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Management’s Discussion and Analysis of Financial Condition and Results of Operations
Ford Motor Company | 2010 Annual Report 37
Other Automotive. The improvement in results is more than explained by net gains resulting from debt reduction
actions and higher returns on the assets held in the TAA.
Mazda Segment. In the fourth quarter of 2008, we sold a significant portion of our investment in Mazda. Our
remaining ownership interest is treated as a marketable security, with mark-to-market adjustments reported in Other
Automotive.
FINANCIAL SERVICES SECTOR RESULTS OF OPERATIONS
2010 Compared with 2009
Details of the Financial Services sector Revenues and Income/(Loss) before income taxes are shown below:
Reve
ReveReve
Revenues
nuesnues
nues
(in billions)
(in billions)(in billions)
(in billions)
Income
IncomeIncome
Income/(Loss)
/(Loss)/(Loss)
/(Loss) Before Income Taxes
Before Income Taxes Before Income Taxes
Before Income Taxes
(in millions)
(in millions)(in millions)
(in millions)
2010
20102010
2010
2009
20092009
2009
2010
20102010
2010
Over/(Under)
Over/(Under)Over/(Under)
Over/(Under)
2009
20092009
2009
2010
20102010
2010
2009
20092009
2009
2010
20102010
2010
Over/(Under)
Over/(Under)Over/(Under)
Over/(Under)
2009
20092009
2009
Ford Credit................................
................................
$ 9.4 $ 12.1 $ (2.7) $ 3,054 $ 2,001 $ 1,053
Other Financial Services
................................
0.3 0.3 — (51) (106) 55
Special Items ................................
................................
— — —
— (81) 81
Total................................
................................
$ 9.7 $ 12.4 $ (2.7) $ 3,003 $ 1,814 $ 1,189
Ford Credit
The increase in pre-tax earnings is more than explained by a lower provision for credit losses, primarily related to a
lower allowance for credit losses and improved charge-off performance (about $1.2 billion); lower depreciation expense
for leased vehicles due to higher auction values (about $600 million); higher financing margin primarily attributable to
lower borrowing costs (about $200 million); lower operating costs (about $100 million); and the non-recurrence of a
valuation allowance for Australian finance receivables sold in 2009 (about $50 million). These factors are offset partially
by lower volume primarily related to lower average receivables (about $400 million); the non-recurrence of net gains
related to unhedged currency exposure primarily from cross-border intercompany lending (about $300 million); higher net
losses related to debt calls and repurchases (about $200 million); and the non-recurrence of net gains related to market
valuation adjustments to derivatives, shown as unallocated risk management in the table below ($135 million).
Results of Ford Credit's operations and unallocated risk management are shown below (in millions):
2010
20102010
2010
2009
20092009
2009
2010
20102010
2010
Over
OverOver
Over/
///(Under)
Under)Under)
Under)
2009
20092009
2009
Income before income taxes
North America operations ................................................................................................
.......................
$ 2,785 $ 1,905 $ 880
International operations................................................................................................
...........................
354 46 308
Unallocated risk management* ................................................................
................................
(85) 50 (135)
Income before income taxes................................................................
................................
3,054 2,001 1,053
Provision for income taxes and Gain on disposal of discontinued operations
................................
1,106 722 384
Net income ................................................................................................
................................
$ 1,948 $ 1,279 $ 669
________
* Consists of gains and losses related to market valuation adjustments to derivatives primarily related to movements in interest rates.
The increase in pre-tax earnings for Ford Credit's North America operations primarily reflects a lower provision for
credit losses, improved residual performance on returned lease vehicles, lower operating costs, and higher financing
margin. These factors are offset partially by lower volume, the non-recurrence of net gains related to unhedged currency
exposure primarily from cross-border intercompany lending, and higher net losses related to debt repurchases. The
increase in pre-tax results for Ford Credit's International operations primarily reflects a lower provision for credit losses,
improved margin, the non-recurrence of a valuation allowance for Australian finance receivables sold in 2009, and lower
losses on residual-based products. These factors are offset partially by lower volume. The change in unallocated risk
management reflected net losses related to market valuation adjustments to derivatives.