Ford
Motor Credit saw its profits for full-year 2007 tumble by
nearly 40 per cent to $775m (£398m), from $1.3bn (£659m) in 2006.
Before tax, Ford Credit managed earnings of $1.2bn (£624m) in 2007,
down by $738m (£379m) – 38 per cent – from 2006.
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The steep fall was caused by a higher costs of borrowing for the
captive, a higher rate of depreciation for leased vehicles and the
“non-recurrence of credit loss reserve reductions”, Ford Credit
said. The restructuring costs involved in its manufacturer parent
Ford’s massive turnaround project, the ‘Way Forward’, also played a
part.
On the positive side, Ford Credit noted that its
restructuring efforts had begun to pay off in the form of lower
expenses, and that the finance unit had suffered lower net losses
related to market valuation adjustments from derivatives.
In a conference call to investors, CEO of Ford, Alan
Mulally said: “Ford Credit continues to be profitable; although
its results were lower than a year ago, it continues to perform in
line with our expectations.”
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By GlobalData “We had a good year in 2007 with a business that performed
consistently and predictably,” said Mike Bannister, chairman and
CEO of Ford Credit. “With our sound business fundamentals, we have
a strong foundation for the future.”
The captive announced it expects its earnings for 2008 to
be “about equal” to the comparable figure for 2007.
Net receivables at year-end 2007 on December 31 stood at
$141bn (£72bn), up 4 per cent from year-end 2006, while managed
receivables declined marginally year on year to $147bn (£75.5bn)
from $148bn (£76bn) at the end of 2006.
Funding in place
Don
Leclair, CFO of Ford said of the funding strategy for Ford
Credit: “Our funding strategy includes maintaining strong liquidity
to meet near-term funding needs by having a substantial cash
balance, as well as committed funding capacity.
“We’ll continue to expand and diversify our global
asset-backed funding, renew committed asset-backed funding
capacity, including outside of the US and continue to access the
unsecured market if and when it makes sense. Already in 2008, we
have successfully completed a $2bn [£1bn] public retail
asset-backed securitisation transaction in the US.”
He added that at the end of 2007, Ford Credit had around
$28bn (£14bn) of surplus liquidity.
Parent’s woes diminishing?
Carmaker Ford managed to narrow its loss for 2007 to $2.7bn
(£1.4bn) on revenue of $174bn (£89bn), down from 2006’s record loss
of $12.6bn (£6.4bn). Mulally said that the improvement was a clear
sign that the Way Forward plan is working, although much remains to
be done: “We have continued to make real progress on our plan.
“Our full year results indicate that we are headed in the
right direction,” he said.
The outlook for 2008 was clouded by a predicted slowdown
in the US market, Mulally added: “[The] US economy is slowing and
the outlook for the auto industry remains challenging.” He said
Ford would respond to tougher market conditions by cutting costs
further, and accelerating its flow of new models and products.
The possible scenario whereby Ford Credit is unable to access
the global debt or securitisation markets at “competitive rates” –
either as a result of ongoing turmoil in credit markets or due to
“additional credit rating downgrades” – was identified by Ford as a
potential danger in 2008, and something for its captive arm to
beware.
