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Notes to the Financial Statements
Ford Motor Company | 2010 Annual Report 115
NOTE 13. VARIABLE INTEREST ENTITIES (Continued)
Our maximum exposure to loss from VIEs of which we are not the primary beneficiary at December 31 is detailed as
follows (in millions):
2010
20102010
2010
2009
20092009
2009
Change in
Change in Change in
Change in
Maximum
Maximum Maximum
Maximum
Exposure
ExposureExposure
Exposure
Investments ................................................................................................
................................
$ 417 $ 421 $ (4)
Cash collateralized letters of credit ................................................................
................................
— 200 (200)
Guarantees ................................................................................................
................................
10 — 10
Total maximum exposure................................................................
................................
$ 427 $ 621 $ (194)
Financial Services Sector
VIEs of which the Financial Services sector is the primary beneficiary:
Our Financial Services sector (for these purposes, Ford Credit and Volvo Auto Bank) uses special purpose entities to
issue asset-backed securities in transactions to public and private investors, bank conduits, and government-sponsored
entities or others who obtain funding from government programs. We have deemed most of these special purpose entities
to be VIEs. The asset-backed securities are secured by finance receivables and interests in net investments in operating
leases. The assets continue to be consolidated by our Financial Services sector. Our Financial Services sector retains
interests in its securitization VIEs, including senior and subordinated securities issued by VIEs and rights to cash held for the
benefit of the securitization investors.
The transactions create and pass along risks to the variable interest holders, depending on the assets securing the debt
and the specific terms of the transactions. Our Financial Services sector aggregates and analyzes its transactions based on
the risk profile of the product and the type of funding structure, including:
• Retail transactions – consumer credit risk and prepayment risk.
• Wholesale transactions – dealer credit risk.
• Net investments in operating lease transactions – vehicle residual value risk, consumer credit risk, and
prepayment risk.
As residual interest holder, our Financial Services sector is exposed to underlying residual and credit risk of the
collateral, and is exposed to interest rate risk in certain transactions. The amount of risk absorbed by our Financial
Services sector's residual interests is generally represented by and limited to the amount of overcollaterization of its
assets securing the debt and any cash reserves.
Our Financial Services sector has no obligation to repurchase or replace any securitized asset that subsequently
becomes delinquent in payment or otherwise is in default, except under standard representations or warranties such as
good and marketable title to the assets, or when certain changes are made to the underlying asset contracts.
Securitization investors have no recourse to our Financial Services sector or its other assets for credit losses on the
securitized assets, and have no right to require the Financial Services sector to repurchase the investments. The
Financial Services sector does not guarantee any asset-backed securities and generally has no obligation to provide
liquidity or contribute cash or additional assets to the VIEs. Ford Credit may be required to support the performance of
certain securitization transactions, however, by increasing cash reserves.
Although not contractually required, Ford Credit regularly supports its wholesale securitization programs by
repurchasing receivables of a dealer from the VIEs when the dealer's performance is at risk, which transfers the
corresponding risk of loss from the VIE to Ford Credit. In order to continue to fund the wholesale receivables, Ford Credit
also may contribute additional cash or wholesale receivables if the collateral falls below the required level. The balances
of cash related to these contributions were $0 at December 31, 2010 and 2009, respectively, and ranged from $0 to
$1,361 million and $0 to $1,372 million during 2010 and 2009, respectively. In addition, while not contractually required,
Ford Credit may purchase the commercial paper issued by Ford Credit's asset-backed commercial paper program
("FCAR").