Ford 2010 Annual Report Download - page 57

Management’s Discussion and Analysis of Financial Condition and Results of Operations
Ford Motor Company | 2010 Annual Report 55
On-Balance Sheet Arrangements
All of Ford Credit's securitization transactions involve sales to consolidated entities or it maintains control over the
assets and, therefore, the securitized assets and related debt remain in Ford Credit's financial statements. Ford Credit
expects its future securitization transactions to continue to be on-balance sheet. Ford Credit believes on-balance sheet
arrangements are more transparent to its investors. Securitized assets are only available to repay the related asset-
backed debt and to pay other securitization investors and other participants. These underlying securitized assets are
available only for payment of the debt and other obligations issued or arising in the securitization transactions; they are
not available to pay Ford Credit's other obligations or the claims of its other creditors. Ford Credit holds the right to the
excess cash flows not needed to pay the debt and other obligations issued or arising in each of these securitization
transactions. This debt is not Ford Credit's legal obligation or the legal obligation of its other subsidiaries. Assets and
associated liabilities related to Ford Credit's on-balance sheet securitization transactions are as follows (in billions):
2010
20102010
2010
2009
20092009
2009
Total outstanding principal amount of finance receivables and net investment in operating leases
included in on-balance sheet securitizations ................................................................
................................
$ 60.7 $ 74.8
Cash balances to be used only to support the on-balance sheet securitizations................................
.........................
4.2 5.2
Debt payable only out of collections on the underlying securitized assets and related enhancements
........................
43.6 52.9
See Note 19 of the Notes to the Financial Statements for more information regarding on-balance sheet securitization
transactions.
Off-Balance Sheet Arrangements
Ford Credit has not entered into any off-balance sheet arrangements (off-balance sheet securitization transactions
and whole-loan sale transactions, excluding sales of businesses and liquidating portfolios) since the first quarter of 2007,
which is consistent with Ford Credit's plan to execute on-balance sheet securitization transactions.
Total Company
Equity/(Deficit). At December 31, 2010, Total equity/(deficit) attributable to Ford Motor Company was negative
$673 million, an improvement of $7.2 billion compared with December 31, 2009. The improvement is more than
explained by favorable changes in Retained earnings (primarily related to 2010 net income attributable to Ford
($6.6 billion), and favorable changes in Capital in excess of par value of stock (primarily the conversion of portions of the
2036 and 2016 Convertible Notes ($2.4 billion) and the various equity issuances ($1.6 billion)), offset partially by
unfavorable changes in Accumulated other comprehensive income/(loss) (primarily related to currency translation
($2.2 billion) and pension and OPEB adjustments ($1.2 billion).
Credit Ratings. Our short-term and long-term debt is rated by four credit rating agencies designated as NRSROs by
the SEC:
• DBRS Limited ("DBRS");
• Fitch, Inc. ("Fitch");
• Moody's Investors Service, Inc. ("Moody's"); and
• Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P").
In several markets, locally-recognized rating agencies also rate us. A credit rating reflects an assessment by the
rating agency of the credit risk associated with a corporate entity or particular securities issued by that entity. Rating
agencies' ratings of us are based on information provided by us and other sources. Credit ratings are not
recommendations to buy, sell or hold securities, and are subject to revision or withdrawal at any time by the assigning
rating agency. Each rating agency may have different criteria for evaluating company risk and, therefore, ratings should
be evaluated independently for each rating agency. Lower credit ratings generally result in higher borrowing costs and
reduced access to capital markets.