福特汽車 (F) 2008 Q4 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 Katina and I'll be your coordinator for today. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this presentation. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. David Dickenson, Fixed Income Investor Relations Manager. Please proceed.

Thank you, Katina, and 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. With me this morning are Peter Daniel, Ford 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 also have some other members of management who are joining us for the call including David Brandi, Assistant Treasurer, and Mark Kosman, Director of Global Accounting.

Before we begin 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 and Media websites for your reference. The financial results discussed herein are presented on a preliminary basis. Final data will be included in our Form 10-K for the year ended December 31, 2008. 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 equivalent as part of the appendix to the slide deck.

Finally, today's presentation includes 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 is summarized at the end of this presentation. These risk factors are detailed in our SEC filings, including our annual quarterly and current reports to the SEC. With that I would like to turn the call over to Ford's Senior Vice President and Controller, Peter Daniel. Peter?

Thanks, Dave. Turning to slide 1, I'll begin by reviewing the key financial results. As shown at the top of the slide, vehicle wholesales last quarter were over 1.1 million units, down 505,000 units from the same period in 2007. Ford's fourth-quarter revenue was $29.2 billion, a $16.3 billion decrease from a year ago. The decrease is primarily explained by lower volume sale of Jaguar, Land Rover and exchange translation.

Ford's fourth-quarter pretax operating loss from continuing operations, excluding special items, was almost $3.7 billion, over a $3 billion decline from a year ago. This decline included about $2.4 billion at Automotive and $653 million at Financial Services. Our fourth-quarter net loss was almost $5.9 billion, including about $1.4 billion of pretax special charges. We ended the quarter with $13.4 billion of cash; this was down about $21 billion from year-end 2007 levels with almost $16 billion of that decline occurring during the first nine months of the year.

As Alan mentioned during the Earnings presentation, we provided notice today to our banks to fully draw our secured credit lines. We took this action because of our growing concerns about the instability of the capital markets with the uncertain state of the global economy. We believe that it is prudent to draw the secured credit lines in this environment. The $10.1 billion will be added to our cash and recorded in our first-quarter balance sheet. Under the terms of our credit agreement, we expect to receive the funds from this borrowing next Tuesday, February the 3rd.

On slide 2 we'll cover special items which were about $1.4 billion in the fourth quarter. In North America we recorded a charge of $229 million largely related to hourly personnel reduction programs in the US. International operations incurred $280 million of charges related to personnel reduction programs, primarily related to implementation of Volvo's and Asia-Pacific's restructuring plans.

We recognized a gain of $82 million due to planned reductions in the number of employees in the Job Security Benefits reserve, primarily due to the utilization of these employees at other plant locations. We recorded a charge of $224 million for accelerated depreciation related to a lease buy-out at our AAI facility. And we recognized a $201 million loss on the sale of a portion of our investment in Mazda. In addition, we incurred supply settlement and other costs of $209 million.

Finally, we recorded $356 million of retiree healthcare charges related to the VEBA agreement with the UAW, primarily reflecting losses on the Temporary Asset Account. These losses will be reversed upon transfer of the Temporary Asset Account to the newly independent VEBA.

Slide 3 shows our automotive cash and cash flow. We ended the fourth quarter with $13.4 billion in gross cash, down $5.5 billion from the third quarter. Our operating-related cash flow was $7.2 billion negative in the fourth quarter reflecting an automotive pretax loss of about $3.3 billion. Capital spending during the quarter about $600 million higher than depreciation and amortization, primarily because of spending associated with the launch of the all new F-150 and the impact of second-quarter asset impairment on depreciation and amortization.

Changes in working capital and other timing differences were $2.7 billion negative. This is primarily explained by a reduction in trade payables of about $4 billion and other timing differences as a result of lower production at the end of the quarter. Significant reductions in inventory and receivables were offset to the lower payables. And payments of $600 million to Ford Credit reflecting our change to up-front payment of subvention. Excluding the up-front subvention payments our operating cash flow was $6.6 billion negative.

This outflow continues to be significantly impacted by declining global demand and actions we have taken to reduce dealer stock by another 50,000 units compared with the third quarter to align better with future expectations. Once volumes stabilize, payables will stop declining and generally will grow as volumes recover. In addition, in part because of the major F-150 launch will be behind us, we expect spending to decline in 2009.

Separation programs resulted in an outflow of $200 million for the quarter and we contributed $100 million to our non-US pension funds. We received a $1.3 billion tax-related payment from Ford Credit. We also received about $500 million from divestitures, primarily the sale of a portion of our Mazda securities. Including all of these impacts, the total decline in gross cash during the fourth quarter was $5.5 billion.

Slide 4 summarizes our automotive sector's net liquidity at December 31, 2008. Total liquidity, including available credit lines, was $24 billion. This liquidity includes $10.1 billion available under our secured credit lines and $500 million of other automotive credit lines. As I mentioned earlier, we provided notice today to our banks to fully draw our secured credit lines.

At year-end automotive debt was $25.8 billion of which less than $3 billion of external debt matures in the next three years. This automotive debt excludes the impact of a secured credit line draw. Also this month, as permitted by the underlying agreement, Ford converted the Temporary Asset Account funds into a new Ford note payable at the end of this year. This will provide the flexibility to utilize over $2 billion of funds to support operations if needed. As a result, this amount will improve liquidity and be included in gross cash starting this quarter.

Now on to slide 5 which shows results of our 2008 full year planning assumptions and operational metrics. Total industry volume for 2008 was 13.5 million units in the US and 16.6 million units in Europe, both down substantially from our planning assumptions. On the operational metrics, the quality of our vehicles has risen consistently for four straight years and our vehicle satisfaction has reached an all-time high.

Ford, Lincoln and Mercury vehicles collectively reduced things gone wrong by 7.7% compared to last year. Things gone wrong, or TGW, is now at the lowest levels ever and statistically tied with the best Japanese brands. Automotive costs were reduced by $4.4 billion, significantly better than plan. US market share was 14.2%, consistent with our plan but better than our recent expectations. Absolute operating cash was $19.5 billion negative; this was higher than plan, and capital expenditures were $6.5 billion.

Slide 6 summarizes our 2009 outlook including our key automotive planning assumptions and operational metrics. We're expecting total industry sales to be in the range of 11.5 million to 12.5 million units for the US and in the range of 12.5 million to 13.5 million units in Europe. These estimates include both light and heavy vehicles.

On operational metrics we will continue to improve our quality. As mentioned previously, we will continue to reduce our automotive structural cost by another $4 billion during 2009. We have focused this metric on structural costs as these are costs largely within our control. While we continue to be pursuing material cost reduction initiatives, we recognize that commodity costs and related hedging gains and losses will continue to be very volatile.

On market share we expect that both our total US share and our share of the US retail market will stabilize and improvements are possible with our new product lineup. We have included the second share performance measurement, the US share of the retail market, as this is the most important and, traditionally, the most profitable market segment in which we participate. In this context, we defined the US retail market as excluding all fleet sales including those to daily rental companies and governments. For 2008, we estimate we had about a 12.1% share of the US retail market. We anticipate total Europe share to be about equal or improved as compared to 2008.

We continue to expect operating cash outflows in 2009, but these will be significantly less than those incurred in 2008. This is based on industry volumes stabilizing early in the year and beginning to recover later in the year. This should result in improvements in payables and a number of other factors.

In addition, the outflows related to the acceleration of subvention payments to Ford Credit will decrease in 2009 and we will be realizing benefits from the actions initiated under our $14 to $17 billion cash improvement plan. Further, we expect to receive funding from the Department of Energy, the European Investment Bank and other sources in support of our investments to improve fuel efficiency and reduce CO2 emissions.

Finally, as indicated in November, capital spending will be in the range of $5 billion to $5.5 billion, down from $6.5 billion in 2008, as we completed spending on our major new F-150 and we realize greater efficiencies from our "ONE Ford" product development initiative. Given the volatile nature of today's market at this time we do not believe it would be prudent to provide any further guidance on profitability. I will now hand over to K.R.

Thanks, Peter. Slide 7 shows Ford Credit's operating results and key metrics for the fourth quarter of 2008. As shown in the left box, our fourth-quarter pretax loss was $372 million compared with a $263 million pretax profit in the fourth quarter of 2007. Shown below the box, excluding the impact of net gains and losses related to market valuation adjustments to derivatives, the pretax loss was $229 million, compared with a $223 million pretax profit in the same period of 2007. The net losses related to market valuation adjustments were $143 million in the fourth quarter of 2008 compared to net gains of $40 million in the same period last year.

You can see on the right box our December 31, 2008 managed receivables were $118 billion. That's down about $29 billion from a year ago and about $12 billion lower than third quarter. The $29 billion receivable decline primarily reflects lower North American receivables, changes in currency exchange rates, the impact of divestitures and alternative business arrangements and a second-quarter 2008 impairment charge for North American operating leases. The $12 billion decline from the third quarter of 2008 primarily reflects lower receivables in North America and Europe and changes in currency exchange rates.

We are projecting further receivable declines in 2009 which reflects lower industry volumes, and Jaguar, Land Rover, and Mazda, as they transition to new finance providers. Our financing share of US Ford, Lincoln Mercury retail installment and lease contracts was 34% in the fourth quarter of 2008 which is not shown on the slide -- it's up 2 points compared to last year and -- I'm sorry, 1 point higher than 2007. Charge-offs for managed receivables in the fourth quarter 2008 were $366 million and the worldwide managed loss to receivables was 118 basis points, up 56 basis points from last year. I'll speak more of this in a few minutes.

At December 31 the allowance for credit losses for on-balance sheet receivables was about $1.7 billion, or 140 basis points of receivables. The allowance was about $120 million higher than the third quarter and up about $600 million from a year ago. Also at December 31, our managed leverage was 9.9 to 1 compared with 9.8 to 1 at December 31, 2007, and below our 2008 year-end originally planned leverage of 11.5 to 1. At the end of the fourth quarter, our equity was about $10.6 billion.

Further, we did not pay a dividend to Ford in the fourth quarter of 2008. However, beginning in 2009 we expect to pay dividends to Ford of about $2 billion through 2010. We will balance returns of capital with the successful execution of our funding plan. This reduction from the previously planned $3 billion dividend through 2010 reflects the impact of an increase in tax payments to Ford consistent with our tax sharing agreement primarily associated with the declining lease portfolio.

In addition, we are restructuring our US operations to meet changing business conditions, including lower automotive sales and planned reductions in Jaguar, Land Rover and Mazda receivables, and to maintain a competitive cost structure. The restructuring will affect servicing, sales and central operations and eliminate about 1,200 staff and agency positions, or about 20%. The reductions will occur in 2009 through attrition, retirements and involuntary separations.

Slide 8 explains the change in Ford Credit's pretax profit for the fourth quarter of 2008 compared with the fourth quarter of 2007. As previously mentioned, Ford Credit's pretax loss was $372 million in the fourth quarter, $635 million lower than in 2007. The decrease in earnings primarily reflected a higher provision for credit losses, higher net losses related to market valuation adjustments to derivatives, lower volume and lower financing margins. Also, lower operating costs were largely offset by other expenses.

Volume and financing margin were lower than a year ago primarily reflecting a decline in receivables in the fourth quarter of 2008. The increase in the provision for credit losses primarily reflected higher severities, higher repossessions, and higher dealer-related losses in the US as well as higher losses in Europe. Residual losses were about the same in the fourth quarter of 2008 compared with last year. While auction values have declined significantly from a year ago in the fourth quarter, the fourth-quarter profit implication of these declines were mitigated by the second-quarter 2008 impairment charge of $2.1 billion for North American operating leasing. We continue to expect auction values to be volatile.

Our international segment, which is primarily Europe, was profitable in the fourth quarter of 2008, although at a lower level than in the same period last year, primarily reflecting lower volume and financing margin, a higher provision for credit losses, and higher reserves for residual-based products, offset partially by lower operating costs. However our North American segment was unprofitable in the fourth quarter of 2008 primarily reflecting the higher provision for credit losses and lower volumes.

Slide 9 shows quarterly trends of charge-offs and lost receivable ratios for our 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 receivables ratios for the US Ford, Lincoln and Mercury retail and lease business. Both the on-balance sheet and managed loss to receivable ratios are up in the fourth quarter 2008 from year ago levels reflecting primarily higher severity per-unit, higher repossessions and higher dealer-related losses in the US, higher losses in Spain, and lower debt sales in Britain and Germany.

Both worldwide and Ford Lincoln Mercury fourth-quarter 2008 loss to receivable ratios were up from third quarter, primarily reflecting higher dealer-related losses, higher repossessions and higher severity per-unit in the US. Consistent with this, managed charge-offs in the fourth quarter were $366 million. That is up $133 million from a year ago reflecting the same factors I just mentioned.

Slide 10 shows the primary drivers of our credit losses in the US Ford, Lincoln and Mercury retail and lease business. Repossessions in the fourth quarter 2008 were 22,000 units; that is up 2,000 units from fourth quarter 2007 and up 1,000 units from the third quarter 2008. Severity of $10,700 in the fourth quarter was $2,400 higher than last year primarily due to the overall auction value deterioration in the used vehicle market, along with an increase in the amount financed and a higher mix of 72-month contracts.

Severity was $500 higher than the third quarter 2008, also reflecting auction value deterioration in the used vehicle market. As previously stated in the third quarter Fixed Income call, severity in September 2008 moderated to between $9,900 and $10,000; however, we saw more auction weakness as the fourth quarter progressed. Over 60-day delinquencies totaled 28 basis points in the fourth quarter, up 3 basis points from the third quarter of 2008. Although still low and within our expectations, delinquencies are up about 5 basis points from last year.

Bankruptcy filings totaled 10,000 in the fourth quarter; that is up 3,000 compared with the fourth quarter of 2007 and equal to the third quarter of 2008. The credit quality of our contract placements remains very good. We continue to closely monitor our key loss metrics, as mentioned above, for any additional deterioration related to broader trends in the economy. We have seen deterioration in the second half of 2008 with some of the credit lost drivers and metrics, and I would like to take a couple minutes to put 2008 in an historical context, similar to what we did last year at this time.

Slide 11 shows the longer-term trends of key metrics for our on balance sheet portfolio over the past eight to 10 years. I have mentioned several times in the past about the higher credit quality portfolio we have today. The top left box shows the average placement FICO score for the United States' retail and lease portfolio, which is a substantial portion of our total portfolio. The average FICO in 2008 was 719 and is consistent with our efforts to maintain the credit quality of our portfolio.

The top right box shows worldwide on-balance sheet loss to receivable ratios. The loss to receivables ratio is up for 2007, but still well below 2001 to 2004. The improvement in loss performance compared with the early part of the decade reflects an increase in the quality of the portfolio. The bottom box shows on-balance sheet charge-offs and the allowance for credit losses. Both charge-offs and the allowance are up above the last few years. At year-end 2008, the credit loss reserve was slightly below 1.5 times 2008 charge-offs.

Slide 12 shows the longer-term trends of our Ford Lincoln Mercury US retail and lease portfolio through several key metrics for the past eight years. Full-year 2008 repossession and repossession ratio are higher than a year ago, but are below the historical peaks that we experienced in 2003. Loss severity of $9,900 was higher than recent years, primarily due to the overall auction value deterioration in the used vehicle market, an increase in the amount financed, as well as a higher mix of 72-month contracts.

Over 60-day delinquencies totaled 24 basis points in 2008, up 5 basis points from last year, but well below the highs seen earlier in the decade. Bankruptcy filings totaled 37,000, up 10,000 compared with 2007, and are the highest we have seen since the implementation of the Bankruptcy Reform Act of 2005.

I wanted to go through these last two slides to give you some perspective. While we are seeing a deterioration in the overall economy, as you can clearly see as manifested in our severity through the auction values and deteriorating credit loss metrics. The decision to improve the overall credit quality of our portfolio during the last eight years has limited these losses to the (inaudible).

Slide 13 shows the lease residual performance for our Ford Lincoln Mercury US brands. Lease return volumes totaled 38,000 units in the fourth quarter of 2008, equal to the fourth quarter of 2007. Return rates were up 6 points to 90%, consistent with the auction values that were lower-than-expected at the time of the contract purchase and a general shift in consumer preferences away from trucks and sport-utility vehicles.

In the fourth quarter 2008 auction values for 24- and 36-month lease vehicles at constant mix, were down on average about $2,600 per unit and $2,200 per unit, respectively, from year ago levels, primarily reflecting the overall auction market deterioration. Compared with the prior quarter, auction values were down about $1,000 in the fourth quarter. I will point out in January we have seen auction prices increase roughly $1,000 from December.

Lease placements continue to shift toward cars and crossovers and away from full-size trucks and SUVs. In the fourth quarter 2008 cars and crossovers represented 74% of new placements, and that is up from 58% in the fourth quarter of 2007 and 71% in the third quarter 2008. Our lease portfolio is presently represented by 53% cars and crossovers and is up from 42% one year ago.

Our worldwide net investment in operating leases was $22.5 billion at year-end 2008, down about $7.2 billion compared with year-end 2007, primarily reflecting the impairment of certain North American operating leases, lower per-unit acquisition cost reflecting a mix shift in the lease portfolio to cars and crossovers, and lower lease placements in the second half of 2008. With that I'll turn it over to Neil.

Thanks, K.R., and good morning, everyone. I'd like to begin on slide 14 by discussing the external funding environment. We, like every other finance company, are facing numerous challenges in funding our business. Despite these challenges, we have executed our funding plan, we've maintained our cash balance, and as of December 31st, we have liquidity available for use of $21 billion or about 18% of our managed receivables. We achieved this by planned and market-driven reductions to managed receivables, the renewal and utilization of some of our committed capacity, and the completion of private funding transactions. These efforts were supported by utilization of the US Commercial Paper Funding program and the European Central Bank's financing facility.

As we move forward, there are still many challenges remaining related to the volatile and unpredictable credit markets. Our key concerns include access to private and public term securitization, asset-backed commercial paper, unsecured debt and hedging instruments.

Moving to slide 15, I'd like to re-emphasize that we continue to view Ford Credit as a strategic asset and are committed to funding the business under the present ownership structure. Ford Credit's funding strategy remains centered on maintaining liquidity to meet our short-term funding needs including holding substantial cash balances. We are maintaining our funding programs and structures so that we are prepared to access the public markets when they reopen.

We are planning to renew our committed capacity throughout the year, and will utilize government-sponsored programs for which we are eligible. Until market access returns, utilization of government-sponsored programs in the US and around the world will be an important component of our short-term funding plans.

We have already utilized the CPFF and the ECB facilities, and are planning on using the TALF facility when launched next month. Gaining approval of our application for an ILC is also a component of our 2009 funding plans, as it will provide us access to lower cost diversified funding from certificates of deposit.

Finally, we will continue to explore and execute alternative business and funding arrangements in those locations where we lack diverse funding capability, while also ensuring that Ford has continued support in these markets if needed.

Slide 16 shows the trends of our funding of our managed receivables. As K.R. mentioned, at the end of the fourth quarter, managed receivables were $118 billion, down $29 billion from year-end 2007, and down $12 billion from September 30. We ended the quarter with $23.6 billion in cash, including $5.5 billion to support on-balance sheet securitizations.

Securitized funding was 62% of managed receivables at the end of the fourth quarter. Cash and securitized funding were higher than our prior forecast as market uncertainties led us to fund a greater percentage of our standby liquidity. We expect our managed receivables will decline further in 2009 reflecting lower US and European industry volumes and as we continue to transition the origination of Jag Land Rover and certain Mazda businesses to other finance providers.

We are projecting 2009 year-end managed receivables in the range of $90 billion to $100 billion, with securitized funding representing 55% to 60% of managed receivables.

Slide 17 shows our term funding plan for Ford Credit, which does not include our short-term funding programs, or asset sales to our on-balance sheet asset-backed commercial paper program. For 2008, we completed $42 billion of term funding. Public market transactions totaled $13 billion, including $11 billion of securitizations and $2 billion of unsecured debt.

In addition, we completed $29 billion of private transactions, which were largely asset-backed transactions. For 2009, our public term funding plans are in the range of $5 billion to $12 billion, consisting of $5 billion to $10 billion of public securitizations, and up to $2 billion of unsecured debt.

We continue to have private funding sources in addition to the public markets. These are largely asset-backed securitization programs for retail, wholesale, and lease assets in various countries around the world. For 2009 we are forecasting $10 billion to $15 billion of private funding. Beginning in November 2008 rating agencies have either downgraded, or placed under review for possible downgrade, certain notes of our public and private term securitizations in the US, Canada and Europe as they reevaluate their rating criteria.

Slide 18 details our liquidity programs and our utilization. The top box shows Ford Credit's committed capacity in our liquidity programs which include unsecured credit facilities, FCAR lines, a multi-asset facility, and conduit capacity. The multi-asset facility is committed to fund multiple asset classes including US lease, dealer floor plan, and assets that are more difficult to securitize.

As of December 31st, we had $69.3 billion of capacity in cash. After excluding securitization cash and adjusting for available assets, liquidity was $59 billion of which $37.6 billion had been utilized, leaving about $21 billion available for use at our present eligible asset level. This is down about $3 billion from the third quarter, consistent with the overall reduction of the balance sheet. Available liquidity as a percent of managed receivable is 18%, about flat with third-quarter levels.

Our cash that is not related to securitization totaled about $18 billion at quarter-end, up about $4 billion from the third quarter. In addition, we have $4.8 billion of excess capacity which provides incremental funding sources for future originations.

Consistent with the overall market, we have seen lower demand for our FCAR asset-backed commercial paper. As of December 31st, $7 billion of the FCAR commercial paper program was placed with the government's CPFF program. For 2008 in total, we renewed $24 billion or about 77% of our committed capacity that came due, including the renewal of our 364-day FCAR commitments in June.

In the fourth quarter, we renewed 39% of our $5.2 billion of committed capacity that was up for renewal. The lower fourth-quarter renewal percentage included the nonrenewal of a $2 billion portion of our multi-asset facility. Prior to that facility expiring, the program was fully funded. In addition to the lower renewal rate that we experienced in the third and fourth quarters of the year, second-half renewals were also completed at higher costs. In 2009, we have about $32 billion of committed capacity up for renewal.

Moving to slide 19, this slide reflects the principle maturities of Ford Credit's on-balance sheet consolidated assets and debt over upcoming annual periods. Assets include finance receivables, leases and cash. Virtually all of the wholesale receivable maturities are reflected in 2009 and we have now shown all floor plan asset-backed securities in 2009 to match debt with the assets regardless of the ABS transaction contractual maturities. All of the FCAR asset-backed commercial paper is also reflected in the 2009 debt maturities.

As you are aware, Ford Credit's asset-backed commercial paper is fully supported by bank liquidity facilities that could obligate the banks to fund for the underlying term of the assets. The overall message of the slide remains the same -- Ford Credit's balance sheet is inherently liquid. Assets scheduled to mature in 2009 exceed debt coming due in the same year by $18 billion. Asset maturities exceed debt maturities on a cumulative basis in each of the extended periods shown on the slide. And as a reminder, this slide is updated once a year when we release our full-year results.

So in summary on slide 20, Ford Motor Company reported 2008 pretax losses from continuing operations excluding special items of $6.7 billion. Net income, including special items, was a loss of $14.6 billion. Automotive cash at year-end was $13.4 billion. Cash together with available automotive credit lines provided total automotive liquidity of $24 billion.

As we mentioned, we provided notice today to our banks to fully access the available capacity in the secured credit line.

For Ford Credit the full-year pretax loss excluding impairment was $473 million. The full-year pretax loss was $2.6 billion including the second-quarter impairment charge of $2.1 billion for operating leases, and the net loss was $1.5 billion.

Ford Credit continues to provide funding to support its dealers and its customers.

The external funding environment remains a challenge. And in 2008, Ford Credit completed $42 billion of term funding. Ford Credit's liquidity available for use is about $21 billion of which $18.1 billion is in cash, and committed asset-backed funding is $4.8 billion.

And with that I'll turn it over to David to start the Q&A session.

Thank you, Neil. Ladies and gentlemen, we're going to start the question-and-answer session now. Katina, can we please have the first question?

(Operator Instructions). Monica Keany, Morgan Stanley.

Hi, good morning. I was wondering if you could talk a little bit about the renewal rate in Q4. You talked about -- I think you said it was about 39%. And then you talked about the nonrenewal aspect, about $2 billion. Did you want some of that $2 billion to lapse? Was it too expensive? Or is it the fact that you're shrinking, you just simply don't need as high a renewal rate? Can you give us a little more color behind that?

I think it was probably a combination of all three of those, the latter one probably was the biggest one which was just the overall shrinkage of the balance sheet. And as I said, I think the key to that was just before it expired we filled it with assets. So it's still out there from a standpoint of holding our assets and those we'll liquidate over time. But that was the biggest piece because that was $2 billion of the $5.2 billion that was available for renewal.

And that $2 billion, what type of assets would that be? And are those assets that -- that type you wouldn't necessarily be originating anymore because it's harder to finance?

No, I think that facility has a lot of flexibility from a standpoint of multi-assets. And I think it was just the right thing for us to do is to let that facility expire and fill it with assets prior.

Would you anticipate that the run rate for renewals going forward is going to be in that area? Do you think it's going to be higher? I mean, obviously the environment is getting somewhat tougher, but I'm just trying to figure out -- obviously the balance sheet is shrinking a good deal next year. So the renewal rate you obviously don't need at 100%. Can you give us sort of a sense of what on average renewal rate, given what your managed receivable target is, you would really need to achieve?

I think at this point we'd rather not say.

Okay. Can you also give us a sense -- I don't know if you gave us this or not. For the 1,200 headcount, what is the total savings for that that you expect and the cash cost for that?

Yes, Monica this is K.R. We won't give you a savings with the 1,200 reduction, but it's fairly simple to figure out. But as far as the cost, we will 8-K today as well that the total cost of the program will be about $70 million. And that $70 million would include not only involuntary separations, but include relocations and other things that will be associated with our total restructuring.

Okay. And then my last question is -- you had alluded to the fact that Manheim obviously was a lot worse sort of sequentially, sort of the October/November timeframe, it wasn't as bad as in December. Can you talk about -- obviously you took that impairment charge in Q2 and I think in the third quarter things did a little better than you expected and how do things look in Q4 versus your expectations? And then how do you feel you're reserved right now for '09 given what Manheim has been trending at?

Okay. Well as far as reserves real quickly -- on the depreciation, it's really not like a reserve, like a credit loss reserve. It's more of an ASD build, building up depreciation and we believe it's appropriate. When we came in through the second quarter, really April, May, June, you saw the auction market just really drop off dramatically and that's when we got ourselves looking at the impairment, took the impairment in the second quarter.

At that time we had expected that the third quarter would actually see a deterioration in auction values, which is traditionally what you see in the third quarter as the model year ages. But what happened was the third quarter actually improved. And then we got into the fourth quarter and the auction market started to fall off again. It fell off particularly in November and it fell off again in December. And I think you can see basically the same data with the Manheim index. We kind of track along with it. It's not perfect but it's close.

And then, like I said, it fell off in December again and then we get to the first three weeks of January, we've actually seen about a $1,000 improvement in auction values. And by the way, all my commentary -- I always do it at a constant mix to try to take out some of the variables that come along with the changing in the portfolio and the like. So just that constant mix to give you an overall perspective of it.

Okay, great. Thanks.

Brian Jacoby, Goldman Sachs.

Hey guys, good morning. I have a few questions. Just on -- maybe on slide 19 where you give the breakout on the amortization of the assets and the debt, can you give us an idea of just the retail versus wholesale and maybe how specifically '09 and 2010 looks if possible? And then I had two other quick questions.

Yes, I think retail and wholesale are about the same in the first year and lease is about half of retail.

Okay. And if you -- I mean right now in '08 we saw severity at close to $10,000 and if we were to experience '09 to jump up to something like $15,000 which is almost more than double what we saw back in the last big downturn, but let's just say we got there. I mean, how confident are you that your assets, based on what you're reserving, what you're projecting, would actually cover the debt over the next couple years?

Well, what you're getting at is another even larger decline in used-car prices at that point in time. We didn't see that kind of a decline this year. It may be much larger than that under that scenario. But it's hard for me to predict where auction values are going at this point in time, so I can't really give you anything -- any better guidance.

Okay. And then two others. You had mentioned last quarter, you talked about how Mazda, Jaguar, Land Rover, the runoff of those portfolios, how they'll have an impact on liquidity from a positive perspective. Can you just give us an update on, again, how those portfolios as they run off the timeframe and just the magnitude? And then the last question I had was if obviously things did not work out as planned could you guys perhaps delay paying a dividend to the parent or is that something that clearly would have to be negotiated with the parent?

I'll cover the Jaguar, Land Rover and Mazda one first. When you look at the Jaguar, Land Rover and the Mazda portfolio that we have on our books, we have $118 billion in managed receivables in total. Jaguar, Land Rover represents about 6% or 7%. Mazda represents about 6% or 7% of that total. Wholesale obviously runs off much quicker as it transitions out, the retail and the lease will take you several years to roll off. So you'll see a nice drop in the first year and that's why we're telegraphing that, the balance sheet will be down to about $90 billion to $100 billion.

By the way, I don't want to confuse -- we do think industry volumes will be lower so that will also drive the balance sheet down. As far as the dividend, it's very straightforward. It is something that is approved by the Ford Credit Board. It is something that we take into consideration. Our funding situation, as always -- if you remember at the beginning of 2008 our plan was that we would pay roughly a $3 billion dividend during 2008. And because the funding environment deteriorated the Board agreed that we would not pay that dividend. So going forward I'll give you the same caveats, but our plan is that we'll be able to fund the business well and we'll be able to pay dividends.

Okay, thank you.

Eric Selle, JPMorgan.

Sorry about that feedback. I don't know if you guys got that. Good morning. Can you give me some color on the cash slide on the Ford Motor slides? The $1.3 billion tax reconciliation, can you give me some color on that? What does that involve? The tax refund from affiliates.

Yes, I'll take it from the credit point of view since I paid it. The payment primarily reflects the settlement of 2007 federal and state income tax liabilities consistent with the Ford Credit tax sharing agreement. And basically these liabilities were primarily generated by the reversal of deferred taxes that were associated with the Ford Credit leasing portfolio.

Okay. Back to the prior question about dividends, I mean do you guys see -- how do you characterize the turning back onto the dividends? I mean, is that a sign in confidence in Ford Motor Credit's liquidity or are you more worried about Ford's liquidity?

As I mentioned to Brian just a second ago, I think it is -- it is a Ford Credit decision and it's about how the Ford Credit Board feels about the funding environment and how things are going moving forward. There's no obligation that we have to pay a dividend but our plan is to pay a dividend both in '09 and in 2010. So really it boils around the whole funding environment and our liquidity levels and if we're comfortable.

And looking at that with liquidity and the asset roll-off, do you guys -- are you confident in being able to meet your '09 maturities without government assistance or without capital markets access? I mean, let's say that you're totally freezed out of the capital markets, do you think you can meet the maturities with just asset roll-off?

No, I think from that perspective I think that the government -- as we said earlier, the government-sponsored programs, the CPFF and the TALF as well as the ECB program, are a bigger piece of our overall funding strategy. The asset runoff helps but it's not a complete solution.

Okay. And then looking at managed charge-offs, definitely understand the dynamics in the fourth quarter but those are growing at 20% sequentially. Is that rate going to continue or should we see that abate as we get into easier times?

Easier times. I'll be honest with you, I'm just not comfortable exactly where the economy is going. I do believe that with the stuff that the government is doing and the fiscal stimulus that it will help out in the second half of the year, but there's a lot of stress out there in the consumer base. We are seeing it in delinquencies. We are seeing it in repossessions.

And as I mentioned earlier, one of the good things that seems to be happening right now, at least in January, is auction markets are coming back. So I'm getting conflicting signals of where all the economy is heading. And so it's hard for me to give you a forecast at this point in time and that's kind of why we decided it would be prudent for us not to provide a forecast this year.

But the stability in the auction market is somewhat encouraging I would imagine.

The first three weeks of January. But then to be honest, I was very encouraged in the third quarter of 2008 and then it went off in the fourth quarter.

And then just one final question if I could sneak it in. You guys obtained Job Bank's concession without a "shared sacrifice" from your bond equity and management. I mean, do you guys think you can get parity of concessions without that shared sacrifice of bondholders, equity holders and management?

This will be clearly part of the negotiations with the UAW. I think it's fair to say that the UAW's expectation is there will be shared sacrifice. So we'll have to go through the discussions with each of the stakeholders.

Okay, thanks a lot, guys.

Sarah Thompson, Park Place (sic) Capital.

Hi, it's Sarah Thompson with Barclays. A question about the ABS and I apologize because I am very novice at the ABS market. But given the --.

Sarah, we're having (multiple speakers).

Sarah, can you talk louder please?

Sorry, is that better? Okay. A question on the ABS, and I apologize because I am not an expert in this area at all. But my understanding of the way that you got risk on the ABS wholesale or floor plan financings given the ratings actions, I'm just curious what the options are in terms of do you put more collateral into them, do you take loans out of them, do you just let them go into early am and hope that you can pick it up in the TALF? How do you think about that?

I think -- for one, I don't think there is any early amortization from the rating actions that have been taken. I think the rating agencies have taken a step back and have started to reevaluate their models given the capital market turmoil and the economic turmoil. And I think we'll have to wait and see how some of that resolves before we think about top-ups or think about putting more enhancements into transactions.

Okay.

But I think we are in an active dialogue with them. We are working not only with them, but we work with investors. We give them our portfolios. We show them how the assets are performing. That justifies the structures we have today and that's not only here but also in Europe.

Great. That's helpful. And then on the ILC, I know you guys haven't been approved and I know you've said that it's part of your funding plan but not a huge part for the year. So if we think about it, if you guys got ILC status and you were able to participate under the loan guarantee program, then that would obviously be a significant positive versus what you're planning for right now?

Yes, I think what's the base plan that has the ILC in it does not assume anything coming from the TLG program. So to the extent that we got the ILC and got access to the guarantee program as an affiliate of the ILC, that would be an opportunity to the existing plan.

Terrific. And can you just tell me at this point -- I realize it is all very hypothetical, but assuming that you could and you met the requirements, how much debt you would have that would fall within that September 30th to June 30th time period?

Yes, it's in the sort of $10 billion range.

Terrific. That's all I had. Thank you very much.

Doug Karson, Bank of America Merrill Lynch.

Good morning. You've touched on the industrial loan status. Could you characterize it we're in the final stages of the negotiations? Because it's been going on so long and it seems that there's a lot of emphasis to try to help here. I'm just wondering what's taking so long for getting that status and if we're kind of at the final stages.

I don't want to characterize at what point or what stages we're in with them. I mean, we continue to have discussion on our application and that's just ongoing at this point in time.

Okay, thank you. And then I look at slide 17. On the funding, it looks like the forecast for the private transactions is $10 billion to $15 billion. It's about half of what we had in '08 and '07. Is that more of a function of originations falling and less need or the market?

No, it's definitely a function of -- a combination of the assets coming down, the level of maturing debt and what we need as incremental funding. So this is sort of the amount of total funding that we need in these two markets as a result of our cash outflows as debt matures plus the inflows as assets get originated.

You've got to remember, we've come off of last year -- last year we -- in 2007 we ended our balance sheet about $147 billion in managed receivables and we're heading by the end of this year down to between $90 billion and $100 billion. So there's a substantial reduction.

And I think the other piece, if you go back and look at what we said our full-year 2008 numbers were going to be relative to where we ended the year, we did pre-fund some of the first-quarter needs in the fourth quarter and we ended the year with a much larger cash balance than we were projecting. So there's a combination of that as well.

All right, so some of that Q1 like '09 was kind of pulled into '08?

Correct.

Okay, great. That's it for me, guys. Thank you.

Josh Lipchin, Eaton Vance.

Hi, thank you. Can you give us your managed leveraged targets for the end of 2009 and into 2010?

No, we're not providing any kind of guidance. What I will tell you, Josh, is that we ended '08 at 9.9. We have said that the credit company, based on the risk of the assets, have always been comfortable with at least 11.5 to 1, but based on our plans right now we won't even come close to that. We'll be substantially below that.

Okay. And then with respect to the ILC, obviously there are affiliate rules that kind of limit what you can do there. Is it your expectation to ask for some relief with respect to those rules or do you plan to find other ways to do floor plans so you can originate more retail?

All we can say at this point in time is we continue to have discussions with the FDIC on the ILC.

Okay. All right, great. Thank you very much.

Ladies and gentlemen, that concludes today's call. Thank you for joining us.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day.