Ford 2013 Annual Report Download - page 45

Download and view the complete annual report

Please find page 45 of the 2013 Ford annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 152

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152

Ford Motor Company | 2013 Annual Report 43
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Ford Credit obtains short-term unsecured funding from the sale of floating rate demand notes under its Ford Interest
Advantage program and by issuing unsecured commercial paper in the United States, Europe, Mexico, and other
international markets. At December 31, 2013, the principal amount outstanding of Ford Interest Advantage notes, which
may be redeemed at any time at the option of the holders thereof without restriction, was $5.3 billion. At
December 31, 2013, the principal amount outstanding of Ford Credit’s unsecured commercial paper was about $2 billion,
which primarily represents issuance under its commercial paper program in the United States. Ford Credit does not hold
reserves specifically to fund the payment of any of its unsecured short-term funding obligations. Instead, Ford Credit
maintains multiple sources of liquidity, including cash, cash equivalents, and marketable securities (excluding marketable
securities related to insurance activities), unused committed liquidity programs, excess securitizable assets, and
committed and uncommitted credit facilities, which should be sufficient to meet Ford Credit’s unsecured short-term funding
obligations.
Cost of Funding Sources. The cost of securitization transactions and unsecured debt funding is based on a margin or
spread over a benchmark interest rate. Spreads are typically measured in basis points. Ford Credit’s asset-backed
funding and unsecured long-term debt costs are based on spreads over U.S. Treasury securities of similar maturities, a
comparable London Interbank Offered Rate (“LIBOR”), or other comparable benchmark rates. The funding costs of Ford
Credit’s floating rate demand notes change depending on market conditions.
In addition to enhancing Ford Credit’s liquidity and diversifying its funding sources, one of the main reasons that
securitization remains a primary funding source has been the cost advantage its securitization transactions offer over its
unsecured long-term debt funding. As its credit ratings improve, Ford Credit expects to increase the mix of unsecured
funding. During 2013, the weighted average spread of the triple-A rated notes offered in Ford Credit’s U.S. public retail
securitization transactions ranged from 9 to 25 basis points over the relevant benchmark rates and its U.S. institutional
unsecured long-term debt transaction spreads ranged from 78 to 159 basis points over the relevant benchmark rates.
Funding Portfolio. The chart below details the trends in the funding of Ford Credit’s managed receivables:
At year-end 2013, managed receivables were $103 billion and Ford Credit ended the year with about $11 billion in
cash. Securitized funding was 44% of managed receivables, down from 47% at year-end 2012, reflecting a greater mix of
unsecured debt.
Ford Credit is projecting 2014 year-end managed receivables of about $110 billion and securitized funding as a
percentage of managed receivables in the range of 38% to 42%. This percentage will continue to decline going forward.
For more information visit www.annualreport.ford.com