Ford 2003 Annual Report Download - page 84

Download and view the complete annual report

Please find page 84 of the 2003 Ford annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

Retained interests in sold receivables were as follows (in millions):
2003 2002
Wholesale receivables sold to securitization entities $ 9,249 $ 12,454
Subordinated securities 1,568 2,845
Interest-only strips 1,169 1,696
Senior securities 520 -
Restricted cash held for the benefit of securitization entities 511 623
Total $ 13,017 $ 17,618
Most of the retained interests in sold wholesale receivables represents our undivided interest in wholesale receivables that are
available to support the issuance of additional securities by the securitization entity ($8.0 billion and $11.4 billion as of December
31, 2003 and 2002, respectively); the balance represents credit enhancements. Interest-only strips represent the right to receive
collections on the sold finance receivables in excess of amounts needed by the securitization entities to pay interest and
principal to investors, servicing fees and other required payments. Investments in subordinated securities and restricted cash
are senior to interest-only strips.
Ford Credit uses a special purpose trust (“FCAR”), as a source of funds for its operations. FCAR’s activities are limited to issuing
asset-backed commercial paper and other securities and buying highly-rated asset-backed securities issued by securitization
special purpose entities (“SPEs”) sponsored by Ford Credit.
In the second quarter of 2003, Ford Credit purchased a portion of equity interests in FCAR from unaffiliated parties. As a result of
this transaction, FCAR’s assets, liabilities and results of operations were consolidated into Ford Credit’s financial statements. In
addition, the consolidation of FCAR also caused certain of the Ford Credit-sponsored securitization SPEs that sell asset-backed
securities to FCAR to lose their status as qualifying SPEs under SFAS No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. Consequently, the receivables previously sold by us to these SPEs were
deemed to be reacquired (“reacquired receivables”) by us in accordance with SFAS No. 140 requirements and were consolidated
in the second quarter at fair value. Following the consolidation of FCAR, most sales of receivables to Ford Credit-sponsored
SPEs that sell asset-back securities to FCAR will not qualify as an accounting sale and will be reported on-balance sheet.
The consolidation of FCAR and related securitization SPEs for financial reporting purposes did not change the bankruptcy-
remote status of FCAR or the Ford Credit-sponsored securitization SPEs. The accounting consolidation did not have a material
impact on Ford Credit’s earnings, back-up credit facilities, unsecured debt funding programs or other securitization programs.
No gain or loss was recorded upon consolidation.
At December 31, 2003, about $14.3 billion of retail installment receivables reported on our balance sheet have been sold for legal
purposes to Ford Credit-sponsored securitization SPEs that sell asset-backed securities to FCAR and are available only to pay
securitization investors and other participants and are not available to pay the obligations of Ford Credit or the claims of Ford
Credit’s creditors. These finance receivables supported $9.0 billion of asset-backed commercial paper issued by FCAR, which is
payable solely out of collections on these receivables and is not the legal obligation of Ford Credit. At December 31, 2003, FCAR
had capacity to issue externally an additional $3.9 billion of asset-backed commercial paper, based on the existing amount of
retail installment receivables that supported this program.
NOTE 9. NET INVESTMENT IN OPERATING LEASES — FINANCIAL SERVICES SECTOR
The net investment in operating leases at December 31 was as follows (in millions):
2003 2002
Vehicles and other equipment, at cost $ 44,098 $ 53,287
Accumulated depreciation (11,615) (12,999)
Allowances for credit losses (624) (561)
Net investment in operating leases $ 31,859 $ 39,727
Minimum rentals on operating leases are contractually due as follows: 2004 — $5.9 billion;
2005 — $4.0 billion; 2006 — $2.1 billion; 2007 — $656 million; 2008 — $214 million; thereafter — $464 million.
Assets subject to operating leases are depreciated primarily on the straight-line method over the term of the lease to reduce the
asset to its estimated residual value. Estimated residual values are based on assumptions for used vehicle prices at lease termi-
nation and the number of vehicles that are expected to be returned. Operating lease depreciation expense (which includes gains
and losses on disposal of assets) was $8.5 billion in 2003, $9.9 billion in 2002, and $9.9 billion in 2001.
82 FORD MOTOR COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 8. Finance Receivables — Financial Services Sector (continued)
FIN73_104 3/22/04 5:11 PM Page 82