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Notes to the Financial Statements
104 Ford Motor Company | 2010 Annual Report
NOTE 7. FINANCE RECEIVABLES (Continued)
The credit quality analysis of Ford Credit's consumer finance receivables portfolio at December 31, 2010 was as
follows (in millions):
Retail
RetailRetail
Retail
Direct
Direct Direct
Direct
Financing
Financing Financing
Financing
Lease
LeaseLease
Leases
sss
North America
North AmericaNorth America
North America
Pass................................................................................................................................
...............................
$ 37,348 $ 17
Special Mention ................................................................................................................................
.............
119 —
Substandard ................................................................................................................................
..................
82 —
Sub-total ................................................................................................................................
......................
37,549 17
International
InternationalInternational
International
Pass................................................................................................................................
...............................
9,068 2,914
Special Mention ................................................................................................................................
.............
60 10
Substandard ................................................................................................................................
..................
19 3
Sub-total ................................................................................................................................
......................
9,147 2,927
Total recorded investment in retail receivables and direct financing leases ................................
...............
$ 46,696 $ 2,944
Non-Consumer Credit Quality. For all classes of non-consumer receivables, Ford Credit extends commercial credit to
dealers primarily in the form of approved lines of credit to purchase new Ford and Lincoln vehicles as well as used
vehicles. Each commercial lending request is evaluated, taking into consideration the borrower's financial condition and
the underlying collateral securing the loan. Ford Credit uses a proprietary model to assign each dealer a risk rating. This
model uses historical performance data to identify key factors about a dealer that Ford Credit considers significant in
predicting a dealer's ability to meet its financial obligations. Ford Credit also considers numerous other financial and
qualitative factors including capitalization and leverage, liquidity and cash flow, profitability, and credit history with Ford
Credit and other creditors. A dealer's risk rating does not reflect any guarantees or a dealer owner's net worth. Ford
Credit regularly reviews its model to confirm the continued business significance and statistical predictability of the factors
and updates the model to incorporate new factors or other information that improves its statistical predictability. In
addition, Ford Credit verifies the existence of the assets collateralizing the receivables by physical audits of vehicle
inventories, which are performed with increased frequency for higher risk (i.e., Group III and Group IV) dealers. Ford
Credit performs a credit review of each dealer at least annually and adjusts the dealer's risk rating, if necessary.
Dealers are assigned to one of four groups according to risk rating as follows:
• Group I – Dealers with strong to superior financial metrics
• Group II – Dealers with fair to favorable financial metrics
• Group III – Dealers with marginal to weak financial metrics
• Group IV – Dealers with poor financial metrics, including dealers classified as uncollectible
Ford Credit suspends credit lines and extends no further funding to dealers classified in Group IV.