福特汽車 (F) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ford Motor Company Fixed Income conference call. My name is Fab and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded for replay purposes.

I would now like to hand the presentation over to Mr. David Dickinson, Fixed-Income Investor Relations Manager. Please proceed.

Thank you, Fab. Good morning, ladies and gentlemen. Welcome to all of you who are joining us either by phone or webcast. On behalf of the entire Ford management team, I would like to thank you for spending time with us this morning.

Our speakers this morning are Peter Daniel, Ford's Senior Vice President and Controller; K.R. Kent, Ford Credit Vice Chairman and Chief Financial Officer; and Neil Schloss, Ford Vice President and Treasurer. We do have some other members of management who are joining us for the call including David Brandi, Assistant Treasurer; Scott Stewart, Assistant Treasurer; Mark Kosman, Director of Accounting; and Phil Horlock, Director Corporate Finance.

Before I hand the call over to Peter, I would like to review a couple of quick items. A copy of this morning's earnings release and the slides we will be using today have been posted on Ford Motor Company's investor website for your reference. The financial results discussed herein are presented on a preliminary basis. Final data will be included in our Form 10-Q for the first-quarter.

Additionally, the financial results presented here are on a GAAP basis and in some cases on a non-GAAP basis. Any non-GAAP financial measures discussed on this call are reconciled to their GAAP equivalents as part of the appendix in the slide deck.

Finally, I need to remind everyone that today's presentation may include some forward-looking statements about our expectations for Ford's future performance. Actual results could differ materially from those suggested by our comments here. Additional information about the factors that could affect future results are summarized at the end of this presentation. These risk factors are detailed in our SEC filings, including our Form 10-K, 10-Q, and 8-Ks.

With that, I would now like to turn this call over to Ford's Senior Vice President and Controller, Peter Daniel. Peter?

Thanks, David. Good morning. We will begin on slide 1 by reviewing the key financial results for the first-quarter. Because Jaguar Land Rover is held for sale, we have excluded its results from continuing operations in 2008, although they are included in the 2007 data.

As shown at the top of the slide, vehicle wholesales last quarter were over 1.5 million units, down 119,000 from the same period in 2007. This reduction includes 68,000 Jaguar Land Rover and Aston Martin units, and 51,000 at other operations. Ongoing company revenue was $39.4 billion excluding Jaguar Land Rover. Revenue was up slightly, with favorable exchange offset by lower volume and lower net pricing.

Pre-tax results from continuing operations were a profit of $736 million, an improvement of $669 million from the same period in 2007. This included about a $900 million improvement in automotive operating results, partially offset by lower profits in financial services.

Our first-quarter net income was $100 million, including $416 million of pre-tax special charges, and we ended the quarter with $28.7 billion of gross cash, down $6.5 billion from year ago levels. This reduction was part of our plan and largely reflects implementation in the initial part of our VEBA agreement with the UAW. Overall, as we said before, our plan is working and we continue to show progress.

If we go to slide 2, we will cover our special items, which were a pre-tax loss of $416 million in the first-quarter. This included a $223 million charge associated with separation programs in North America largely related to hourly separation programs in the U.S. and associated curtailments to our benefit plans. In addition, we have taken a $108 million charge related to the reduction of our dealer base including a write-off associated with our investments in U.S. dealerships.

We recorded a $70 million charge as a result of the restructuring of our investment at Ballard which we announced last November. Additional charges in the first-quarter totaled $13 million, which was largely associated with personnel reductions in all of Europe and Asia-Pacific. And as I indicated, given the pending completion of the sale of Jaguar Land Rover, we are treating their results as a special item because they are no longer a part of our ongoing operations.

At the end of the fourth-quarter, we classified our Jaguar Land Rover operations as held for sale. At that time, our book value at Jaguar Land Rover approximated the net cash proceeds we expected to receive upon sale. At the end of March, we signed a definitive agreement to sell Jaguar Land Rover for approximately its year-end 2007 book value. In the first-quarter, Jaguar Land Rover's positive operating results were essentially offset by an impairment charge. The recently announced sale of our ACH Glass business will result in a largely non-cash special charge during the second quarter.

If you move to slide 3, we will show you our automotive cash and cash flow. We ended the first-quarter with $28.7 billion in gross cash, down $5.9 billion compared with year-end 2007. Our operating-related cash flow was $1.5 billion negative in the first-quarter, reflecting an automotive pre-tax profit of $700 million; capital spending during the quarter of about $100 million lower than depreciation and amortization; changes in working capital and other items of $1.3 billion negative, reflecting mainly timing differences and non-cash items in profits; and payments of $1 billion to Ford Credit reflecting our change to upfront payment of subvention.

Excluding the upfront subvention payments, our operating cash flow was $500 million negative. Separation programs resulted in an outflow of $100 million for the quarter and we contributed $600 million to our non-U.S. pension plans. Consistent with our UAW agreement, we reclassified $1.9 billion of VEBA assets out of our cash and contributed $2.7 billion of cash to the temporary asset account. We received a tax related payment from financial services of $900 million, and Ford Credit did not pay Ford a dividend during the first-quarter.

Slide 4 summarizes our liquidity on March 31. Total liquidity including available credit lines was $40.6 billion. Automotive debt was $27.1 billion. Upon implementation of the independent VEBA, debt will increase by about $6.3 billion.

On to slide 5, where we are showing our planning assumptions and operational metrics for 2008, total industry sales during the first-quarter were equal to a SAAR of 15.6 million units in the U.S. and 18 million units in the 19 markets that we track in Europe. Based on the decline in economic conditions, we now expect the U.S. industry to be in the range of 15.3 million to 15.6 million units for the full year, and that includes medium and heavy trucks. European industry volumes could be above 17.6 million units for the full year.

On the operational metrics, our current model quality continues to improve and based on the latest surveys, Ford's initial quality in the U.S. is amongst the best in class. Automotive costs were reduced by $1.7 billion, consistent with our plan. Market share was down slightly compared with last year in the U.S. and we are on track with our plan. Absolute operating cash flow was $1.5 billion negative. This also was consistent with our plan and we continue to expect operating cash outflow and personnel separation payments to be in the range of $12 billion to $14 billion for 2007 through 2009. Capital expenditures were $1.4 billion, also consistent with our plan.

Slide 6 shows our 2008 outlook by sector. We still expect the automotive full-year pre-tax results to be a loss but equal to or better than 2007 when you exclude Jaguar Land Rover from the results. First-quarter results were aided by several positive factors that are not likely to continue to occur. These factors included recognition of mark-to-market hedging gains as related to commodity price increases that are expected to be incurred through cost of sales and not offset by hedges in future quarters, reductions in warranty reserves, and the increase in U.S. dealer inventories.

In addition, we expect that the industry volumes will weaken somewhat from first-quarter levels and vehicle segmentation will continue to shift away from areas where our share has been high. Financial services 2008 pre-tax results are expected to be worse than 2007, but profitable for the full year. Total company pre-tax operating results excluding special items are expected to be a loss and worse than 2007, reflecting the expected decline in financial service results.

We also expect special items to be less than 2007, with full-year personnel related restructuring costs below $1 billion and total pre-tax results are expected to be a loss although improved compared with 2007 when you exclude Jaguar Land Rover from the results.

On to slide 7, we provide an assessment of where we stand on achieving our key business metrics and financial goals. The profit improvements we've seen in our ongoing automotive operations, $1.2 billion this quarter and over $3 billion last year largely from our restructuring efforts and our strong flow of new products coming later this year, give us added confidence that we will meet our 2009 profitability targets in spite of the economic conditions worse than we initially envisioned.

We are committed to returning to profitability in 2009, and we see achievement of our 2008 cost reduction target as a key element in that plan. We will continue to focus on cost reductions in 2009 and the full benefits of the UAW agreement should be achieved by 2010. We expect our U.S. market share to be at the low-end of the 14% to 15% range and, we are still planning to be in the range of $12 billion to $14 billion cash outflow for 2007 to 2009 to fund operating losses and the restructuring of our business.

With that, I will turn it over to K.R.

Thanks, Peter. Slide 8 shows Ford Credit's operating results and key metrics for the first-quarter of 2008. We are reporting our Japan and Philippines operations as discontinued operations for the first-quarter and prior periods, reflecting our recent sale of these affiliates. Ford Credit's results do include Jaguar and Land Rover financing profits, as we will continue to own the present receivables and will provide financing for Jag and Land Rover dealers and customers during the transitional period, which can vary by market of up to 12 months.

Now onto to the results of Ford Credit. As shown on the left box, our first-quarter pre-tax profit was $36 million. This is down $257 million from a year ago. Shown below the box, excluding the impact of net losses related to market valuation adjustments from derivatives, pre-tax profits were $195 million, and that is down $134 million from the first-quarter of 2007. The net losses related to market valuation adjustment of $159 million in the first-quarter of 2008, were $123 million worse than the same period last year.

You can see on the right box, our March 31, 2008 managed receivables were $146 billion and that is about equal to a year ago and about $1 billion higher than the fourth-quarter of 2007, which is not shown. Japan and Philippine receivables of about $2 billion are excluded from these numbers for both periods.

As we mentioned during our fourth-quarter earnings call, subvention-related payments on contracts originated beginning in January of this year are being made to us on an upfront bases. At the end of the first-quarter, the unearned portion for upfront subvention payments on financed receivables itself was about $700 million. For managed receivable reporting, we are going to exclude this $700 million and there is an appendix that gives you a little bit of a walk.

Charge-offs for managed receivables in the first-quarter 2008 were $242 million and the worldwide managed loss-to-receivables was 66 basis points. On March 31, the allowance for credit losses for on-balance sheet receivables was $1.2 billion or 84 basis points of receivables. This was up about $100 million from the fourth-quarter 2007, which is not shown, and up about $200 million from a year ago.

At March 31, our managed leverage was 9.4 to 1, compared with 11.1 to 1 at March 31, 2007. As discussed in the year-end call, we had planned to pay regular distributions in 2008, but given the present credit market conditions and to maintain greater flexibility in the execution of our funding plan, we have elected for now not to reinstate these distributions until market conditions improve. Managed leverage is not expected to reach the 11.5 to 1 by year-end 2008, as we had previously forecasted.

Slide 9 explains the changes in Ford Credit's pre-tax profits for the first-quarter of 2008 compared to the first-quarter of 2007. As previously mentioned, pre-tax earnings at Ford Credit were $36 million in the first-quarter, $257 million lower than in 2007. The decrease in earnings primarily reflected higher provision for credit losses, higher depreciation expense for leased vehicles, and higher net losses related to market valuation adjustments from derivatives. These factors were offset partially by lower expenses primarily related to non-recurrence of costs associated with our North American business transformation initiative and higher financing margins.

Before quarter end, Ford paid us about $100 million under the terms of our profit maintenance agreement. This first-quarter cash payment did not impact our profit. It was recorded as a liability for FMCC and was eliminated in Ford's consolidated financial results. Consistent with our outlook of Ford Credit's profits and the terms of the profit maintenance agreement, it is planned that we will repay Ford before the end of the year. Additional information concerning the profit maintenance is included in appendix 13.

In summary, the continued weakness in the U.S. and Canadian used vehicle auction markets has adversely impacted the value of off-lease as well as repossessed vehicles. Delinquencies and repossessions have increased since last year in the U.S. Ford Credit's financing margins have improved year-over-year. Underlying market interest rate, especially in the U.S., have declined. However, the re-pricing of risk is a partial offset.

Finally, I would like to mention that Ford Credit's North American transformation to the business centers, which continues to improve our operating efficiency and costs, was completed in the first-quarter of this year.

Slide 10 shows quarterly trends of charge-offs and loss-to-receivable ratios for on-balance sheet and managed portfolios. The top left box shows loss-to-receivable ratios for the worldwide portfolio. The top right box shows loss-to-receivable ratios for the U.S. Ford, Lincoln and Mercury retail and lease business. Both the on-balance sheet and managed loss-to-receivable ratios are up in the first-quarter 2008 from a year ago levels, reflecting primarily increased severity per unit in the U.S. retail and lease portfolio.

First-quarter 2008 worldwide loss-to-receivable ratios shown in the top left box were also up from the fourth-quarter. That primarily reflects lower recoveries in international regions, offset partially by lower losses in North America. Shown in the top right box, the lower loss-to-receivables ratios in the first-quarter 2008 compared to the fourth-quarter of 2007 for Ford, Lincoln and Mercury in the U.S. primarily reflects fewer skips, higher recoveries and fewer other charge-offs, offset partially by the higher severity I mentioned.

Consistent with this, managed charge-offs for the first-quarter 2008 were $242 million, and that is up $119 million from a year ago levels, reflecting primarily increased severity per unit, higher repossessions and other charge-offs in the U.S. retail and lease portfolio.

Not shown on the slide but worth mentioning is that the worldwide loss-to-receivable levels in the first-quarter 2008 are about half of what we experienced in 2002 and 2003, reflecting the improved quality of the portfolio.

On slide 11, shows the primary drivers of the credit losses in the U.S. Ford, Lincoln and Mercury retail and lease business. Repossessions in the first-quarter 2008 were 20,000 units, up about 1000 from the first-quarter in 2007 and equal to the fourth-quarter of 2007.

Loss severity of $8800 in the first-quarter is $2200 higher than last year and that primarily reflects auction value deterioration in the used vehicle market, an increase in the amount financed as well as a higher mix of 72-month contracts. Loss severity is $500 higher than the fourth-quarter 2007, primarily reflecting the same factors I just mentioned.

Over 60-day delinquencies totaled 22 basis points in the first-quarter of 2008. Although still within our expectations, delinquencies are up about 6 basis points from last year and down 1 basis point from the fourth-quarter of 2007. Bankruptcy filings totaled 8000 in the first-quarter, which is up about 2000 compared with the first-quarter of 2007 and up about 1000 from the fourth-quarter of 2007. Bankruptcy filings continue at a very low level.

In summary, the quality of the portfolio is very good. We continue to closely monitor our key loss metrics for any additional deterioration related to broader trends in the economy.

As I move to slide 12, it shows the lease residual performance for our Ford and Lincoln Mercury U.S. brands. Lease return volumes totaled 48,000 units in the first-quarter of 2008, which is flat compared with the first-quarter of 2007. Return rates, however, were up 2 points to 86%, consistent with the auction values that were lower than expected at the time contract was purchased, and a general shift in the consumer preferences away from trucks and sport utility vehicles.

In the first-quarter of 2008, auction values for 24- and 36-month lease vehicles at constant mix were down about $1270 and about $1500 per unit respectively from a year ago levels, primarily reflecting the overall auction market value deterioration from the used vehicle market. For the same reason, auction values were also down for both terms compared with the fourth-quarter of 2007. We ended quarter with our worldwide net investment in operating leases at $29.3 billion, which is down about $400 million compared with the fourth-quarter of 2007.

With that, I will turn it over to Neil.

Thanks, K.R., and good morning, everybody. Slide 13 shows the trends in funding for our managed receivables. As K.R. mentioned, at the end of the first-quarter, managed receivables were $146 billion, up slightly from year-end 2007. Our year-end 2008 managed receivables forecast remains at $130 billion to $140 billion.

We plan to continue holding a large cash balance. We ended the quarter with $15.9 billion in cash, including $5.7 billion to support on-balance sheet securitizations. Our year-end forecast for cash remains at $13 billion to $16 billion, which will provide flexibility to us in the execution of our funding plan. Securitized funding was 54% of managed receivables at the end of the first-quarter. We expect that securitization levels will remain at the high end of the projected range of 49% to 54% through year-end.

Moving to slide 14, Ford Credit's funding strategy includes maintaining strong liquidity to meet near-term funding obligations by having a substantial cash balance and committed funding capacity with eligible assets available for funding. We plan to continue to diversify our global asset-backed funding capabilities and renew global asset-backed funding capacity. This includes maintaining a diversity of liquidity providers. We may access the unsecured debt market and we will continue to explore and execute alternative business arrangements in those locations where we lack diverse funding capability while also ensuring that Ford has continued support in these markets if needed.

Slide 15 shows our term funding plans for Ford Credit, which does not include our short-term funding programs, asset sales to our on-balance sheet asset-backed commercial paper programs or proceeds from revolving transactions. For 2008, our public term funding plans are in the range of $8 billion to $16 billion, consisting of $8 billion to $14 billion of public securitizations and the potential of up to $2 billion of unsecured debt. Through yesterday we have completed about $4 billion of public term securitization funding transactions in the U.S. and Germany, including $1.5 billion U.S. retail transaction we completed this week.

As shown at the bottom of the page, we have substantial private funding sources in addition to our access to the public markets. These are largely asset-backed securitization programs for retail, lease, and wholesale assets in various countries around the world. This private funding provides us flexibility in the execution of our funding plan. For 2008, we are forecasting $15 million to $22 billion of private funding. Year-to-date, we have completed $8 billion including lease, wholesale, and retail asset-backed securitizations.

Slide 16 details our liquidity programs and the utilization against those programs. The top box shows Ford Credit's committed capacity in our liquidity programs, which include unsecured credit facilities, our FCAR program, an unrated notes facility and conduit capacity. As of March 31, we had $71.9 billion of capacity and cash. As of March 31, liquidity was $62.8 billion, of which $38.9 billion was utilized, leaving about $24 billion available for use given our present level of eligible receivables. Most of our available liquidity is in banks sponsored conduits, which is generally accessible within two days.

Additionally, our cash that is not related to securitization is also available immediately. In addition to the $24 billion of liquidity available for use, $3.4 billion of capacity, excess of eligible receivables provides an incremental funding source for future originations. Not reflected in the liquidity numbers for the first-quarter are $1.5 billion of proceeds from the April 1 sale of PRIMUS Japan and the $1.5 billion public retail securitization transaction completed in the U.S. this week.

About half of the $56 billion of committed capacity is up for renewal before year-end. Year-to-date, we have renewed about $5 billion of bank sponsored conduit capacity, including the renewal of most of our 364-day wholesale funding commitments. Also given the nature of the asset-backed committed facilities, we have the ability to obtain term funding up to the time the facilities expire. At that point, any outstanding debt at expiration remains outstanding through the term of the underlying assets.

So in summary, Ford Motor Company was profitable in the first-quarter led by strong results at Ford Europe and Ford South America. Ford North America pre-tax results improved by nearly $600 million compared to last year. Automotive gross cash at quarter end remained strong at $28.7 billion. Cash together with available automotive credit lines provided liquidity of $40.6 billion.

For Ford Credit, pre-tax profit was $36 million and net income was $24 million. Excluding the net losses related to market valuation adjustments for derivatives, pre-tax profits in the quarter were $195 million. Ford Credit's North America business center restructuring was completed in March of this year. Ford Credit completed $12 billion of term funding year-to-date, about one-third of our plan. Ford Credit's liquidity remains solid with available liquidity for use of $24 billion and committed asset-backed funding capacity beyond our present needs.

With that, I will turn it over to David to begin the Q&A session.

Thanks, Neil. Ladies and gentlemen, we are going to start the question-and-answer session now. Fab, can we please have the first question?

(OPERATOR INSTRUCTIONS) Monica Keany, Morgan Stanley.

Neil, could you go over one more time what you said had been renewed in terms of the 364? I didn't catch those numbers.

Yes, we have -- year-to-date we have got about $5 billion of our capacity that comes due this year renewed and included in that is the majority of our 364-day wholesale facilities.

Okay, so those have all been renewed then?

Correct.

Okay, great. And your point too was on that even if they had been renewed, those backup conduits, so the assets just roll off?

The point I was making to the extent -- we have up until the day they mature to fund them in a term format and at which point the assets would stay and just liquidate from there. So even though they are 364-day facilities, we have the ability to fund them up until the day before they mature.

Great, and then the liquidity available for use on that slide, slide 16 where you have the $24 billion. Your point -- that doesn't include, though, an incremental $3 billion from the proceeds from Japan and the securitization that you just included?

Correct.

Okay, then in terms of the profit and maintenance agreement, that $109 million, I was just looking at the actual document. Is the pre-tax income measured with the derivative for the $36 million was reported? (multiple speakers)

Yes, Monica, it is fairly straightforward from the standpoint it is measured on an annualized basis. It measures Ford Credit's PBT has to be at least 2% of an invested capital. And that is effectively our equity level at the end of last year. A little adjustment for minority interest. Or the other one is net income of at least 1%.

So I use the $36 million then as the pre-tax for this quarter? You wouldn't back out the derivatives?

No, you do not. It is our bottom line.

Okay, great. And in terms of severity, obviously frequency seems to not really be picking up much. It is the severity that you must be watching fairly closely, and given what Manheim and used prices have been doing, can you talk to us a little bit, K.R., about what trends you are seeing? And what -- do you think things are going to get materially worse there? Are we closer to the bottom? How do you think about forecasting that?

That is a good question, Monica. The issue that is really floating around is, one is gas prices, oil prices, and what that will do to the market in general. Then the overall U.S. economy I think is the other big piece. What we have been seeing if you look at the Manheim Index itself, comparing this year first-quarter versus last year's first-quarter, the index itself was down about 5%. But that is the total used car market.

Our lease portfolio is much more weighted towards trucks and SUVs and we actually saw auction prices down about 8% on a constant mix basis. We are actually seeing a little bit worse than what the Manheim Index would indicate based on the mix of our portfolio.

As far as going forward, it really depends on where the economy goes. I can't go in much more than that.

Okay, and in terms of April delinquencies, can you comment a little bit on what you're seeing there? And then I am done.

Sure, on April through yesterday, basically tracking what we saw in the first-quarter as far as delinquencies go compared to last year, up a little bit.

Up a little bit sequentially or year-on-year?

Year-on-year, sorry. Usually there is a seasonality component that goes with delinquencies and repos and comes off a little bit. It is not up sequentially, but it is up versus last year.

Mark Altherr, Credit Suisse.

Thank you very much. Could you --? It looks like Ford might drill back on paying you dividends depending on how the year goes. Part of that was an offset to the subvention payments. Are those still on track to be pretty much cleared up this year and next year? I think it was $6.3 billion at the end of the year.

Yes, let me address that. The upfront subvention payments are for all the new business that it placed after January 1 of 2008. The old subvention that was not paid up front, which was roughly the $6 billion from before, that will take several years for it to roll off. I think it finally ends up being gone by 2011. There is a very small piece left I think at that point but it is over the life of the original contract. So if you did a 72-month contract, Ford is still paying the credit company a little bit of that subvention on a monthly basis. That will take a little bit of time to roll off.

Okay, so at the current run rate, you could probably expect to see that $1 billion repeated each quarter? Would that be a good estimate?

No, you spike up at first but then it will slowly -- it's kind of like the reverse of the subvention rolling off. It won't be as high as $1 billion a quarter. It will be maybe half of that by the end of the year.

Okay, in response to I guess a little uptick here in delinquencies, have you tightened up FICO scoring or anything else in response to the market?

No, we have not changed our underwriting standards at all. We are still buying a full spread of business and continue to support the automotive brands.

Okay, thank you.

I will tell you that one of the things that comes up is what are we doing on the collection side of the equation because we do have, I think, a world-class servicing operation. Compared to last year, we have increased our collection staff a little bit. But then again, we continue to utilize our behavioral scoring models to predict the probability of the default and it continues to allow us to prioritize and focus our collection efforts, which I think are really paying off.

Okay. I guess the last question, on the loan loss reserve as a percentage of the outstandings, you are -- it ticked up a little bit, but you are still sort of keeping track. Is that how we should look at that as you will respond in the quarter to what you were seeing in loss severity in the quarter to keep it somewhat under 1%? Is there a goal there?

There is no target like a 1% or a target like that, but it is something that we continually focus on. And we do watch the LTRs, the loss-to-receivables as well as we have a model that also does a little bit of predictive on the reserves as well. You know, it's basically a look over time to see how the market is moving and what the impact should be to the reserve.

Great, Thank you.

Chet Luy, Barclay's Capital.

Good morning, everyone. Congrats on the quarter. First, do you expect vehicles coming off leases to increase further in '08? And what impact will this have on used vehicle pricing?

For the credit company?

Yes.

I don't think it's going to move that much. It might be up a little bit for the rest of the year. The credit company -- Ford Motor Company and what we have coming off lease is just a really small part of the overall auction market. I don't think we can move it ourselves, but (multiple speakers)

How about the industry in general?

As far as what, Chet?

The auction market in general.

Right now what we've seen year-to-date is weakness. We would have expected -- normally at this time of year we would expect an improvement versus say, the end of last year. I will give you an example. Last year for the first-quarter compared to the fourth-quarter of '06, it was -- our auction values were up about 5%. This year they are down 4% versus the fourth-quarter. Normally you get a seasonal uplift in the auction market. And I think that just reflects basically the overall weakness in the economy.

Right, how about the vehicles coming off leases? Is that something that could be a factor going forward?

As I mentioned, we have a fairly sizable portfolio of trucks and SUVs right now. That is what has been rolling off. Like in the first-quarter I think roughly 74% of our vehicles that came off lease were trucks and SUVs. What we've got going on in the auto company is that we have been selling a lot more of the crossover vehicles and a lot more cars. That is going to slowly move to the cars and crossover, which are holding up much better in the auction market than what the trucks and SUVs are. I think a lot of that is driven by gas prices, fuel costs, and the economy.

Right, now are you noticing that the Fed funds rate decline is translating to lower auto loan rates for captive finance subs like Ford Motor Credit?

On a competitive basis?

Yes, in other words how are auto loan rates behaving given the fact that the Fed funds rate have been coming down?

I can talk about the credit company itself. If you think back about since when I guess August or so, Fed funds are down from 5.25% to 2.25%. At the same time, there is a bit of re-pricing of risk that is going on in the market. I'm talking here retail U.S. markets, largest and easiest. Compared to -- we did a retail ABS transaction last August and we just completed one last week. Total, it is down a little bit, but not the 3 points that the Fed has reduced on Fed funds, maybe 50 basis points or so. That does translate into lower rates in the marketplace.

Right, to what do you attribute the lack of a direct correlation between the Fed funds rate decline and general auto loan rates?

I think part of it is the underlying funding costs of the institutions are combined with not only the underlying rate but also spreads, and I think as non-captives are feeling the pain of some of their other business lines, they are also re-pricing some of these assets as well and/or not originating. So I think the amount of competitors out there and the size that they were is less and credit spreads have offset some of the reduction in borrowing rates.

Right, right. Do higher costs in the ABS market have to do with the stickiness in rates despite the Fed fund's decline?

I think -- in other words, are our asset-backed transactions costing us more today than they were a year ago?

Right, is that having an impact on the stickiness in terms of lower auto loan rates in the face of substantially lower Fed funds rate?

I think it has kept auto rates from dropping lower than they would have dropped, having it not been the credit spread problem.

Right, where do you see 60-day delinquency rates trending moving going forward? Are you noticing credit standards -- not Ford Motor Credit but in general the industry being (inaudible) given higher delinquencies?

No, it really always comes back to the same thing. It is where is the economy going to go? Right now we have seen a deterioration versus last year. If -- what everybody is doing in the marketplace, the Fed, as well as the government has a stimulative effect, hopefully it won't go up any higher and maybe come down a little bit.

It does vary by originator. I mean, if you look at the different participants in the marketplace, the delinquencies do vary. So a lot of the reports that have been issued that tries to combine the industry together does not give you as much clarity as if you look at the individual originators, which will have different assets performances.

David Andrews, PIMCO.

Good morning. I had a auto company question and then a credit card -- a credit company question. On the auto side, can you help me understand on the commodity hedging which -- I mean steel is your biggest commodity and my understanding is certainly that is not something that can be easily hedged. What specific hedges were in place and exactly how large were these relative to the total cost increase for commodities?

The hedges are primarily related to all our precious metals, rhodium and palladium, etc. The hedging gains in the first-quarter were about $300 million.

That is globally?

Yes.

Okay, so if I look at the page 17, the parent company's presentation, the swing from an $800 million cost headwind in '07 to a positive $100 million -- this is just for North America. I think Don said that $250 million of that $300 million was in North America. So the balance of that then is coming from what?

Europe, there's roughly about $100 million of hedging gains in Europe.

I'm sorry, I meant of the $900 million swing just in North America, $250 million of that is hedging out of that $900 million positive swing. Where is the other $750 million of that or $650 million of that coming from?

It is roughly about at 2/10 a quarter. It was running about 2/10 a quarter in '07. and still running about that level, but we've got hedging gains.

Doug Karson, Banc of America.

Great, guys. Quick follow-up question on the funding. I heard the $5 billion was renewed on I think the 364. How much funding capacity is up for renewal? What was the larger number? I missed it.

About half of the $56 billion was up for renewal in 2008. So if you look at the schedule, slide 16, that says the committed capacity of $56 billion, which is the first four bars on the upper box.

Got it, half of that.

Half of that renews in 2008.

If we were to kind of guess, do you think you can get 75% of that renewed? Do you feel confident we should get all of it as we kind of model the liquidity here given --?

I think we are working hard. We have made a lot of progress over the years with our relationships and with consistent asset performance; that these are still very valuable assets for a lot of our bank providers of these types of facilities. It will cost us more, there's no question, but we're pretty confident that we can get the majority of it matured or renewed.

All right, good. The banks aren't doing that well right now, and it looks like they're tightening up their lending. But if you feel confident with that, that's good. On the ABS side, the deal you recently did looked like it was swaps plus 200, I think for the lowest AAA tranche, I think. If you would have had an issue that swaps 350 or 400, would that still work? Would that still be economical to do? Because people were fearing that we were headed that direction. It is hard to know what is profitable funding and what's not.

Doug, I don't want to get into speculation on where the market is going to go on spreads. Obviously, the higher it goes up, the more squeezed we get both in the credit company and/or some of the business that we do directly with the auto company, like subvention. The point that it becomes uneconomical, I don't know -- I don't want to declare a point like that.

That is fair.

Doug, can I jump in real quick? I'm sorry, Doug. David Andrews, I think we got you cut off before you had a chance to ask your credit question. I'd like you to get back in the queue if you could. Thanks Doug.

Sure, thanks, guys. I'm done.

David Andrews.

Thanks, guys. I was still a little confused on that motor company question. I understand the hedging. I was trying to move outside of the hedging, what was causing that commodity year-over-year improvement that was not hedging?

Yes, I mean you're looking at a full-year number of $0.8 billion negative, right, which is primarily the commodity increases, and comparing that to $0.1 billion favorable in the first-quarter. So it is a full-year comparison versus quarter one. So you can't make that comparison. You've got to look at it on the basis that we are roughly running at about 200 tenths negative in the quarter. In the first-quarter because we had the hedging gains, we had a positive because the underlying commodity cost increase was about $200 million negative. The gain was about $300 million positive, so we have slight gain.

Okay, I'm with you. I got you. Sorry about that. The credit company question I had was the off-lease vehicles you mentioned, 74% trucks and SUVs, presuming those are all vehicles that were sold two or three years ago, at least primarily most of those are. And any reason why that mix will shift over the next two, three, or four quarters?

Absolutely. I need to correct myself. I said 74%, but it was really 76%. I was going off my memory. What is really going to start happening, I will give you an example. What came back in the first-quarter of that total 100%, 4% were crossovers and that is the Edge, the MKX, the Taurus X. And you are right, these are all two, three, three and a half year-old vehicles coming back off lease. As the auto company has been selling more of the crossover vehicles as a percent of their total, as well as the smaller cars are doing much more -- much better in this environment, it is going to switch over over time.

Now I'm not trying to imply that it's going to switch over immediately. It is going to take a little bit of time to work through the portfolio itself, but it will start to switch over.

That I understand. It seemed like more logically the next at least quarter or two we are probably going to be pretty close to that type of mix. And then as you said over time, it will slowly start to migrate back into the product that's been selling over the past years since oil prices have changed. But it sort of gets me back to that $1.8 billion run rate of depreciation for the quarter. It sounds like we are probably going to be pretty close to that range in the next couple of quarters now.

I don't want to really give a forecast on it because a lot of it depends on where the market goes.

Okay, but nothing else going on in the market that we can see in terms of the used market that is either a circular shift or a short-term cyclical shift that did not play out in the first-quarter that you expect in the second or third?

No, I don't really think so. I did look at -- before this call I usually try to gather what's going on in April so far to make sure we are up on top of everything. And so far through April it has been pretty much in line with our forecast which wasn't a material change from what the run rate has been for auction values.

Great, thank you, guys.

James Leda, Merrill Lynch.

Thank you, just a couple of questions. First of all, I wanted to keep on the theme of leasing margins. I guess just to make sure that I understand, when looking at the margin, it is as simple as taking the lease revenue and taking out the depreciation or are there some other factors that we should consider in thinking about the leasing margins? Maybe there is an interest component for example that would play into the margin?

Yes, this is a small piece. There is some rental income in there, but that's small.

So essentially it is a negative margin business right now?

No, I'm not trying to imply that at all. The lease business, it is a portfolio. The vehicles that came off lease in the first-quarter, for example, they were not, I would say, not positive from when we originally placed the business two to three years ago. However, as a total portfolio perspective, and as you place the new business, obviously we believe that we place it profitably.

But you get caught in these spikes and downturns on residual values and sometimes in the past we've had some really good quarters where the auction values are very strong, much better than what we had expected, and in some quarters you get into where it's a deterioration. I am not sure if I helped you on that, Jim.

Well I think the reconciliation maybe is that in the quarter it was negative margin if you look at the financials, but maybe over the longer run you are proposing that that would obviously be positive.

The other thing I should point out, what also gets in the depreciation is the supplemental depreciation where you are depreciating vehicles that are in your portfolio over time. It is a straight line basis from a point in time. So you can get into a quarter for example, first-quarter is actually a good example, where we were depreciating vehicles but at the same time to where you think they're going to end up at, but at the same time, you ended up on the vehicles that came back, got a little bit larger residual loss at one point in time that we were not expecting when we had previously depreciated those vehicles up to the first-quarter.

Just while we are on that topic, maybe an administrative question on slide 12. It seems that in the bottom left panel, the return rates, it seems that some of the historical numbers for some of the previous quarters have changed from previous disclosures. Was there a change in what is reflected in those numbers or --?

Yes, that is a good point. Maybe I should have pointed that out earlier. What this shows now is that Ford Lincoln Mercury U.S. and what we are showing before was North America. We decided to switch it over to U.S. to be consistent with the rest of the chart.

Okay, so previously those numbers were lower, so the return rates are actually higher in the U.S. versus I guess non U.S., but I would think that is a significantly smaller slice of the puzzle outside the U.S.?

It is also -- this is again, Ford Lincoln Mercury, so it did not include Jags and Land Rovers and the other non-Ford Lincoln Mercury vehicles.

Right, okay. I also wanted to follow up on some of the previous questions regarding the conduit capacity and I think it has been fully addressed that of the $13 billion in capacity that you have, about $5 billion of that has been renewed and that that was primarily related to wholesale.

So the first question would be does that imply that the remainder is related to retail or is there another component? Then secondly, can you talk about the maturity profiles of what is remaining in the conduit bucket?

I think the majority of what is left in the conduit capacity that is up for renewal is retail-oriented, so I think you are correct with that. And I think the calendarization of that is pretty well even throughout the year.

Can you -- of the one-half of the $56 billion, which I guess is $28 billion, can you characterize for us how much of that incremental, let's say, $25 billion in conduit capacity is due for renewal this year?

Yes, I would say from the standpoint of if you just walk across the slide 16, the top of the bar, you would -- I am not going to be overly specific but I would say about one-third of the unsecured credit facilities mature. About half of the FCAR facility comes due. The unrated notes program, the majority of that matures in 2009 or 2010, and then the conduit is about half. Those were sort of full-year numbers so there has been a little bit of that done, the $5 billion of that has been done in the first-quarter.

Sarah Thompson, Lehman Brothers.

I had a question on the receivables. It looks like your managed receivables estimates for 2008 are lower now than they were on the last conference call. I am just curious if you guys are changing things, because funding is more difficult, or that is reflective of what you think is the sales rate for the year?

No, Sarah, in the last call itself we were at the $135 to $145 billion level and we actually changed that when we got to the 10-K. We took that down to $130 to $140 billion. And we have been at that level since that point in time. There is no effort to slow down or stop receivables at this point in time. There is some natural things that will happen this year such as, as I mentioned earlier, we sold the Japan affiliate, for example. I also mentioned Jaguar and Land Rover. We will continue to support them up over the next 12 months. But some of that could happen this year as well where it starts to go away.

Okay, so this is mostly divestitures. It is not necessarily having anything to do with funding?

Not with funding. I would say it has to do with the economy when it has an impact on the automotive industry, so it is not funding-driven but it is the economy-driven.

Okay, and if you guys -- I know you sound pretty confident about your ability to renew the facilities that are maturing, but if they -- if you were not as successful in that, how do you -- just strategically how do we think about you managing that lack of funding capacity and still trying to support Ford in their auto sales?

I think part of it is the fact that we're going into it with more capacity than we have assets available for it, so that $3.4 billion that I mentioned of capacity in excess of eligible assets, so I'm starting with more than 100%. So there is ability to lose some. And I think from the standpoint as we really -- the diversity of our funding sources, the different institutions, not just in the U.S., but around the world, gives us a lot of flexibility and ability to fund the assets in the markets where they are funded.

In the meantime, we are continuing to work on alternative business arrangements in some of the smaller markets. I don't want to be overly specific there, but there is some in the works and we will continue to work toward renewing all these capacities. But I think we have a lot of flexibility around losing some. Obviously if you lost a lot of them, you would have to rethink which markets you are doing business in.

Great, thank you.

Eric Selle, JPMorgan.

Just to clarify, of the $28 billion of committed capacity you have to renew this year, how much have you guys renewed year-to-date?

About $5 billion.

All right. Looking at the public securitization market, is there any change in the portion you guys are retaining of the equity tranche or are you having to retain some of the higher tranches as well?

The first two deals -- or the deals we have done so for this year, which was the January transaction, and the one we completed earlier this week, we only sold the AAA pieces of that, which again, is the majority of the structure, but we did retain the BBB and below.

And is that AAA, that is typically, what, 95% of the facility?

Thereabouts, yes.

Okay, on the private securitizations you guys are doing, it looks like you guys got a lot done year-to-date. Is there any change in the appetite of the buyers? Is there any change in the customer base or terms in those as well?

Not really. On the ones we've done so for this year, I think it has been -- and it has been across all asset classes as well -- so it is lease, retail, wholesale. So I think the assets still talk. The quality of the assets, the way they perform, the consistency of how they perform, we haven't changed the filters on what we are doing from the standpoint of how the pools are selected. And so I think that investors have continued to support us from the standpoint -- although at higher rates.

Are you guys seeing any stress in the dealer base on the wholesale side? I mean, I know those guys typically survive on parts and service, but is there any stress that you are seeing on those?

From a credit standpoint, losses for the first-quarter on wholesale were minimal. So I am not really seeing it from the credit company side.

And I think from the auto side, I think there has been a very big strategic push to continue to right size inventories and keep the days supply at a level that is manageable. So we have not flushed a lot of vehicles into the dealer system, which would create additional financing requirements for the dealer, which would create additional financing requirements for Ford Credit. So there is a concerted effort to balance what is on the dealer inventory.

Okay, and then you -- looking at the derivative adjustments, what was a big cause of the year-over-year swing in that derivative adjustment? Was it because of the drop in LIBOR? Is that kind of what we should look at modeling that going forward?

If you can figure out how to model it going forward, please let us know.

I'm trying to make it simple.

I know, the problem is -- we said last year that we had no designated hedges, so in 2008, we got back into designated hedging. The concept behind that is to minimize the profit, accounted profit volatility. It has nothing to do with the economics underlying why we are doing the swaps. But what you end up getting into is you have the capability to manage your portfolio and designate a portion of it so you can offset a parallel shift in the yield curve. The complete yield curve from one month all the way out to 10 years.

And if it is a parallel shift, you end up getting no news. However when you get a twist up or a twist down, you get news. That is basically what it is. There was a twist up in the U.S. LIBOR curve was a big chunk of it. Again, this is more than just a U.S. LIBOR curve. It's the Canadian LIBOR curve. It is EURIBOR. It is all the pieces. When you get that model put together, let me know.

Ladies and gentlemen, we are out of time and that concludes today's call. Thank you all for joining us.