retained interests in
such sold receivables were $1.4 billion and $9.2 billion, respectively. The decline primarily reflected Ford Credit's accounting
consolidation of its off-balance sheet wholesale securitization program as a result of certain changes made to the program during the
fourth quarter of 2005.
Ford Credit generally has no obligation to repurchase or replace any receivable sold to an SPE that subsequently becomes
delinquent in payment or otherwise is in default. Investors holding securities issued by an SPE have no recourse to Ford Credit or its
other assets for credit losses on the sold receivables and have no right to require it to repurchase the securities. Ford Credit does not
guarantee any asset-backed securities and has no obligation to provide liquidity or make monetary contributions or contributions of
additional receivables to its SPEs either due to the performance of the sold receivables or the credit rating of Ford Credit's short-term
or long-term debt. However, as the seller and servicer of the finance receivables to the SPE, Ford Credit is obligated to provide
certain kinds of support to its securitizations, which are customary in the securitization industry. These obligations consist of
indemnifications, receivable repurchase obligations on receivables that do not meet eligibility criteria or that have been materially
modified, the mandatory sale of additional receivables in revolving transactions, and, in some cases, servicer advances of interest
shortfalls.
Risks to Continued Funding under Securitization Programs. The following securitization programs contain structural features that
could prevent Ford Credit from using these sources of funding in certain circumstances:
�FCAR. If credit losses or delinquencies in Ford Credit's portfolio of retail, wholesale or lease receivables exceed specified
levels, FCAR is not permitted to purchase additional asset-backed securities of the affected type for so long as such levels are
exceeded. FCAR is permitted to purchase only highly-rated asset-backed securities, and if the credit enhancement on any
asset-backed security purchased by FCAR is reduced to zero, FCAR may not purchase any additional asset-backed securities
and would wind down its operations.
�Conduits. If credit losses or delinquencies on the pool of sold receivables held by a conduit exceed specified levels, or if the
level of overcollateralization for such pool decreases below a specified level, Ford Credit will be unable to sell additional
pools of receivables to that conduit.
�Wholesale Securitization and Motown Notes Program. If the payment rates on wholesale receivables are lower than
specified levels, the SPE will be unable to issue additional securities and any existing securities would begin to amortize.
Based on its experience, Ford Credit does not expect that any of these features will have a material adverse impact on its ability to
use securitization to fund its operations.
In addition to the specific transaction-related structural features discussed above, Ford Creditʼs ability to sell receivables in any of
its securitization programs may be affected by the following factors: the amount and credit quality of receivables available to sell, the
performance of receivables in its previous receivables sales, general demand for the type of receivables supporting the asset-backed
securities, market capacity for Ford Credit and Ford Credit-sponsored investments, accounting and regulatory changes, Ford Creditʼs
credit rating, and the availability of liquidity facilities. If as a result of any of these or other factors the cost of securitized funding
were to increase significantly or funding through securitizations were no longer available to Ford Credit, it would have a material
adverse impact on Ford Credit's financial condition, results of operations or liquidity.
Variable Interest Entities
See Note 17 of the Notes to the Financial Statements for a discussion of our variable interest entities.
Guarantees
See Note 27 of the Notes to the Financial Statements for a discussion of our guarantees.