Ford 2004 Annual Report Download - page 75

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NOTES TO THE FINANCIAL STATEMENTS
For the year ended December 31, 2004, we utilized certain point-of-sale assumptions in our retail transactions, which included
discount rates of 11% to 13.5%, a prepayment speed of 0.8% to 1.5% (which represents expected payments earlier than
scheduled maturity dates) and credit losses of 0.8% to 2.8% over the life of sold receivables. The weighted-average life of the
underlying assets was 50.2 months. Our wholesale transactions included discount rates of 11% to 12%.
Cash Flow
The following table summarizes the cash flow movements between the transferees and us in our off-balance sheet sales of
receivables for the years ended December 31 (in millions):
Other Disclosures
The following table summarizes key assumptions used in estimating cash flows from sold retail receivables and the
corresponding sensitivity of the current fair values to 10% and 20% adverse changes (in millions):
The effect of a variation in a particular assumption on the fair value of residual interest in securitization transactions was
calculated without changing any other assumptions and changes in one factor may result in changes in another.
Outstanding delinquencies over 30 days related to the off-balance sheet securitized portfolio were $410 million and
$704 million at December 31, 2004 and 2003, respectively. Credit losses, net of recoveries, were $244 million and
$551 million for the years ended December 31, 2004 and 2003, respectively. Expected static pool credit losses related to
outstanding securitized retail receivables were 2.07% at December 31, 2004. To calculate the static pool credit losses, actual
and projected future credit losses are added together and divided by the original balance of each pool of assets.
On-Balance Sheet Securitization Special Purpose Entities
We use SPEs, including on-balance sheet SPEs, in a variety of securitization transactions as a source of funds for our
operations. At December 31, 2004 and 2003, about $16.9 billion and $14.3 billion, respectively, of finance receivables have
been sold for legal purposes to consolidated securitization SPEs. In addition, at December 31, 2004, interests in operating
leases and the related vehicles of about $2.5 billion have been transferred for legal purposes to consolidated securitization
SPEs. These receivables and interests in operating leases and the related vehicles are only available to pay the obligations or
claims of the SPEs; they are not available to pay our other obligations or the claims of our other creditors. The associated debt
issued by the SPEs was $16.5 billion and $9.3 billion at December 31, 2004 and 2003, respectively, and includes both asset-
backed commercial paper and notes payable out of collections on these receivables and interests in operating leases and the
related vehicles. This debt is the legal obligation of the SPEs, but for financial statement reporting purposes is reported as debt
on our balance sheet.
2004 2003 2002
Proceeds from sales of receivables $ 10,319 $ 19,337 $ 40,138
Net change in retained interest (374) 2,033 (5,355)
Servicing fees 372 618 689
Interest on retained securities and residual
interest in securitization transactions 1,646 1,545 1,150
Repurchased retail receivables (143) (193) (340)
Impact on Fair Value
Assumption Based on Adverse Change
Percentage 10% Change 20% Change
(annual rate)
Cash flow discount rate 11.0% - 13.5% $ (10) $ (18)
Estimated net credit loss rate 0.5% - 6.0% (27) (49)
Prepayment speed 0.8% - 2.0% (18) (37)