Ford 2009 Annual Report Download - page 37

Management’s Discussion and Analysis of Financial Condition and Results of Operations
Ford Motor Company | 2009 Annual Report 35
U.S. Ford, Lincoln, and Mercury Brand Retail Operating Lease Experience
The following table shows return volumes for Ford Credit's Ford, Lincoln, and Mercury brand U.S. operating lease
portfolio. Also included are auction values at constant fourth quarter 2009 vehicle mix for lease terms comprising 59% of
Ford Credit's active Ford, Lincoln, and Mercury brand U.S. operating lease portfolio (in thousands, except for percentages):
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   
In 2009, Ford, Lincoln, and Mercury brand U.S. return volumes were down 9,000 units compared with 2008, primarily
reflecting a lower return rate, down 10 percentage points to 78%, consistent with improved auction values relative to Ford
Credit's expectations of lease-end values at the time of contract purchase. Auction values at constant fourth quarter 2009
mix were up $2,360 per unit from 2008 levels for vehicles under 24-month leases, and up $1,350 for vehicles under 36-
month leases, primarily reflecting the overall auction value improvement in the used vehicle market. Ford Credit expects
future auction values to remain volatile.
2008 Compared with 2007
Details of the full-year Financial Services sector Revenues and Income/(Loss) before income taxes for 2008 and 2007
are shown below:
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Ford Credit
The decline in pre-tax results primarily reflected the significant decline in used vehicle auction values during 2008. This
decline in auction values contributed to an impairment charge to Ford Credit's North America segment operating lease
portfolio ($2.1 billion), a higher provision for credit losses ($1.2 billion), and higher depreciation expense for leased vehicles
(about $700 million). Other factors that explain the decrease in pre-tax earnings include lower volume primarily related to
lower average receivables (about $300 million), higher net losses related to market valuation adjustments to derivatives
(about $200 million), and the non-recurrence of the gain related to the sale of a majority of Ford Credit's interest in
AB Volvofinans (about $100 million). These factors were partially offset by higher financing margin primarily attributable to
lower borrowing costs (about $200 million), the non-recurrence of costs associated with Ford Credit's North American
business transformation initiative (about $200 million), lower expenses primarily reflecting improved operating costs (about
$300 million), and a gain related to the sale of approximately half of Ford Credit's ownership interest in its Nordic operation
(about $100 million).