Ford 2007 Annual Report Download - page 49

Securitization SPEs have limited purposes and generally are only permitted to purchase the securitized assets, issue
the asset-backed securities and make payments on the securities. Some SPEs, such as the trusts that issue securities
backed by retail installment sale contracts, only issue a single series of securities and generally are dissolved when those
securities have been paid in full. Other SPEs, such as the trusts that issue securities backed by wholesale receivables,
issue multiple series of securities from time to time and are not dissolved until the last series of securities is paid in full.
Ford Credit's use of SPEs in its securitizations is consistent with conventional practices in the securitization industry.
Ford Credit sponsors the SPEs used in all of its securitization programs with the exception of bank-sponsored conduits.
None of Ford Credit's officers, directors or employees holds any equity interests in its SPEs or receives any direct or
indirect compensation from the SPEs. These SPEs do not own Ford Credit's shares or shares of any of its affiliates.
Ford Credit has no direct exposure to monoline insurance companies (i.e., insurance companies that operate in a single
industry and guarantee the timely repayment of bond principal and interest in the event an issuer defaults).
Ford Credit retains interests in its securitization transactions, including senior and subordinated securities issued by the
SPE, rights to cash held for the benefit of the securitization investors (for example, a reserve fund) and residual interests.
Residual interests represent the right to receive collections on the securitized assets in excess of amounts needed to pay
securitization investors and to pay other transaction participants and expenses. Ford Credit retains credit risk in
securitizations because its retained interests include the most subordinated interests in the securitized assets, which are
the first to absorb credit losses on the securitized assets. Based on past experience, Ford Credit expects that any credit
losses in the pool of securitized assets would likely be limited to its retained interests.
At December 31, 2007 and 2006, the total outstanding principal amount of finance receivables sold by Ford Credit in
off-balance sheet securitizations was $6 billion and $12.2 billion, respectively. At December 31, 2007 and 2006, Ford
Credit's retained interests in such sold receivables were $653 million and $990 million, respectively.
At December 31, 2007 and 2006, Ford Credit's total outstanding principal amount of finance receivables and net
investment in operating leases included in on-balance sheet securitizations was $86.1 billion and $71.7 billion,
respectively. The cash balances to be used only to support the on-balance sheet securitizations at December 31, 2007
and 2006, were approximately $4.7 billion and $3.7 billion, respectively. Debt issued that is payable only out of collections
on the underlying securitized assets and related enhancements totaled $69.2 billion and $59.6 billion at
December 31, 2007 and 2006, respectively.
Ford Credit generally has no obligation to repurchase or replace any securitized asset that subsequently becomes
delinquent in payment or otherwise is in default. Securitization investors have no recourse to Ford Credit or its non-
securitized assets for credit losses on the securitized assets and have no right to require Ford Credit to repurchase their
investments. Ford Credit does not guarantee any asset-backed securities and has no obligation to provide liquidity or
make monetary contributions or contributions of additional assets to its SPEs either due to the performance of the
securitized assets or the credit rating of its short-term or long-term debt. However, as the seller and servicer of the
securitized assets, Ford Credit is obligated to provide certain kinds of support to its securitizations, which are customary in
the securitization industry. These obligations consist of indemnifications, repurchase obligations on assets that do not
meet eligibility criteria or that have been materially modified, the mandatory sale of additional assets in revolving
transactions and, in some cases, servicer advances of interest shortfalls or other amounts.
Risks to Continued Funding under Securitization Programs. The following securitization programs contain structural
features that could prevent Ford Credit from using these sources of funding in certain circumstances:
•
Retail Securitization. If the credit enhancement on any asset-backed security held by FCAR is reduced to zero,
FCAR may not purchase any additional asset-backed securities and would wind down its operations. In addition, if
credit losses or delinquencies in Ford Credit's portfolio of retail assets exceed specified levels, FCAR is not
permitted to purchase additional asset-backed securities for so long as such levels are exceeded.
• Retail Conduits. If credit losses or delinquencies on the pool of assets held by a conduit exceed specified levels,
or if the level of over-collateralization for such pool decreases below a specified level, Ford Credit will not have the
right to sell additional pools of assets to that conduit.
• Wholesale Securitization. If the payment rates on wholesale receivables are lower than specified levels, or if there
are significant dealer defaults, Ford Credit will be unable to obtain additional funding and any existing funding
would begin to amortize.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Ford Motor Company | 2007 Annual Report 47