FORD MOTOR CREDIT CO LLC - FORM 10-Q

Attached files

file	filename
EX-12 - EXHIBIT 12 - FORD MOTOR CREDIT CO LLC	c92085exv12.htm
EX-15 - EXHIBIT 15 - FORD MOTOR CREDIT CO LLC	c92085exv15.htm
EX-31.1 - EXHIBIT 31.1 - FORD MOTOR CREDIT CO LLC	c92085exv31w1.htm
EX-32.2 - EXHIBIT 32.2 - FORD MOTOR CREDIT CO LLC	c92085exv32w2.htm
EX-31.2 - EXHIBIT 31.2 - FORD MOTOR CREDIT CO LLC	c92085exv31w2.htm
EX-32.1 - EXHIBIT 32.1 - FORD MOTOR CREDIT CO LLC	c92085exv32w1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-6368

Ford Motor Credit Company LLC

(Exact name of registrant as specified in its charter)


Delaware (State of organization)		38-1612444 (I.R.S. employer identification no.)

One American Road, Dearborn, Michigan (Address of principal executive offices)		48126 (Zip code)

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

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. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

All of the limited liability company interests in the registrant (“Shares”) are held by an affiliate of the registrant. None of the Shares are publicly traded.

REDUCED DISCLOSURE FORMAT

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

EXHIBIT INDEX APPEARS AT PAGE 55

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
		CONSOLIDATED STATEMENT OF OPERATIONS
		CONSOLIDATED BALANCE SHEET
		CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
		CONSOLIDATED STATEMENT OF CASH FLOWS
		NOTES TO THE FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
	ITEM 5.OTHER INFORMATION
	ITEM 6.EXHIBITS
SIGNATURES
		REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXHIBIT INDEX
Exhibit 12
Exhibit 15
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

For the Periods Ended September 30, 2009 and 2008
(in millions)


	Third Quarter						Nine Months
	2009			2008			2009			2008
Financing revenue
Operating leases	$	1,168		$	1,598		$	3,854		$	5,000
Retail		750			866			2,266			2,504
Interest supplements and other support costs earned from affiliated companies		917			1,189			2,813			3,682
Wholesale		188			425			709			1,340
Other		18			32			60			103

Total financing revenue		3,041			4,110			9,702			12,629
Depreciation on vehicles subject to operating leases		(842	)		(1,573	)		(3,200	)		(7,477	)
Interest expense		(1,259	)		(1,888	)		(3,969	)		(5,781	)

Net financing margin		940			649			2,533			(629	)
Other revenue
Insurance premiums earned, net		20			28			76			110
Other income, net (Note 13)		144			294			574			832

Total financing margin and other revenue		1,104			971			3,183			313
Expenses
Operating expenses		306			415			956			1,161
Provision for credit losses (Note 4)		111			377			893			1,249
Insurance expenses		10			18			47			90

Total expenses		427			810			1,896			2,500

Income/(Loss) before income taxes		677			161			1,287			(2,187	)
Provision for/(Benefit from) income taxes		250			66			462			(870	)

Income/(Loss) from continuing operations		427			95			825			(1,317	)
Gain on disposal of discontinued operations (Note 12)		—			—			2			9

Net income/(loss)	$	427		$	95		$	827		$	(1,308	)

The accompanying notes are an integral part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)


	September 30,		December 31,
	2009		2008
ASSETS
Cash and cash equivalents (Note 1)	$	15,296	$	15,473
Marketable securities		8,641		8,606
Finance receivables, net (Note 2)		76,163		93,331
Net investment in operating leases (Note 3)		16,320		22,506
Notes and accounts receivable from affiliated companies		846		1,047
Derivative financial instruments (Note 11)		2,328		3,791
Assets held-for-sale (Note 12)		911		214
Other assets (Note 7)		4,287		5,159

Total assets	$	124,792	$	150,127


LIABILITIES AND SHAREHOLDER’S INTEREST
Liabilities
Accounts payable
Customer deposits, dealer reserves and other	$	1,060	$	1,781
Affiliated companies		1,685		1,015

Total accounts payable		2,745		2,796
Debt (Note 8)		103,368		126,458
Deferred income taxes		2,078		2,668
Derivative financial instruments (Note 11)		1,481		2,145
Liabilities held-for-sale (Note 12)		—		56
Other liabilities and deferred income (Note 7)		4,628		5,438

Total liabilities		114,300		139,561

Shareholder’s interest
Shareholder’s interest		5,149		5,149
Accumulated other comprehensive income		1,016		432
Retained earnings (Note 9)		4,327		4,985

Total shareholder’s interest		10,492		10,566

Total liabilities and shareholder’s interest	$	124,792	$	150,127

The accompanying notes are an integral part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Periods Ended September 30, 2009 and 2008
(in millions)


	Third Quarter					Nine Months
	2009		2008			2009			2008

Net income/(loss)	$	427	$	95		$	827		$	(1,308	)
Other comprehensive income/(loss), net of tax:
Foreign currency translation		186		(686	)		585			(352	)
Change in value of retained interests in securitized assets		1		(12	)		(1	)		(32	)
Adjustment for the adoption of the fair value option (a)		—		—			—			(6	)

Total other comprehensive income/(loss)		187		(698	)		584			(390	)

Comprehensive income/(loss)	$	614	$	(603	)	$	1,411		$	(1,698	)


(a)		Refer to Note 1 of our Annual Report on Form 10-K for the year ended December 31, 2008 for additional information.

The accompanying notes are an integral part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Periods Ended September 30, 2009 and 2008
(in millions)


	Nine Months
	2009			2008
Cash flows from operating activities
Net income/(loss)	$	827		$	(1,308	)
Adjustments to reconcile net income to net cash provided by operations
Provision for credit losses		893			1,249
Depreciation and amortization		3,667			7,945
Amortization of upfront interest supplements		(1,321	)		(913	)
Net change in deferred income taxes		(675	)		(2,461	)
Net change in other assets		2,091			2,391
Net change in other liabilities		251			2,059
All other operating activities		(704	)		(247	)

Net cash provided by operating activities		5,029			8,715

Cash flows from investing activities
Purchases of finance receivables (other than wholesale)		(16,943	)		(26,837	)
Collections of finance receivables (other than wholesale)		24,281			26,241
Purchases of operating lease vehicles		(2,344	)		(9,889	)
Liquidations of operating lease vehicles		5,798			6,030
Net change in wholesale receivables		9,687			2,569
Net change in notes receivable from affiliated companies		161			49
Purchases of marketable securities		(22,082	)		(16,718	)
Proceeds from sales and maturities of marketable securities		21,112			14,173
Proceeds from sales of businesses		168			3,699
Settlements of derivatives		479			688
All other investing activities		54			333

Net cash provided by/(used in) investing activities		20,371			338

Cash flows from financing activities
Proceeds from issuances of long-term debt		23,904			27,345
Principal payments on long-term debt		(42,501	)		(31,859	)
Change in short-term debt, net		(5,666	)		(4,370	)
Cash distributions (a)		(400	)		—
All other financing activities		(549	)		(325	)

Net cash (used in) financing activities		(25,212	)		(9,209	)
Effect of exchange rate changes on cash and cash equivalents		265			(63	)
Cumulative correction of a prior period error (b)		(630	)		—


Total cash flows from operations		(177	)		(219	)

Cash and cash equivalents, beginning of period	$	15,473		$	14,137
Change in cash and cash equivalents		(177	)		(219	)

Cash and cash equivalents, end of period	$	15,296		$	13,918


(a)		See Note 9 for information regarding $1.1 billion of non-cash distributions in 2009.

(b)		In the first quarter of 2009, we recorded a $630 million cumulative adjustment to correct for the overstatement of cash and cash equivalents and certain accounts payable that originated in prior periods. The impact on previously issued annual and interim financial statements was not material.

The accompanying notes are an integral part of the financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information, and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, these unaudited financial statements include all adjustments considered necessary for a fair statement of the results of operations and financial conditions for interim periods for Ford Motor Credit Company LLC, its consolidated subsidiaries and consolidated variable interest entities (“VIEs”) in which Ford Motor Credit Company LLC is the primary beneficiary (collectively referred to herein as “Ford Credit”, “we”, “our” or “us”). Results for interim periods should not be considered indicative of results for any other interim period or for the full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2008 (“2008 10-K Report”). We are an indirect, wholly owned subsidiary of Ford Motor Company (“Ford”).

We reclassified certain prior year amounts in our consolidated financial statements to conform to current year presentation.

Liquidity

At September 30, 2009, we had $23.9 billion of cash, cash equivalents and marketable securities, including $6.1 billion which may only be used to support our on-balance sheet securitizations and $500 million related to our insurance activities. Risks and uncertainties related to the credit environment may affect our ability to obtain funding and thereby reduce our future liquidity. If credit markets constrain our ability to obtain funding, we may need to further reduce the amount of finance receivables and operating leases we purchase or originate. While challenges remain, we continue to see improvement in the capital markets for the second consecutive quarter evidenced by improvement in market access and credit spreads.

Risks and uncertainties related to the global economy, the automotive industry, and the credit environment could materially impact Ford. Uncertainties relating to Ford’s business also cause uncertainties that could result in a change to our current business plan. In addition, Ford’s ability to satisfy its obligations to us (e.g., interest supplements and other support payments) could be impacted and, if so, would reduce our future liquidity. We believe, however, Ford will satisfy its obligations to us. If Ford fails to satisfy its obligations to us, we may use any of our obligations to Ford as an offset. However, in the event of a material adverse effect on Ford’s financial condition or operations, Ford Credit could be similarly impacted in a material adverse way.

While there are risks and uncertainties related to the credit environment, the global economy, and the automotive industry, we believe we have sufficient liquidity to meet our obligations and operating plan. Accordingly, we have concluded that there is no substantial doubt about our ability to continue as a going concern, and our financial statements have been prepared on a going concern basis.

Noncontrolling Interest

We adopted the Financial Accounting Standards Board’s (“FASB”) revised standard on accounting for noncontrolling interests on its effective date, January 1, 2009 and applied the presentation and disclosure requirements retrospectively for all periods presented. This standard establishes accounting and reporting requirements for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The standard clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in its consolidated financial statements. Previously, noncontrolling interests were reflected in our financial statements as Minority interests in net assets of subsidiaries, which was not included in equity. As a result of this standard, our shareholder’s interest, net income/(loss), and comprehensive income/(loss) will be reflected as attributable to either Ford Credit or our noncontrolling interests (if our noncontrolling interests are more than de minimis). At September 30, 2009, our noncontrolling interests were de minimis. This standard also required us to incorporate a consolidated statement of comprehensive income.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 1. ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalents and Marketable Securities

Cash and all highly liquid investments with a maturity of 90 days or less at date of purchase are classified as Cash and cash equivalents. See Note 5 for information on cash and cash equivalents that supports on-balance sheet securitization transactions.

Cash Equivalents — Financial Instruments. We measure financial instruments classified as cash equivalents at fair value. We use quoted prices where available to determine fair value for U.S. Treasury securities and industry-standard valuation models using market-based inputs when quoted prices are unavailable, such as for government agency securities and corporate obligations.

Marketable securities include investments in U.S. government and non-U.S. government securities, corporate obligations and equities and asset backed securities with a maturity date greater than 90 days at the date of purchase. Where available, including for U.S. Treasury securities and corporate equities, we use quoted market prices to measure fair value. If quoted market prices are not available, such as for government agency securities, asset-backed securities, and corporate obligations, prices for similar assets and matrix pricing models are used.

Retained Interests in Securitized Assets

The fair value of residual interests is estimated based on the present value of monthly collections on the sold finance receivables in excess of amounts needed for payment of the debt and other obligations issued or arising in the securitization transactions and is calculated using a discounted cash flow analysis. We estimate the fair value of retained interests using internal valuation models, market inputs and our own assumptions. The three key inputs that affect the valuation of the residual interests’ cash flows include: credit losses; prepayment speed; and the discount rate.

Interest Supplements and Other Support Costs Earned from Affiliated Companies

As of January 1, 2008, to reduce ongoing obligations to us and to be consistent with general industry practice, Ford began paying interest supplements and residual value support to us at the time we purchase eligible contracts from dealers. Finance receivables are reported at their outstanding balance, including origination cost and late charges, net of unearned income and unearned interest supplements received from Ford and other affiliates. The amount of unearned interest supplements for finance receivables was $1.8 billion and $1.3 billion at September 30, 2009 and December 31, 2008, respectively. Net investment in operating leases are recorded at cost and the vehicles are depreciated on a straight-line basis over the lease term to the estimated residual value. Unearned interest supplements and residual support payments received from Ford and other affiliates for investments in operating leases are recorded in Other liabilities and deferred income. The amount of unearned interest supplements and residual support payments for net investment in operating leases was $1.2 billion and $1.3 billion at September 30, 2009 and December 31, 2008, respectively.

At September 30, 2009, in the United States and Canada, Ford is obligated to pay us $1.3 billion of interest supplements and about $225 million of residual value support over the terms of the related finance contracts, compared with $2.5 billion of interest supplements and about $450 million of residual value support at December 31, 2008, in each case for contracts purchased prior to January 1, 2008. The unpaid interest supplements and residual value support obligations on these contracts will continue to decline as the contracts liquidate.

Derivative Financial Instruments and Hedge Accounting

We adopted the FASB’s new standard on disclosures for derivative instruments and hedging activities on its effective date, January 1, 2009. The standard enhances the current disclosure framework for derivative instruments and hedging activities. In this initial year of adoption, we have elected to not present earlier periods for comparative purposes.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 1. ACCOUNTING POLICIES (Continued)

In the normal course of business, we are exposed to interest rate changes and foreign currency exchange rate fluctuations. Interest rate and currency exposures are monitored and managed by us as an integral part of our overall risk management program, which recognizes the unpredictability of financial markets and seeks to reduce potential adverse effects on our operating results. Risk is reduced in two ways: (1) through the use of funding instruments that have interest and maturity profiles similar to the assets they are funding, and (2) through the use of interest rate and foreign exchange derivatives. Our risk management strategy is reviewed on a regular basis by our management. We do not engage in any speculative activities in the derivative markets.

We enter into master agreements with counterparties that generally allow for netting of certain exposures. To ensure consistency in our treatment of derivative and non-derivative exposures with regard to these agreements, we do not net our derivative position by counterparty for purposes of balance sheet presentation and disclosure.

Nature of Exposure

Currency Exchange Rate Risk. We face exposure to currency exchange rate fluctuations if a mismatch exists between the currency of our receivables and the currency of the debt funding those receivables. When possible, we fund receivables with debt in the same currency, minimizing exposure to exchange rate movements. When funding is in a different currency, we may execute the following foreign currency derivatives to convert our foreign currency debt obligations to the currency of the receivables:

•

Foreign currency swap — an agreement to convert non-U.S. dollar long-term debt to U.S. dollar denominated payments or non-local market debt to local market debt for our international affiliates; or

•

Foreign currency forward — an agreement to buy or sell an amount of funds in an agreed currency at a certain time in the future for a certain price.

We have also used foreign currency exchange derivatives to hedge the net assets of certain foreign entities to offset the translation and economic exposures related to our investment in these entities. Presently, we have no active derivatives hedging our net investment in foreign operations.

Interest Rate Risk. We face exposure to interest rate risk when assets and the related debt have different re-pricing periods and, consequently, respond differently to changes in interest rates. We may execute the following interest rate derivatives in our interest rate risk management process to better match the re-pricing characteristics of our interest-sensitive assets and liabilities based on our established tolerances:

•

Interest rate swap — an agreement to convert fixed-rate interest payments to floating or floating-rate interest payments to fixed; or

•

Interest rate cap/floor — an agreement to limit exposure to floating interest rates in which we receive the amount by which the floating rate exceeds (cap) or drops below (floor) a certain threshold.

Hedge Accounting

All derivative instruments are recorded on the balance sheet at fair value. We elect to apply designated hedge accounting to certain derivatives. Derivatives that receive designated hedge accounting treatment are documented and the relationships are evaluated for effectiveness. Some derivatives did not qualify for hedge accounting; for others, we elected not to apply hedge accounting. Regardless of hedge accounting treatment, we only enter into transactions we believe will be highly effective at offsetting the underlying economic risk.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 1. ACCOUNTING POLICIES (Continued)

Fair Value Hedges. We use certain derivatives to reduce the risk of changes in the fair value of liabilities. We have designated certain receive-fixed, pay-float interest rate swaps as hedges of existing fixed-rate debt under the “long-haul” method of assessing effectiveness. The risk being hedged is the risk of changes in the fair value of the hedged item attributable to changes in the benchmark interest rate. We use regression analysis to assess hedge effectiveness at the time the hedges are designated as well as throughout the hedge period. If the hedge relationship is deemed to be highly effective, we record the changes in fair value of the hedged item related to the risk being hedged in Debt with the offset in Other income, net. The change in fair value of the related derivative also is recorded in Other income, net. Hedge ineffectiveness, recorded directly in earnings, is the difference between the change in fair value of the entire derivative instrument and the change in fair value of the hedged item attributable to changes in the benchmark interest rate.

When a derivative is de-designated from a fair value hedge relationship, or when the derivative in a fair value hedge relationship is terminated before maturity, the fair value adjustment to the hedged item continues to be reported as part of the basis of the item and is amortized over its remaining life. The exchange of cash associated with fair value hedges is reported in Cash flows from operating activities in our statement of cash flows.

Derivatives Not Designated as Hedging Instruments. We report changes in the fair value of derivatives not designated as hedging instruments in Other income, net. The earnings impact primarily relates to changes in fair value of interest rate derivatives, which are included in evaluating our overall risk management objective, and foreign currency derivatives, which are substantially offset by the revaluation of foreign denominated debt. The exchange of cash associated with derivatives not designated as hedging instruments is reported in Cash flows from investing activities in our statement of cash flows.

See Note 10 for information on fair value measurements. See Note 11 for detail regarding income effect and balance sheet effect of derivative instruments.

Fair Value Measurements

In determining fair value, we use various valuation techniques and prioritize the use of observable inputs. We assess the inputs used to measure fair value using the following three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market:

•

Level 1 — inputs include quoted prices for identical instruments and are the most observable; or

•

Level 2 — inputs include quoted prices for similar assets and observable inputs such as interest rates, currency exchange rates and yield curves; or

•

Level 3 — inputs are not observable in the market and include management’s judgments about the assumptions market participants would use in pricing the asset or liability.

The use of observable and unobservable inputs is reflected in our hierarchy assessment disclosed in Note 10.

Provision for/(Benefit from) Income Taxes

The provision for/(benefit from) income taxes is computed by applying our estimated annual effective tax rate to year-to-date income/(loss) before taxes.

Subsequent Events

We evaluated the effects of all subsequent events from the end of the third quarter through November 6, 2009, the date we filed our financial statements with the U.S. Securities and Exchange Commission.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES

Net finance receivables at September 30, 2009 and December 31, 2008 were as follows (in millions):


	September 30,			December 31,
	2009			2008
Retail (including direct financing leases)	$	58,391		$	65,475
Wholesale		18,547			27,765
Other		2,524			2,791

Total finance receivables, net of unearned income (a)(b)		79,462			96,031
Less: Unearned interest supplements		(1,830	)		(1,296	)
Less: Allowance for credit losses		(1,469	)		(1,404	)

Finance receivables, net	$	76,163		$	93,331


Net finance receivables subject to fair value (c)	$	73,581		$	90,280
Fair value		74,228			87,056


(a)		At September 30, 2009 and December 31, 2008, includes $640 million and $1.0 billion, respectively, of primarily wholesale receivables with entities that are reported as consolidated subsidiaries of Ford. The consolidated subsidiaries include dealerships that are partially owned by Ford and consolidated as VIEs and also certain overseas affiliates. The associated vehicles that are being financed by us are reported as inventory on Ford’s balance sheet.

(b)		At September 30, 2009 and December 31, 2008, includes finance receivables of $63.0 billion and $73.7 billion, respectively, that have been sold for legal purposes in securitization transactions that do not satisfy the requirements for accounting sale treatment, of which $256 million is reported as inventory by Ford at September 30, 2009. The receivables are available only for payment of the debt and other obligations issued or arising in the securitization transactions; they are not available to pay our other obligations or the claims of our other creditors. We hold the right to the excess cash flows not needed to pay the debt and other obligations issued or arising in each of these securitization transactions. Refer to Note 5 for additional information.

(c)		At September 30, 2009 and December 31, 2008, excludes $2.6 billion and $3.0 billion, respectively, of certain receivables (primarily direct financing leases) that are not subject to fair value disclosure requirements.

The fair value of finance receivables is generally calculated by discounting future cash flows using an estimated discount rate that reflects the current credit, interest rate and prepayment risks associated with similar types of instruments.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 3. NET INVESTMENT IN OPERATING LEASES

During the second quarter of 2008, we recorded a pre-tax impairment charge of $2.1 billion in Depreciation on vehicles subject to operating leases representing the amount by which the carrying value of certain vehicle lines in our lease portfolio exceeded the fair value.

Net investment in operating leases at September 30, 2009 and December 31, 2008 were as follows (in millions):


	September 30,			December 31,
	2009			2008
Vehicles, at cost, including initial direct costs	$	22,965		$	27,984
Less: Accumulated depreciation		(6,399	)		(5,214	)
Less: Allowance for credit losses		(246	)		(264	)

Net investment in operating leases (a)	$	16,320		$	22,506


(a)		At September 30, 2009 and December 31, 2008, includes net investment in operating leases of $13.9 billion and $15.6 billion, respectively, that have been included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These net investment in operating leases are available only for payment of the debt and other obligations issued or arising in the securitization transactions; they are not available to pay our other obligations or the claims of our other creditors. We hold the right to the excess cash flows not needed to pay the debt and other obligations issued or arising in each of these securitization transactions. Refer to Note 5 for additional information.

NOTE 4. ALLOWANCE FOR CREDIT LOSSES

Following is an analysis of the allowance for credit losses related to finance receivables and net investment in operating leases for the periods ended September 30 (in millions):


	Third Quarter						Nine Months
	2009			2008			2009			2008
Balance, beginning of period	$	1,846		$	1,493		$	1,668		$	1,090
Provision for credit losses		111			377			893			1,249
Deductions
Charge-offs before recoveries		346			402			1,172			1,094
Recoveries		(106	)		(106	)		(315	)		(323	)

Net charge-offs		240			296			857			771
Other changes, principally amounts related to translation adjustments and finance receivables sold or transferred to held-for-sale		2			27			(11	)		21

Net deductions		242			323			846			792

Balance, end of period	$	1,715		$	1,547		$	1,715		$	1,547

Consistent with our normal practices and policies, we assess the adequacy of our allowance for credit losses quarterly and regularly evaluate the assumptions and models used in establishing the allowance. At September 30, 2009, our allowance for credit losses includes about $260 million primarily reflecting higher retail installment and lease repossession assumptions and higher wholesale and dealer loan default assumptions compared to historical trends used in our models.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 5. TRANSFERS OF RECEIVABLES

On-Balance Sheet Securitization Transactions

Secured Borrowings

Most of our securitization transactions do not satisfy the requirements for accounting sale treatment and, therefore, the securitized assets and related liabilities are included in our financial statements. Cash and cash equivalent balances relating to securitization transactions are used only to support the on-balance sheet securitization transactions. The receivables and net investment in operating leases that have been included in securitization transactions are only available for payment of the debt and other obligations issued or arising in the securitization transactions. We hold the right to the excess cash flows not needed to pay the debt and other obligations issued or arising in each of these securitization transactions. The asset-backed debt has been issued either directly by us or by consolidated VIEs.

The following table shows the assets and the related liabilities related to our secured debt arrangements that were included in our financial statements at September 30, 2009 and December 31, 2008 (in billions):


	September 30, 2009						December 31, 2008
	Cash & Cash				Related		Cash & Cash				Related
	Equivalents		Receivables		Debt		Equivalents		Receivables		Debt
Retail	$	3.6	$	47.5	$	37.5	$	3.3	$	51.6	$	42.6
Wholesale		1.2		15.5		9.6		1.2		22.1		17.6
Net investment in operating leases		1.3		13.9		9.5		1.0		15.6		12.0

Total secured debt arrangements (a)(b)	$	6.1	$	76.9	$	56.6	$	5.5	$	89.3	$	72.2


(a)		Includes debt of $51.7 billion and $62.3 billion at September 30, 2009 and December 31, 2008, respectively, issued by VIEs of which we are the primary beneficiary or an affiliate whereby the debt is backed by the collateral of the VIE. The carrying values of our assets securing the debt issued by these VIEs were $5.8 billion and $4.8 billion of cash and cash equivalents, $43.4 billion and $41.9 billion of retail receivables, $13.5 billion and $19.6 billion of wholesale receivables, and $13.9 billion and $15.6 billion of net investment in operating leases at September 30, 2009 and December 31, 2008, respectively. Refer to Note 6 for further discussion regarding our VIEs.

(b)		Includes assets pledged as collateral of $3.6 billion and $1.4 billion and the related secured debt arrangements of $2.4 billion and $1.1 billion as of September 30, 2009 and December 31, 2008, respectively.

In certain financing structures, we issue asset-backed debt directly, rather than from consolidated VIEs. For our bank-sponsored conduit program, we transfer finance receivables, in which we retain a significant interest, to bank conduits or sponsor banks. The outstanding balance of the transferred pools of finance receivables was $3.6 billion and $8.4 billion and the related secured debt was $3.0 billion and $6.9 billion at September 30, 2009 and December 31, 2008, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 5. TRANSFERS OF RECEIVABLES (Continued)

Our financial performance related to our secured borrowings for the periods ended September 30 were as follows (in millions):


	Third Quarter				Nine Months
	2009		2008		2009		2008
Derivative expense	$	262	$	140	$	273	$	139
Interest expense	$	474	$	801	$	1,549	$	2,489

Most of these secured borrowings utilize VIEs. Refer to Note 6 for information concerning the financial performance of secured borrowings that utilized VIEs.

Derivative Instruments

Many of our securitization entities enter into derivative transactions to mitigate interest rate exposure, primarily resulting from fixed-rate assets securing floating-rate debt and in certain instances, currency exposure resulting from assets in one currency and debt in another currency. Refer to Note 11 regarding the fair value of derivatives. In many instances, the counterparty enters into offsetting derivative transactions with us to mitigate its interest rate risk resulting from derivatives with our securitization entities. Our exposures based on the fair value of derivative instruments related to securitization programs at September 30, 2009 and December 31, 2008 were as follows (in millions):


	September 30, 2009				December 31, 2008
	Derivative		Derivative		Derivative		Derivative
	Asset		Liability		Asset		Liability
Securitization entities	$	187	$	845	$	59	$	995
Ford Credit (excluding securitization entities)		655		154		887		39

Total derivative financial instruments	$	842	$	999	$	946	$	1,034

Off-Balance Sheet Securitization Transactions

We recognized a loss of $49 million and income of $69 million in the third quarter of 2009 and 2008, respectively, and a loss of $30 million and income of $186 million in the first nine months of 2009 and 2008, respectively, of investment and other income related to the sales of receivables. Third quarter 2009 includes a $52 million valuation allowance for Australian finance receivables classified as held-for-sale at the end of the quarter. These amounts are included in Other income, net. Also, we received cash flows of $60 million and $243 million in the first nine months of 2009 and 2008, respectively, related to the net change in retained interests in securitized assets. These amounts are included in All other investing activities in our statement of cash flows.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 6. VARIABLE INTEREST ENTITIES

We consolidate VIEs of which we are the primary beneficiary. We determine whether or not we are the primary beneficiary by applying a qualitative analysis of the nature of the risks the entity was created to absorb. We consider the rights and obligations conveyed by explicit and implicit contractual arrangements to determine whether our variable interests will absorb a majority of the VIEs expected losses, receive a majority of its expected residual returns or both.

VIEs of which we are the primary beneficiary

We use special purpose entities to issue asset-backed securities in securitization transactions to public and private investors, bank conduits and government sponsored entities or others who obtain funding from government programs. The asset-backed securities are backed by the expected cash flows from finance receivables and our interest in net investments in operating leases. These assets or interests in these assets have been legally sold but continue to be recognized by us. We retain interests in our securitization transactions, including senior and subordinated securities issued by the VIEs, rights to cash held for the benefit of the securitization investors, such as cash reserves, and residual interests.

As residual interest holder, we are exposed to the underlying residual and credit risk of the collateral, and may be exposed to interest rate risk. Our exposure does not represent incremental risk to us and was $26.3 billion and $18.2 billion at September 30, 2009 and December 31, 2008, respectively. The amount of risk absorbed by our residual interests is generally represented by and limited to the amount of overcollateralization of our assets securing the debt and any cash reserves.

We generally have no obligation to repurchase or replace any securitized asset that subsequently becomes delinquent in payment or otherwise is in default. Securitization investors have no recourse to us or our other assets for credit losses on the securitized assets and have no right to require us to repurchase their investments. We do not guarantee any asset-backed securities and generally have no obligation to provide liquidity or contribute cash or additional assets to our VIEs.

In certain instances in the first nine months of 2009, we elected to provide additional enhancements or repurchase specific senior or subordinated notes in order to address market conditions. From time to time, we renegotiate terms of our commitments or reallocate the commitments globally. In certain securitization transactions, we have dynamic enhancements where we are required to support the performance of the securitization transactions by purchasing additional subordinated notes or increasing cash reserves. Although not contractually required, we regularly support our wholesale securitization programs by repurchasing receivables of a dealer from the VIEs when the dealer’s performance is at risk, which transfers the corresponding risk of loss from the VIE to us.

VIEs that are exposed to interest rate or currency risk have reduced their exposure by entering into derivatives. In certain instances, we have entered into derivative transactions with the VIE to protect the VIE from these risks that are not mitigated through derivative transactions between the VIE and its counterparty.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 6. VARIABLE INTEREST ENTITIES (Continued)

FCAR Owner Trust (“FCAR”) is a VIE that issues asset-backed commercial paper and we may, on occasion, purchase the debt issued by FCAR. In October 2008, we registered to sell up to $16 billion of FCAR asset-backed commercial paper to the U.S. Federal Reserve’s Commercial Paper Funding Facility (“CPFF”). Commercial paper sold to the CPFF is for a term of 90 days and sales can be made through February 1, 2010. At September 30, 2009, we did not have any commercial paper issued to the CPFF. At September 30, 2009, the finance receivables of FCAR supported $6.7 billion of asset-backed commercial paper outstanding, of which $98 million was held by us.

Finance receivables and net investment in operating leases that collateralize the secured debt of the VIE remain on our balance sheet and therefore are not included in the VIE assets shown in the following table. As of September 30, 2009, the carrying values of the assets were $43.4 billion of retail receivables, $13.5 billion of wholesale receivables, and $13.9 billion of net investment in operating leases. As of December 31, 2008, the carrying values of the assets were $41.9 billion of retail receivables, $19.6 billion of wholesale receivables, and $15.6 billion of net investment in operating leases. The liabilities recognized as a result of consolidating these VIEs do not represent additional claims on our general assets; rather, they represent claims against only the specific securitized assets. Conversely, these specific securitized assets do not represent additional assets that could be used to satisfy claims against our general assets.

The total consolidated VIE assets and liabilities that support our securitization transactions reflected in our September 30, 2009 and December 31, 2008 balance sheets were as follows (in billions):


	September 30, 2009				December 31, 2008
	Cash & Cash				Cash & Cash
	Equivalents (a)		Debt (b)		Equivalents (a)		Debt (b)
VIEs by asset-class (c)
Retail	$	3.4	$	32.1	$	2.7	$	34.5
Wholesale (d)		1.0		8.0		1.0		15.5
Net investment in operating leases		0.5		9.5		0.2		12.0

Total	$	4.9	$	49.6	$	3.9	$	62.0


(a)		Additional cash and cash equivalents available to support the obligations of the VIEs that are not assets of the VIEs were $926 million and $949 million as of September 30, 2009 and December 31, 2008, respectively, and are reflected in our consolidated financial statements.

(b)		Certain notes issued by the VIEs to affiliated companies served as collateral for accessing the European Central Bank open market operations program. This external funding of $2.1 billion and $308 million at September 30, 2009 and December 31, 2008, respectively, was not reflected as a liability of the VIEs, but was included in our consolidated liabilities.

(c)		The derivative assets of our consolidated VIEs were $58 million and $46 million at September 30, 2009 and December 31, 2008, respectively, and the derivative liabilities were $650 million and $808 million at September 30, 2009 and December 31, 2008, respectively.

(d)		Cash and cash equivalents includes cash contributions to excess funding accounts of $68 million and $179 million at September 30, 2009 and December 31, 2008, respectively, that were made by us to the VIE. These cash enhancements ranged from zero to $1.4 billion during the first nine months of 2009.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 6. VARIABLE INTEREST ENTITIES (Continued)

The financial performance of the consolidated VIEs that support our securitization transactions reflected on our statements of operations for the periods ended September 30 were as follows (in millions):


	Third Quarter
	2009					2008
	Derivative					Derivative
	(Income)/			Interest		(Income)/			Interest
	Expense			Expense		Expense			Expense
VIEs by asset-class
Retail	$	174		$	215	$	135		$	442
Wholesale		(1	)		68		(10	)		174
Net investment in operating leases		99			125		11			135

Total	$	272		$	408	$	136		$	751


	Nine Months
	2009					2008
	Derivative					Derivative
	(Income)/			Interest		(Income)/			Interest
	Expense			Expense		Expense			Expense
VIEs by asset-class
Retail	$	202		$	739	$	87		$	1,319
Wholesale		(3	)		199		(26	)		536
Net investment in operating leases		82			368		76			476

Total	$	281		$	1,306	$	137		$	2,331

VIEs of which we are not the primary beneficiary

We also have investments in certain joint ventures determined to be VIEs of which we are not the primary beneficiary. These joint ventures provide consumer and dealer financing in their respective markets. The joint ventures are financed by external debt as well as subordinated financial support provided by our joint venture partners. The risks and rewards associated with our interests in these joint ventures are based primarily on ownership percentages. Our investments in these joint ventures are accounted for as equity method investments which are included in Other assets. Our maximum exposure to any potential losses associated with these VIEs is limited to our equity investments, and amounted to $69 million and $109 million at September 30, 2009 and December 31, 2008, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 7. OTHER ASSETS AND OTHER LIABILITIES AND DEFERRED INCOME

Other assets at September 30, 2009 and December 31, 2008 were as follows (in millions):


	September 30,		December 31,
	2009		2008
Accrued interest, rents and other non-finance receivables	$	1,067	$	1,223
Deferred charges including unamortized dealer commissions		702		740
Collateral held for resale, at net realizable value		580		633
Investment in non-consolidated affiliates		491		524
Prepaid reinsurance premiums and other reinsurance receivables		291		385
Property and equipment, net of accumulated depreciation of $344 at September 30, 2009 and $316 at December 31, 2008		179		207
Investment in used vehicles held for resale, at net realizable value		84		603
Retained interests in securitized assets		33		92
Other		860		752

Total other assets	$	4,287	$	5,159

Other liabilities and deferred income at September 30, 2009 and December 31, 2008 were as follows (in millions):


	September 30,		December 31,
	2009		2008
Deferred income	$	1,212	$	1,330
Interest payable		1,098		1,315
Income taxes payable (a)(b)		929		1,647
Unearned insurance premiums		335		452
Other		1,054		694

Total other liabilities and deferred income	$	4,628	$	5,438


(a)		During the second quarter 2009, we purchased $3.4 billion principal amount of Ford’s unsecured, nonconvertible securities for an aggregate cost of $1.1 billion (including transaction costs and accrued and unpaid interest payments for such tendered debt securities) and transferred the securities to Ford in satisfaction of $1.1 billion of our tax liabilities to Ford.

(b)		At September 30, 2009, includes $875 million payable to Ford in accordance with our intercompany tax sharing agreement.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 8. DEBT

At September 30, 2009 and December 31, 2008, debt was as follows (in millions):


	Interest Rates
	Average						Weighted-
	Contractual (a)						Average (b)						September 30,			December 31,
	2009			2008			2009			2008			2009			2008
Short-term debt
Asset-backed commercial paper (c)		1.7	%		3.5	%							$	6,571		$	11,503
Other asset-backed short-term debt (c)		3.7	%		5.4	%								5,198			5,569
Ford Interest Advantage (d)		2.9	%		3.9	%								3,146			1,958
Other short-term debt (e)		6.0	%		8.7	%								784			1,055

Total short-term debt		2.7	%		4.5	%		3.8	%		5.2	%		15,699			20,085

Long-term debt
Senior indebtedness
Notes payable within one year (e)														11,149			16,003
Notes payable after one year (e)														31,982			35,148
Unamortized discount														(554	)		(251	)
Fair value adjustments (f)														290			334
Asset-backed debt (c)
Notes payable within one year														21,494			26,501
Notes payable after one year														23,308			28,638

Total long-term debt (g)		5.2	%		6.1	%		5.1	%		6.0	%		87,669			106,373

Total debt		4.9	%		5.8	%		4.9	%		5.8	%	$	103,368		$	126,458


Fair value of debt (h)													$	103,708		$	110,520


(a)		Third quarter 2009 and fourth quarter 2008 average contractual rates exclude the effects of derivatives and facility fees.

(b)		Third quarter 2009 and fourth quarter 2008 weighted-average rates include the effects of derivatives and facility fees.

(c)		Obligations issued in securitizations that are payable only out of collections on the underlying securitized assets and related enhancements.

(d)		The Ford Interest Advantage program consists of our floating rate demand notes.

(e)		Includes debt with affiliated companies as indicated in the table below.

(f)		Adjustments related to designated fair value hedges of debt.

(g)		Average contractual and weighted-average interest rates for total long-term debt reflect the rates for both notes payable within one year and notes payable after one year.

(h)		Fair value of debt reflects interest accrued but not yet paid of $1,160 million and $1,369 million at September 30, 2009 and December 31, 2008, respectively. Interest accrued is reported in Other liabilities and deferred income and Accounts payable — Affiliated companies. The fair value of debt is estimated based upon quoted market prices, current market rates for similar debt with approximately the same remaining maturities, or discounted cash flow models utilizing current market rates.


	September 30,		December 31,
	2009		2008
Debt with affiliated companies
Other short-term debt	$	404	$	65
Notes payable within one year		36		345
Notes payable after one year		151		120

Total debt with affiliated companies	$	591	$	530

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 8. DEBT (Continued)

Debt Repurchases. In the third quarter 2009 and the first nine months of 2009, through private market transactions, we repurchased an aggregate of $1.5 billion and $2.5 billion, respectively, principal amount of our outstanding unsecured notes for $1.5 billion and $2.5 billion, respectively, in cash. As a result, we recorded a pre-tax (loss)/gain of $(4) million and $18 million (which included unamortized premiums and discounts) in Other income, net in the third quarter of 2009 and the first nine months of 2009, respectively.

Short-term and long-term debt matures at various dates through 2048. Maturities are as follows (in millions):


	2009 (a)		2010 (b)		2011		2012		2013		Thereafter (c)		Total
Unsecured debt maturities	$	7,746	$	8,287	$	11,820	$	7,092	$	4,853	$	7,263	$	47,061
Asset-backed debt maturities		15,984		21,098		14,749		3,647		939		154		56,571

Total debt maturities (d)	$	23,730	$	29,385	$	26,569	$	10,739	$	5,792	$	7,417	$	103,632


(a)		Includes $12,225 million for short-term and $11,505 million for long-term debt.

(b)		Includes $3,474 million for short-term and $25,911 million for long-term debt.

(c)		Approximately $5.7 billion of unsecured debt matures between 2014 and 2017 with the remaining balance maturing after 2031.

(d)		Amounts exclude fair value adjustments of $290 million and unamortized discounts of $554 million.

NOTE 9. RETAINED EARNINGS

The following table summarizes earnings retained for use in the business for the periods ended September 30 (in millions):


	Third Quarter					Nine Months
	2009			2008		2009			2008
Retained earnings, beginning balance	$	4,331		$	5,118	$	4,985		$	6,515
Adjustment for the adoption of the fair value option		—			—		—			6
Net income/(loss)		427			95		827			(1,308	)
Distributions		(431	)		—		(1,485	)		—

Retained earnings, ending balance	$	4,327		$	5,213	$	4,327		$	5,213

In the third quarter 2009, we made a cash distribution of $400 million and a non-cash distribution of $31 million for our ownership interest in AB Volvofinans to our parent, Ford Holdings LLC.

In the first quarter 2009, a plan was announced to restructure Ford’s debt through a combination of a conversion offer by Ford and tender offers by us. As part of this debt restructuring, we commenced a cash tender offer for Ford’s secured term loan under Ford’s secured credit agreement, pursuant to which we purchased from lenders thereof $2.2 billion principal amount of term loan for an aggregate cost of about $1.1 billion (including transaction costs). This transaction settled on March 27, 2009, following which we distributed the term loan to our parent whereupon it was forgiven. The transaction is reflected in the table above as a $1,054 million distribution, which consists of the fair value of the term loan purchased plus transaction expenses.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 10. FAIR VALUE MEASUREMENTS

The following table summarizes the fair values of financial instruments measured at fair value on a recurring basis at September 30, 2009 (in millions):


	Items Measured at Fair Value on a Recurring Basis
	Quoted Price in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable		Balance as of
	Assets		Inputs		Inputs		September 30,
	(Level 1)		(Level 2)		(Level 3)		2009
Assets
Cash equivalents — financial instruments
U.S. government	$	400	$	—	$	—	$	400
Government-sponsored enterprises		—		4,500		—		4,500
Government — non U.S.		—		751		—		751

Total cash equivalents — financial instruments (a)		400		5,251		—		5,651
Marketable securities
U.S. government		6,549		—		—		6,549
Government-sponsored enterprises		—		1,453		—		1,453
Corporate debt		—		169		3		172
Mortgage-backed		—		249		—		249
Equity		20		—		—		20
Government — non U.S.		—		24		—		24
Other liquid investments (b)		—		174		—		174

Total marketable securities		6,569		2,069		3		8,641
Derivative financial instruments		—		1,779		549		2,328
Retained interests in securitized assets		—		—		33		33

Total assets at fair value	$	6,969	$	9,099	$	585	$	16,653


Liabilities
Derivative financial instruments	$	—	$	760	$	721	$	1,481

Total liabilities at fair value	$	—	$	760	$	721	$	1,481


(a)		Cash equivalents — financial instruments excludes $6,677 million of time deposits, certificates of deposit and money market accounts reported at par value, which approximates fair value.

(b)		Includes CDs and time deposits with maturities greater than 90 days on date of purchase.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 10. FAIR VALUE MEASUREMENTS (Continued)

The following table summarizes the changes in Level 3 financial instruments measured at fair value on a recurring basis for the period ended September 30, 2009 (in millions):


	Fair Value Measurements Using Significant Unobservable Inputs
															Change in
															Unrealized
	Fair Value at			Total Realized						Net Transfers		Fair Value at			Gains/(Losses)
	December 31,			/Unrealized			Net Purchases/			Into/(Out of)		September 30,			on Instruments
	2008			Gains/(Losses)			(Settlements)			Level 3		2009			Still Held (a)
Marketable securities (b)	$	5		$	(2	)	$	—		$	—	$	3		$	(2	)
Derivative financial instruments, net (c)		(81	)		(61	)		(30	)		—		(172	)		(108	)
Retained interests in securitized assets (d)		92			9			(68	)		—		33			(1	)

Total Level 3 fair value	$	16		$	(54	)	$	(98	)	$	—	$	(136	)	$	(111	)


(a)		For those assets and liabilities still held at September 30, 2009.

(b)		Realized/Unrealized gains/(losses) on marketable securities for the period presented are recorded to Other income, net ($0 gain for third quarter of 2009 and $2 million loss for first nine months of 2009).

(c)		Reflects fair value of derivative assets, net of liabilities. Realized/Unrealized gains/(losses) on derivative financial instruments for the period presented are recorded to Other income, net ($85 million loss for third quarter of 2009 and $62 million loss for first nine months of 2009), and Other comprehensive income/(loss) reflecting foreign currency translation ($19 million loss for third quarter of 2009 and $1 million gain for first nine months of 2009).

(d)		Realized/Unrealized gains/(losses) on the retained interests in securitized assets for the period presented are recorded in Other Income, net ($0 gain for third quarter of 2009 and $10 million gain for first nine months of 2009) and Other comprehensive income/(loss) ($1 million gain for third quarter of 2009 and $1 million loss for first nine months of 2009).

The following table summarizes the fair values of items measured at fair value on a nonrecurring basis at September 30, 2009 (in millions):

Items Measured at Fair Value on a Nonrecurring Basis

Quoted Price in

Significant

Active Markets

Other

Significant

for Identical

Observable

Unobservable

Assets

Inputs

Total

(Level 1)

(Level 2)

(Level 3)

Total

Gains/(Losses)

Held-for-sale finance receivables (a)

—

911

—

911

(52

)


(a)		During third quarter 2009, we reclassified held-for-investment Australian finance receivables that we no longer had the intent to hold for the foreseeable future or until maturity or payoff to Assets held-for-sale. We used information from an independent bid for these assets to determine fair value. The loss was recorded to Other income, net.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Income Effect of Derivative Financial Instruments

The following table summarizes the pre-tax gain/(loss) for each type of hedge designation (in millions):


	Gain/(Loss) Recognized in Income
	2009
	Third Quarter			Nine Months
Fair value hedges
Interest rate contracts
Net interest settlements and accruals excluded from the assessment of hedge effectiveness	$	50		$	107
Ineffectiveness (a)		(18	)		(14	)

Total	$	32		$	93

Derivatives not designated as hedging instruments
Interest rate contracts	$	28		$	(63	)
Foreign exchange forward contracts (b)		(106	)		(269	)
Cross currency interest rate swap contracts (b)		(54	)		60
Other contracts		1			0

Total	$	(131	)	$	(272	)


(a)		Hedge ineffectiveness is the difference between the change in fair value on the derivative ($46 million gain for third quarter of 2009 and $1 million loss for first nine months of 2009) and the change in fair value on the hedged item attributable to the hedged risk ($64 million loss for third quarter of 2009 and $13 million loss for first nine months of 2009).

(b)		Gains/(Losses) related to foreign currency derivatives were substantially offset by net revaluation impacts on foreign denominated debt, which were also recorded in Other income, net.

For fair value hedges, we report net interest settlements and accruals excluded from the assessment of hedge effectiveness in Interest expense and hedge ineffectiveness in Other income, net. We report gains and losses on derivatives not designated as hedging instruments in Other income, net.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

The following table summarizes the estimated fair value of our derivative financial instruments at September 30, 2009:


			Fair		Fair
			Value		Value
	Notional		Assets		Liabilities
	(in billions)		(in millions)
Fair value hedges
Interest rate contracts	$	7	$	465	$	—

Derivatives not designated as hedging instruments
Interest rate contracts		85		1,609		1,150
Foreign exchange forward contracts (a)		6		34		64
Cross currency interest rate swap contracts		3		220		267

Total derivatives not designated as hedging instruments		94		1,863		1,481

Total derivative financial instruments	$	101	$	2,328	$	1,481


(a)		Includes forward contracts between Ford Credit and an affiliated company.

We report derivative assets and derivative liabilities in Derivative financial instruments.

We estimate the fair value of our derivatives using industry standard valuation models. These models project future cash flows and discount the future amounts to a present value using market-based expectations for interest rates, foreign exchange rates and the contractual terms of the derivative instruments.

We include an adjustment for non-performance risk in the recognized measure of fair value of derivative instruments. The adjustment reflects the full credit default spread swap (“CDS”) spread applied to a net exposure, by counterparty. We use our counterparty’s CDS spread when we are in a net asset position and our own CDS spread when we are in a net liability position. At September 30, 2009, our adjustment for non-performance risk, relative to a measure based on an unadjusted inter-bank deposit rate (e.g. LIBOR), reduced our derivative assets by $14 million and our derivative liabilities by $29 million.

In certain cases, market data is not available and we use management judgment to develop assumptions which are used to determine fair value. This includes situations where there is illiquidity for a particular currency or for longer-dated instruments. For longer-dated instruments with regards to which observable interest rates or foreign exchange rates are not available for all periods through maturity, we hold the last available data point constant through maturity.

The use of derivatives does generate a risk that a counterparty may default on a derivative contract. We establish exposure limits for each counterparty to minimize this risk and provide counterparty diversification. Substantially all of our counterparty exposures are with counterparties that have long-term credit ratings of single-A or better. The total fair value of derivative instruments in asset positions on September 30, 2009 is approximately $2 billion, and represents the maximum loss we would recognize at that date if all counterparties failed to perform as contracted. We enter into master agreements with counterparties that generally allow for netting of certain exposures; therefore, our actual loss we would recognize if all counterparties failed to perform as contracted would be lower.

See Note 10 for additional information regarding fair value measurements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 12. DIVESTITURES AND OTHER ACTIONS

North America Segment

Triad Financial Corporation. In 2005, we completed the sale of Triad Financial Corporation (“Triad”). We received additional proceeds pursuant to a contractual agreement entered into at the closing of the sale, and recognized after-tax gains of $2 million and $9 million in the first nine months of 2009 and 2008, respectively, in Gain on disposal of discontinued operations.

International Segment

FCA Holdings Limited. At the end of the third quarter 2009, we reclassified $911 million of finance receivables that we no longer had the intent to hold for the foreseeable future, or until maturity or payoff, from Finance receivables, net to Assets held-for-sale. These assets represent the majority of our retail finance receivables in FCA Holdings Limited, our operation in Australia. With the reclassification, we recorded a valuation allowance of $52 million to Other income, net to reflect the receivables at the lower of cost or fair value. The receivables were sold on October 1, 2009.

Primus Leasing Company Limited. In March 2009, we completed the sale of Primus Leasing Company Limited (“Primus Thailand”), our operation in Thailand that offered automotive retail and wholesale financing of Ford, Mazda and Volvo vehicles. As a result of the sale, Finance receivables, net were reduced by approximately $173 million, and we recognized a de minimis pre-tax gain in Other income, net.

Nordic Operations. During the second quarter of 2008, we completed the creation of a new legal entity and transferred into it the majority of our business and assets from Denmark, Finland, Norway and Sweden. Also in the second quarter, we sold 50% of the new legal entity. As a result of the sale, we reduced Finance receivables, net by approximately $1.7 billion, and recognized a pre-tax gain in Other income, net of approximately $85 million, net of transaction costs and including $35 million of foreign currency translation adjustments. We report our ownership interest in the new legal entity in Other assets as an equity method investment. The new legal entity supports the sale of Ford vehicles in these markets.

PRIMUS Financial Services Inc. In April 2008, we completed the sale of 96% of our ownership interest in PRIMUS Financial Services Inc., our operation in Japan that offered automotive retail and wholesale financing of Ford and Mazda vehicles. As a result of the sale, Finance receivables, net were reduced by approximately $1.8 billion, Debt was reduced by approximately $252 million, and we recognized a pre-tax gain of $22 million, net of transaction costs and including $28 million of foreign currency translation adjustments, in Other income, net. Included in the foreign currency translation adjustments is the recognition of $3 million relating to a matured net investment hedge. We report our remaining ownership interest in Other assets as a cost method investment.

Primus Finance and Leasing, Inc. During the second quarter of 2008, we completed the sale of our 60% ownership interest in Primus Finance and Leasing, Inc. (“Primus Philippines”), our operation in the Philippines that offered automotive retail and wholesale financing of Ford and Mazda vehicles. We also completed the sale of our 40% ownership in PFL Holdings, Inc., a holding company in the Philippines that owned the remaining 40% ownership interest in Primus Philippines. As a result of the sale, we recognized a pre-tax gain of $5 million, net of transaction costs and including $1 million of foreign currency translation adjustments, in Other income, net.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 13. OTHER INCOME

The following table summarizes amounts included in Other income, net (in millions):


	Third Quarter						Nine Months
	2009			2008			2009			2008
Interest and investment income	$	52		$	169		$	130		$	405
Gains/(Losses) on derivatives (a)		(147	)		297			(284	)		314
Currency revaluation gains/(losses) (b)		211			(339	)		482			(483	)
Investment and other income related to sales of receivables (c)		(49	)		69			(30	)		186
Other		77			98			276			410

Other income, net	$	144		$	294		$	574		$	832


(a)		Gains/(Losses) related to foreign currency derivatives are substantially offset by net revaluation impacts on foreign denominated debt. See Note 11 for detail by derivative instrument and risk type.

(b)		Includes net gains of $65 million and $316 million in pre-tax earnings related to unhedged currency exposure primarily from cross-border intercompany lending in third quarter 2009 and first nine months of 2009, respectively.

(c)		Includes a $52 million valuation allowance for Australian finance receivables classified as held-for-sale at the end of the quarter and sold in the fourth quarter.

NOTE 14. EMPLOYEE SEPARATION ACTIONS

North America Segment

In the first quarter 2009, we announced plans to restructure our U.S. operations to meet changing business conditions, including the decline in our receivables. The restructuring will affect servicing, sales and central operations and will eliminate about 1,200 staff and agency positions, or about 20% of our U.S. operations. The reductions will occur in 2009 through attrition, retirements and involuntary separations. Involuntary separation programs are accrued for when management has approved the program and the affected employees are identified. In the third quarter of 2009 and the first nine months of 2009, we recognized pre-tax charges of $4 million and $37 million, respectively, in Operating expenses as a result of these actions.

In the third quarter of 2009 and first nine months of 2009, we recognized pre-tax charges of $2 million in Operating expenses for employee separation actions in Canada. These separations are expected to be substantially completed by the end of 2009.

International Segment

In the third quarter of 2009 and the first nine months of 2009, we recognized pre-tax charges of $7 million and $24 million, (including $1 million of income and $7 million of expense for retirement plan benefits), respectively, in Operating expenses for employee separation actions in Latin America, Asia Pacific and European locations. These separations are expected to be substantially completed by the end of 2009.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 15. SEGMENT INFORMATION

We divide our business segments based on geographic regions: the North America Segment (includes operations in the United States and Canada) and the International Segment (includes operations in all other countries). We measure the performance of our segments primarily on an income before income taxes basis, after excluding the impact to earnings from gains and losses related to market valuation adjustments to derivatives primarily related to movements in interest rates. These adjustments are included in Unallocated Risk Management and are excluded in assessing our North America and International segment performance, because our risk management activities are carried out on a centralized basis at the corporate level, with only certain elements allocated to these segments. We also adjust segment performance to re-allocate interest expense between the North America and International segments reflecting debt and equity levels proportionate to their product risk. The North America and International segments are presented on a managed basis. Managed basis includes Finance receivables, net and Net investment in operating leases reported on our balance sheet, excluding unearned interest supplements related to finance receivables, and receivables we sold in off-balance sheet securitizations and continue to service.

Key operating data for our business segments for the periods ended September 30 were as follows (in millions):


						Unallocated/Eliminations
												Effect of
	North					Unallocated			Effect of			Unearned
	America		International			Risk			Sales of			Interest
	Segment		Segment			Management			Receivables			Supplements		Total			Total
Third Quarter 2009
Revenue (a)	$	2,602	$	576		$	34		$	(7	)	$	—	$	27		$	3,205
Income
Income/(Loss) before income taxes (b)		650		(7	)		34			—			—		34			677
Provision for/(Benefit from) income taxes		242		(3	)		11			—			—		11			250
Income/(Loss) from continuing operations		408		(4	)		23			—			—		23			427
Other disclosures
Depreciation on vehicles subject to operating leases		773		69			—			—			—		—			842
Interest expense		896		366			—			(3	)		—		(3	)		1,259
Provision for credit losses		65		46			—			—			—		—			111

Third Quarter 2008
Revenue (a)	$	3,460	$	990		$	(24	)	$	6		$	—	$	(18	)	$	4,432
Income
Income/(Loss) before income taxes		114		71			(24	)		—			—		(24	)		161
Provision for/(Benefit from) income taxes		49		25			(8	)		—			—		(8	)		66
Income/(Loss) from continuing operations		65		46			(16	)		—			—		(16	)		95
Other disclosures
Depreciation on vehicles subject to operating leases		1,500		73			—			—			—		—			1,573
Interest expense		1,260		654			—			(26	)		—		(26	)		1,888
Provision for credit losses		346		31			—			—			—		—			377


(a)		Total Revenue represents Total financing revenue, Insurance premiums earned, net and Other income, net.

(b)		North America segment income/(loss) before income taxes includes a net gain of $65 million related to unhedged currency exposure primarily from cross-border intercompany lending.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 15. SEGMENT INFORMATION (Continued)


							Unallocated/Eliminations
													Effect of
	North						Unallocated			Effect of			Unearned
	America			International			Risk			Sales of			Interest
	Segment			Segment			Management			Receivables			Supplements			Total			Total
First Nine Months 2009
Revenue (a)	$	8,462		$	1,875		$	43		$	(28	)	$	—		$	15		$	10,352
Income
Income/(Loss) before income taxes (b)		1,245			(1	)		43			—			—			43			1,287
Provision for/(Benefit from) income taxes		447			—			15			—			—			15			462
Income/(Loss) from continuing operations		798			(1	)		28			—			—			28			825
Other disclosures
Depreciation on vehicles subject to operating leases		3,018			182			—			—			—			—			3,200
Interest expense		2,790			1,192			—			(13	)		—			(13	)		3,969
Provision for credit losses		693			200			—			—			—			—			893
Finance receivables and net investments in operating leases		70,906			23,493			—			(86	)		(1,830	)		(1,916	)		92,483
Total assets		95,447			31,228			—			(53	)		(1,830	)		(1,883	)		124,792

First Nine Months 2008
Revenue (a)	$	10,655		$	3,166		$	(174	)	$	(76	)	$	—		$	(250	)	$	13,571
Income
Income/(Loss) before income taxes		(2,454	)		441			(174	)		—			—			(174	)		(2,187	)
Provision for/(Benefit from) income taxes		(964	)		155			(61	)		—			—			(61	)		(870	)
Income/(Loss) from continuing operations		(1,490	)		286			(113	)		—			—			(113	)		(1,317	)
Other disclosures
Depreciation on vehicles subject to operating leases		7,258			219			—			—			—			—			7,477
Interest expense		3,983			1,934			—			(136	)		—			(136	)		5,781
Provision for credit losses		1,136			113			—			—			—			—			1,249
Finance receivables and net investments in operating leases		93,392			36,300			—			(1,105	)		(1,271	)		(2,376	)		127,316
Total assets		116,051			41,476			—			(951	)		(1,271	)		(2,222	)		155,305


(a)		Total Revenue represents Total financing revenue, Insurance premiums earned, net and Other income, net.

(b)		North America segment income/(loss) before income taxes includes a net gain of $316 million related to unhedged currency exposure primarily from cross-border intercompany lending.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 16. GUARANTEES AND INDEMNIFICATIONS

The fair values of guarantees and indemnifications issued are recorded in the financial statements and are not material. We have estimated the probability of payment for each guarantee and indemnification to be remote and have not recorded any loss accruals. At September 30, 2009, the following guarantees and indemnifications were issued and outstanding:

Guarantees of certain obligations of unconsolidated and other affiliates: In some cases, we have guaranteed debt and other financial obligations of unconsolidated affiliates, including Ford. Expiration dates vary, and guarantees will terminate on payment and/or cancellation of the obligation. A payment would be triggered by failure of the guaranteed party to fulfill its obligation covered by the guarantee. In some circumstances, we are entitled to recover from Ford or an affiliate of Ford amounts paid by us under the guarantee. However, our ability to enforce these rights is sometimes stayed until the guaranteed party is paid in full. The maximum potential payments under these guarantees totaled approximately $194 million and $270 million at September 30, 2009 and December 31, 2008, respectively; of these values, $37 million and $110 million at September 30, 2009 and December 31, 2008, respectively was counter-guaranteed by Ford to us.

FCE Bank plc (“FCE”) has also guaranteed obligations of Ford in Romania of which the maximum potential payment of $395 million has been fully collateralized by cash received from Blue Oval Holdings, a Ford U.K. subsidiary which is available for use in FCE’s day to day operations, and is recorded as Debt. The expiration dates of the guarantee are August 2010 ($359 million) and September 2010 ($36 million) and could terminate on payment and/or cancellation of the obligation by Ford. A payment to the guaranteed party would be triggered by failure of Ford to fulfill its obligation covered by the guarantee.

Guarantees of obligations to Ford. We have guaranteed $127 million and $96 million of third-party obligations payable to Ford Brazil at September 30, 2009 and December 31, 2008, respectively. Payment would be triggered in the event of an unfavorable ruling in a certain lawsuit and the failure of the third-parties to repay Ford the obligated amounts. The guarantee will terminate upon the repayment or cancellation of the obligations.

Indemnifications. In the ordinary course of business, we execute contracts involving indemnifications standard in the industry and indemnifications specific to a transaction, such as the sale of a business. These indemnifications might include and are not limited to claims relating to any of the following: environmental, tax and shareholder matters; intellectual property rights; governmental regulations and employment-related matters; other commercial contractual relationships; and financial matters, such as securitizations. Performance under these indemnities would generally be triggered by a breach of terms of the contract or by a third-party claim. We are party to numerous indemnifications and many of these indemnities do not limit potential payment; therefore, we are unable to estimate a maximum amount of potential future payments that could result from claims made under these indemnities. We regularly evaluate the probability of having to incur costs associated with these indemnifications and have accrued for expected losses that are probable.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Third Quarter 2009 Compared with Third Quarter 2008

In the third quarter of 2009, our net income was $427 million, an increase of $332 million compared with a year ago. On a pre-tax basis, we earned $677 million in the third quarter of 2009, an increase of $516 million compared with a year ago. The increase in pre-tax earnings primarily reflected:

•

Lower depreciation expense for leased vehicles consistent with lower residual losses on returned vehicles due to higher auction values (about $400 million);

•

A lower provision for credit losses primarily related to lower severity offset partially by higher repossessions (about $250 million);

•

Lower operating costs (about $100 million);

•

Net gains related to unhedged currency exposure primarily from cross-border intercompany lending (about $60 million); and

•

The non-recurrence of net losses related to market valuation adjustments to derivatives, shown as unallocated risk management in the table below ($58 million).

These factors were offset partially by:

•

Lower volume primarily reflecting lower industry volumes, lower dealer stocks, the impact of divestitures and alternative business arrangements, and changes in currency exchange rates (about $300 million); and

•

A valuation allowance for finance receivables classified as held-for-sale at September 30, 2009 related to the sale of our Australia retail portfolio on October 1, 2009 (about $50 million).

Results of our operations by business segment and unallocated risk management for the third quarter of 2009 and 2008 are shown below:


	Third Quarter
							2009
							Over/(Under)
	2009			2008			2008
				(in millions)
Income/(Loss) before income taxes
North America Segment	$	650		$	114		$	536
International Segment		(7	)		71			(78	)
Unallocated risk management		34			(24	)		58

Income/(Loss) before income taxes		677			161			516
Provision for/(Benefit from) income taxes and Gain on disposal of discontinued operations		250			66			184

Net income/(loss)	$	427		$	95		$	332

The increase in North America Segment pre-tax earnings primarily reflected lower depreciation expense for leased vehicles, a lower provision for credit losses, net gains related to unhedged currency exposure from cross-border intercompany lending, and lower operating costs. These factors were offset partially by lower volume.

The decrease in International Segment pre-tax earnings primarily reflected lower volume, a valuation allowance for finance receivables classified as held-for-sale at September 30, 2009 related to the sale of our Australia retail portfolio on October 1, 2009 (about $50 million), and a higher provision for credit losses. These factors were offset partially by lower operating costs and lower residual losses.

The change in unallocated risk management reflected the non-recurrence of net losses related to market valuation adjustments to derivatives primarily related to movements in interest rates. For additional information on our unallocated risk management, refer to Note 15 of our Notes to the Financial Statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

First Nine Months 2009 Compared with First Nine Months 2008

In the first nine months of 2009, our net income was $827 million, compared with a net loss of $1.3 billion a year ago. On a pre-tax basis, we earned $1.3 billion in the first nine months of 2009, compared with a loss of $2.2 billion a year ago. The improvement in pre-tax earnings primarily reflected:

•

The non-recurrence of the 2008 impairment charge to our North America Segment operating lease portfolio for contracts terminating beginning third quarter of 2008 (about $2.1 billion);

•

Lower depreciation expense for leased vehicles and lower residual losses on returned vehicles due to higher auction values (about $1.4 billion);

•

A lower provision for credit losses primarily related to non-recurrence of higher severity offset partially by higher repossessions (about $350 million);

•

Net gains related to unhedged currency exposure primarily from cross-border intercompany lending (about $300 million);

•

The non-recurrence of net losses related to market valuation adjustments to derivatives, shown as unallocated risk management in the table below ($217 million); and

•

Lower operating costs, offset partially by other expenses including restructuring costs (about $200 million).

These factors were offset partially by:

•

The non-recurrence of the gain related to the sale of approximately half of our ownership interest in our Nordic operations (about $100 million); and

•

A valuation allowance for finance receivables classified as held-for-sale at September 30, 2009 related to the sale of our Australia retail portfolio on October 1, 2009 (about $50 million).

For additional information on the 2008 impairment charge, refer to the “Results of Operations — Impairment of Net Investment in Operating Leases” section of Item 7 of Part II of our 2008 10-K Report.

Results of our operations by business segment and unallocated risk management for the first nine months of 2009 and 2008 are shown below:


	First Nine Months
							2009
							Over/(Under)
	2009			2008			2008
				(in millions)
Income/(Loss) before income taxes
North America Segment	$	1,245		$	(2,454	)	$	3,699
International Segment		(1	)		441			(442	)
Unallocated risk management		43			(174	)		217

Income/(Loss) before income taxes		1,287			(2,187	)		3,474
Provision for/(Benefit from) income taxes and Gain on disposal of discontinued operations		460			(879	)		1,339

Net income/(loss)	$	827		$	(1,308	)	$	2,135

The improvement in North America Segment pre-tax earnings primarily reflected non-recurrence of the impairment charge for operating leases, lower depreciation expense for leased vehicles, a lower provision for credit losses, net gains related to unhedged currency exposure from cross-border intercompany lending, and lower operating costs. These factors were offset partially by lower volume.

The decrease in International Segment pre-tax earnings primarily reflected lower volume, a higher provision for credit losses primarily reflecting losses in Spain and Germany, non-recurrence of a gain related to the sale of approximately half of our ownership interest in our Nordic operations, lower financing margin primarily in Mexico, and a valuation allowance for finance receivables classified as held-for-sale at September 30, 2009 related to the sale of our Australia retail portfolio on October 1, 2009 (about $50 million). These factors were offset partially by lower operating costs and lower residual losses.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

The change in unallocated risk management reflected the non-recurrence of net losses related to market valuation adjustments to derivatives primarily related to movements in interest rates.

Placement Volume and Financing Share

Total worldwide financing contract placement volumes for new and used vehicles are shown below:


	Third Quarter				First Nine Months
	2009		2008		2009		2008
	(in thousands)
North America Segment
United States		161		277		449		864
Canada		15		43		68		122

Total North America Segment		176		320		517		986

International Segment
Europe		112		149		358		504
Other international		11		27		37		105

Total International Segment		123		176		395		609


Total contract placement volume		299		496		912		1,595

Shown below are our financing shares of new Ford, Lincoln and Mercury brand vehicles sold by dealers in the United States and new Ford brand vehicles sold by dealers in Europe. Also shown below are our wholesale financing shares of new Ford, Lincoln and Mercury brand vehicles acquired by dealers in the United States, excluding fleet, and of new Ford brand vehicles acquired by dealers in Europe:


	Third Quarter						First Nine Months
	2009			2008			2009			2008
United States
Financing share — Ford, Lincoln and Mercury
Retail installment and lease		30	%		46	%		30	%		40	%
Wholesale		80			77			79			77

Europe
Financing share — Ford
Retail installment and lease		27	%		31	%		27	%		28	%
Wholesale		99			98			99			98

North America Segment

In the third quarter of 2009, our total contract placement volumes were 176,000, down 144,000 contracts from a year ago. This decrease primarily reflected lower sales of new Ford, Lincoln and Mercury vehicles, due primarily to lower U.S. industry volumes and lower Ford, Lincoln and Mercury financing share, and the transition of Jaguar, Land Rover, and Mazda financing to other finance providers. Lower Ford, Lincoln and Mercury financing share was primarily explained by changes in Ford’s marketing programs and our reduction in leasing.

In the first nine months of 2009, our total contract placement volumes were 517,000, down 469,000 contracts from a year ago, reflecting the causal factors described above.

International Segment

In the third quarter of 2009, our total contract placement volumes were 123,000, down 53,000 contracts from a year ago. This decrease primarily reflected lower industry volumes, the transition of Jaguar, Land Rover, and Mazda financing to other finance providers, a planned financing share reduction in Spain, and the discontinuation of retail originations in Australia.

In the first nine months of 2009, our total contract placement volumes were 395,000, down 214,000 contracts from a year ago. This decrease primarily reflected lower industry volumes, the transition of Jaguar, Land Rover, and Mazda financing to other finance providers, a planned financing share reduction in Spain, the discontinuation of retail originations in Australia, and the divestiture of our Japan and Thailand operations.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Financial Condition

Finance Receivables and Operating Leases

Our receivable levels are shown below:


	September 30,			December 31,
	2009			2008
	(in billions)
Receivables — On-Balance Sheet
Finance receivables
North America Segment
Retail installment	$	44.0		$	49.5
Wholesale		10.3			14.0
Other		2.0			2.2

Total North America Segment — finance receivables		56.3			65.7
International Segment
Retail installment		14.4			16.0
Wholesale		8.3			13.7
Other		0.5			0.6

Total International Segment — finance receivables		23.2			30.3
Unearned interest supplements		(1.8	)		(1.3	)
Allowance for credit losses		(1.5	)		(1.4	)

Finance receivables, net		76.2			93.3
Net investment in operating leases		16.3			22.5

Total receivables — on-balance sheet (a)(b)	$	92.5		$	115.8


Memo:
Total receivables — managed (c)	$	94.4		$	117.7
Total receivables — serviced (d)		94.5			118.0


(a)		At September 30, 2009 and December 31, 2008, includes finance receivables of $63.0 billion and $73.7 billion, respectively, that have been sold for legal purposes in securitization transactions that do not satisfy the requirements for accounting sale treatment. In addition, at September 30, 2009 and December 31, 2008, includes net investment in operating leases of $13.9 billion and $15.6 billion, respectively, that have been included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These underlying securitized assets are available only for payment of the debt and other obligations issued or arising in the securitization transactions; they are not available to pay our other obligations or the claims of our other creditors. We hold the right to the excess cash flows not needed to pay the debt and other obligations issued or arising in each of these securitization transactions. For additional information on our securitization transactions, refer to the “Funding” section of Item 2.

(b)		Includes allowance for credit losses of $1.7 billion at September 30, 2009 and December 31, 2008.

(c)		Includes on-balance sheet receivables, excluding unearned interest supplements related to finance receivables of $1.8 billion and $1.3 billion at September 30, 2009 and December 31, 2008, respectively; and includes off-balance sheet retail receivables of about $100 million and about $600 million at September 30, 2009 and December 31, 2008, respectively.

(d)		Includes managed receivables and receivables sold in whole-loan sale transactions where we retain no interest, but which we continue to service of about $100 million and about $300 million at September 30, 2009 and December 31, 2008, respectively.

Receivables decreased from year-end 2008, primarily reflecting lower industry volumes, lower dealer stocks, and the transition of Jaguar, Land Rover, and Mazda financing to other finance providers.

As of January 1, 2008, Ford began paying interest supplements and residual value support to us at the time we purchase eligible contracts from dealers. The amount of unearned interest supplements for finance receivables was $1.8 billion at September 30, 2009, compared with $1.3 billion at December 31, 2008 included in Finance receivables, net and the amount of unearned interest supplements and residual support payments for net investment in operating leases was $1.2 billion at September 30, 2009, compared with $1.3 billion at December 31, 2008 included in Other liabilities and deferred income.

At September 30, 2009, in the United States and Canada, Ford is obligated to pay us $1.3 billion of interest supplements and about $225 million of residual value support payments over the terms of the related finance contracts and operating leases, compared with $2.5 billion of interest supplements and about $450 million of residual value support at December 31, 2008, in each case for contracts purchased prior to January 1, 2008. The unpaid interest supplements and residual value support payment obligations on these contracts will continue to decline as the contracts liquidate. For additional information on our finance receivables and net investment in operating leases, refer to Notes 1, 2, and 3 of our Notes to the Financial Statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Credit Risk

Credit risk is the possibility of loss from a customer’s or dealer’s failure to make payments according to contract terms. Credit risk has a significant impact on our business. We actively manage the credit risk of our retail installment and lease and wholesale and dealer loan portfolios to balance our level of risk and return. The allowance for credit losses included on our balance sheet is our estimate of the probable credit losses inherent in receivables and leases at the date of our balance sheet. Consistent with our normal practices and policies, we assess the adequacy of our allowance for credit losses quarterly and regularly evaluate the assumptions and models used in establishing the allowance.

In purchasing retail finance and lease contracts, we use a proprietary scoring system that classifies contracts using several factors, such as credit bureau information, FICO score, customer characteristics, and contract characteristics. In addition to our proprietary scoring system, we consider other factors, such as employment history, financial stability, and capacity to pay. As of September 30, 2009, about 5% of the outstanding U.S. retail finance and lease contracts in our serviced portfolio were classified as high risk at contract inception, slightly higher than year-end 2008 of about 4%. This increase primarily reflects a lower percentage of lease contracts in our retail installment and lease portfolio. Lease contracts generally include shorter average terms and higher average FICO scores compared with retail finance contracts.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Credit Loss Metrics

Worldwide

The following table shows worldwide charge-offs (credit losses, net of recoveries) for the various categories of financing during the periods indicated. The loss-to-receivables ratios, which equal charge-offs on an annualized basis divided by the average amount of receivables outstanding for the period, excluding the allowance for credit losses and unearned interest supplements related to finance receivables, are shown below.


	Third Quarter						First Nine Months
	2009			2008			2009			2008
	(in millions)
Charge-offs — On-Balance Sheet
Retail installment and lease	$	204		$	299		$	774		$	757
Wholesale		33			(3	)		73			10
Other		3			—			10			4

Total charge-offs — on-balance sheet	$	240		$	296		$	857		$	771


Loss-to-Receivables Ratios — On-Balance Sheet
Retail installment and lease		1.04	%		1.22	%		1.28	%		1.00	%
Wholesale		0.74			(0.04	)		0.47			0.04
Total loss-to-receivables ratio (including other) — on-balance sheet		0.97	%		0.89	%		1.10	%		0.74	%

Memo:
Total charge-offs — managed (in millions)	$	241		$	303		$	862		$	800
Total loss-to-receivables ratio (including other) — managed		0.97	%		0.89	%		1.10	%		0.75	%

Most of our charge-offs are related to retail installment sale and lease contracts. Charge-offs depend on the number of vehicle repossessions, the unpaid balance outstanding at the time of repossession, the auction price of repossessed vehicles, and other charge-offs. We also incur credit losses on our wholesale loans, but default rates for these receivables historically have been substantially lower than those for retail installment sale and lease contracts.

In the third quarter, charge-offs decreased from a year ago primarily reflecting lower losses in the United States, offset partially by higher losses in Europe. The charge-off decrease in the United States reflected lower severity and lower other charge-offs, offset partially by higher repossessions and higher wholesale and dealer loan charge-offs. Charge-offs in Europe increased primarily reflecting higher wholesale charge-offs and non-recurrence of recoveries in Germany.

In the first nine months, charge-offs increased from a year ago reflecting higher losses in Europe, offset partially by lower losses in the United States. The charge-off increase in Europe reflected higher losses in Spain and Germany. Charge-offs in the United States decreased due to lower severity and lower other charge-offs, offset partially by higher repossessions, higher wholesale and dealer loan charge-offs, and lower recoveries.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

U.S. Ford, Lincoln and Mercury Brand Retail Installment and Operating Lease

The following table shows the credit loss metrics for our Ford, Lincoln and Mercury brand U.S. retail installment sale and operating lease portfolio. This portfolio was approximately 64% of our worldwide on-balance sheet portfolio of retail installment receivables and net investment in operating leases at September 30, 2009. In the third quarter of 2009, on-balance sheet charge-offs were lower compared to the same period a year ago primarily due to lower severity and lower other charge-offs, offset partially by higher repossessions. Severity was lower by $2,900 per unit, mainly due to improvements in auction values in the used vehicle market.


	Third Quarter						First Nine Months
	2009			2008			2009			2008
On-Balance Sheet
Charge-offs (in millions)	$	136		$	216		$	485		$	531
Loss-to-receivables ratio		1.15	%		1.53	%		1.31	%		1.23	%

Other Metrics — Serviced
Repossessions (in thousands)		24			21			71			59
Repossession ratio (a)		3.15	%		2.40	%		2.96	%		2.20	%
Severity (b)	$	7,300		$	10,200		$	8,400		$	9,600
New bankruptcy filings (in thousands)		13			10			36			27
Over-60 day delinquency ratio (c)		0.24	%		0.25	%		0.25	%		0.22	%

Memo:
Charge-offs — managed (in millions)	$	136		$	221		$	487		$	553
Loss-to-receivables ratio — managed		1.15	%		1.52	%		1.31	%		1.23	%


(a)		Repossessions as a percent of the average number of accounts outstanding during the periods.

(b)		Average loss per disposed repossession.

(c)		Delinquencies are expressed as a percent of the accounts outstanding for non-bankrupt accounts.

Allowance for Credit Losses

Our allowance for credit losses and our allowance for credit losses as a percentage of end-of-period receivables (finance receivables, excluding unearned interest supplements, and net investment in operating leases, excluding the allowance for credit losses) for our on-balance sheet portfolio are shown below. A description of our allowance setting process is provided in the “Critical Accounting Estimates — Allowance for Credit Losses” section of Item 7 of Part II of our 2008 10-K Report.


	September 30,			December 31,
	2009			2008
	(in millions)
Allowance for Credit Losses
Retail installment and lease	$	1,637		$	1,610
Wholesale		51			55
Other		27			3

Total allowance for credit losses	$	1,715		$	1,668


As a Percentage of End-of-Period Receivables
Retail installment and lease		2.18	%		1.82	%
Wholesale		0.27			0.20
Total including other		1.79	%		1.40	%

The allowance for credit losses is primarily a function of portfolio quality, historical loss performance, and receivable levels. While the credit quality of our retail and lease originations remains high, our allowance for credit losses has increased from 2008. The increase in allowance for credit losses is consistent with the increase in charge-offs and includes about $260 million primarily reflecting higher retail installment and lease repossession assumptions and higher wholesale and dealer loan default assumptions compared to historical trends used in our models.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Residual Risk

We are exposed to residual risk on operating leases and similar balloon payment products where the customer may return the financed vehicle to us. Residual risk is the possibility that the amount we obtain from returned vehicles will be less than our estimate of the expected residual value for the vehicle. We estimate the expected residual value by evaluating recent auction values, return volumes for our leased vehicles, industry-wide used vehicle prices, marketing incentive plans, and vehicle quality data. For additional information on our residual risk on operating leases, refer to the “Critical Accounting Estimates — Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 of Part II of our 2008 10-K Report.

North America Retail Operating Lease Experience

We use various statistics to monitor our residual risk:

•

Placement volume measures the number of leases we purchase in a given period;

•

Termination volume measures the number of vehicles for which the lease has ended in the given period; and

•

Return volume reflects the number of vehicles returned to us by customers at lease-end.

The following table shows operating lease placement, termination, and return volumes for our North America Segment, which accounted for about 97% of our total investment in operating leases at September 30, 2009:


	Third Quarter						First Nine Months
	2009			2008			2009			2008
	(in thousands)
Placements		11			68			46			287
Terminations		95			97			297			301
Returns		73			84			249			257

Memo:
Return rates		77	%		86	%		84	%		85	%

In the third quarter of 2009, placement volumes were down 57,000 units compared with the same period a year ago, primarily reflecting lower industry volumes, the transition of Jaguar, Land Rover, and Mazda financing to other finance providers, and changes in Ford’s marketing programs which emphasized retail installment sale contracts.

In the third quarter of 2009, termination volumes were down 2,000 units compared with the same period a year ago, reflecting lower volumes for Jaguar, Land Rover, and Volvo brand vehicles. Return volumes were also down 11,000 units, reflecting lower overall return rates, consistent with improved auction values relative to our expectations of lease-end values at the time of contract purchase.

In the first nine months of 2009, placement volumes were down 241,000 units compared with the same period a year ago. Termination volumes decreased 4,000 units compared with the same period a year ago. Return volumes decreased 8,000 units compared with the same period a year ago, reflecting lower return rates and lower terminations.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

U.S. Ford, Lincoln and Mercury Brand Retail Operating Lease Experience

The following table shows return volumes for our Ford, Lincoln and Mercury brand U.S. operating lease portfolio. Also included are auction values at constant third quarter 2009 vehicle mix for lease terms comprising about 61% of our active Ford, Lincoln and Mercury brand U.S. operating lease portfolio:


	Third Quarter						First Nine Months
	2009			2008			2009			2008
	(in thousands)
Returns
24-Month term		12			18			43			71
36-Month term		11			15			53			43
39-Month/Other term		10			6			27			16

Total returns		33			39			123			130


Memo:
Return rates		70	%		88	%		81	%		87	%

Auction Values at Constant Third Quarter 2009
Vehicle Mix
24-Month term	$	19,730		$	16,920		$	18,330		$	17,205
36-Month term		14,825			12,880			13,450			13,010

In the third quarter of 2009, Ford, Lincoln and Mercury brand U.S. return volumes were down 6,000 units compared with the same period a year ago, primarily reflecting a lower return rate, down 18 percentage points to 70%, consistent with improved auction values relative to our expectations of lease-end values at the time of contract purchase. Auction values at constant third quarter 2009 mix were up $2,800 per unit from year ago levels for vehicles under 24-month leases and up $1,900 per unit for vehicles under 36-month leases, primarily reflecting the overall auction value improvement in the used vehicle market. Auction values, at constant third quarter 2009 mix, improved compared with the second quarter of 2009 for vehicles under 24-month and 36-month leases by $1,200 per unit.

In the first nine months of 2009, trends and causal factors compared with the same period a year ago were consistent with those described above. While vehicle auction values were up significantly from 2008 levels, we expect them to remain volatile.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Credit Ratings

Our short-term and long-term debt is rated by four credit rating agencies designated as nationally recognized statistical rating organizations (“NRSROs”) by the Securities and Exchange Commission (“SEC”):

•

DBRS Limited (“DBRS”);

•

Fitch, Inc. (“Fitch”);

•

Moody’s Investors Service, Inc. (“Moody’s”); and

•

Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“S&P”).

In July 2009, S&P changed the outlook assigned to us to developing from negative. In August 2009, Fitch changed the outlook assigned to us to stable from negative and revised the senior unsecured credit rating assigned to us to B from B-. Also in August 2009, DBRS changed the trend assigned to us to stable from negative. In September 2009, Moody’s placed the ratings assigned to us under review for a possible upgrade.

On November 2, 2009, DBRS placed the ratings assigned to us under review with positive implications; Fitch changed the outlook assigned to us to positive from stable; and Moody’s upgraded the senior unsecured credit rating assigned to us to B3 from Caa1, while keeping the long-term ratings assigned to us under review for a further possible upgrade. On November 3, 2009, S&P upgraded the senior unsecured credit rating assigned to us to B- from CCC+ with a stable outlook.

The following chart summarizes long-term senior unsecured credit ratings, short-term credit ratings, and the outlook assigned to us by these four NRSROs:

NRSRO RATINGS

DBRS

Fitch

Moody’s

S&P

Long-

Short-

Long-

Short-

Long-

Short-

Long-

Short-

Term

Trend

Term

Outlook

Term

Outlook

Term

Outlook

Dec. 2008

B (low)

R-5

Negative

B-

Negative

Caa1

Negative

CCC+

Negative

July 2009

B (low)

R-5

Negative

B-

Negative

Caa1

Negative

CCC+

Developing

Aug. 2009

B (low)

R-5

Stable

Caa1

Negative

CCC+

Developing

Sep. 2009

B (low)

R-5

Stable

Caa1

Review

CCC+

Developing

Nov. 2009

B (low)

R-5

Positive

Review

B-*

Stable


*		S&P assigns FCE Bank plc (“FCE”) a long-term senior unsecured credit rating of B, maintaining a one notch differential versus Ford Credit.

The NRSROs also assign ratings to the securities issued in our public securitization transactions and in some of our private securitization transactions. In September 2009, Moody’s downgraded certain notes issued in FCE’s wholesale securitization programs.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Funding

Overview

Our funding strategy is to maintain sufficient liquidity to meet short-term funding obligations by having a substantial cash balance and committed funding capacity. As a result of lower unsecured credit ratings assigned to us over the past few years, our unsecured funding costs have increased over time. While we have accessed the unsecured debt market when available, we have increased our use of securitization funding as this has been more cost effective than unsecured funding and has allowed us access to a broad investor base. We plan to meet most of our 2009 funding requirements through securitization transactions, a significant portion of which will consist of eligible issuances pursuant to government-sponsored securitization funding programs. In addition, we have various alternative business arrangements for select products and markets that reduce our funding requirements while allowing us to support Ford (e.g., our partnering in Brazil for retail financing and FCE’s partnering with various institutions in Europe for full service leasing and retail and wholesale financing). We are continuing to explore and execute such alternative business arrangements. We also have applied for Federal Deposit Insurance Corporation (“FDIC”) and State of Utah approval for an industrial loan corporation. Our application is pending.

Consistent with the overall market, we have been impacted by volatility and disruptions in the asset-backed securities markets since August 2007. The global credit crisis has presented many challenges, including reduced access to public and private unsecured and securitization markets, a significant increase in the credit spreads associated with both asset-backed and unsecured funding, higher renewal costs on our committed liquidity programs, higher enhancements resulting in reduced net proceeds from securitization transactions, shorter maturities in our public and private securitization issuances in certain circumstances, and a reduction in our capacity to obtain derivatives to manage market risk, including interest rate risk, in our securitization programs.

While challenges remain, we continue to see improvement in the capital markets for the second consecutive quarter evidenced by improvement in market access and credit spreads, including: three unsecured debt issuances for about $4 billion with significantly improved credit spreads from the first to the most recent; increasingly tighter spreads on the top-rated tranches of our U.S. retail securitization transactions; our first public wholesale securitization transaction since 2006; and the sale of over $150 million of subordinated notes from our September 2009 public retail securitization transaction.

In the third quarter of 2009, we also experienced higher renewal rates for our committed liquidity programs. During the third quarter of 2009, we had about $8 billion of committed capacity programs up for renewal, including about $1 billion that was originally scheduled to renew later in the year, of which we renewed about $6 billion or 78%. About $4 billion, or about 10%, of our committed capacity is up for renewal during the fourth quarter of 2009. Most of our asset-backed committed facilities enable us to obtain term funding up to the time that the facilities mature. Any outstanding debt at the maturity of the facilities remains outstanding and is repaid as underlying assets liquidate. Our ability to obtain funding under our committed asset-backed liquidity programs is subject to having a sufficient amount of assets eligible for these programs as well as our ability to obtain derivatives to manage the interest rate risk. For additional information on our committed capacity programs, refer to the “Liquidity” section of Item 7 of Part II of our 2008 10-K Report.

Our funding plan is subject to risks and uncertainties, many of which are beyond our control, including:

•

Continued disruption in the market for the types of asset-backed securities used in our asset-backed funding;

•

Continued disruption in the capital markets beyond the conclusion of the government-sponsored funding programs; or

•

Potential impact of industry events on our ability to access debt and derivative markets or renew our committed liquidity programs in sufficient amounts and at competitive rates.

As a result, we may need to further reduce the amount of finance receivables and operating leases we purchase or originate, thereby reducing our ongoing profits and adversely affecting our ability to support the sale of Ford vehicles.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Government-Sponsored Securitization Funding Programs

Although we will continue to utilize government-sponsored securitization funding programs in the near term, we expect to rely less on these funding sources in the future and to derive more funding from public and private securitization and unsecured markets.

The U.S. Federal Reserve’s Term Asset-Backed Securities Loan Facility (“TALF”) became effective in March 2009. Much of our public securitization issuance in the United States during 2009 has been and will be eligible for TALF. Through October 31, 2009, we completed six TALF-eligible securitization transactions totaling $10.3 billion, including about $8 billion of retail loan securitization transactions, $1.5 billion in October 2009 for a wholesale securitization transaction, and about $800 million for a lease securitization transaction.

At September 30, 2009, FCE had $2.2 billion of outstanding short-term funding under the European Central Bank’s (“ECB”) open market operations program backed by retained rated securitization notes of $2.1 billion and wholesale receivables of about $100 million.

In September 2009, Ford Credit Australia received access to the Australian government-sponsored “OzCar” program. The AU$550 million program provides asset-backed wholesale funding, subject to wholesale asset levels. This program is available until June 30, 2010.

In January 2009, the Canadian government announced the C$12 billion Canadian Secured Credit Facility, which is intended to provide asset-backed funding for automotive and commercial loans and leases. Given our present ability to access the Canadian public and private securitization markets, we do not plan to participate in this program.

In October 2008, we registered to sell up to $16 billion of FCAR asset-backed commercial paper to the U.S. Federal Reserve’s Commercial Paper Funding Facility (“CPFF”). Commercial paper sold to the CPFF is for a term of 90 days and as announced by the Federal Reserve in June 2009 sales can be now be made through February 1, 2010. At September 30, 2009, we do not have any FCAR asset-backed commercial paper issued to the CPFF.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Funding Portfolio

Our outstanding debt and off-balance sheet securitization transactions were as follows on the dates indicated:


	September 30,			December 31,
	2009			2008
	(in billions)
Debt
Asset-backed commercial paper (a)(b)	$	6.6		$	11.5
Other asset-backed short-term debt (a)		5.2			5.6
Ford Interest Advantage		3.1			2.0
Other short-term debt		0.8			1.1

Total short-term debt		15.7			20.2
Unsecured long-term debt (including notes payable within one year)		42.9			51.2
Asset-backed long-term debt (including notes payable within one year) (a)		44.8			55.1

Total debt		103.4			126.5

Off-Balance Sheet Securitization Transactions
Securitized off-balance sheet portfolio		0.1			0.6
Retained interest		(0.1	)		(0.1	)

Total off-balance sheet securitization transactions		0.0			0.5


Total debt plus off-balance sheet securitization transactions	$	103.4		$	127.0


Ratios
Securitized funding to managed receivables		60	%		62	%
Short-term debt and notes payable within one year to total debt		47			50
Short-term debt and notes payable within one year to total capitalization		42			46


(a)		Obligations issued in securitization transactions that are payable only out of collections on the underlying securitized assets and related enhancements.

(b)		At September 30, 2009, we did not have any asset-backed commercial paper sold to the CPFF. At December 31, 2008, includes asset-backed commercial paper sold to the CPFF of $7 billion.

At September 30, 2009, unsecured long-term debt (including notes payable within one year) was down about $8 billion from year-end 2008, primarily reflecting about $12 billion of debt maturities and repurchases, offset partially by about $4 billion of new unsecured long-term debt issuance. Unsecured long-term debt maturities were as follows: 2009 — $4 billion; 2010 — $8 billion; 2011 — $12 billion; and the remainder thereafter.

At September 30, 2009, asset-backed long-term debt (including notes payable within one year) was down about $10 billion from year-end 2008, reflecting amortization of asset-backed debt in excess of asset-backed long-term debt issuance.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

The following table shows worldwide cash and cash equivalents, receivables, and related debt by segment and product for our on-balance sheet securitization transactions:


	September 30, 2009						December 31, 2008
	Cash and						Cash and
	Cash				Related		Cash				Related
	Equivalents		Receivables		Debt		Equivalents		Receivables		Debt
	(in billions)
On-Balance Sheet Securitization Transactions (a)
Finance Receivables
North America Segment
Retail installment	$	2.2	$	36.8	$	29.7	$	2.2	$	42.6	$	35.2
Wholesale (b)		0.7		9.6		5.9		0.3		13.3		11.1

Total North America Segment — finance receivables		2.9		46.4		35.6		2.5		55.9		46.3
International Segment
Retail installment		1.4		10.7		7.8		1.1		9.0		7.4
Wholesale (b)		0.5		5.9		3.7		0.9		8.8		6.5

Total International Segment — finance receivables		1.9		16.6		11.5		2.0		17.8		13.9

Total finance receivables		4.8		63.0		47.1		4.5		73.7		60.2
Net investment in operating leases		1.3		13.9		9.5		1.0		15.6		12.0

Total on-balance sheet arrangements (c)	$	6.1	$	76.9	$	56.6	$	5.5	$	89.3	$	72.2


(a)		Most of our securitization transactions do not satisfy the requirements for accounting sale treatment and, therefore, the securitized assets and related debt are included in our financial statements. Securitized assets are only available to repay the related asset-backed debt and to pay other securitization investors and other participants. These underlying securitized assets are available only for payment of the debt and other obligations issued or arising in the securitization transactions; they are not available to pay our other obligations or the claims of our other creditors. We hold the right to the excess cash flows not needed to pay the debt and other obligations issued or arising in each of these securitization transactions. For additional information on our on-balance sheet securitization transactions, see Note 5 of our Notes to the Financial Statements.

(b)		The amount of our participation interest fluctuates based on the outstanding receivable and debt levels of the respective trusts.

(c)		Includes assets pledged as collateral of $3.6 billion and $1.4 billion and the related secured debt arrangements of $2.4 billion and $1.1 billion as of September 30, 2009 and December 31, 2008, respectively.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Term Funding Plan

The following table shows our public and private term funding issuances in 2008 and through October 31, 2009, and our planned issuances for full year 2009:


	2009
	Full Year		Through		2008
	Forecast		October 31,		Actual
	(in billions)
Public Term Funding
Unsecured	$	4 - 5	$	4	$	2
Securitization Transactions (a)		14 - 16		13		11

Total public term funding	$	18 - 21	$	17	$	13


Private Term Funding (b)	$	9 - 10	$	9	$	29


(a)		Reflects new issuance; excludes other structured financings.

(b)		Includes private term debt, securitization transactions, other structured financings, and other term funding; excludes sales to Ford Credit’s on-balance sheet asset-backed commercial paper programs.

Through October 31, 2009, we completed about $17 billion of public term funding transactions, including about $10 billion of retail asset-backed securitization transactions in the United States, Canada, and Europe, about $2 billion of wholesale asset-backed securitization transactions in the United States, about $1 billion of lease asset-backed securitization transactions in the United States and Germany, and about $4 billion of unsecured issuances.

Through October 31, 2009, we completed about $9 billion of private term funding transactions (excluding our on-balance sheet asset-backed commercial paper program) in several markets, including about $4 billion in Canada. These private transactions included retail, lease, and wholesale asset-backed securitization transactions.

Our funding plan is subject to risks and uncertainties, many of which are beyond our control. If credit markets constrain term securitization funding, we will consider reducing our assets below the low-end of our projected year-end 2009 managed receivables balance (i.e., below $90 billion). For additional information on our projected year-end 2009 managed receivables, refer to the “Outlook” section of Item 2.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Liquidity

We define liquidity as cash, cash equivalents, and marketable securities (excluding marketable securities related to insurance activities) and capacity (which includes capacity in our committed liquidity programs, FCAR program, and credit facilities), less asset-backed capacity in excess of eligible receivables and cash and cash equivalents required to support on-balance sheet securitization transactions. We have multiple sources of liquidity, including committed asset-backed funding capacity.


	September 30,			December 31,
	2009			2008
	(in billions)
Cash, cash equivalents, and marketable securities*	$	23.4		$	23.6

Committed liquidity programs	$	23.3		$	28.0
Asset-backed commercial paper (“FCAR”)		10.4			15.7
Credit facilities		1.3			2.0

Committed capacity	$	35.0		$	45.7

Committed capacity and cash	$	58.4		$	69.3
Less: Capacity in excess of eligible receivables		(7.7	)		(4.8	)
Less: Cash and cash equivalents to support on-balance sheet securitization transactions		(6.1	)		(5.5	)

Liquidity	$	44.6		$	59.0
Less: Utilization		(20.7	)		(37.6	)

Liquidity available for use	$	23.9		$	21.4


*		Excludes marketable securities related to insurance activities.

At September 30, 2009, committed capacity and cash shown above totaled $58.4 billion, of which $44.6 billion could be utilized (after adjusting for capacity in excess of eligible receivables of $7.7 billion and cash required to support on-balance sheet securitization transactions of $6.1 billion). At September 30, 2009, $20.7 billion was utilized, leaving $23.9 billion available for use (including $17.3 billion of cash, cash equivalents and marketable securities, but excluding marketable securities related to insurance activities, and cash and cash equivalents to support on-balance sheet securitization transactions). At September 30, 2009, our liquidity available for use was greater than year-end 2008 by $2.5 billion, as debt maturities and cash payments were lower than the impact of lower receivables and new debt issuances. The increase in liquidity available for use from year-end 2008 also included a $630 million cumulative adjustment, reflected in the first quarter of 2009, to correct for the overstatement of cash and cash equivalents and certain accounts payable that originated in prior periods. For additional information on this correction, refer to the Consolidated Statement of Cash Flows. Liquidity available for use was about 25% of managed receivables, compared with 18% at year-end 2008. In addition to the $23.9 billion of liquidity available for use, the $7.7 billion of capacity in excess of eligible receivables provides us with an alternative for funding future purchases or originations and gives us flexibility to shift capacity to alternate markets and asset-classes.

Cash, Cash Equivalents, and Marketable Securities. At September 30, 2009, our cash, cash equivalents, and marketable securities (excluding marketable securities related to insurance activities) totaled $23.4 billion, compared with $23.6 billion at year-end 2008. In the normal course of our funding activities, we may generate more proceeds than are required for our immediate funding needs. These excess amounts are maintained primarily as highly liquid investments, which provide liquidity for our short-term funding needs and give us flexibility in the use of our other funding programs. Our cash, cash equivalents, and marketable securities (excluding marketable securities related to insurance activities) primarily include federal agency securities, bank time deposits with investment grade institutions, A-1/P-1 (or higher) rated commercial paper, U.S. Treasury bills, and money market funds that invest primarily in federal agency securities, U.S. Treasury bills, and other short-term investment grade securities. The average maturity of these investments is typically less than 90 days and is adjusted based on market conditions and liquidity needs. We monitor our cash levels and average maturity on a daily basis. Cash and cash equivalents include amounts to be used only to support our on-balance sheet securitization transactions of $6.1 billion at September 30, 2009 and $5.5 billion at December 31, 2008.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Committed Liquidity Programs. We and our subsidiaries, including FCE, have entered into agreements with a number of bank-sponsored asset-backed commercial paper conduits (“conduits”) and other financial institutions whereby such parties are contractually committed, at our option, to purchase from us eligible retail or wholesale assets or to purchase or make advances under asset-backed securities backed by retail or wholesale assets for proceeds of up to $19.3 billion at September 30, 2009 ($10.7 billion retail and $8.6 billion wholesale) of which $7.9 billion are commitments to FCE. These committed liquidity programs have varying maturity dates, with $14.8 billion having maturities within the next twelve months (of which $4.9 billion relates to FCE commitments), and the balance having maturities between November 2010 and October 2011. While there is a risk of non-renewal of some of these committed liquidity programs, which could lead to a reduction in the size of these programs and/or higher costs, our capacity in excess of eligible receivables would enable us to absorb some reductions. Our ability to obtain funding under these programs is subject to having a sufficient amount of assets eligible for these programs as well as our ability to obtain interest rate hedging arrangements for securitization transactions. At September 30, 2009, $11.3 billion of these commitments were in use. These programs generally are free of material adverse change clauses, restrictive financial covenants (for example, debt-to-equity limitations and minimum net worth requirements), and credit rating triggers that could limit our ability to obtain funding. However, the unused portion of these commitments may be terminated if the performance of the underlying assets deteriorates beyond specified levels. Based on our experience and knowledge as servicer of the related assets, we do not expect any of these programs to be terminated due to such events.

In addition, we have a committed liquidity program for the purchase of up to $4 billion of asset-backed securities which is committed until December 2010 and at our option can be supported with various retail, wholesale, or lease assets. Our ability to obtain funding under this program is subject to having a sufficient amount of assets available to issue the securities. This program is also free of material adverse change clauses, restrictive financial covenants and credit rating triggers that could limit our ability to obtain funding. At September 30, 2009, we had $2.1 billion of outstanding funding in this program.

Credit Facilities

Our credit facilities and asset-backed commercial paper lines were as follows on the dates indicated:


	September 30,			December 31,
	2009			2008
	(in billions)
Credit Facilities
Ford Credit bank lines	$	0.0		$	0.3
FCE bank lines		1.3			1.7
Utilized amounts		(0.6	)		(0.6	)

Available credit facilities	$	0.7		$	1.4


Asset-Backed Commercial Paper Lines
FCAR asset-backed commercial paper lines	$	10.4		$	15.7

At September 30, 2009, we and our subsidiaries, including FCE, had $1.3 billion of contractually-committed unsecured credit facilities with financial institutions, of which $671 million were available for use. Of the lines available for use, $273 million expire in 2010, $338 million expire in 2011, and $60 million expire in 2012. Of the $1.3 billion of contractually-committed credit facilities, almost all are FCE worldwide credit facilities. The FCE worldwide credit facilities may be used, at FCE’s option, by any of FCE’s direct or indirect majority owned subsidiaries. FCE will guarantee any such borrowings. All of the FCE worldwide credit facilities are free of material adverse change clauses, restrictive financial covenants, and credit rating triggers that could limit FCE’s ability to obtain funding.

In addition, at September 30, 2009, we had $10.4 billion of contractually-committed liquidity facilities provided by banks to support our FCAR program. This includes $114 million provided by Lehman Brothers Bank, FSB (“Lehman Brothers Bank”), which is guaranteed by Lehman Brothers Holdings Inc. (“Lehman”). On September 15, 2008, Lehman filed for protection under Chapter 11 of the U.S. Bankruptcy Code.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Of the $10.4 billion of contractually-committed liquidity facilities, $4.4 billion are committed through June 28, 2010, $174 million are committed through June 30, 2011, and $5.8 billion are committed through June 29, 2012. Utilization of these facilities is subject to conditions specific to the FCAR program and our having a sufficient amount of eligible assets for securitization. The FCAR program must be supported by liquidity facilities equal to at least 100% of its outstanding balance. At September 30, 2009, $10 billion of FCAR’s bank liquidity facilities were available to support FCAR’s asset-backed commercial paper, subordinated debt or FCAR’s purchase of our asset-backed securities, and the remaining FCAR bank liquidity facilities of $412 million were available to support FCAR’s purchase of our asset-backed securities. At September 30, 2009, the outstanding commercial paper balance for the FCAR program was $6.7 billion, of which $98 million was held by us.

Liquidity Risks

Refer to the “Liquidity” section of Item 7 of Part II of our 2008 10-K Report for a list of factors that could affect our liquidity.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements (off-balance sheet securitization transactions and whole-loan sale transactions, excluding sales of businesses and liquidating portfolios) since January 2007, which is consistent with our plan to execute on-balance sheet securitization transactions. For additional information on our off-balance sheet arrangements, refer to Notes 5 and 7 of our Notes to the Financial Statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Leverage

We use leverage, or the debt-to-equity ratio, to make various business decisions, including evaluating and establishing pricing for retail, wholesale, and lease financing, and assessing our capital structure. We refer to our shareholder’s interest as equity. We calculate leverage on a financial statement basis and on a managed basis using the following formulas:

Financial

Total Debt

Statement

Equity

Leverage

Retained

Interest in

Securitized

Cash,

Adjustments for

Off-balance

Cash Equivalents

Derivative

Total Debt

Sheet

and Marketable

Accounting

Receivables

Securities (a)

on Total Debt (b)

Managed Leverage

Adjustments for

Equity

Derivative

Accounting

on Equity (b)


(a)		Excludes marketable securities related to insurance activities.

(b)		Primarily related to market valuation adjustments to derivatives due to movements in interest rates. Adjustments to debt are related to designated fair value hedges and adjustments to equity are related to retained earnings.

The following table shows the calculation of our financial statement leverage (in billions, except for ratios):


	September 30,		December 31,
	2009		2008

Total debt	$	103.4	$	126.5
Equity		10.5		10.6
Financial statement leverage (to 1)		9.9		12.0

The following table shows the calculation of our managed leverage (in billions, except for ratios):


	September 30,			December 31,
	2009			2008

Total debt	$	103.4		$	126.5
Securitized off-balance sheet receivables outstanding		0.1			0.6
Retained interest in securitized off-balance sheet receivables		—			(0.1	)
Adjustments for cash, cash equivalents, and marketable securities (a)		(23.4	)		(23.6	)
Adjustments for derivative accounting (b)		(0.4	)		(0.4	)

Total adjusted debt	$	79.7		$	103.0


Equity	$	10.5		$	10.6
Adjustments for derivative accounting (b)		(0.1	)		(0.2	)

Total adjusted equity	$	10.4		$	10.4


Managed leverage (to 1)		7.7			9.9


(a)		Excludes marketable securities related to insurance activities.

(b)		Primarily related to market valuation adjustments to derivatives due to movements in interest rates. Adjustments to debt are related to designated fair value hedges and adjustments to equity are related to retained earnings.

We plan our managed leverage by considering prevailing market conditions and the risk characteristics of our business. At September 30, 2009, our managed leverage was 7.7 to 1, compared with 9.9 to 1 at December 31, 2008. Our managed leverage is significantly below the threshold of 11.5 to 1 set forth in the Amended and Restated Support Agreement with Ford. In the third quarter of 2009, we paid a cash distribution of $400 million and a non-cash distribution of $31 million for our ownership interest in AB Volvofinans to our parent. For additional information on our planned distributions, see the “Outlook” section of Item 2.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Accounting Standards Codification

FAS No. 168, The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162. Issued in June 2009, this standard establishes the FASB Accounting Standards Codification (“Codification”) as the single source of authoritative U.S. GAAP, superseding all previously issued authoritative guidance. All references to pre-Codification GAAP in our financial statements are replaced with descriptive titles.

Accounting Standards Issued But Not Yet Adopted

Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140. Issued in June 2009, this standard provides greater transparency about transfers of financial assets and a company’s continuing involvement in transferred financial assets. The standard also removes the concept of a qualifying special-purpose entity from U.S. GAAP, changes the requirements for derecognizing financial assets, and requires additional disclosures about a transferor’s continuing involvement with the transferred financial assets and the related risks retained. This standard applies to transfers occurring on or after January 1, 2010, and early adoption is prohibited.

Amendments to FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities. Issued in June 2009, this standard replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach that is primarily qualitative. The standard also requires ongoing reassessments to determine if a company must consolidate a variable interest entity. In addition, it requires a company to provide additional disclosures about its involvement with variable interest entities. The standard is effective for us as of January 1, 2010, and early adoption is prohibited. We continue to address the potential impact of this standard on our financial condition, results of operations, and financial statement disclosures.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Outlook

We expect to be profitable in the fourth quarter of 2009. We anticipate managed receivables at year-end 2009 to be in the range of $90 billion to $95 billion, consistent with managed receivables of $94 billion at September 30, 2009. Subject to our funding plan risks, described above in “Funding — Overview,” we expect the funding structure required for this level of managed receivables at year-end 2009 to be the following (in billions, except for percentages):


	December 31,
	2009
Funding Structure
Ford Interest Advantage	$	~ 3
Asset-backed commercial paper		~ 6
Term asset-backed securities		46 – 50
Term debt and other		41 – 45
Equity		~ 11
Cash, cash equivalents, and marketable securities*		(17) – (20	)

Total funding structure	$	90 – 95

Memo:
Securitized funding as a percentage of managed receivables		58 – 60	%


*		Excludes marketable securities related to insurance activities.

We expect to pay total distributions of about $3 billion in 2009 — 2010, which includes a first quarter of 2009 non-cash distribution of about $1.1 billion and in the third quarter of 2009 a cash distribution of $400 million and non-cash distribution of $31 million for our ownership interest in AB Volvofinans. This is an increase from the $2 billion of planned distributions in 2009 — 2010 reported in the “Outlook” section of Item 2 of our Quarterly Report on Form 10-Q for the period ended June 30, 2009. The increase in planned distributions is based on the improved funding environment and our lower managed leverage. We will continue to balance future distributions with the successful execution of our funding plan.

We expect reduced profits in 2010 based on lower average receivables and non-recurrence of certain favorable 2009 factors.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Cautionary Statement Regarding Forward Looking Statements

Statements included or incorporated by reference herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:

Automotive Related:

•

Further declines in industry sales volume, particularly in the United States or Europe, due to financial crisis, deepening recessions, geo-political events or otherwise;

•

Decline in Ford’s market share;

•

Continued or increased price competition for Ford vehicles resulting from industry overcapacity, currency fluctuations or other factors;

•

A further increase in or acceleration of the market shift away from sales of trucks, sport utility vehicles, or other more profitable vehicles, particularly in the United States;

•

Continued or increased high prices for, or reduced availability of, fuel;

•

Lower-than-anticipated market acceptance of new or existing Ford products;

•

Adverse effects from the bankruptcy of, government-funded restructuring of, change in ownership or control of, or alliances entered into by a major competitor;

•

Economic distress of suppliers may require Ford to provide financial support or take other measures to ensure supplies of components or materials and could increase Ford’s costs, affect Ford’s liquidity, or cause production disruptions;

•

Work stoppages at Ford or supplier facilities or other interruptions of supplies;

•

Single-source supply of components or materials;

•

Inability to implement the Retiree Health Care Settlement Agreement to fund and discharge UAW hourly retiree health care obligations;

•

The discovery of defects in Ford vehicles resulting in delays in new model launches, recall campaigns or increased warranty costs;

•

Increased safety, emissions, fuel economy or other regulation resulting in higher costs, cash expenditures and/or sales restrictions;

•

Unusual or significant litigation or governmental investigations arising out of alleged defects in Ford products or otherwise;

•

A change in Ford’s requirements for parts or materials where it has entered into long-term supply arrangements that commit it to purchase minimum or fixed quantities of certain parts or materials, or to pay a minimum amount to the seller (“take-or-pay contracts”);

•

Adverse effects on our results from a decrease in or cessation of government incentives;

•

Adverse effects on Ford’s operations resulting from certain geo-political or other events;

•

Substantial negative operating-related cash flows for the near- to medium-term affecting Ford’s ability to meet its obligations, invest in its business or refinance its debt;

•

Substantial levels of indebtedness adversely affecting Ford’s financial condition or preventing Ford from fulfilling its debt obligations (which may grow because Ford is able to incur substantially more debt, including additional secured debt);

•

Inability of Ford to implement its plans to further reduce structural costs and increase liquidity;

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Ford Credit Related:

•

A prolonged disruption of the debt and securitization markets;

•

Inability to access debt, securitization or derivative markets around the world at competitive rates or in sufficient amounts due to additional credit rating downgrades, market volatility, market disruption or otherwise;

•

Inability to obtain competitive funding;

•

Higher-than-expected credit losses;

•

Adverse effects from the government-supported restructuring of, change in ownership or control of, or alliances entered into by a major competitor;

•

Increased competition from banks or other financial institutions seeking to increase their share of retail installment financing Ford vehicles;

•

Collection and servicing problems related to our finance receivables and net investment in operating leases;

•

Lower-than-anticipated residual values or higher-than-expected return volumes for leased vehicles;

•

New or increased credit, consumer or data protection or other regulations resulting in higher costs and/or additional financing restrictions;

•

Changes in Ford’s operations or changes in Ford’s marketing programs could result in a decline in our financing volumes;

General:

•

Continued or worsening financial crisis;

•

Fluctuations in foreign currency exchange rates and interest rates;

•

Failure of financial institutions to fulfill commitments under committed credit and liquidity facilities;

•

Labor or other constraints on Ford’s or our ability to restructure its or our business;

•

Substantial pension and postretirement healthcare and life insurance liabilities impairing Ford’s or our liquidity or financial condition; and

•

Worse-than-assumed economic and demographic experience for postretirement benefit plans (e.g., discount rates, investment returns, and health care cost trends).

We cannot be certain that any expectations, forecasts or assumptions made by management in preparing these forward-looking statements will prove accurate, or that any projections will be realized. It is to be expected that there may be differences between projected and actual results. Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. For additional discussion of these risk factors, see Item 1A of Part I of our 2008 10-K Report and Item 1A of Part I of Ford’s 2008 10-K Report, as updated by Ford’s and Ford Credit’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Other Financial Information

With respect to the unaudited financial information of Ford Motor Credit Company as of September 30, 2009 and for the three- and nine-month periods ended September 30, 2009 and 2008, included in this Form 10-Q, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated November 6, 2009 appearing herein states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited financial information because that report is not a “report” or a “part” of the registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.


ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In our 2008 10-K Report, we discuss in greater detail our market risk, counter-party risk, credit risk, residual risk, liquidity risk, and operating risk.

Currency Exchange Rate Risk

At September 30, 2009, our cross-border intercompany loans were fully hedged, compared to unhedged loans of $3.8 billion at the end of the second quarter of 2009. Our fully hedged position was achieved through implementation of alternate hedging structures and continued reduction in intercompany loans resulting from local funding actions. As a result, we believe our market risk exposure relating to changes in currency exchange rates is insignificant. Our overall currency exposure and our hedging requirements will reduce as we continue to work on funding our operations locally and explore alternative business arrangements in markets where local funding is not available.

Interest Rate Risk

To provide a quantitative measure of the sensitivity of our pre-tax cash flow to changes in interest rates, we use interest rate scenarios that assume a hypothetical, instantaneous increase or decrease in interest rates of 100 basis points (or 1%) across all maturities, as well as a base case that assumes that interest rates remain constant at existing levels. These interest rate scenarios are purely hypothetical and do not represent our view of future interest rate movements. The differences in pre-tax cash flow between these scenarios and the base case over a twelve-month period represent an estimate of the sensitivity of our pre-tax cash flow. Under this model, we estimate that at September 30, 2009, all else constant, such an increase in interest rates would reduce our pre-tax cash flow by $8 million over the next twelve months, compared with $28 million at December 31, 2008. The sensitivity analysis presented above assumes a one-percentage point interest rate change to the yield curve that is both instantaneous and parallel. In reality, interest rate changes are rarely instantaneous or parallel and rates could move more or less than the one percentage point assumed in our analysis. As a result, the actual impact to pre-tax cash flow could be higher or lower than the results detailed above.


ITEM 4.		CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Michael E. Bannister, our Chairman of the Board and Chief Executive Officer (“CEO”), and Kenneth R. Kent, our Vice Chairman, Chief Financial Officer (“CFO”) and Treasurer, have performed an evaluation of the Company’s disclosure controls and procedures, as that term is defined in Rule 13a-15 (e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2009 and each has concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

We had no material changes in business processes or practices during the third quarter of 2009 that resulted in or likely would result in significant changes in our internal control over financial reporting.

PART II. OTHER INFORMATION


ITEM 5.		OTHER INFORMATION

Effective September 1, 2009, we ceased retail financing in the Taiwan market; we will continue to service existing retail installment sale contracts. We will also cease wholesale financing in Taiwan, but will support existing dealers’ wholesale financing in order to allow time for these dealers to obtain alternative financing. At September 30, 2009, the Taiwan retail installment portfolio represented less than one-half of one percent of our worldwide retail installment and net investment in operating lease portfolio and about 1% of the International Segment retail installment and net investment in operating lease portfolio.

On October 1, 2009, we sold our retail portfolio in Australia to Macquarie Bank Limited. We will continue to service the portfolio through a transitional period expected to end on December 31, 2009, and will continue to support existing dealers’ wholesale financing. At September 30, 2009, the Australia retail portfolio represented about 1% of our worldwide retail installment and net investment in operating lease portfolio and about 6% of the International Segment retail installment and net investment in operating lease portfolio.

Effective December 1, 2009, we will cease retail financing for Volvo in the U.S. market. We will continue to service the existing retail installment and operating lease contracts as this portion of our portfolio liquidates. This decision presently does not affect wholesale financing to Volvo dealers who have existing wholesale financing arrangements with us. At September 30, 2009, the U.S. Volvo retail installment and operating lease portfolio represented about 1% of our worldwide retail installment and net investment in operating lease portfolio and of the North America Segment retail installment and net investment in operating lease portfolio.

In the fourth quarter of 2009, we will begin to cease retail financing in the Mexico market, and all new retail installment sale contracts originated under the Ford Credit brand will be processed through BBVA Bancomer. At September 30, 2009, the Mexico retail installment and operating lease portfolio represented about 1% of our worldwide retail installment and net investment in operating lease portfolio and about 6% of the International Segment retail installment and net investment in operating lease portfolio.

Additional information about Ford can be found in Ford’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009, filed separately with the SEC and incorporated by reference as an exhibit to this Report (without Financial Statements or Exhibits).


ITEM 6.		EXHIBITS

Exhibits: please refer to the Exhibit Index on page 55.

Instruments defining the rights of holders of certain issues of long-term debt of Ford Credit have not been filed as exhibits to this Report because the authorized principal amount of any one of such issues does not exceed 10% of the total assets of Ford Credit. Ford Credit will furnish a copy of each such instrument to the SEC upon request.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Ford Motor Credit Company LLC has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


FORD MOTOR CREDIT COMPANY LLC

By:		/s/ Kenneth R. Kent Kenneth R. Kent
		Vice Chairman, Chief Financial Officer and Treasurer

Date:		November 6, 2009

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of
Ford Motor Credit Company LLC:

We have reviewed the accompanying consolidated balance sheet of Ford Motor Credit Company LLC and its subsidiaries (the “Company”) as of September 30, 2009, and the related consolidated statement of operations and consolidated statement of comprehensive income for the three-month and nine-month periods ended September 30, 2009 and 2008, and the consolidated statement of cash flows for the nine-month periods ended September 30, 2009 and 2008. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2008, and the related consolidated statements of income, of shareholder’s interest/equity, and of cash flows for the year then ended (not presented herein), and in our report dated February 26, 2009, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2008, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

Detroit, Michigan
November 6, 2009

FORD MOTOR CREDIT COMPANY LLC

EXHIBIT INDEX


Designation	Description	Method of Filing
Exhibit 12	Ford Motor Credit Company LLC and Subsidiaries Calculation of Ratio of Earnings to Fixed Charges	Filed with this Report

Exhibit 15	Letter of PricewaterhouseCoopers LLP, dated November 6, 2009, relating to Unaudited Interim Financial Information	Filed with this Report

Exhibit 31.1	Rule 15d-14(a) Certification of CEO	Filed with this Report

Exhibit 31.2	Rule 15d-14(a) Certification of CFO	Filed with this Report

Exhibit 32.1	Section 1350 Certification of CEO	Furnished with this Report

Exhibit 32.2	Section 1350 Certification of CFO	Furnished with this Report

Exhibit 99	Items 2 — 4 of Part I and Items 1, 2 and 5 of Part II of Ford Motor Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009	Incorporated herein by reference to Ford Motor Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009. File No. 1-3950.

FORD MOTOR CREDIT CO LLC - FORM 10-Q - November 6, 2009

Attached files

FORD MOTOR CREDIT CO LLC Reports