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Ford Motor Credit Company

ANNUAL REPORT

for the year ended

Filed pursuant to Section 13

TABLE OF CONTENTS

UNITED STATES

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2001

For the transition period from                           to                          

Commission file number 1-6368

Ford Motor Credit Company

Registrant’s telephone number, including area code (313) 322-3000

Securities registered pursuant to Section 12(b) of the Act:

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   ü         No        

     As of March 28, 2002, the registrant had outstanding 250,000 shares of Common Stock. No voting stock of the registrant is held by non-affiliates of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

     This Report incorporates by reference into Items 1 and 3 hereof Sections of Items 1, 3, 6, 7 and 7A of Ford Motor Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

     The registrant meets the condition set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this Form with the reduced disclosure format.

Overview

      We are the world’s largest automotive finance company based on the dollar value of the portfolio of finance receivables we own and manage. We provide vehicle and dealer financing in 36 countries to more than 11 million customers and more than 12,500 automotive dealers. We were incorporated in Delaware in 1959 and are a wholly-owned subsidiary of Ford Motor Company (Ford). Our principal executive offices are located at One American Road, Dearborn, Michigan 48126 and our telephone number is (313) 322-3000.

      Services. We offer a wide variety of automotive financial services to and through automotive dealers throughout the world. Under the Ford Credit brand name, we provide financial services to and through dealers of Ford, Lincoln and Mercury brand vehicles and their affiliated dealers. Our PRIMUS division offers financial services to and through dealers of Jaguar, Land Rover, Aston Martin and Mazda brand vehicles and non-Ford dealers. Our Volvo finance subsidiaries provide financing to and through Volvo dealers. Our Fairlane and Triad subsidiaries offer non-prime financing through dealers, mainly for used vehicles. We also offer financial services to vehicle leasing companies and fleet purchasers.

      Our primary financial services fall into three categories:

	•	Retail financing — purchasing retail installment sale contracts and retail leases from dealers.
	•	Wholesale financing — making loans to dealers to finance the purchase of vehicle inventory, also known as floorplan financing.
	•	Other financing — making loans to dealers for working capital, improvements to dealership facilities, and acquisition of real estate.

We also service the finance receivables we originate and purchase, make loans to Ford affiliates, finance receivables of Ford and its subsidiaries and provide insurance services related to our financing programs. We earn our revenue primarily from retail installment sale contracts and leases and interest supplement and other support payments we receive from Ford on special-rate retail financing programs. See Item 7 for quantitative information concerning the amount of revenue generated by the different types of services we provide.

      Geographic Scope of Operations. We conduct our financing operations directly or through our subsidiaries and affiliates. We do business in all 50 states of the United States through about 175 dealer automotive financing branches and seven regional service centers. Our United States operations accounted for 79% and 78% of our total revenues in 2001 and 2000, respectively. Outside the United States, our largest operation is FCE Bank plc (Ford Credit Europe), which accounted for 11% of our total revenue in both 2001 and 2000. Ford Credit Europe does business in the United Kingdom, Germany, most other European countries, and Saudi Arabia. We also operate in Canada, Mexico, Brazil, Australia, a number of Asia-Pacific countries, Argentina and Chile. In addition, we manage Ford’s vehicle financing operations in other countries where we do not have independent operations. We conduct our operations outside of the United States in a manner similar to our United States operations, with appropriate adjustments for local law and other circumstances.

      Competition. The automotive financing business is highly competitive. Our principal competitors for retail and wholesale financing are:

No single company is a dominant force in the industry. We compete mainly on the basis of service and financing rates. A key foundation of our service is providing broad and consistent purchasing policies for retail installment sale and lease contracts and consistent support for dealer financing requirements across economic cycles. These policies have built strong relationships with Ford’s dealer network that enhance our competitiveness. Our ability to provide competitive financing rates depends on accessing the capital markets efficiently and effectively and originating, purchasing and servicing our receivables efficiently. We routinely monitor the capital markets and develop funding alternatives to maximize our competitive position. The integration of our financing services with Ford’s vehicle production and marketing plans gives us a competitive advantage in providing financing to Ford dealers and their customers. In addition, our size allows us to take advantage of economies of scale in both origination and servicing of receivables.

      Seasonal Variations. As a finance company, we own and manage a large portfolio of finance receivables and operating leases that are generated throughout the year and are collected over a number of years, primarily in fixed monthly payments. As a result, our overall financing revenues do not exhibit seasonal variations. However, throughout the automobile financing industry, credit losses are typically higher in the first and fourth quarters of the year due to competing financial demands on customers and lower vehicle resale values.

      Dependence on Ford Motor Company. The financing of Ford vehicles is the largest portion of our business. Any extended reduction or suspension of Ford’s production or sale of vehicles due to a decline in consumer demand, work stoppage, governmental action, negative publicity or other event could have an adverse effect on our business. On the other hand, an increase in Ford’s vehicle production or a significant marketing program sponsored by Ford could positively impact our business. A description of Ford’s business is included as an exhibit to this Report and incorporated by this reference. Additional information about Ford’s business, operations, production, sales and risks can be found in Ford’s Annual Report on Form 10-K for the year ended December 31, 2001, filed separately with the Securities and Exchange Commission.

Retail Financing

     Overview

      We provide financial services to retail customers through automotive dealers that have established relationships with us. Our primary business consists of purchasing retail installment sale and lease contracts for new and used vehicles mainly through dealers of Ford vehicles. Worldwide in 2001, we financed about 4.5 million vehicles through installment sales and finance leases, and we financed about 1.1 million vehicles through operating leases. We report the receivables from customers under installment sale contracts and certain leases with fleet customers as finance receivables. We report our retail leases as operating leases with the capitalized cost of the vehicles recorded as depreciable assets and reported in our financial statements as net investment in operating leases. At December 31, 2001, our worldwide retail finance receivables totaled $85.5 billion and our worldwide total net investment in operating leases was $39.3 billion.

      The amount (or volume) of our retail finance receivables and operating leases depends on several factors:

	•	The number of new and used vehicle sales and leases,
	•	The extent to which we purchase retail installment sale contracts and lease contracts for these vehicles, also known as financing share,
	•	The cost of vehicles financed, and
	•	Our sales of receivables in securitizations.

In the past, Ford periodically has sponsored special low-rate financing programs available only through us. Similar programs may be offered in the future. Under these programs, Ford makes interest supplement or other support payments to us. These programs can increase our financing volume and share of Ford vehicles. We earned $4.0 billion and $3.4 billion in interest supplements and other support payments from Ford in 2001 and 2000, respectively.

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     Installment Sale Contracts

      We purchase from dealers retail installment sale contracts that meet our credit standards. Most of these contracts relate to the purchase of new vehicles, but some are for used vehicles. The amount we pay for an installment sale contract is based on a negotiated vehicle purchase price agreed to between the dealer and the retail customer, less any vehicle trade-in or down payment applied to the purchase price. The net purchase price owed by the customer is paid over a specified number of months with interest at a fixed rate negotiated between the dealer and the retail customer. The dealer may retain a portion of the finance charge. Installment sale contract terms generally range from 12 to 72 months with an average original term of 54 months in the United States in 2001. In the United States, the average repayment obligation for new Ford, Lincoln, and Mercury brand vehicles under installment sale contracts was $24,915 in 2001, compared to $21,205 in 2000 and $19,547 in 1999. The corresponding average monthly payment was $505 in 2001, $495 in 2000, and $454 in 1999.

      We hold a security interest in the vehicles purchased through installment sale contracts. The priority of our security interest is protected against claims from other creditors, usually through lien notation on vehicle titles or other forms of security interest perfection. If our collection efforts fail to bring a delinquent customer’s payments current, we generally can repossess their vehicle, after satisfying local legal requirements and sell it at auction. The customer remains liable for any deficiency between net auction proceeds and their defaulted contract obligations. We require retail customers to carry fire, theft and collision insurance on financed vehicles.

     Retail Lease Plans

      We offer leasing plans to retail customers through our dealers. Our most successful retail leasing plan is called Red Carpet Lease, which is offered in the United States and Canada through dealers of Ford, Lincoln and Mercury brand vehicles. We offer similar lease plans through dealers of other Ford vehicles, Mazda dealers and private label plans for a limited number of non-Ford dealers. Under these plans, dealers originate the leases and offer them to us for purchase. We purchase leases that meet our credit standards. Upon our purchase of a lease, we take ownership of the lease and title to the leased vehicle from the dealer. At the end of the lease, the customer has the option to purchase the vehicle for the lease-end value as specified in the lease contract or return the vehicle to the dealer. Afterwards, the dealer may buy the vehicle from us for the specified lease-end value or return it to us. Once we purchase a lease from a dealer, that dealer generally has no further obligation to us in connection with the lease and no responsibility if the value of a leased vehicle at the end of the lease is less than the specified lease-end value.

      The amount we pay to a dealer for a retail lease, also called the acquisition cost, is based on the negotiated price for the vehicle less vehicle trade-in or down payment from the customer. The customer makes monthly lease payments, in an amount equal to the acquisition cost less the estimated residual value of the vehicle at the lease term end amortized over the lease term, plus lease charges. Retail lease terms range from 12 to 48 months with an average original lease term of 32 months in the United States in 2001. In the United States, the average monthly payment of retail lease contracts for new Ford, Lincoln, and Mercury brand vehicles we purchased was $420 in 2001, $394 in 2000, and $380 in 1999.

      If our collection efforts fail to bring delinquent lease customer’s payments current, we repossess the vehicle and sell it at auction. We require lease customers to carry fire, theft, liability and collision insurance on leased vehicles.

     Other Retail Financing

      We also offer vehicle financing programs to leasing companies, daily rental companies, government entities and fleet customers. These financings include both lease plans and installment purchase plans and are generally for terms of 12 to 84 months. The financing obligations are collateralized by perfected liens on financed vehicles in almost all instances and, where appropriate, an assignment of rentals under any related

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leases. At the end of the finance term, a lease customer may be required to pay us any shortfall between the fair market value and the specified end of term value of the vehicle. If the fair market value of the vehicle at the end of the finance term exceeds the specified end of term value, we may pay the lease customer the excess amount. These financings are included in retail installment finance receivables and net investment in operating leases and in the United States totaled about $6 billion as of December 31, 2001.

Wholesale Financing

      We offer a wholesale financing program for qualifying dealers to purchase new and used vehicles held in inventory. We generally finance 100% of the vehicle wholesale price for new vehicles and up to 100% of the auction price for used vehicles. Dealers pay a floating interest rate on wholesale receivables based on the prime rate. Each wholesale receivable is paid off by the dealer as vehicles are sold or leased. In the United States in 2001, the average wholesale receivable was outstanding for 80 days, including vehicle delivery time. In 2001, we financed about 5 million vehicles worldwide through wholesale financing, and at December 31, 2001, we had a total of $15.6 billion in wholesale financing outstanding, after taking into account sales of wholesale receivables in securitizations during 2001. Our wholesale financing program includes financing of large multi-brand national dealer groups that are some of our largest wholesale customers, based on the amount financed.

      When a dealer uses our wholesale financing program to purchase vehicles from Ford, another manufacturer or other vehicle source, we obtain a security interest in the vehicles and, in many instances, other assets of the dealer. We generally are able to repossess the financed vehicles if the dealer does not make timely payments or meet its obligations under the financing program. However, once a vehicle is sold or leased to a retail customer, our right to repossess the vehicle to satisfy wholesale obligations is no longer effective. We are insured for vehicle damage and theft of vehicles held in dealer inventory.

      Since 1999, we have provided more than 84% of the wholesale financing on new Ford, Lincoln and Mercury brand vehicles acquired by dealers in the United States and 97% of the wholesale financing on new Ford brand vehicles acquired by European dealers.

      The amount of our wholesale receivables depends on several factors:

	•	The number of total vehicle sales by Ford to dealers,
	•	The level of dealer inventories,
	•	Our financing share of Ford’s sales to dealers,
	•	The costs of the vehicles financed, and
	•	Our sales of wholesale receivables in securitizations.

Other Financing

      We make loans to vehicle dealers for facilities improvements, working capital and to enable them to purchase dealership real estate. For dealers in the United States and Canada, these loans totaled about $4.3 billion at December 31, 2001 and were included in other finance receivables. These loans are typically secured by liens on real estate, other dealership assets and sometimes personal guarantees of the individual owners of the dealership.

      We also purchase receivables generated by certain divisions and affiliates of Ford, primarily in connection with the delivery of vehicle inventories from United States Ford manufacturing plants to dealers and the sale of parts and accessories by Ford to dealers. At December 31, 2001, these purchased receivables totaled about $4.7 billion, of which about $3 billion was included in wholesale finance receivables and $1.7 billion was included in other finance receivables.

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Servicing

      After we purchase retail installment sale contracts and leases from dealers and other customers, we manage the receivables during their contract term. This management process is called servicing. We service both our owned and sold receivables. Our servicing duties include collecting monthly payments from customers, providing reports to customers, contacting delinquent customers for payment, releasing liens on paid-off finance contracts, repossessing vehicles and selling repossessed and returned vehicles. We operate our retail servicing from 15 regional service centers in North America and Europe that use state-of-the-art servicing and collection tools.

Insurance

      We conduct insurance operations primarily through The American Road Insurance Company and its subsidiaries in the United States and Canada. We offer extended service plan contracts, mainly through Ford dealers for new and used vehicles, physical damage insurance covering vehicles and equipment financed by us at wholesale, and the reinsurance of credit life and credit disability insurance for retail purchasers of vehicles and equipment. We also offer various Ford branded insurance products throughout the world underwritten by non-affiliated insurance companies from which we receive fee income. Our insurance business generated less than 1% of our total revenues in 2001.

Segment Information

      Financial information regarding our operating segments and operations by geographic area is shown in Note 16 of our Notes to Financial Statements.

OUR EMPLOYEE RELATIONS

      At December 31, 2001, we had about 22,000 employees. Most of our employees are salaried, and most are not represented by a union. We consider employee relations to be satisfactory.

OUR GOVERNMENTAL REGULATIONS

      As a finance company, we are highly regulated by the governmental authorities in the locations where we operate. In some countries outside the United States, certain of our subsidiaries, including Ford Credit Europe, are regulated banking institutions and are required, among other things, to maintain minimum capital reserves. In many locations, governmental authorities require us to obtain licenses to conduct our financing business. We must renew these licenses periodically.

      We actively monitor proposed changes to relevant legal and regulatory requirements in order to maintain our compliance. Through our governmental relations efforts, we also attempt to participate in the legislative and administrative rule making process on regulatory initiatives that impact finance companies. Lawmakers and judges in recent years have continued to show concern for the protection of consumers in financing transactions. This has led us to make adjustments to some of our business processes and, in some instances, to adopt new business practices. Our ongoing compliance efforts have not had a material adverse effect on our operations.

      Interest rates on consumer financing generally are limited by law. In periods of high interest rates, these rate limitations can have an adverse effect on our operations if we are unable to pass on increased costs to our customers.

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OUR TRANSACTIONS WITH FORD AND AFFILIATES

      We have a profit maintenance agreement with Ford that requires Ford to make payments to us to maintain our earnings at specified minimum levels. A copy of this agreement is filed as an exhibit to this Report. In addition, we have an agreement to maintain a minimum control interest in Ford Credit Europe and to maintain Ford Credit Europe’s net worth above a minimum level. No payments were made under these agreements during the period from 1998 through 2001.

      We also formally documented our long-standing business practices with Ford in an agreement dated October 18, 2001, a copy of which was filed with the Securities and Exchange Commission on that date. The principal terms of this agreement include the following:

	•	Any extension of credit from us to Ford and any of Ford’s automotive affiliates will be on arm’s length terms and will be enforced in a commercially reasonable manner.
	•	We will not be required to guarantee the indebtedness or make equity investments in Ford or any of Ford’s automotive affiliates.
	•	We and Ford agree to maintain our stockholder’s equity at a commercially reasonable level to support the amount, quality and type of receivables in light of prevailing economic circumstances.
	•	We will not be required to accept credit or residual risk beyond what we would be willing to accept acting in a prudent and commercially reasonable manner.
	•	We and Ford are separate, legally distinct companies and will continue to maintain separate books, accounts, assets and liabilities.

More information about transactions between us and Ford and other affiliates, is contained in Note 12 of our Notes to Financial Statements, “Our Business — Overview”, “Our Business — Retail Financing”; “Our Business — Other Financing” and the description of Ford’s business included as an exhibit to this report.

      We own our world headquarters in Dearborn, Michigan, our PRIMUS corporate offices in Nashville, Tennessee. Ford Credit Europe leases its corporate offices in Brentwood, England. Most of our dealer automotive finance branches and service centers are located in leased properties. The continued use of any of these leased properties is not material to our operations. At December 31, 2001, our total obligation under leases of real property was about $163 million.

      We are subject to legal actions, governmental investigations and other proceedings and claims relating to state and federal laws concerning finance and insurance, employment-related matters and other contractual relationships. Some of these matters are class actions or are seeking class action status. Some of these matters may involve compensatory, punitive or treble damage claims and attorneys’ fees in very large amounts, or other requested relief which, if granted, would require very large expenditures. Our significant pending matters are summarized below:

      Lease Residual Class Action. In January 1998, in connection with a case pending in Illinois state court, we and Ford were served with a summons and intervention counterclaim complaint relating to our leasing practices (Higginbotham v. Ford Credit). The counterclaim plaintiff, Carla Higginbotham, is a member of a class that has been conditionally certified for settlement purposes in Shore v. Ford Credit. In the Shore case, we commenced an action for deficiency against Virginia Shore, one of our lease customers. Ms. Shore counterclaimed for purported violations of the Truth-in-Leasing Act (alleging that certain lease charges were excessive) and the Truth-in-Lending Act (alleging that the lease lacked clarity). Ms. Shore purported to represent a class of all similarly situated lessees. Ms. Higginbotham objected to the proposed settlement of the Shore case, intervened as a named defendant, filed separate counterclaims against us, and joined Ford as an

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additional counterclaim defendant. Ms. Higginbotham asserts claims against us for violations of the Consumer Leasing Act, declaratory judgment concerning the enforceability of early termination provisions in our leases, and fraud. She also asserts a claim against us and Ford for conspiracy to violate the Truth-in-Lending Act. The Higginbotham counterclaims allege that we inflate the residual values of our leased vehicles, which results in lower monthly lease payments but higher termination fees for lessees who exercise their right of early termination. Ms. Higginbotham claims that the early termination fees were not adequately disclosed on the lease form and that the fees are excessive and illegal because of the allegedly inflated residual values. She also alleges that Ford dictated the residual values to us and thereby participated in an unlawful conspiracy. This case was stayed pending the approval or rejection of the settlement in Shore. We have reached individual settlements with the Shore plaintiffs.

      The Illinois court in Higginbotham found that the lease-end residual value of Ms. Higginbotham’s vehicle was properly valued and, as a result, Ms. Higginbotham was an inadequate representative for the class. Subsequently, Ms. Higginbotham voluntarily dismissed her intervention counterclaim without prejudice in the Illinois state court and has reactivated her initial suit in the Florida federal court, pursuing substantially similar claims on behalf of herself and others similarly situated. Consequently, the Higginbotham case is proceeding in Florida. In addition, we have filed a response to Ms. Higginbotham’s motion for class certification and have renewed our motion for summary judgment based on information obtained in discovery.

      Late Charges Class Actions. A purported state-wide class action was filed in Maryland (Simpkins v. Ford Credit) in which the plaintiffs are contending that our late charges on lease accounts violate state law. The plaintiffs allege that we violated the Maryland Consumer Leasing Act, Maryland Constitution and Maryland Consumer Code by charging late fees in consumer lease transactions in excess of 6%. The plaintiffs assert that the maximum late fee allowed under Maryland law is the judgment rate of interest, which is 6% per annum. Plaintiffs are seeking restitution, punitive damages and injunctive relief. We have removed the case to federal court and the plaintiffs have filed a motion to remand the case to state court. The case was remanded to state court. We have filed a motion to dismiss.

      Fair Lending Class Action. We have been served with three purported class actions alleging that our pricing practices are discriminatory. One (Jones v. Ford Credit) was filed in federal court in New York, another (Rodriquez v. Ford Credit) was filed in federal court in Illinois and the last (Lucena v. PRIMUS) was filed in federal court in Pennsylvania. The Jones case alleges that our pricing practices discriminate against African Americans. Specifically, plaintiffs allege that although our initial credit risk scoring analysis applies objective criteria to calculate the risk-related “Buy Rate,” we then authorize dealers to impose a subjective component in their credit pricing system “the Mark-up Policy” to impose additional non-risk charges. The plaintiffs allege that this allegedly subjective mark-up discriminates against African Americans. Our motion to dismiss was denied and the parties are preparing for trial. Rodriquez and Lucena involve similar allegations with respect to Hispanic Americans. In Rodriquez, the court denied our motion to dismiss, and we expect the plaintiffs to file a motion for class certification. In Lucena, the plaintiffs filed a motion to voluntarily dismiss the case without prejudice which was granted. We expect the plaintiffs will re-file the case. We believe that our pricing practices are fair and are not discriminatory.

      Litigation is subject to many uncertainties and the outcome is not predictable. It is reasonably possible that some of the matters described above could be decided unfavorably to us. Although the amount of liability at December 31, 2001 with respect to these matters cannot be ascertained, we believe that any resulting liability should not materially affect our consolidated financial position or results of operations.

      In addition, any litigation, investigation, proceeding or claim against Ford that results in Ford incurring significant liability expenditures or costs could also have a material adverse affect on our business, results of operations and financial condition. For a discussion of pending cases against Ford see Item 3 in Ford’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission and included as an exhibit to our Report and incorporated by this reference.

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ITEM 5.	MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      At December 31, 2001 all shares of our common stock were owned by Ford FSG, Inc., a wholly-owned subsidiary of Ford. We have not issued or sold any equity securities during 2001. There is no market for our stock. During the first nine months of 2001, we paid cash dividends of $400 million, no dividend was paid in the fourth quarter of 2001. During 2000, we paid cash dividends of $119.7 million. We also paid dividends in 1999, 1998 and 1997. We may pay additional dividends from time to time depending on the amount of our receivables, capital requirements and profitability.

      In January 2002, we received a capital contribution of $700 million from Ford.

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FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES