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Management’s Discussion and Analysis of Financial Condition and Results of Operations
64 Ford Motor Company | 2011 Annual Report
Ford Credit's balance sheet is inherently liquid because of the short-term nature of its finance receivables, investment
in operating leases, and cash. Maturities of investment in operating leases consist primarily of rental payments
attributable to depreciation over the remaining life of the lease and the expected residual value at lease termination.
Maturities of finance receivables and investment in operating leases in the chart above include expected prepayments for
our retail installment sale contracts and investment in operating leases. The 2012 finance receivables maturities in the
chart above also include all of the wholesale receivables maturities that are otherwise extending beyond 2012. The chart
above also reflects the following adjustments to debt maturities to match all of the asset-backed debt maturities with the
underlying asset maturities:
• The 2012 maturities include all of the wholesale securitization transactions, even if the maturities extend beyond
2012; and
• Retail securitization transactions under certain committed liquidity programs are assumed to amortize immediately
rather than after their contractual maturity even if it extends beyond January 1, 2012.
Leverage. Ford Credit uses leverage, or the debt-to-equity ratio, to make various business decisions, including
evaluating and establishing pricing for retail, wholesale, and lease financing, and assessing its capital structure. Ford
Credit refers to its shareholder's interest as equity.
The following table shows the calculation of Ford Credit's financial statement leverage at December 31 (in billions,
except for ratios):
Total debt
Equity
Financial statement leverage (to 1)
2011
$84.7
8.9
9.5
2010
$82.9
10.3
8.0
2009
$96.3
11.0
8.8
The following table shows the calculation of Ford Credit's managed leverage at December 31 (in billions, except for
ratios):
Total debt
Securitized off-balance sheet receivables outstanding
Adjustments for cash, cash equivalents, and marketable securities (a)
Adjustments for derivative accounting (b)
Total adjusted debt
Equity
Adjustments for derivative accounting (b)
Total adjusted equity
Managed leverage (to 1) (c)
2011
$84.7
—
(12.1)
(0.7)
$71.9
$8.9
(0.2)
$8.7
8.3
2010
$82.9
—
(14.6)
(0.3)
$68.0
$10.3
(0.1)
$10.2
6.7
2009
$96.3
0.1
(17.3)
(0.2)
$78.9
$11.0
(0.2)
$10.8
7.3
________
(a) Excludes marketable securities related to insurance activities.
(b) Primarily related to market valuation adjustments to derivatives due to movements in interest rates. Adjustments to debt are related to designated
fair value hedges and adjustments to equity are related to retained earnings.
(c) Equals total adjusted debt over total adjusted equity.
Ford Credit believes that managed leverage is useful to its investors because it reflects the way Ford Credit manages
its business. Ford Credit deducts cash and cash equivalents, and marketable securities (excluding marketable securities
related to insurance activities) because they generally correspond to excess debt beyond the amount required to support
its operations and amounts to support on-balance sheet securitization transactions. Ford Credit makes derivative
accounting adjustments to its assets, debt, and equity positions to reflect the impact of interest rate instruments Ford
Credit uses in connection with its term-debt issuances and securitization transactions. The derivative accounting
adjustments related to these instruments vary over the term of the underlying debt and securitized funding obligations
based on changes in market interest rates. Ford Credit generally repays its debt obligations as they mature. As a result,
Ford Credit excludes the impact of these derivative accounting adjustments on both the numerator and denominator in
order to exclude the interim effects of changes in market interest rates. Ford Credit believes the managed leverage
measure provides its investors with meaningful information regarding management's decision-making processes.