Ford 2009 Annual Report Download - page 49

Management’s Discussion and Analysis of Financial Condition and Results of Operations
Ford Motor Company | 2009 Annual Report 47
In 2009, total issuance was about $11 billion lower than 2008, primarily reflecting lower funding requirements resulting
from lower receivables. However, 2009 public issuance was about $7 billion higher than 2008, primarily reflecting the
availability of and Ford Credit's preference to issue in the public markets. In 2009, there was a corresponding reduction in
reliance on private capacity as Ford Credit lowered its utilization of committed funding programs.
Through February 24, 2010, Ford Credit completed about $4 billion of public term funding transactions, including about
$1 billion of retail asset-backed securitization transactions in the United States, Canada, and Europe, about $1 billion for a
lease asset-backed securitization transaction in the United States, about $1 billion of wholesale asset-backed securitization
transactions in the United States, and about $1 billion of unsecured issuances. Ford Credit also completed about $1 billion
of private term funding transactions, primarily reflecting retail and wholesale asset-backed securitization transactions in the
United States and Europe.
The cost of securitization transactions and unsecured debt funding is based on a margin or spread over a benchmark
interest rate. Spreads are typically measured in basis points. Ford Credit's asset-backed funding and unsecured long-
term debt costs are based on spreads over U.S. Treasury securities of similar maturities, a comparable London Interbank
Offered Rate ("LIBOR") or other comparable benchmark rates. Ford Credit's floating rate demand notes funding costs are
changed depending on market conditions. In addition to enhancing Ford Credit's liquidity, one of the main reasons that
Ford Credit has increased its use of securitization transactions as a funding source over the last few years has been that
spreads on Ford Credit's securitization transactions have been more stable and lower than those on Ford Credit's
unsecured long-term debt funding. Prior to August 2007, Ford Credit's securitized funding spreads (which are based on
the creditworthiness of the underlying securitized asset and enhancements) were not volatile, while its unsecured long-
term spreads were volatile. Consistent with the overall market, Ford Credit was impacted by volatility in the asset-backed
securitization market beginning in the second half of 2007. Ford Credit experienced higher spreads for several of its
committed liquidity programs as well as its public and private issuances. During 2009, Ford Credit's spreads on the three-
year fixed rate notes offered in its U.S. public retail securitization transactions decreased from 425 basis points to
70 basis points over the relevant benchmark rates from March 2009 to November 2009, respectively. During 2009, Ford
Credit's U.S. unsecured long-term debt transaction spreads decreased from 1,006 basis points to 480 basis points over the
relevant benchmark rates from June 2009 to December 2009, respectively.
Liquidity. The following table illustrates the various sources of Ford Credit's liquidity as of the dates shown (in billions):
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* Excludes marketable securities related to insurance activities.
At December 31, 2009, committed capacity and cash shown above totaled $51.1 billion, of which $39.4 billion could be
utilized (after adjusting for capacity in excess of eligible receivables of $6.5 billion and cash required to support on-balance
sheet securitization transactions of $5.2 billion). At December 31, 2009, $18.3 billion was utilized, leaving $21.1 billion
available for use (including $12.1 billion of cash, cash equivalents, and marketable securities, but excluding marketable
securities related to insurance activities and cash and cash equivalents to support on-balance sheet securitization
transactions).
At December 31, 2009, Ford Credit's liquidity available for use was lower than year-end 2008 by about $300 million, as
debt maturities and cash payments were higher than the impact of lower receivables and new debt issuances. The reduction
in liquidity available for use from year-end 2008 also included a $630 million cumulative adjustment, reflected in the first
quarter of 2009, to correct for the overstatement of cash and cash equivalents and certain accounts payable that originated in
prior periods. Liquidity available for use was 22% of managed receivables. In addition to the $21.1 billion of liquidity
available for use, the $6.5 billion of capacity in excess of eligible receivables provides Ford Credit with an alternative for