Ford 2003 Annual Report Download - page 45

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2003 ANNUAL REPORT 43
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
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 securitization transactions, and with respect to subordinated retained interests, has
credit risk. As a result, it evaluates credit losses, receivables and leverage on a managed, as well as an on-balance sheet basis.
In contrast, Ford Credit does not have the same financial interest in the performance of receivables sold through whole-loan
sale transactions because it retains no interests in those receivables and, therefore, has no credit risk with respect to them.
Accordingly, Ford Credit generally reviews the performance of its serviced portfolio only to evaluate the effectiveness of its
origination and collection activities.
Ford Credit’s finance receivables, net of allowance for credit losses, and net investment in operating leases for our on-balance
sheet, securitized off-balance sheet, managed and serviced portfolios are shown below (in billions):
December 31,
2003 2002
On-Balance Sheet (including on-balance sheet securitizations)
Finance receivables
Retail installment $77.8 $ 68.4
Wholesale 22.5 16.4
Other 8.6 9.8
Total finance receivables, net 108.9 94.6
Net investment in operating leases 23.2 31.3
Total on-balance sheet $ 132.1 $ 125.9
Memo: Allowance for credit losses included above $ 3.0 $ 3.2
Securitized Off-Balance Sheet
Finance receivables
Retail installment $29.1 $ 48.9
Wholesale 20.3 22.5
Other --
Total finance receivables, net 49.4 71.4
Net investment in operating leases --
Total securitized off-balance sheet $49.4 $ 71.4
Managed
Finance receivables
Retail installment $ 106.9 $ 117.3
Wholesale 42.8 38.9
Other 8.6 9.8
Total finance receivables, net 158.3 166.0
Net investment in operating leases 23.2 31.3
Total managed* $ 181.5 $ 197.3
Serviced $ 188.8 $ 202.3
–––––––––––––
* At December 31, 2003 and 2002, Ford Credit's retained interests in sold receivables were $13.0 billion and $17.6 billion, respectively.
For more information regarding these retained interests, see “Liquidity and Capital Resources — Financial Services Sector.”
On-Balance Sheet Receivables — On-balance sheet finance receivables and net investment in operating leases, net of
allowance for credit losses, increased $6.2 billion or 5% from a year ago. The increase primarily reflected the receivables that
were recorded on our balance sheet (“reacquired receivables”) as a result of the accounting consolidation of FCAR Owner Trust
(“FCAR”) in May 2003 (discussed in Note 8 of the Notes to Financial Statements) and the impact related to changes in currency
exchange rates. The increase was offset partially by the impact of lower lease and retail placement volumes and receivables sold
in off-balance sheet securitizations and whole-loan sale transactions.
At December 31, 2003, on-balance sheet retail receivables included $14.3 billion that were sold for legal purposes to
Ford Credit-sponsored special purpose entities (“SPE”) that sell asset-backed securities to FCAR and are available only for
repayment of asset-backed commercial paper issued by FCAR, other securitization investors and other participants. These
receivables are not available to pay the obligations of Ford Credit or the claims of Ford Credit’s creditors.
Securitized Off-Balance Sheet Receivables —Total securitized off-balance sheet receivables decreased $22 billion or 31%
from a year ago. This decrease primarily reflected the reacquired receivables resulting from the consolidation of FCAR, now
reported on our balance sheet, the slower pace of securitizations and the increased use of whole-loan sale transactions.
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