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Ford Motor Company Annual Report 2005 32 Ford Motor Company Annual Report 2005 33
Managementʼs Discussion and Analysis of Financial
Condition and Results of Operations
The following table shows worldwide credit losses net of recoveries ("charge-offs") for Ford Credit for the various categories of
financing during the periods indicated. The loss-to-receivables ratios, which equal charge-offs divided by the average amount of
receivables outstanding for the period, are shown below for Ford Credit's on-balance sheet and managed portfolios.
2005 2004
2005
Over/(Under)
2004
Charge-offs (in millions)
On-Balance Sheet
Retail installment and lease .......................................................................................................................................... $ 681 $ 1,281 $ (600)
Wholesale...................................................................................................................................................................... 23 43 (20)
Other.............................................................................................................................................................................. 2 3 (1)
Total on-balance sheet ................................................................................................................................................ $ 706 $ 1,327 $ (621)
Reacquired Receivables (retail)* .............................................................................................................................. $ 22 $ 74 $ (52)
Securitized Off-Balance Sheet
Retail installment and lease .......................................................................................................................................... $ 127 $ 244 $ (117)
Wholesale...................................................................................................................................................................... — — —
Other.............................................................................................................................................................................. — — —
Total securitized off-balance sheet............................................................................................................................. $ 127 $ 244 $ (117)
Managed
Retail installment and lease .......................................................................................................................................... $ 830 $ 1,599 $ (769)
Wholesale...................................................................................................................................................................... 23 43 (20)
Other.............................................................................................................................................................................. 2 3 (1)
Total managed ............................................................................................................................................................ $ 855 $ 1,645 $ (790)
Loss-to-Receivables Ratios
On-Balance Sheet
Retail installment and lease .......................................................................................................................................... 0.72% 1.25% (0.53) pts.
Wholesale...................................................................................................................................................................... 0.09 0.20 (0.11)
Total including other .................................................................................................................................................. 0.57% 1.02% (0.45) pts.
Managed
Retail installment and lease .......................................................................................................................................... 0.73% 1.29% (0.56) pts.
Wholesale...................................................................................................................................................................... 0.06 0.10 (0.04)
Total including other .................................................................................................................................................. 0.54% 0.96% (0.42) pts.
__________
* Reacquired receivables reflect the amount of receivables that resulted from the accounting consolidation of Ford Credit's FCAR Owner Trust retail securitization
program ("FCAR") in the second quarter of 2003.
Charge-offs and loss-to-receivable ratios for Ford Credit's on-balance sheet, securitized off-balance sheet and managed portfolios
declined from a year ago, primarily reflecting fewer repossessions and a lower average loss per repossession. These improvements
resulted from a higher-quality retail installment and lease portfolio, higher used vehicle prices and enhancements to Ford Credit's
collection practices. Lower levels of retail installment receivables also contributed to reduced charge-offs.
Shown below is an analysis of Ford Creditʼs allowance for credit losses related to finance receivables and operating leases for the
years ended December 31 (dollar amounts in billions):
2005 2004
Allowance for Credit Losses
Balance, beginning of year.................................................................................................................................................................................... $ 2.4 $ 2.9
Provision for credit losses ................................................................................................................................................................................... 0.2 0.9
Deductions
Charge-offs ....................................................................................................................................................................................................... 1.2 1.8
Recoveries......................................................................................................................................................................................................... (0.5) (0.5)
Net charge-offs ............................................................................................................................................................................................... 0.7 1.3
Other changes, principally amounts related to finance receivables sold and translation adjustments ............................................................ 0.3 0.1
Net deductions ................................................................................................................................................................................................ 1.0 1.4
Balance, end of year .............................................................................................................................................................................................. $ 1.6 $ 2.4
Allowance for credit losses as a percentage of end-of-period net receivables..................................................................................................... 1.19% 1.80%
The allowance for credit losses decreased about $800 million from year-end 2004, primarily reflecting improved charge-off
performance and the effect of lower retail receivable levels.