Ford 2005 Annual Report Download - page 41

Ford Motor Company Annual Report 2005 38 Ford Motor Company Annual Report 2005 39
Managementʼs Discussion and Analysis of Financial
Condition and Results of Operations
market interest rates. Ford Credit generally repays its debt obligations as they mature. As a result, Ford Credit excludes the impact of
the fair value hedge accounting adjustments on both the numerator and denominator in order to exclude the interim effects of changes
in market interest rates. Accordingly, the managed leverage measure provides Ford Creditʼs investors with meaningful information
regarding managementʼs decision-making processes.
Ford Credit's managed leverage strategy involves establishing a leverage level that takes into consideration prevailing market
conditions and reflects the risk characteristics of its business. At December 31, 2005, Ford Credit's managed leverage was 12.3 to 1,
compared with 13.7 to 1 a year ago. Ford Credit plans to continue to reduce its managed leverage in 2006. In 2005, Ford Credit paid
cash dividends of $2.75 billion.
Total Company
Stockholders' Equity. Our stockholders' equity was $13.0 billion at December 31, 2005, down $3.1 billion compared with
December 31, 2004. The decrease primarily reflected foreign currency translation adjustments, net losses on derivative instruments,
and cash dividends, offset partially by net income. For additional discussion of foreign currency translation adjustments and
derivative instruments, see Notes 1 and 20, respectively, of the Notes to the Financial Statements.
Credit Ratings. Our short- and long-term debt is rated by four credit rating agencies designated as nationally recognized statistical
rating organizations ("NRSROs") by the Securities and Exchange Commission:
• Dominion Bond Rating Service Limited ("DBRS");
• Fitch, Inc. ("Fitch");
• Moodyʼs Investors Service, Inc. ("Moody's"); and
• Standard & Poorʼs Rating Services, a division of McGraw-Hill Companies, Inc. ("S&P").
In several markets, locally recognized rating agencies also rate us. A credit rating reflects an assessment by the rating agency of
the credit risk associated with particular securities we issue, based on information provided by us and other sources. Credit ratings are
not recommendations to buy, sell or hold securities and are subject to revision or withdrawal at any time by the assigning rating
agency. Each rating agency may have different criteria for evaluating company risk, and therefore ratings should be evaluated
independently for each rating agency. Lower credit ratings generally result in higher borrowing costs and reduced access to capital
markets. The NRSROs have indicated that our lower ratings are primarily a reflection of the rating agencies' concerns regarding our
automotive cash flow and profitability, declining market share, excess industry capacity, industry pricing pressure and rising health
care costs.
Ford. In December 2005, Fitch lowered Ford's long-term rating to BB+ from BBB-, lowered our short-term rating to B from F2
and maintained our outlook at Negative. In January 2006, S&P lowered our long-term rating to BB- from BB+, lowered our short-
term rating to B-2 from B-1 and maintained our outlook at Negative. In January 2006, Moody's lowered our long-term rating to Ba3
from Ba1 and maintained our outlook at Negative. In January 2006, DBRS lowered our long-term rating to BB (low) from BB (high),
affirmed our short-term rating at R-3 (high) and maintained our trend at Negative.
Ford Credit. In December 2005, Fitch lowered Ford Credit's long-term rating to BB+ from BBB-, lowered Ford Credit's short-
term rating to B from F2 and maintained Ford Credit's outlook at Negative. In January 2006, S&P lowered Ford Credit's long-term
rating to BB- from BB+, lowered Ford Credit's short-term debt rating to B-2 from B-1 and maintained Ford Credit's outlook at
Negative. In January 2006, Moody's lowered Ford Credit's long-term rating to Ba2 from Baa3, lowered Ford Credit's short-term
rating to Not Prime ("NP") from P3 and maintained Ford Credit's outlook at Negative. In January 2006, DBRS lowered Ford Credit's
long-term rating to BB from BBB (low), lowered Ford Credit's short-term rating to R-3 (high) from R-2 (low) and maintained Ford
Credit's trend at Negative.