Attached files

file filename
EX-15 - EXHIBIT 15 - FORD MOTOR CREDIT CO LLCa6711015ex15.htm
EX-12 - EXHIBIT 12 - FORD MOTOR CREDIT CO LLCa6711015ex12.htm
EX-31.2 - EXHIBIT 31.2 - FORD MOTOR CREDIT CO LLCa6711015ex31_2.htm
EX-32.2 - EXHIBIT 32.2 - FORD MOTOR CREDIT CO LLCa6711015ex32_2.htm
EX-32.1 - EXHIBIT 32.1 - FORD MOTOR CREDIT CO LLCa6711015ex32_1.htm
EX-31.1 - EXHIBIT 31.1 - FORD MOTOR CREDIT CO LLCa6711015ex31_1.htm
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-Q
(Mark One)
[X] 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
 
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011
OR
 
[   ] 
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
38-1612444
(State of organization)
(I.R.S. employer identification no.)
One American Road, Dearborn, Michigan
48126
(Address of principal executive offices)
(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. (Check one):
 
 
Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the 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 67
 
1

 
 
 
PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
For the Periods Ended March 31, 2011 and 2010
(in millions)

   
First Quarter
 
   
2011
   
2010
 
Financing revenue
           
Operating leases
  $ 647     $ 988  
Retail
    529       624  
Interest supplements and other support costs earned from affiliated companies
    712       867  
Wholesale
    225       225  
Other
    14       20  
Total financing revenue
    2,127       2,724  
Depreciation on vehicles subject to operating leases
    (411 )     (641 )
Interest expense
    (893 )     (1,127 )
Net financing margin
    823       956  
Other revenue
               
Insurance premiums earned, net
    23       26  
Other income, net (Note 12)
    77       96  
Total financing margin and other revenue
    923       1,078  
Expenses
               
Operating expenses
    266       292  
Provision for credit losses (Note 4)
    (64 )     (51 )
Insurance expenses
    8       9  
Total expenses
    210       250  
Income before income taxes
    713       828  
Provision for income taxes (Note 1)
    262       300  
Net income
  $ 451     $ 528  
                 

The accompanying notes are an integral part of the financial statements.
 
 
2

 
 
Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(in millions)

   
March 31,
   
December 31,
 
   
2011
   
2010
 
ASSETS
           
Cash and cash equivalents
  $ 8,591     $ 8,347  
Marketable securities
    4,927       6,759  
Finance receivables, net (Note 2)
    73,200       71,302  
Net investment in operating leases (Note 3)
    9,976       9,956  
Notes and accounts receivable from affiliated companies
    1,307       1,095  
Derivative financial instruments (Note 11)
    949       1,246  
Other assets (Note 7)
    2,825       2,991  
Total assets
  $ 101,775     $ 101,696  
                 
LIABILITIES AND SHAREHOLDER’S INTEREST
               
Liabilities
               
Accounts payable
               
Customer deposits, dealer reserves and other
  $ 1,416     $ 1,272  
Affiliated companies
    1,623       884  
Total accounts payable
    3,039       2,156  
Debt (Note 8)
    82,943       82,879  
Deferred income taxes
    1,475       1,494  
Derivative financial instruments (Note 11)
    305       534  
Other liabilities and deferred income (Note 7)
    3,807       4,311  
Total liabilities
    91,569       91,374  
                 
Shareholder’s interest
               
Shareholder’s interest
    5,274       5,274  
Accumulated other comprehensive income
    1,154       821  
Retained earnings (Note 9)
    3,778       4,227  
Total shareholder’s interest
    10,206       10,322  
Total liabilities and shareholder’s interest
  $ 101,775     $ 101,696  

 
The following table includes assets to be used to settle the liabilities of the consolidated variable interest entities (“VIEs”).  These assets and liabilities are included in the consolidated balance sheet above.  See Notes 5 and 6 for additional information on our VIEs:

   
March 31,
   
December 31,
 
   
2011
   
2010
 
Cash and cash equivalents
  $ 4,351     $ 4,031  
Finance receivables, net
    49,914       50,001  
Net investment in operating leases
    5,345       6,121  
Derivative financial instruments assets
    44       26  
Debt
    41,379       40,247  
Derivative financial instruments liabilities
    105       222  
                 

The accompanying notes are an integral part of the financial statements.
 
 
3

 
 
Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the Periods Ended March 31, 2011 and 2010
(in millions)

   
First Quarter
 
   
2011
   
2010
 
Net income
  $ 451     $ 528  
Other comprehensive income/(loss):
               
Foreign currency translation (net of tax of $0)
    333       (173 )
Comprehensive income
  $ 784     $ 355  
                 

The accompanying notes are an integral part of the financial statements.
 
 
4

 
 
Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
For the Periods Ended March 31, 2011 and 2010
(in millions)

   
First Quarter
 
   
2011
   
2010
 
Cash flows from operating activities
           
Net income
  $ 451     $ 528  
Adjustments to reconcile net income to net cash provided by operations
               
Provision for credit losses
    (64 )     (51 )
Depreciation and amortization
    560       748  
Amortization of upfront interest supplements
    (439 )     (445 )
Net change in deferred income taxes
    42       (87 )
Net change in other assets
    169       524  
Net change in other liabilities
    548       900  
All other operating activities
    (43 )     (12 )
Net cash provided by operating activities
    1,224       2,105  
Cash flows from investing activities
               
Purchases of finance receivables (other than wholesale)
    (5,932 )     (5,549 )
Collections of finance receivables (other than wholesale)
    6,808       7,418  
Purchases of operating lease vehicles
    (1,812 )     (1,226 )
Liquidations of operating lease vehicles
    1,434       1,959  
Net change in wholesale receivables
    (1,620 )     541  
Net change in notes receivable from affiliated companies
    (7 )     (4 )
Purchases of marketable securities
    (7,830 )     (9,239 )
Proceeds from sales and maturities of marketable securities
    9,664       6,284  
Settlements of derivatives
    (22 )     174  
All other investing activities
    (3 )     (77 )
Net cash provided by investing activities
    680       281  
Cash flows from financing activities
               
Proceeds from issuances of long-term debt
    8,386       8,767  
Principal payments on long-term debt
    (10,003 )     (8,824 )
Change in short-term debt, net
    693       (1,136 )
Cash distributions to parent
    (900 )     (500 )
All other financing activities
    (31 )     (36 )
Net cash (used in) financing activities
    (1,855 )     (1,729 )
Effect of exchange rate changes on cash and cash equivalents
    195       (176 )
                 
Total cash flows from continuing operations
    244       481  
                 
Cash and cash equivalents, beginning of period
  $ 8,347     $ 10,882  
Change in cash and cash equivalents
    244       481  
Cash and cash equivalents, end of period
  $ 8,591     $ 11,363  
                 

The accompanying notes are an integral part of the financial statements.
 
 
5

 
 
Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents

Note
 
Page
Note 1
Accounting Policies
7
Note 2
Finance Receivables
8
Note 3
Net Investment in Operating Leases
17
Note 4
Allowance for Credit Losses
18
Note 5
Transfers of Receivables
21
Note 6
Variable Interest Entities
24
Note 7
Other Assets and Other Liabilities and Deferred Income
26
Note 8
Debt
27
Note 9
Retained Earnings
29
Note 10
Fair Value Measurements
30
Note 11
Derivative Financial Instruments and Hedging Activities
37
Note 12
Other Income
41
Note 13
Employee Separation Actions
41
Note 14
Segment Information
42
Note 15
Commitments and Contingencies
44
 
 
6

 
 
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 condition for interim periods for Ford Motor Credit Company LLC, its consolidated subsidiaries and consolidated 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, 2010 (“2010 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.

Provision for Income Taxes

The provision for income taxes is computed by applying our estimated annual effective tax rate to year-to-date income before taxes.

Accounting Standards Issued But Not Yet Adopted

Troubled Debt Restructurings.  In April 2011, the Financial Accounting Standards Board (“FASB”) issued a new standard to clarify the accounting for and disclosures about troubled debt restructurings by creditors.  The new standard was issued to address concerns about the diversity in practice related to identifying troubled debt restructurings and provides additional guidance as to whether a restructuring meets the criteria to be considered a troubled debt restructuring for purposes of recording an impairment and providing related disclosures.  The standard is effective for us as of July 1, 2011 and will be applied prospectively to troubled debt restructurings occurring on or after January 1, 2011.  We do not expect this standard to have a material impact on our financial condition, results of operations, and financial statement disclosures.

Insurance.  In October 2010, the FASB issued a new standard addressing the deferral of acquisition costs within the insurance industry.  The new standard modifies which types of costs can be capitalized in the acquisition and renewal of insurance contracts.  The standard is effective for us as of January 1, 2012.  We do not expect this standard to have a material impact on our financial condition, results of operations, and financial statement disclosures.

 
7

 

Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2.  FINANCE RECEIVABLES

We segment our North America and International portfolio of finance receivables into “consumer” and “non-consumer” receivables.  The receivables are secured by the vehicles, inventory, or other property being financed.

Consumer Segment.  Receivables in this portfolio segment relate to products offered to individuals and businesses that finance the acquisition of Ford vehicles from dealers for personal and commercial use.  The products include:

Retail financing – retail installment contracts for new and used vehicles
Direct financing leases – direct financing leases with retail customers, government entities, daily rental companies, and fleet customers

Non-Consumer Segment.  Receivables in this portfolio segment relate to products offered to automotive dealers and purchased receivables.  The products include:

Wholesale financing – loans to dealers to finance the purchase of vehicle inventory, also known as floorplan financing
Dealer loans – loans to dealers to finance working capital, and to finance the purchase of dealership real estate and/or make improvements to dealership facilities
Other financing – purchased receivables from Ford and its affiliates, primarily related to the sale of parts and accessories to dealers

Notes and accounts receivable from affiliated companies are presented separately on the balance sheet.  These receivables are based on intercompany relationships, and the balances are settled regularly.  We do not assess these receivables for potential credit losses, nor are they subjected to aging analysis, credit quality reviews, or other formal assessments.  As a result, Notes and accounts receivable from affiliated companies are not subject to the following disclosures contained herein.
 
 
8

 
 
Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2.  FINANCE RECEIVABLES (Continued)

Finance Receivables, net

Finance receivables, net were as follows (in millions):

   
March 31, 2011
   
December 31, 2010
 
   
North
America
   
International
   
Total Finance
 Receivables
   
North
America
   
International
   
Total Finance
 Receivables
 
Consumer
                                   
Retail, gross
  $ 38,601     $ 9,362     $ 47,963     $ 39,129     $ 9,124     $ 48,253  
Less:  Unearned interest supplements (a)
    (1,559 )     (293 )     (1,852 )     (1,580 )     (285 )     (1,865 )
  Retail
    37,042       9,069       46,111       37,549       8,839       46,388  
Direct financing leases, gross
    12       1,401       1,413       17       1,449       1,466  
Less:  Unearned interest supplements (a)
          (17 )     (17 )           (16 )     (16 )
  Direct financing leases
    12       1,384       1,396       17       1,433       1,450  
Consumer finance receivables (b)
  $ 37,054     $ 10,453     $ 47,507     $ 37,566     $ 10,272     $ 47,838  
                                                 
Non-Consumer
                                               
Wholesale
  $ 14,146     $ 9,870     $ 24,016     $ 13,273     $ 8,663     $ 21,936  
Dealer loans
    1,085       55       1,140       1,117       57       1,174  
Other
    724       482       1,206       738       383       1,121  
   Non-Consumer finance receivables (b)(c)
    15,955       10,407       26,362       15,128       9,103       24,231  
Total recorded investment
  $ 53,009     $ 20,860     $ 73,869     $ 52,694     $ 19,375     $ 72,069  
                                                 
Recorded investment in finance receivables
  $ 53,009     $ 20,860     $ 73,869     $ 52,694     $ 19,375     $ 72,069  
Less:  Allowance for credit losses (d)
    (532 )     (137 )     (669 )     (625 )     (142 )     (767 )
  Finance receivables, net (e)
  $ 52,477     $ 20,723     $ 73,200     $ 52,069     $ 19,233     $ 71,302  
                                                 
Net finance receivables subject to fair value (f)
                  $ 71,797                     $ 69,830  
Fair value
                    73,486                       71,547  
                                                 
 
 
(a) 
Ford-sponsored special-rate financing attributable to retail contracts and direct financing leases.
(b) 
At March 31, 2011 and December 31, 2010, includes North America consumer receivables of $28.3 billion and $28.7 billion and non-consumer receivables of $13 billion and $12.8 billion, respectively, and International consumer receivables of $6.7 billion and $7.1 billion and non-consumer receivables of $6.6 billion and $5.9 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be included in our consolidated financial statements, of which $103 million is reported as inventory by Ford at March 31, 2011.  The cash flows generated from the collection of these 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 March 31, 2011 and December 31, 2010, includes $52 million and $45 million, respectively, of North America wholesale receivables and $20 million and $24 million, respectively, of North America dealer loans with entities (primarily dealers) that are reported as consolidated subsidiaries of Ford.  At March 31, 2011 and December 31, 2010, includes $466 million and $418 million, respectively, of International wholesale receivables with entities (primarily dealers) that are reported as consolidated subsidiaries of Ford.  The associated vehicles that are being financed by us are reported as inventory on Ford’s balance sheet.
(d) 
At March 31, 2011 and December 31, 2010, includes $622 million and $701 million, respectively, of allowance for credit losses attributable to consumer receivables and $47 million and $66 million, respectively, attributable to non-consumer receivables.  See Note 4 for additional information related to our allowance for credit losses.
(e) 
At March 31, 2011 and December 31, 2010, excludes $167 million and $176 million, respectively, of accrued uncollected interest receivable, which we report in Other assets on our balance sheet.
(f) 
At March 31, 2011 and December 31, 2010, excludes $1.4 billion and $1.5 billion, respectively, of certain receivables (primarily direct financing leases) that are not subject to fair value disclosure requirements.
 
 
9

 

Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2.  FINANCE RECEIVABLES (Continued)

Aging.  For all classes of finance receivables, we define “past due” as any payment, including principal and interest, that has not been collected and is at least 31 days past the contractual due date.  The aging analysis of our finance receivables balances at March 31, 2011 was as follows (in millions):

   
31-60
Days
Past Due
   
61-90
Days
Past Due
   
91-120
Days
Past Due
   
Greater
Than
120 Days
   
Total
Past Due
   
Current
   
Total
Finance Receivables
 
North America
                                         
Consumer
                                         
  Retail
  $ 633     $ 64     $ 26     $ 77     $ 800     $ 36,242     $ 37,042  
  Direct financing leases
    3       0       0       0       3       9       12  
Non-Consumer
                                                       
  Wholesale
    6       0       0       2       8       14,138       14,146  
  Dealer loans
    5       0       9       15       29       1,056       1,085  
  Other
                                  724       724  
    Sub-total
    647       64       35       94       840       52,169       53,009  
                                                         
International
                                                       
Consumer
                                                       
  Retail
  $ 86     $ 35     $ 17     $ 50     $ 188     $ 8,881     $ 9,069  
  Direct financing leases
    11       5       2       4       22       1,362       1,384  
Non-Consumer
                                                       
  Wholesale
    1       0       0       7       8       9,862       9,870  
  Dealer loans
                                  55       55  
  Other
                                  482       482  
    Sub-total
    98       40       19       61       218       20,642       20,860  
                                                         
Total recorded investment
  $ 745     $ 104     $ 54     $ 155     $ 1,058     $ 72,811     $ 73,869  

Credit Quality

Consumer

When originating all classes of consumer receivables, we use a proprietary scoring system that measures the credit quality of the related receivables using several factors such as credit bureau information, consumer credit risk scores (e.g., FICO score), customer characteristics, and contract characteristics.  In addition to our proprietary scoring system, we consider other individual consumer factors such as employment history, financial stability, and capacity to pay.

Subsequent to origination, we review the credit quality of our retail and direct financing lease receivables based on customer payment activity.  As each customer develops a payment history, we use an internally developed behavioral scoring model to assist in determining the best collection strategies.  Based on data from this scoring model, contracts are categorized by collection risk.  Our collection models evaluate several factors including origination characteristics, updated credit bureau data, and payment patterns.  These models allow for more focused collection activity on higher risk accounts and are used to refine our risk-based staffing model to ensure collection resources are aligned with portfolio risk.
 
 
10

 
 
Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2.  FINANCE RECEIVABLES (Continued)

Credit quality ratings for our consumer receivables are categorized as follows:

  
Pass – receivables that are current to 60 days past due
  
Special Mention – receivables 61 to 120 days past due and in aggressive collection status
  
Substandard – receivables greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged-off,
as measured using the fair value of the collateral

The credit quality analysis of our consumer receivables portfolio was as follows (in millions):

   
March 31, 2011
   
December 31, 2010
 
   
Retail
   
Direct Financing
 Leases
   
Retail
   
Direct Financing
 Leases
 
North America
                       
Pass
  $ 36,875     $ 12     $ 37,348     $ 17  
Special Mention
    90       0       119       0  
Substandard
    77       0       82       0  
Sub-total
    37,042       12       37,549       17  
                                 
International
                               
Pass
    8,967       1,373       8,762       1,423  
Special Mention
    52       7       58       7  
Substandard
    50       4       19       3  
Sub-total
    9,069       1,384       8,839       1,433  
    Total recorded investment
  $ 46,111     $ 1,396     $ 46,388     $ 1,450  

Non-Consumer

For all classes of non-consumer receivables, we extend commercial credit to dealers primarily in the form of approved lines of credit to purchase new Ford and Lincoln vehicles as well as used vehicles.  Each commercial lending request is evaluated, taking into consideration the borrower’s financial condition and the underlying collateral securing the loan.

We use a proprietary model to assign each dealer a risk rating.  This model uses historical performance data to identify key factors about a dealer that we consider significant in predicting a dealer’s ability to meet its financial obligations.  We also consider numerous other financial and qualitative factors including capitalization and leverage, liquidity and cash flow, profitability, and credit history with Ford Credit and other creditors.  A dealer’s risk rating does not reflect any guarantees or a dealer owner’s net worth.

We regularly review our model to confirm the continued business significance and statistical predictability of the factors and update the model to incorporate new factors or other information that improves its statistical predictability.  In addition, we verify the existence of the assets collateralizing the receivables by physical audits of vehicle inventories, which are performed with increased frequency for higher risk (i.e., Group III and Group IV) dealers.  We perform a credit review of each dealer at least annually and adjust the dealer’s risk rating, if necessary.

Dealers are assigned to one of four groups according to risk ratings as follows:

Group I – Dealers with strong to superior financial metrics
Group II – Dealers with fair to favorable financial metrics
Group III – Dealers with marginal to weak financial metrics
Group IV – Dealers with poor financial metrics, including dealers classified as uncollectible

We suspend credit lines and extend no further funding to dealers classified in Group IV.
 
 
11

 
 
Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2.  FINANCE RECEIVABLES (Continued)

Performance of our non-consumer receivables is evaluated based on our internal dealer risk rating analysis, as payment for wholesale receivables generally is not required until the dealer has sold the vehicle inventory.  Wholesale and dealer loan receivables with the same dealer customer share the same risk rating.

The credit quality analysis of our wholesale and dealer loan receivables was as follows (in millions):

   
March 31, 2011
   
December 31, 2010
 
   
Wholesale
   
Dealer Loan
   
Wholesale
   
Dealer Loan
 
North America
                       
  Group I
  $ 11,632     $ 770     $ 10,540     $ 785  
  Group II
    2,220       196       2,372       208  
  Group III
    276       107       353       107  
  Group IV
    18       12       8       17  
    Sub-total
    14,146       1,085       13,273       1,117  
                                 
International
                               
  Group I
    6,163       28       5,270       29  
  Group II
    2,325       16       1,939       15  
  Group III
    1,374       10       1,454       12  
  Group IV
    8       1       0       1  
    Sub-total
    9,870       55       8,663       57  
        Total recorded investment
  $ 24,016     $ 1,140     $ 21,936     $ 1,174  

Other non-consumer receivables consist primarily of purchased receivables from Ford, and are excluded from our credit quality reporting, since the performance of this group of receivables is generally guaranteed by Ford.

Non-Accrual

The accrual of revenue is discontinued at the time a receivable is determined to be uncollectible, at bankruptcy status notification, or at 120 days past due.  Finance receivable accounts may be restored to accrual status only when a customer settles all past-due deficiency balances and future payments are reasonably assured.  For receivables in non-accrual status, subsequent financing revenue is recognized only to the extent a payment is received.  Payments are generally applied first to outstanding interest and then to the unpaid principal balance.  Consumer receivables in non-accrual status were as follows (in millions):

   
March 31, 2011
   
December 31, 2010
 
   
Retail
   
Direct Financing
 Leases
   
Retail
   
Direct Financing
 Leases
 
North America
                       
Greater than 120 days past due
  $ 77     $     $ 82     $  
Less than 120 days past due
    337             355        
  Sub-total
    414             437        
                                 
International
                               
Greater than 120 days past due
    50       4       19       3  
Less than 120 days past due
    4             26       1  
  Sub-total
    54       4       45       4  
    Total recorded investment
  $ 468     $ 4     $ 482     $ 4  

Finance receivables greater than 90 days past due and still accruing interest at March 31, 2011 and December 31, 2010, reflect $20 million and $7 million, respectively, of non-bankrupt retail accounts in the 91 – 120 days past-due category that are in the process of collection and $9 million and $1 million, respectively, of dealer loans.
 
 
12

 
 
Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2.  FINANCE RECEIVABLES (Continued)

Impaired Receivables

Our consumer receivables are collectively evaluated for impairment.  Our non-consumer receivables are both collectively and specifically evaluated for impairment.  Specifically impaired non-consumer receivables represent accounts with dealers that have weak or poor financial metrics or dealer loans that have been modified in troubled debt restructurings.

We place impaired receivables in non-accrual status.  The following factors (not necessarily in the order of importance or probability of occurrence) are considered in determining whether a receivable is impaired:

  
Delinquency in contractual payments of principal or interest
  
Deterioration of the borrower’s competitive position
  
Cash flow difficulties experienced by the borrower
  
Breach of loan covenants or conditions
  
Initiation of dealer bankruptcy or other insolvency proceedings
  
Fraud or criminal conviction

See Note 4 for additional information related to the development of our allowance for credit losses.

 
13

 

Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2.  FINANCE RECEIVABLES (Continued)

The following tables identify non-consumer receivables that were both impaired and in non-accrual status (in millions):

   
March 31, 2011
 
   
Recorded
 Investment in
Impaired
 Receivables &
 Receivables in
Non-Accrual
 Status
   
Unpaid
Principal
Balance
   
Related
Allowance for
 Credit Losses
   
Average
Recorded
 Investment
   
Financing
 Revenue
 Collected
 
North America
                             
  With no allowance recorded
                             
    Wholesale
  $ 18     $ 18     $     $ 19     $ 0  
    Dealer loans
    6       6             8       0  
                                         
  With an allowance recorded
                                       
    Wholesale
                             
    Dealer loans
    63       63       8       67       0  
                                         
International
                                       
  With no allowance recorded
                                       
    Wholesale
    20       20             22       0  
    Dealer loans
    1       1             2       0  
                                         
  With an allowance recorded
                                       
    Wholesale
    4       4       1       4       0  
    Dealer loans
                             
                                         
Total
                                       
    Wholesale
  $ 42     $ 42     $ 1     $ 45     $ 0  
    Dealer loans
    70       70       8       77       0  
       Total
  $ 112     $ 112     $ 9     $ 122     $ 0  

Impaired receivables with no related allowance for credit losses recorded are primarily attributable to accounts for which the uncollectible portion of the receivables has already been charged off.
 
 
14

 
 
Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2.  FINANCE RECEIVABLES (Continued)

   
December 31, 2010
 
   
Recorded
Investment in
 Impaired
 Receivables &
 Receivables in
Non-Accrual
Status
   
Unpaid
Principal
Balance
   
Related
Allowance for
Credit Losses
   
Average
Recorded
Investment
   
Financing
Revenue
Collected
 
North America
                             
  With no allowance recorded
                             
    Wholesale
  $ 8     $ 8     $     $ 19     $ 2  
    Dealer loans
    2       2             9       0  
                                         
  With an allowance recorded
                                       
    Wholesale
                             
    Dealer loans
    64       64       10       69       3  
                                         
International
                                       
  With no allowance recorded
                                       
    Wholesale
    22       22             29       2  
    Dealer loans
    1       1             2       0  
                                         
  With an allowance recorded
                                       
    Wholesale
    4       4       1       7       0  
    Dealer loans
                             
                                         
Total
                                       
    Wholesale
  $ 34     $ 34     $ 1     $ 55     $ 4  
    Dealer loans
    67       67       10       80       3  
       Total
  $ 101     $ 101     $ 11     $ 135     $ 7  

Impaired receivables with no related allowance for credit losses recorded are primarily attributable to accounts for which the uncollectible portion of the receivables has already been charged off.
 
 
15

 
 
Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2.  FINANCE RECEIVABLES (Continued)

Troubled Debt Restructurings

A restructuring of debt constitutes a troubled debt restructuring if we grant a concession for economic or legal reasons related to the debtor’s financial difficulties that we otherwise would not consider in the normal course of our business.

Consumer.  While payment extensions are granted on consumer receivables in the normal course of the collection process, no concessions are made on the principal balance loaned or the interest rate charged.  Payment extensions typically result in a one-month deferral of the consumer’s normal monthly payment and do not constitute a troubled debt restructuring.

Non-Consumer.  Within our non-consumer receivables segment, only dealer loans subject to forbearance, moratoriums, extension agreements, or other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral are classified as troubled debt restructurings.

Dealer loans involved in troubled debt restructurings are assessed for impairment and included in our allowance for credit losses based on either the present value of the expected future cash flows of the receivable discounted at the loan’s original effective interest rate, or the fair value of the collateral adjusted for estimated costs to sell.

For loans where foreclosure is probable, the fair value of the collateral is used to estimate the specific impairment.  An impairment charge is recorded as part of the provision to the allowance for credit losses for the amount by which the recorded investment of the receivable exceeds its estimated fair value.

We do not grant concessions on the principal balance of dealer loan modifications but may make other concessions if the dealer is experiencing financial difficulties.  The principal balance of dealer loans involved in troubled debt restructurings in the period ending March 31, 2011 was $12 million.

 
16

 
 
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

Net investment in operating leases consists primarily of lease contracts for new and used vehicles with retail customers, daily rental companies, government entities and fleet customers with terms of 60 months or less.

We receive interest supplements and residual support payments on certain leasing transactions under agreements with Ford and other affiliates.  The unamortized balance of unearned interest supplements and residual support payments on operating leases are included in Other liabilities and deferred income on the balance sheet.  Refer to Note 7 for further information.

Net investment in operating leases were as follows (in millions):

   
March 31,
2011
   
December 31,
2010
 
             
Vehicles, at cost, including initial direct costs
  $ 13,637     $ 14,046  
Less:  Accumulated depreciation
    (3,586 )     (4,003 )
Net investment in operating leases before
allowance for credit losses (a)
    10,051       10,043  
Less:  Allowance for credit losses
    (75 )     (87 )
Net investment in operating leases
  $ 9,976     $ 9,956  
                 
 
(a) 
At March 31, 2011 and December 31, 2010, includes net investment in operating leases of $5.4 billion and $6.2 billion, respectively, that have been included in securitization transactions but continue to be included in our consolidated financial statements.  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 until the associated debt or other obligations are satisfied.  Refer to Note 5 for additional information.
 
 
17

 
 
Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 4.  ALLOWANCE FOR CREDIT LOSSES

The allowance for credit losses represents our estimate of the probable loss on the collection of finance receivables and operating leases as of the balance sheet date.  The adequacy of the allowance for credit losses is assessed quarterly, and the assumptions and models used in establishing the allowance are regularly evaluated.  Because credit losses can vary substantially over time, estimating credit losses requires a number of assumptions about matters that are uncertain.

Consumer

The majority of our credit losses are attributable to our consumer receivables segment.  We estimate the allowance for credit losses on our consumer receivables segment and on our investments in operating leases using a combination of measurement models and management judgment.  The models consider factors such as historical trends in credit losses and recoveries (including key metrics such as delinquencies, repossessions and bankruptcies), the composition of our present portfolio (including vehicle brand, term, risk evaluation and new/used vehicles), trends in historical and projected used vehicle values, and economic conditions.  Estimates from these models rely on historical information and may not fully reflect losses inherent in the present portfolio.  Therefore, we may adjust the estimate to reflect management’s judgment regarding justifiable changes in recent economic trends and conditions, portfolio composition and other relevant factors.

We make projections of two key assumptions to assist in estimating the consumer allowance for credit losses:

Frequency – the number of finance receivables that are expected to default over the loss emergence period, measured as repossessions

Loss severity – the expected difference between the amount a customer owes when the finance contract is charged-off and the amount received,
net of expenses, from selling the repossessed vehicle, including any recoveries from the customer

The consumer receivables portfolio allowance is evaluated primarily using a collective loss-to-receivables (“LTR”) model that based on historical experience indicates that credit losses have been incurred in the portfolio even though the particular receivables that are uncollectible cannot be specifically identified.  The LTR model is based on the most recent years of history.  Each LTR is calculated by dividing credit losses by average end-of-period receivables excluding unearned interest supplements and allowance for credit losses.  A weighted-average LTR is calculated for each class of consumer receivables and multiplied by the end-of-period receivable balances for that given class.
 
 
18

 
 
Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 4.  ALLOWANCE FOR CREDIT LOSSES (Continued)

The loss emergence period (“LEP”) is a key assumption within our models and represents the average amount of time between when a loss event first occurs to when it is charged-off.  This time period starts when the borrower begins to experience financial difficulty.  It is evidenced later, typically through delinquency, before eventually resulting in a charge-off.  The LEP is a multiplier in the calculation of the collective consumer allowance for credit losses.

For consumer receivables greater than 120 days past due, the uncollectible portion of the receivable is charged-off, such that the remaining recorded investment in the loan is equal to the estimated fair value of the collateral less costs to sell.

After establishing the collective allowance for credit losses, if management believes the allowance does not reflect all losses inherent in the portfolio due to changes in recent economic trends and conditions, or other relevant factors, an adjustment is made based on management judgment.

Non-Consumer

We estimate the allowance for credit losses for non-consumer receivables based on historical LTR ratios, expected future cash flows, and the fair value of collateral.

Collective Allowance for Credit Losses.  We estimate an allowance for non-consumer receivables that are not specifically identified as impaired using a LTR model for each financing product based on historical experience.  This LTR is a weighted-average of the most recent historical experience and is calculated consistent with the consumer receivables LTR approach.  All accounts that are specifically identified as impaired are excluded from the calculation of the non-specific or collective allowance.

Specific Allowance for Impaired Receivables.  The wholesale and dealer loan portfolio is evaluated by grouping individual loans into risk pools determined by the risk characteristics of the loan (such as the amount of the loan, the nature of the collateral, and the financial status of the debtor).  The risk pools are analyzed to determine if individual loans are impaired, and a specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the loan’s effective interest rate or the fair value of any collateral adjusted for estimated costs to sell.

After establishment of the collective and specific allowance for credit losses, if management believes the allowance does not reflect all losses inherent in the portfolio due to changes in recent economic trends and conditions, or other relevant factors, an adjustment is made based on management judgment.

 
19

 

Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 4.  ALLOWANCE FOR CREDIT LOSSES (Continued)

Allowance for Credit Losses

Following is an analysis of the allowance for credit losses related to finance receivables and investment in operating leases for the period ended March 31, 2011 (in millions):
 
    Finance Receivables       Net Investment in     Total  
    Consumer     Non-Consumer     Total     Operating Leases     Allowance  
Allowance for credit losses
                             
  Beginning balance
  $ 701     $ 66     $ 767     $ 87     $ 854  
    Charge-offs
    (112 )     3       (109 )     (29 )     (138 )
    Recoveries
    57       1       58       25       83  
    Provision for credit losses
    (31 )     (24 )     (55 )     (9 )     (64 )
    Other (a)
    7       1       8       1       9  
  Ending balance
  $ 622     $ 47     $ 669     $ 75     $ 744  
                                         
Analysis of ending balance of
allowance for credit losses
                                       
  Collective impairment allowance
  $ 622     $ 38     $ 660     $ 75     $ 735  
  Specific impairment allowance
          9       9             9  
    Ending balance
  $ 622     $ 47     $ 669     $ 75     $ 744  
                                         
Analysis of ending balance of finance
receivables and net investment in
operating leases
                                       
  Collectively evaluated for impairment
  $ 47,507     $ 26,250     $ 73,757     $ 10,051          
  Specifically evaluated for impairment
          112       112                
    Recorded investment (b)
  $ 47,507     $ 26,362     $ 73,869     $ 10,051          
                                         
Ending balance, net of allowance for
credit losses
  $ 46,885     $ 26,315     $ 73,200     $ 9,976          
 
 
(a) 
Represents principally amounts related to translation adjustments.
(b) 
Finance receivables and net investment in operating leases before allowance for credit losses.
 
 
20

 

Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 5.  TRANSFERS OF RECEIVABLES

We securitize finance receivables and net investments in operating leases through a variety of programs, utilizing amortizing, variable funding and revolving structures.  We also sell finance receivables in structured financing transactions.  Due to the similarities between securitization and structured financing, we refer to structured financings as securitization transactions.  Our securitization programs are targeted to many different investors in both public and private transactions in capital markets worldwide.

We transfer finance receivables and net investments in operating leases in securitization transactions to fund operations and to maintain liquidity.  Our securitization transactions are recorded as asset-backed debt and the associated assets are not derecognized and continue to be included in our financial statements.

The finance 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.  Cash and cash equivalents balances relating to securitization transactions are used only to support the on-balance sheet 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 entities.

Most of these securitization transactions utilize VIEs.  Refer to Note 6 for more information concerning VIEs.  The following tables show the assets and liabilities related to our securitization transactions that were included in our financial statements (in billions):

   
March 31, 2011
 
   
Cash and Cash Equivalents
   
Finance Receivables & Net Investment in Operating Leases (a)
   
Related Debt
 
   
Before Allowance
for Credit Losses
   
Allowance for
Credit Losses
   
After Allowance
for Credit Losses
 
VIE (b)
                             
Retail (c)
  $ 3.0     $ 32.7     $ 0.4     $ 32.3     $ 27.2  
Wholesale
    0.6       17.6       0.0       17.6       11.8  
Finance receivables
    3.6       50.3       0.4       49.9       39.0  
Net investment in operating leases
    0.8       5.4       0.1       5.3       2.4  
Total
  $ 4.4     $ 55.7     $ 0.5     $ 55.2     $ 41.4  
                                         
Non-VIE
                                       
Retail (c)
  $ 0.1     $ 2.3     $ 0.0     $ 2.3     $ 1.9  
Wholesale
    0.0       2.0       0.0       2.0       1.7  
Finance receivables
    0.1       4.3       0.0       4.3       3.6  
Net investment in operating leases
                             
Total
  $ 0.1     $ 4.3     $ 0.0     $ 4.3     $ 3.6  
                                         
Total securitization transactions
                                       
Retail (c)
  $ 3.1     $ 35.0     $ 0.4     $ 34.6     $ 29.1  
Wholesale
    0.6       19.6       0.0       19.6       13.5  
Finance receivables
    3.7       54.6       0.4       54.2       42.6  
Net investment in operating leases
    0.8       5.4       0.1       5.3       2.4  
Total
  $ 4.5     $ 60.0     $ 0.5     $ 59.5     $ 45.0  
                                         
 
(a) 
Unearned interest supplements are excluded from securitization transactions.
(b) 
Includes assets to be used to settle the liabilities of the consolidated VIEs.
(c) 
Includes direct financing leases.
 
 
21

 
 
Item 1.  Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 5.  TRANSFERS OF RECEIVABLES (Continued)

   
December 31, 2010
 
   
Cash and Cash Equivalents
   
Finance Receivables & Net Investment in Operating Leases (a)
   
Related Debt
 
   
Before Allowance
for Credit Losses
   
Allowance for
Credit Losses
   
After Allowance
for Credit Losses
 
VIE (b)
                             
Retail (c)
  $ 2.8     $ 33.8     $ 0.4     $ 33.4     $ 27.1  
Wholesale
    0.4       16.6       0.0       16.6       10.1  
Finance receivables
    3.2       50.4       0.4       50.0       37.2  
Net investment in operating leases
    0.8       6.2       0.1       6.1       3.0  
Total
  $ 4.0     $ 56.6     $ 0.5     $ 56.1     $ 40.2  
                                         
Non-VIE
                                       
Retail (c)
  $ 0.1     $ 2.0     $ 0.0     $ 2.0     $ 1.7  
Wholesale
    0.1       2.1       0.0