Ford 2013 Annual Report Download - page 91

Ford Motor Company | 2013 Annual Report 89
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 6. FINANCIAL SERVICES SECTOR FINANCE RECEIVABLES (Continued)
The aging analysis of our finance receivables balances at December 31 were as follows (in millions):
2013 2012
North America International Total North America International Total
Consumer
31-60 days past due $ 715 $ 39 $ 754 $783 $ 50 $ 833
61-90 days past due 88 17 105 97 18 115
91-120 days past due 18 9 27 21 930
Greater than 120 days past due 37 26 63 52 29 81
Total past due 858 91 949 953 106 1,059
Current 38,789 10,459 49,248 37,287 10,067 47,354
Consumer finance receivables 39,647 10,550 50,197 38,240 10,173 48,413
Non-Consumer
Total past due 49 40 89 29 11 40
Current 22,755 8,132 30,887 20,089 7,617 27,706
Non-Consumer finance receivables 22,804 8,172 30,976 20,118 7,628 27,746
Total recorded investment $ 62,451 $ 18,722 $81,173 $58,358 $17,801 $ 76,159
Credit Quality
Consumer Portfolio. When originating all classes of consumer receivables, we use a proprietary scoring system that
measures the credit quality of the receivables using several factors, such as credit bureau information, consumer credit
risk scores (e.g., FICO score), and contract characteristics. In addition to our proprietary scoring system, we consider
other individual consumer factors, such as employment history, financial stability, and capacity to pay.
Subsequent to origination, we review the credit quality of retail financing based on customer payment activity. As
each customer develops a payment history, we use an internally-developed behavioral scoring model to assist in
determining the best collection strategies which allows us to focus collection activity on higher-risk accounts. These
models are used to refine our risk-based staffing model to ensure collection resources are aligned with portfolio risk.
Based on data from this scoring model, contracts are categorized by collection risk. Our collection models evaluate
several factors, including origination characteristics, updated credit bureau data, and payment patterns.
Credit quality ratings for consumer receivables are based on aging. Refer to the aging table above.
Consumer receivables credit quality ratings are as follows:
• Pass – current to 60 days past due
• Special Mention – 61 to 120 days past due and in intensified collection status
• Substandard – greater than 120 days past due and for which the uncollectible portion of the receivables has
already been charged-off, as measured using the fair value of collateral
Non-Consumer Portfolio. We extend credit to dealers primarily in the form of lines of credit to purchase new Ford and
Lincoln vehicles as well as used vehicles. Payment is required when the dealer has sold the vehicle. Each non-
consumer lending request is evaluated by taking into consideration the borrower’s financial condition and the underlying
collateral securing the loan. We use a proprietary model to assign each dealer a risk rating. This model uses historical
dealer performance data to identify key factors about a dealer that we consider most significant in predicting a dealer’s
ability to meet its financial obligations. We also consider numerous other financial and qualitative factors of the dealer’s
operations including capitalization and leverage, liquidity and cash flow, profitability, and credit history with ourselves and
other creditors. A dealer’s risk rating does not reflect any guarantees or a dealer owner’s net worth.
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