Ford 2014 Annual Report Download - page 14

Item 1. Business (Continued)
FINANCIAL SERVICES SECTOR
Ford Motor Credit Company LLC
Our wholly-owned subsidiary Ford Motor Credit Company LLC (“Ford Credit”) offers a wide variety of automotive
financing products to and through automotive dealers throughout the world. The predominant share of Ford Credit’s
business consists of financing our vehicles and supporting our dealers. Ford Credit earns its revenue primarily from
payments made under retail installment sale and lease contracts that it originates and purchases; interest rate
supplements and other support payments from us and our subsidiaries; and payments made under dealer financing
programs.
As a result of these financing activities, Ford Credit has a large portfolio of finance receivables and operating leases
which it classifies into two portfolios— “consumer” and “non-consumer.” Finance receivables and operating leases in the
consumer portfolio include products offered to individuals and businesses that finance the acquisition of our vehicles from
dealers for personal and commercial use. Retail financing includes retail installment sale contracts for new and used
vehicles and direct financing leases for new vehicles to retail customers, government entities, daily rental car companies,
and fleet customers. Finance receivables in the non-consumer portfolio include products offered to automotive dealers.
Ford Credit makes wholesale loans to dealers to finance the purchase of vehicle inventory (i.e., floorplan financing), as
well as loans to dealers to finance working capital and improvements to dealership facilities, finance the purchase of
dealership real estate, and finance other dealer vehicle programs. Ford Credit also purchases receivables generated by
us and our subsidiaries, primarily related to the sale of parts and accessories to dealers, receivables from Ford-related
loans, and certain used vehicles from daily rental fleet companies.
Ford Credit does business in the United States and Canada through business centers. Outside of the United States,
Europe is Ford Credit’s largest operation. Ford Credit’s European operation is managed through its United Kingdom-
based subsidiary, FCE Bank plc (“FCE”). Within Europe, FCE’s largest markets are the United Kingdom and Germany,
representing approximately 67% of FCE’s finance receivables and operating leases.
The following table shows Ford Credit’s financing shares of new Ford and Lincoln vehicles sold by dealers in the
United States and new Ford vehicles sold by dealers in Europe, as well as its wholesale financing shares of new Ford and
Lincoln vehicles acquired by dealers in the United States (excluding fleet) and new Ford vehicles acquired by dealers in
Europe:
Years Ended December 31,
2014 2013 2012
United States - Financing Share
Retail installment and lease 45% 40% 38%
Wholesale 77 77 78
Europe - Financing Share
Retail installment and lease 36% 34% 32%
Wholesale 98 98 98
See Item 7 and Notes 5, 6, and 7 of the Notes to the Financial Statements for a detailed discussion of Ford Credit’s
receivables, credit losses, allowance for credit losses, loss-to-receivables ratios, funding sources, and funding strategies.
See Item 7A for discussion of how Ford Credit manages its financial market risks.
We routinely sponsor special retail and lease incentives to dealers’ customers who choose to finance or lease our
vehicles from Ford Credit. In order to compensate Ford Credit for the lower interest or lease payments offered to the retail
customer, we pay the value of the incentive directly to Ford Credit when it originates the retail finance or lease contract.
These programs increase Ford Credit’s financing volume and share. See Note 2 of the Notes to the Financial Statements
for information about our accounting for these programs.
On April 30, 2014, we entered into a Relationship Agreement with Ford Credit, pursuant to which, if Ford Credit’s
managed leverage for a calendar quarter were to be higher than 11.5 to 1 (as reported in its most recent periodic report),
Ford Credit could require us to make or cause to be made a capital contribution to it in an amount sufficient to have
caused such managed leverage to have been 11.5 to 1. No capital contributions have been made pursuant to this
agreement. The agreement also limits to $2 billion the amount Ford Credit may borrow under our Second Amended and
Restated Credit Agreement dated as of April 30, 2014. In a separate agreement with FCE, Ford Credit also has agreed to
maintain FCE’s net worth in excess of $500 million; no payments have been made pursuant to that agreement.
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