福特汽車 (F) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ford Motor Company's fixed-income earnings conference call. My name is Katina and I will be your coordinator for today. At this time all participants are in 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'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 also have some other members of management who are joining us for the call, including David Brandi, Assistant Treasurer; Mike Seneski, 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 website for your reference. We have one correction to a slide, and that is on slide 14. The date should show as March 31, 2009. Some slides may be showing it as 2008.

The financial results discussed herein are discussed on a preliminary basis. Final data will be included in our Form 10-Q for the quarter ended March 31, 2009.

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 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 is summarized at the end of the presentation.

These risk factors are detailed in our SEC filings including our annual, quarterly, and current reports with 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 in the first quarter were 973,000 units, down 558,000 from the same period in 2008. First-quarter revenue was $24.8 billion, a $14.4 billion decrease from a year ago. The decrease is primarily explained by lower volume and unfavorable exchange, partly offset by higher net pricing.

Our first-quarter pretax operating loss excluding special items was about $2 billion, over a $2.6 billion decline from a year ago, when we were profitable. This decline includes $2.5 billion in automotive and $126 million in financial services.

Our first-quarter net loss attributable to Ford was $1.4 billion, including a pretax special items gain of $362 million.

We ended the quarter with $21.3 billion of cash, down about $7.4 billion from a year ago. This will be discussed in more detail later.

On slide 2, we cover special items, which resulted in a pretax gain of $362 million in the first quarter. In North America, we recorded a charge of $171 million, largely related to personnel reduction programs in the US. We recorded a gain for job security benefits of $292 million, which primarily relates to the elimination of the Jobs Bank which was part of the modified agreement reached with the UAW.

We recognize an $81 million dealer related charge which primarily reflects the investment write-off related to the proposed sale of dealerships in the dealer development program. This initiative provides an opportunity for qualified operators to become private capital owners of a dealership.

We recorded a charge of $178 million for retiree healthcare and other related costs, which is primarily related to the UAW retiree healthcare VEBA agreement.

We recognized a $1.3 billion gain primarily associated with the repurchase of $2.2 billion of our term loan debt and $234 million of unsecured notes. This reflected the difference between the book value of the debt and the market price at which the debt was repurchased. During the second quarter, we expect to realize about a $3.4 billion gain on the debt restructuring completed in early April. Our debt restructuring actions will be covered in more detail later.

At the end of the first quarter, based on the status of our strategic review of Volvo, we concluded that the criteria for held-for-sale status has been met, triggering an impairment test that resulted in an impairment charge of about $700 million. This amount reflects the difference between the book value and estimated fair market value of Volvo as held for sale, net of estimated disposal costs.

Finally, we recorded an impairment of our equity investment in Diversified Financial Operations partnership of non-core lease assets.

Slide 3 shows automotive cash and cash flow. We ended the first quarter with $21.3 billion of gross cash, up $7.9 billion from the fourth-quarter 2008. Our automotive operating related cash flow was $3.7 billion negative in the first quarter, reflecting an automotive pretax loss of $1.9 billion.

Capital spending during the quarter was about $300 million higher than depreciation and amortization. Changes in working capital resulted in over $1 billion of positive cash flow due to higher payables, lower inventories, and lower receivables. This improvement, however, was more than offset by timing differences in marketing, warranty, retiree healthcare payments, and in-transit receivables.

Payment of $500 million to Ford Credit reflecting our change to upfront payment of subvention as I mentioned. Excluding the impact of the change to upfront subvention payments, our automotive operating related cash flow was $3.2 billion negative.

This outflow in the first-quarter is less than half of the outflow during each of the third and fourth quarters of 2008, despite further decline in volume, in part related to actions taken to reduce dealer stocks. The improvement is due primarily to improved working capital, lower automotive pretax losses, and lower net spending.

Further changes in gross cash that in total more than offset the operating related cash flow included personnel reduction programs of $300 million, pension contributions of $400 million, net impact of $2 million related to the conversion of assets in the temporary asset account set aside for the VEBA healthcare trust into a new Ford note as discussed in January, accessing our revolver line of credit of $10.1 billion also discussed in January.

Including all of these impacts, the total increase in gross cash during the first quarter was $7.9 billion.

Now on to slide 4 which shows the status of our 2009 first-quarter planning assumptions and operational metrics. Total industry volume during the first quarter was equal to a SAAR of 9.8 million units in the US and 14.8 million units in the 19 markets we track in Europe. We expect the full-year US industry volume to be at the lower end of the range previously defined, based on the present economic environment, with potential upside in the second half of the year from government fiscal stimulus programs and the potential for fleet modernization programs.

As a result of the implementation of government stimulus programs focused on replacing [all the] vehicles with more fuel-efficient ones, European industry volume now is expected to be higher than our plan, in the range of 13.5 million to 14.5 million units.

On the operational metrics, initial quality of Ford, Lincoln and Mercury brand vehicles improved in the US by 5% as compared to last year, surpassing Honda and essentially tying Toyota, for the overall lead according to the latest Global Quality Research Systems study of US vehicle quality.

International operations show an improvement in the latest GQRS initial quality results, with the exception of Europe, where we experienced some near-term issues which we're working to address.

Customer satisfaction with vehicle quality is improving in North America, Europe, and Asia, reaching its highest levels ever in North America.

Automotive structural costs were reduced by $1.9 billion, which is on track to exceed our plan. US market share was 13.9%; and retail share of retail market was 12.7%, which are both consistent with our plan.

European market share was 9.4%, on track with our plan.

Automotive operating-related cash flow was $3.7 billion negative, again on track with our plan. And our capital expenditures were $1.4 billion, also consistent with our plan.

On to slide 5. As previously announced, we have completed debt restructuring initiatives that have reduced automotive debt by $10.1 billion of par value and will lower annual interest payments by more than $500 million. Ford and Ford Credit utilized $2.6 billion in cash plus 468 million shares of Ford common stock to complete the debt restructuring.

The term loan was completed March 27 and will be reflected in our first-quarter financial statements. The other major components of the debt restructuring were completed April 8 and will be reflected in our second-quarter financial statements.

This successful debt restructuring, coupled with previously announced agreements with the auto union, will substantially strengthen Ford's balance sheet. I will now turn it over to K.R.

Thanks, Peter, and good morning, everyone. Slide 6 shows Ford Credit's operating results and key metrics for the first quarter of 2009. We simplified this slide and the credit loss metrics slide to focus more towards on-balance sheet metrics due to the liquidation of our off-balance sheet receivable portfolio. For example, off-balance sheet receivables are now only about $500 million.

As shown in the left box, our first-quarter pretax loss was $36 million compared with a $32 million pretax profit in the first quarter of 2008. Shown below the left box, excluding the impact of net losses related to market valuation adjustments to derivatives, the pretax loss was $12 million compared with $194 million pretax profit in the same period of 2008.

The net losses related to market valuation adjustments were $24 million in the first quarter of 2009 compared with net losses of $162 million in the same period last year.

You can see in the box on the right our March 31 on-balance sheet receivables were $104 billion, about $39 billion lower than a year ago.

Our managed receivables were $106 billion, about $42 billion lower than a year ago. This decline primarily reflects lower industry volumes, lower dealer stocks, changes in currency exchange rates, and the impact of divestitures and alternative business arrangements.

At March 31, 2009, both on-balance sheet and managed receivables were $12 billion lower than the fourth-quarter 2008. This decline primarily reflected lower receivables in North America and Europe, reflecting lower industry volumes, lower dealer stocks, and the transition of Jaguar, Land Rover, and Mazda financing to other finance providers.

Our financing share of the US Ford, Lincoln, and Mercury retail installment and lease contracts was 31% in the first-quarter 2009. This was 6 points lower than the same period last year, which was more than explained by our reduction in leasing.

Chargeoffs for on-balance sheet receivables in the first quarter were $332 million. And the worldwide loss-to-receivable ratio was 121 basis points, up 57 basis points from last year. I will speak more on this in a few minutes.

At March 31 the allowance for credit losses for on-balance sheet receivables was $1.7 billion or 160 basis points of receivables. The allowance was about $45 million higher than fourth quarter of 2008, and up about $500 million from a year ago.

In the first quarter we completed a cash tender offer for a portion of Ford's senior secured term loan debt term for $1.1 billion of cash. This debt was distributed to our parent, Ford Holdings LLC, whereupon it was forgiven.

This distribution of $1.1 billion is consistent with our previously announced plans to pay total distributions of about $2 billion through 2010. We will balance additional returns of capital with the successful execution of our funding plan.

At March 31, our managed leverage was 10-to-1 compared with 9.5-to-1 at March 31, 2008, and compared to 9.9 at the end of 2008.

At the end of the first-quarter 2009, our equity was about $9.3 billion.

Slide 7 explains the change in Ford Credit's pretax profits for the first quarter of 2009 compared with the first quarter of 2008. As previously mentioned, Ford Credit's pretax loss was $36 million in the first quarter, a $68 million decline from a year ago. The decrease in earnings primarily reflected lower volume and a higher provision for credit losses.

These factors were offset partially by lower depreciation expense for leased vehicles and lower net losses related to market valuation adjustments to derivatives. Lower operating costs were offset partially by higher other expenses, including restructuring costs.

Volume was lower compared with a year ago, reflecting the decline in the receivables. The increase in the provision for credit losses is more than explained by higher repossessions, higher severity, lower recoveries, and higher wholesale and dealer loan losses in the US, and higher credit losses in Spain and Germany.

Residual losses declined in the first quarter compared with last year. This decline primarily reflects lower residual losses on vehicles returned in the first quarter of 2009 and lower depreciation expense.

Ford Credit's first-quarter auction values improved compared with the fourth-quarter 2008; but we expect them to continue to remain volatile.

Our international segment, which is primarily Europe, was profitable in the first-quarter 2009, although at a lower level than in the same period last year, primarily reflecting a higher provision for credit losses, changes in currency exchange rates, and lower volumes.

However, our North American segment was unprofitable in the first quarter of 2009, primarily reflecting lower volume and a higher provision for credit losses, offset partially by lower depreciation expense for leased vehicles.

Slide 8 shows quarterly trends of chargeoffs and loss-to-receivable ratios for our on-balance sheet portfolio. The top box shows loss-to-receivable ratios for the worldwide portfolio and loss-to-receivable ratios for the US Ford, Lincoln, and Mercury retail and lease business. Both worldwide and US Ford, Lincoln, and Mercury loss-to-receivable ratios are up in the first-quarter 2009 from year-ago levels, primarily reflecting higher repossessions, higher severity, lower recoveries, and higher wholesale and dealer loan losses in the US, as well as higher credit losses in Spain and Germany.

The worldwide first-quarter 2009 loss-to-receivable ratio was slightly worse than the fourth quarter of 2008. Ford, Lincoln, and Mercury US first-quarter 2009 loss-to-receivable ratio on the retail and lease business improved from the fourth-quarter 2008, reflecting lower severity and higher recoveries, offset partially by higher repossessions.

Chargeoffs in the first-quarter 2009 were $332 million, which was up $103 million from a year ago, reflecting the same factors mentioned before.

Slide 9 shows the primary drivers of credit losses in the US Ford, Lincoln, and Mercury retail and lease business. Repossessions in the first quarter were 25,000 units, up 5,000 units from the first quarter of 2008 and up 3,000 units from the fourth quarter of 2008.

Severity of $9,300 in the first quarter was $500 higher than last year, primarily due to a higher mix of 72-month contracts for vehicles repossessed in our portfolio. Severity was $1,400 lower than fourth-quarter 2008, more than explained by improvements in auction values in the used vehicle market.

While averaging $9,300 a unit in the first quarter, we saw steady improvements in each month, ending at $8,800 severity in March. This is primarily a reflection of the improvements in the auction market.

Over-60-day delinquencies totaled 29 basis points in the first quarter, up 1 basis point from the fourth quarter of 2008. Although still low and within our expectations, delinquencies are up 7 basis points from last year.

Bankruptcy filings totaled 11,000 in the first quarter, up 1,000 compared with the fourth quarter of 2008 and up 3,000 from the first quarter of 2008. The credit quality of our contract placements remained very good. We continue to closely monitor all key loss metrics above for any additional deterioration related to broader trends in the overall economy.

Slide 10 shows the lease residual performance for the Ford and Lincoln Mercury US brands. Lease return volumes totaled 44,000 units in the first quarter, down 4,000 from the first quarter of 2008. Return rates were up 3 points to 89%, consistent with auction values that were lower than expected at the time of contract purchase.

In the first quarter, auction values for 24- and 36-month lease vehicles at constant mix were down on average about $300 per unit and $400 per unit, respectively, from year-ago levels, primarily reflecting the overall auction value deterioration in the used vehicle market. However, compared with the prior quarter, auction values were up dramatically by about $2,100 a unit and $1500 a unit for 24- and 36-month lease vehicles, respectively.

Lease placements continue to shift toward cars and crossovers and away from full-size trucks and SUVs. In the first quarter, cars and crossovers represented 88% of new placements, up from 58% in the first quarter of 2008 and 74% in the fourth quarter of 2008. Our lease portfolio is presently 55% cars and crossovers, up from 46% one year ago.

Our worldwide net investment in operating leases was $20.2 billion at the end of the first quarter of 2009. With that, I'll turn it over to Neil.

Thanks, K.R. I would like to begin on slide 11 by re-emphasizing that we continue to view Ford Credit as a strategic asset and are committed to funding the business under the present ownership structure despite the challenges of the credit markets.

Ford Credit is maintaining its funding programs and securitization structures. We plan to renew committed capacity consistent with the size of the balance sheet, and we will utilize government-sponsored programs for which we are eligible. In the near term, utilization of government-sponsored programs in the US and around the world will be an important component of our funding plans.

We continue to utilize the Commercial Paper Funding Facility and the European Central Bank's facilities; and in March we completed a Term Asset-backed Loan Facility, better known as TALF, --eligible $3 billion auto loan securitization transaction.

Gaining approval of our application for an Industrial Loan Corporation is also a component of our funding plan. It will provide us access to lower-cost diversified funding from FDIC-insured deposits.

We will continue to explore and execute alternative business and funding arrangements in those locations where we lack diverse funding capability, while also ensuring the funding has continued support for these markets.

We remain concerned about the credit markets' access for public and private securitizations, asset-backed commercial paper, unsecured debt, and hedging instruments. As a result, we continue to focus our attention on the funding of our dealer floorplan receivables, as recent credit rating announcements will make future funding more challenging.

Ford Credit's funding strategy remains focused on maintaining liquidity to meet short-term funding obligations, including holding substantial cash balances.

Slide 12 shows the trends of funding of our managed receivables. As K.R. mentioned, at the end of the first quarter managed receivables were $106 billion, down $12 billion from year-end 2008. We ended the quarter with about $19 billion in cash, including $5.4 billion to support on-balance sheet securitizations.

Securitized funding was 61% of managed receivables at the end of the first quarter. We are projecting further receivable declines in 2009, primarily reflecting lower industry volumes and the transition of Jaguar, Land Rover, and Mazda business to other finance providers. We are now projecting 2009 year-end managed receivables in the range of $85 billion to $95 billion, with securitized funding representing 55% to 60% of managed receivables.

Slide 13 shows our term funding plans 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. Through April 23 we have completed about $5 billion of term funding. About $4 billion of this funding was public, including our $3 billion TALF-eligible US auto loan securitization completed in March, as well as a German lease securitization that we funded through the ECB's open market operations program. In addition, we completed about $1 billion of funding through our private channels.

Regarding the TALF program, we are pleased to have participated in the March issuance. We plan to continue to make our public retail and lease issuance TALF-eligible. Given present program rules, our dealer floorplan assets are not eligible for issuance under TALF. However, we continue to work on gaining TALF eligibility for floorplan assets.

For 2009, our public term funding plans are in the range of $10 billion to $15 billion, consisting of $8 billion to $13 billion of public securitization and up to $2 billion of unsecured debt. We continue to have private funding sources in addition to 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 $5 billion to $10 billion of private funding.

During the first quarter, Moody's and Standard & Poor's downgraded certain notes of our lease and floorplan securitizations. This month, Fitch downgraded certain notes of our rated US floorplan securitizations.

Slide 14 details our liquidity programs and utilization. The top box shows Ford Credit's committed capacity to our liquidity programs, which include unsecured credit lines, FCAR asset-backed CP lines, a multi-asset facility, and asset-backed conduit capacity. The multi-asset facility is committed to fund various asset classes including US lease, dealer floorplan, and assets that are more difficult to securitize.

As of March 31, we had $63 billion of capacity and cash. After excluding securitization cash and adjusting for available assets, liquidity was $47.4 billion, of which $30.2 billion was utilized, leaving about $17 billion available for use given our present level of eligible receivables.

Available liquidity as a percent of managed receivables was 16%, down about 2 percentage points from the fourth quarter of 2008. Our cash that is not related to securitization totaled about $14 billion at quarter-end, down about $4 billion from the fourth quarter of 2008.

In addition, at quarter-end we had excess capacity of about $10 billion to support securitization transactions, the majority of which are available for US retail auto loan assets.

As of March 31 and unchanged from year-end 2008, $7 billion of the FCAR program was placed with the Federal Reserve's CPFF program.

About $30 billion of the $44 billion of committed capacity is up for renewal before year-end. During the first quarter of 2009, we extended the renew dates of about $2 billion of our floorplan conduit commitments, mostly into the second quarter. We plan to renew committed capacity consistent with the size of the balance sheet.

In summary, Ford had a pretax loss of about $2 billion excluding special items and a net loss of $1.4 billion including special items.

First-quarter-end automotive gross cash was $21.3 billion. We reduced automotive debt obligations by $10.1 billion and lowered annual cash interest expense by more than $500 million.

For Ford Credit, the pretax loss was $36 million and net loss of $13 million. Excluding the net loss related to market valuation adjustments to derivatives, the pretax loss was $12 million.

Ford Credit continues to provide funding to support its dealers and its customers. The external funding environment remains challenging.

Ford Credit completed $5 billion of term funding including $3 billion of TALF-eligible funding in the first quarter. Ford Credit's liquidity available for use is about $17 billion, of which $14 billion is in cash.

And now I would like to turn it back to David to begin the Q&A session.

Thank you, Neil. Ladies and gentlemen, we are 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 on the loss-to-receivables ratios, is that seasonally --? I saw if you look at Q4 '07 to Q1 '08, it didn't really move that much; and that was again the case. But was that better than your expectations? Or is it really just a seasonality trend?

Yes, Monica. You know, when you look at LTRs, there are pieces that are seasonal. There is a bit of seasonality that goes with repossessions, I will call it, in a normal year, which we often see.

The problem that we're faced right now is nothing seems to be really normal anymore, as the economy has deteriorated. For example, when the economy deteriorates, you can see repossessions have increased; but the severity has been up and down dramatically based on what's going on in the auction market.

We saw a huge deterioration in the auction market last year, which really pushed the severity up. Then we have seen an improvement in the first quarter. So it's very hard for me to give you at this point any kind of real good comments on seasonality when it ties to the LTRs.

But would you have thought -- that that would have been worse, given the trends in the economy?

It's very hard to say. What we are seeing -- you can see the repossessions have been increasing. I do believe that part of the reason why the auction market has improved dramatically is because the brand-new vehicle market has deteriorated so much. So it's kind of hard for me to say. It doesn't surprise me, really.

Okay. Then I had a question in terms of the conduits or any conduits that either got renewed. It sounds like you said there was $2 billion of some floorplan that got done in the quarter. Was that in total that was renewed?

No, there were $2 billion that we extended predominantly into the second quarter of the amount that was maturing in the first quarter.

Okay, so was that pushed --

Or coming due.

It just got pushed out three months, you're saying?

Correct.

Okay. Was there anything else that was coming due that got pushed out or did get renewed?

No.

So the bulk of what's getting renewed is from Q2 and Q3; is that right?

Yes, we had about $4 billion in capacity that was coming due in the first quarter. We extended $2 billion of it. If you look at back at slide 14 you will notice that we had about $10.2 billion of excess capacity. As our balance sheet shrinks, we are going to be shrinking our conduit capacity to come with that.

So that's one of the reasons we extended it, and also the fact that we've got a decent amount maturing the balance of the year, spread out between second and fourth quarter.

In terms of the discussions, are the discussions revolving more about price or are they trying to also change the structure of these conduits? Because I know that what's good about the conduits now is if there was any issue with them, the assets would term out.

I think it's a combination, Monica, of both price and just right capacity. It's not structure.

Okay, so anything that would get renewed you would expect that there wouldn't be any foreclosure, right? It would continue to be the kind of thing that would just term out?

Yes, our structures have not been -- nobody is pushing back on the structure.

Okay, that's great. Then in terms of the updating on some of the distributions, I know obviously in the K you talked about distributions of $2 billion, at Ford Credit. And obviously there was this movement of the cash. Can you give us an update for the rest of the year? If you said it already I just didn't catch it.

At this point in time, Monica, all we've done as far as distributions go is we bought the term loan debt back and we contributed that to our parent. So that was about $1.1 billion.

Our plans at this point in time are still to provide about $2 billion through 2010. So $1.1 billion is done. But we're going to balance that with our funding plans.

Okay, great. Thanks.

Doug Karson, Bank of America.

Great, thanks, guys. Quick balance sheet question. With the $15 billion of cash on the balance sheet, I guess excluding what is set aside for securitizations, is there some focus on any type of restructuring or exchange on Ford Credit's balance sheet? Right now it seems the focus has been on Ford's. Given where bonds are trading is that something you're maybe looking at potentially?

I don't think we're looking at any kind of restructuring of the balance sheet at this point.

Okay, thanks. A separate question. The close to $3 billion TALF-related asset-backeds, I've heard some concerns of investors regarding obtaining funds and partnering with the government. You're closer to it than us, obviously.

What is your opinion on how the program is going? Do you think Ford Credit could continue to use this avenue for funding?

Yes, I think we were very pleased to be a part of the first transaction. I think since the program was announced, the transactions themselves and the program has evolved. When you think about it, it went back to October when it was announced originally, and it took five to six months to get up and running.

So there is clearly some things that still have to work their way through the system. The first transaction, getting the pipe set, proved the structure works.

The invest -- we had a decent amount of investors participate in our first transaction that were TALF specific. And we are continuing to work with all the parties to make sure that this becomes a viable longer-term funding vehicle. But we have a lot of confidence in the program.

The results were better than I had expected. It looks like you are running kind of close to breakeven at Ford Credit. I'm not sure; have you come out with any guidance as when you think you're going to be profitable? I know FordCo is going to be saying they're going to be above breakeven by 2011.

Do you have any targets? It looks like things have stabilized here and potentially doing better.

Yes, Doug, at this point in time we don't provide any sort of guidance. I am pleased with the first-quarter results. The thing that always worries me in this business right now has been the volatility in the auction market. Because it has really had a huge deterioration last year and then a rather large improvement in the first quarter.

In the end, a lot of our business is based on the funding in the credit markets. And as long as we maintain access to the credit markets, get our funding done, appropriately price our business, get our margins right, keep our operating costs under control, as it always has been in the past, it's a good business to be in.

Great. Thanks. That's it for me.

Jeff Skoglund, UBS.

Morning. There's been some quotes in the press from sources saying that you expect to get the same savings from the UAW that GM and Chrysler get, regardless of how those situations play out. Does that just apply to operating items like wages, workroom (technical difficulty)? Is there anything you can get additionally on the (technical difficulty) retirement obligations?

Well, we will clearly monitor the negotiations that the UAW has with GM and Chrysler; and as appropriate, we would go back and seek to remain competitive with both companies.

I think the other piece of the negotiations was the restructuring of the VEBA agreement, which allowed us to put half of the obligation in Ford stock. So there were two pieces to the new negotiations.

Okay. Then, I guess we will just have to wait and see on that. On the Volvo sale, can you just confirm what you would anticipate any proceeds (technical difficulty)?

We're not going to get into it. We not going to get into the specifics on Volvo today.

Okay. Last question on slide 9, this is a little detail question, I guess. But it looks like there is a very modest increase in delinquencies over 60 days for the pool overall. But if I go through the public trust data, it looks like some of the more recent trusts have a significant elevation in the (technical difficulty) to 90-day delinquencies. But they seem to be cured (technical difficulty) within 90 and 120 days.

So I was just wondering if you could kind of maybe talk to those and (technical difficulty) driving that? Is it just a matter of (technical difficulty) servicing (technical difficulty) as well in chasing down (technical difficulty)?

As far as the detail question, you might want to get with Dave after the call and talk to him. I'm sorry, Jeff. You might get with him after the call and get into that.

But the underlying effort within the Credit Company is across the board fairly stable from the standpoint of our effort to try to collect money. It's not like it's based on a vintage or anything. We service all the portfolio the same.

So there might be some bit of timing that gets into comparing a securitization transaction three years ago versus a securitization transaction in the last six or eight months.

But the underlying running of the business, when someone becomes delinquent we chase them down and try to work with them to get it paid up.

Thank you.

Brian Jacoby, Goldman Sachs.

Hi, guys. Good morning. Two questions. One, maybe the update on (technical difficulty) you guys are hearing anything on the status of getting Industrial Loan Bank status. There hasn't been much talk on the DOE loans for anybody. Just the focus seems to be on your other two Detroit competitors, but no talk about DOE loans.

Can you give us any color there on those two items? Then I had one other follow-up.

Yes, Brian, I will handle the Industrial Loan Bank. We continue to work with the FDIC on our application. It has been in for a while. We believe we are making some progress at this point in time. But in the end we need to make sure the bank is acceptable to both the FDIC as well as to ourselves. Hopefully we can get something done this year.

Yes, and I think specifically on the DOE, we continue to have active discussions with them. Our application has been in. It's been reviewed. They have done their due diligence. So I think we are making lots of progress to get a lot closer.

I think the expectation that we had in our cash flow projections is still solid from a standpoint of what we would expect to get from not only the DOE here in the US but also from some of the international agencies to support the local affiliates there.

Okay. Then my last question is just more of a housekeeping item. But it's on appendix 17 of 19 in your actual, your earnings slides, where you have this unsecured convert, this accounting FSP, the APB 14-1, where it looks like the reduction from $4.9 billion down to $3.3 billion.

What exactly is going on? Is that like a mark to market associated with converting it? Pre-conversion? What exactly is going on there with that, the convert note?

Yes, this is Mark Kosman. That is actually -- it is splitting into two pieces the conversion premium and putting it into equity and amortizing it back to the income statement over time. That's what you will see happening there with the standard.

So it's just breaking into the two pieces to have kind of like the regular debt and the conversion into a separate piece. That standard has been adopted as of January 1.

Okay, thank you.

Eric Selle, JPMorgan.

Morning, guys. I know $2 billion of the cash delta from year-end is because of the tender. What is the other $2 billion? How do you -- what's the explanation?

Well, I think that only $1 billion of the debt restructuring occurred in the first quarter. The rest of it occurred in early April.

I think there's a couple things going on in there. One is we had a very large debt maturity in the first quarter, which makes up more than the total amount of change in liquidity.

So we ended the year with a lot of liquidity, pre-funding in some sense the maturity in January. Then we also had a receivable reduction in the first quarter that was a partial offset to that.

Then is there anything to read into your further reduction in managed AR guidance? I think it dropped like $5 billion from year-end. Is that just you basically were at the low end of your SAAR estimate?

That's exactly right, Eric. I mean effectively the industry is going to come in a little bit lower than what we expected. We're tied in with the auto company and their projections.

So since it's more toward the lower end, we dropped our projection down to the 85 to 95.

Eric, just as a follow-on to your other question, I think the other piece that we continue to look at is liquidity as a percent of the balance sheet. As the balance sheet does shrink, liquidity will go down with it. So the percentage was pretty consistent from a year-end level to now.

Okay. Then I think you guys have around $9 billion of FCAR coming due in the second quarter. Can you speak to the ability to renew that going out?

Yes, at the end of the quarter we had about $10 billion of FCAR outstanding. $7 billion of that is with the CPFF program. So the majority of what we have coming due in the second quarter is with the Fed program, which is extendable into the October time.

How far out? Is that the -- right now that is extended through October? Is there any signs that they are going to extend that? I thought it was extended a little bit later in the year, but is there any --?

Well, it goes through October 31, which then allows you to issue 90 days. So it gets you into issuance into January.

I think the other piece of the renewal part is the fact that we have our 364-day FCAR lines maturing in June, and we are just about ready to get to our banks with our plans for that renewal.

Okay, then a couple of housekeeping things. You guys sticking to the 11.5 leverage goal for the end of the year?

No, no. Eric, sorry. The 11.5 was an agreement with the parent company that we would not go above that. We will be substantially below 11.5 by the end of the year.

That's good to hear. That's good to hear. Then just generally can you guys give us your outlook on consumer credit with being mindful of we got a benefit on delinquencies for the tax refund period. And then also your outlook on the auction market, obviously with the looming potential bankruptcy of a couple of your peers.

Yes, I will do the second one first on the auction market. We do have protections. But the reality of the auction market is it is extremely volatile. We saw from the end of 2008 to the end of the first quarter probably about a $2,000 improvement, 15%, 16% improvement that we were not expecting.

So going forward from here, normally you would say there is normal seasonality where the third quarter dips, but it's just too hard for me to predict the auction market at this point in time.

We expected the dip last year in the third quarter, which didn't happen. Then we got the dip in the fourth quarter, which was not what our expectations were.

Then the first question, what was the first part?

The consumer credit, just looking at, going through -- I know the tax refund season -- people I've talked to, it's been better than expected. Are we going to see a fade in consumer credit post that?

I look at it from the standpoint of the items like repossession ratios. Typically there is seasonality with the repossession ratios when you get past the tax time, for example. So there might be a small dip in it.

But the overall trend is that the repossessions and the ratio will be climbing a bit because of the overall expectation that unemployment will be increasing. So that has an impact on top of it.

I do want to point out that there is one thing, and that is when you get into the consumers, as far as Ford Credit is concerned, we have not changed our underwriting practices. We continue to purchase every, what we call every collectible receivable that we can.

In the end, our process has not changed. There have been some updates for individuals, specific elements like projections on credit losses or things like that. But our underwriting standards themselves have not changed at all.

We continue to support the dealers, we continue to support the consumer, and we continue to get people into Ford Motor Company's vehicles.

I will sneak one in. Have you seen any change in banks' predisposition towards underwriting standards? I know they tightened mid 2007 and remain tight. Are they starting to loosen up as unemployment growth seems to be petering out?

That's an excellent point, Eric, because that in our view -- or at least my view of the Company's view of the Credit Company -- is the beauty of having a captive. The captive is there year in, year out. We continue to work to get people into vehicles.

As you mentioned last year a number of banks tightened their standards. Other banks decided that this business was not for them, so they left the business completely. So the one thing that the auto company can count on is that Ford Credit is there and Ford Credit will continue to focus on getting people into vehicles.

Hey, thanks a lot for your time, guys.

Josh Lipchin, Eaton Vance.

Thanks. Given that you expect the receivable balance to be about $5 billion lower at the end of '09 than you did a quarter ago, does that create excess capital at Ford Credit and potentially money that could be used to upstream to Ford?

In the end, the lower the receivable balance -- as long as we don't have some loss or something -- it does create excess capital.

But as I stated earlier, Josh, the key for us running the Credit Company is to balance returns of capital with our capability to continue to fund the business. Right now, our plans are only to return up to $2 billion through 2010.

We have already returned $1.1 billion; so the other $900 million would come between now and 2010. But we've got to balance it off with our funding capability and the (multiple speakers).

Okay. Then, that $2 billion we are referring to is a dividend. There is also, if I'm understanding it correctly, a tax-sharing agreement.

Yes.

Can you give some guidance on what you might expect this year for tax sharing?

I can't give you guidance but I can clarify something that has come up on occasion. When we did the unsecured debt restructuring, we utilized Ford Credit's cash. What we did was essentially Ford Credit paid $1.1 billion to buy back that debt in April.

What effectively happens is we had a payable that we owed the parent company for taxes that have built up over the last year. We settled the tax payable with those bonds.

So that $1.1 billion is not a return of capital, not a dividend per se; it was more a settling of a tax payable at the parent company.

Is there any tax payable still outstanding?

Yes, there is, and it will continue to be there. We had -- separate from the settlement for the tax payable with the debt transaction, we had about $300 million that we paid in the first quarter. The reason we are still generating taxes to be paid ties back into our larger lease portfolio in the past. As the lease portfolio comes down you had what's called a like-kind exchange impact. So our taxes become due.

When we pay our taxes to the parent company they effectively, for all intents and purposes, are our IRS.

Okay. Then just -- I don't know if you have this handy or not, but do you know what that balance is? Tax receivable balance at the end of the first quarter.

I believe it was $1.5 billion or $1.6 billion.

Okay.

Before the payoff, before the payment in April.

Okay, okay, 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.