福特汽車 (F) 2011 Q4 法說會逐字稿

Great day, ladies and gentlemen, and welcome to the fourth-quarter Ford Motor Company Fixed Income conference call. My name is Katina and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end the 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. Shawn Ryan, Manager, Ford Fixed Income Investor Relations. 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.

Presenting today will be Bob Shanks, Ford Vice President and Controller; Michael Seneski, Ford Credit 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 Marion Harris, Assistant Treasurer; Paul Andonian, Director of Global Accounting; and George Sharp, Executive Director Investor Relations.

Before we begin, I would like to review a couple of items. A copy of this morning's earnings release and the slides we will be using today have been posted on Ford's 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.

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 the US 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. The most significant factors that could affect future results are summarized at the end of this presentation. These risk factors and other key information 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 Vice President and Controller, Bob Shanks.

Thanks, Shawn, and we will start on slide 1 with an overall summary of our 2011 fourth-quarter and full-year results.

Our fourth-quarter results reflected higher volume and net revenue. They were our 10th consecutive quarterly pretax operating profit and we also generated positive automotive operating-related cash flow.

In the quarter, North America drove our automotive profitability with strong performance. Since the third-quarter earnings call, however, the deteriorating external environment impacted most of our automotive operations outside of North America. In addition, commodity costs, exchange rates, and the floods in Thailand all had a greater than expected adverse impact. As a result, our margins were somewhat lower than the guidance that we provided in October.

In 2011, we improved total Company pretax operating profit and improved automotive operating-related cash flow, enabling us to further strengthen our balance sheet. In addition, Ford Credit continued to perform strongly, providing significant contribution to our overall profit consistent with our guidance. During the quarter and throughout the year, we continued to invest for future growth and a stronger product lineup around the world.

Now turning to 2012, we expect to continue improving our business and deliver solid profits and strong automotive operating-related cash flow while working to strengthen our operations in Europe and South America and continue to grow.

We believe our 2011 performance as well as our guidance for next year confirm that we are well on track to achieve the mid-decade outlook we provided in the middle of last year.

Now let's look more closely at the financial highlights of the quarter and full-year 2011. Slide 2 summarizes our fourth-quarter and full-year business results compared with the year ago. In the fourth quarter, vehicle wholesales were 1.4 million units, up 30,000 units or 3% from 2010. Revenue was about $35 billion, an increase of about $2 billion or 6%.

Pretax operating profit excluding special items was $1.1 billion, $189 million lower than a year ago. Earnings were $0.20 per share. Net income attributable to Ford was $13.6 billion, which includes a favorable special item in our taxes totaling $12.4 billion. This reflects the release of almost all of the valuation allowance against our net deferred tax assets. We also had favorable pretax special items up $349 million. Earnings were $3.40 per share.

Automotive operating-related cash flow was $700 million which was the seventh consecutive quarter of positive performance. In the full year compared with a year ago, vehicle wholesales increased by 7% and revenue improved 13%. Full-year pretax operating profit excluding special items was $8.8 billion, a $463 million improvement. Net income attributable to Ford was $20.2 billion, which was $13.7 billion higher than a year ago, reflecting mainly the tax valuation allowance release.

Operating-related cash flow was $5.6 billion for the year and we ended the year with $22.9 billion of automotive gross cash and with automotive gross cash exceeding debt by $9.8 billion. This is a net cash improvement of $8.4 billion compared with the year ago and it's $1.7 billion higher than the third quarter.

Despite a challenging external environment, we had a good fourth quarter and a strong full year reflecting the strength of our business and our ONE Ford plan.

Turning to slide 3 and our automotive gross cash and operating-related cash flow, as I mentioned, we ended the quarter with $22.9 billion of automotive gross cash, which was an increase of $2.1 billion from the end of the third quarter.

As mentioned, our automotive operating related cash flow was $700 million and our cash flow before changes in debt and pension contributions was $1.9 billion, including receipts from financial services of $1.3 billion.

Net debt inflows in the quarter totaled $300 million, which reflected primarily an increase in low-cost loans for development of advanced technologies. We made payments of $100 million to our non-US funded pension plans.

For the full year, automotive operating-related cash flow was $5.6 billion and cash flow before changes in debt and pension contributions totaled $9.3 billion. Looking ahead to 2012, we expect strong positive automotive operating-related cash flow.

Slide 4 summarizes our automotive sector cash and debt position at the end of the fourth quarter. Automotive debt was $13.1 billion at the end of the year and we continue to make significant progress in improving our balance sheet. We ended the year with net cash of $9.8 billion, which was an improvement of $8.4 billion from the end of 2010. Our automotive liquidity is now more than $32 billion.

Slide 5 summarizes 2011 results for our planning assumptions and key metrics compared with the plan that we shared at the beginning of the year. Overall we achieved solid results across the business in 2011 meeting or exceeding our plan in most instances. Importantly, we delivered improved total Company pretax operating profit and automotive operating-related cash flow compared with 2010.

US and Europe industry sales were in line with our expectations and we met or exceeded our share targets for the US. Both structural and commodity costs increased in 2011, as we had expected, and capital spending was less than we projected, due mainly to efficiencies.

Shortfalls to our plan occurred in quality in the US and with our automotive operating margin. We believe we have the quality issues well in hand and are back on track to deliver quality levels that are among the best in the business.

Our operating margin shortfall can be more than explained by higher commodity costs, which reduced our margin by nearly 2 percentage points.

So in summary, 2011 was a strong year and it kept us well on track to our mid-decade outlook.

Now let's turn to 2012 on slide 6. The entire Ford organization is energized as we enter this year, keenly aware of the challenges but also the opportunities that we face in the current environment. While the uncertainty surrounding the European debt crisis and its impact on the global economy presents a challenge for everyone, our strong product portfolio and the prospect of global economic growth offer opportunities for our business going forward.

Although we will keep a close eye on the economic environment throughout the year, we are sharing key current planning assumptions as follows. First, we expect full-year industry volume to range from 13.5 million to 14.5 million units in the US and from 14 million to 15 million units in Europe. We project our full-year market share in the US and Europe to be about the same compared with 2011. And for quality, we expect to deliver year-over-year improvement.

Compared with 2011 we expect our 2012 financial performance to reflect the following. First, automotive pretax operating profit to improve. Next, Ford Credit to be solidly profitable although at a lower level than 2011, which will be discussed later in the presentation.

Third, total Company pretax operating profit excluding special items to be about equal. And automotive structural costs to increase by less than $2 billion as we continue to support higher volumes, new product launches, and our growth plans. Finally, we expect our automotive operating margin to improve.

In terms of our capital spending outlook, we expect it to range from $5.5 billion to $6 billion and although it's not shown on the slide, we are expecting a nonmaterial increase in commodity costs for 2012.

Overall, we expect 2012 to be a solid year for Ford Motor Company, consistent with our glide path to our mid-decade outlook. We're off to a good start with the overwhelmingly positive reaction to recently introduced global products including the all-new Fusion in Detroit, the all-new EcoSport in Dehli, and the all-new Escape in LA.

With that, I'm going to turn over to Mike.

Thanks, Bob. We will now turn our attention to Ford Credit's performance. Ford Credit had another strong year with pretax profit of $2.4 billion for the full year and $506 million for the fourth quarter. Net income for the year was $1.8 billion and in the fourth quarter was $611 million. The year-over-year increase is more than explained by a favorable one-time non-cash item recorded in the quarter related to our net deferred tax liability.

We have concluded that a portion of our non-US earnings will be retained in market for the foreseeable future in part to support the growth inherent in our business plans. We believe our ongoing effective tax rate will be about 33%.

We had higher managed receivables at the end of 2011. They were $85 billion, up $2 billion from 2010 and up $3 billion from the third quarter. We had higher Ford and Lincoln receivables, which were partially offset by the runoff of our discontinued brands and unfavorable exchange rates.

We brought down full-year charge-offs substantially to $201 million from $415 million in 2010. Fourth-quarter charge-offs of $52 million were half the level of a year ago.

Our full year loss-to-receivables ratio was 24 basis points, the lowest level in the past 10 years and the ratio was 25 basis points for the fourth quarter. At December 31, the allowance for credit losses or reserve was $534 million or 63 basis points of receivables.

We continued our strong support of Ford, paying significant distributions of $3 billion including $300 million in the fourth quarter. We also made $1.4 billion in tax payments in 2011.

We continued to make progress in our managed leverage, which was 8.3 to 1 at December 31, 2011, up from 8 to 1 at September 30. At the end of the fourth quarter, our equity was $8.9 billion.

Turning to slide 8, this slide compares fourth-quarter pretax results with a year ago by causal factor. In line with our expectations, the results are more than explained by fewer leases being terminated, which resulted in fewer vehicles sold at a gain offset partially by Other, reflecting primarily foreign currency translation adjustments related to the discontinuation of financing in Australia.

As shown in the memo, Ford Credit's pretax profit decreased by $75 million compared with the third quarter, more than explained by the same lease factor just mentioned.

Slide 9 provides an explanation of the change in Ford Credit's full-year results compared with 2010 by causal factor. Ford Credit reported full-year pretax profit of $2.4 billion, a $650 million decrease. As guided, the decline reflects fewer leases being terminated, which resulted in fewer vehicles sold at a gain as well as lower credit loss reserve reductions.

For the full year 2012, we expect to be solidly profitable but at a lower level than 2011, reflecting primarily the same factors just mentioned. The pretax profit contribution related to the lease and credit loss reserve factors was about $800 million favorable in 2011 and these factors are expected to be minimal in 2012.

In addition, we expect to pay distributions of between $500 million and $1 billion and at year-end 2012, we anticipate managed receivables in the range of $85 billion to $95 billion.

Slide 10 shows the annual key metrics for our worldwide portfolio over the past five years. We also have included information in the appendix on our fourth-quarter credit loss performance, which was consistent with the full-year trends and continued to be favorable for all regions versus prior year.

Our charge-offs are down from 2010 levels, primarily reflecting lower repossessions in the US and lower losses in Europe, offset partially by lower recoveries in the United States. The loss-to-receivables ratio is almost 50% lower than 2010 and is the lowest we've seen in the last decade.

Reserves and reserves as a percent of end of period receivables are both lower than a year ago, reflecting the decrease in charge-offs.

Slide 11 shows the annual trends of our US Ford and Lincoln retail and lease business, which comprises about 70% of our consumer portfolio. From a quality of input perspective, we have mentioned several times in the past about our consistent underwriting standards since 2003 and the high quality maintained in our portfolio.

The upper left box shows our average placement FICO. The increase in FICO scores reflect primarily an increase in the credit quality of Ford customers coming through the door.

The rest of the metrics on the page give you a sense of how the portfolio is performing. Over 60-day delinquencies and repossessions continue to be low. Severity of $6,500 in 2011 was $400 lower than a year ago, primarily reflecting improvements in auction values in the used vehicle market, offset partially by an increase in the amount financed and a higher mix of 72-month contracts.

Charge-offs and the loss-to-receivables ratio in 2011 decreased from a year ago, reflecting primarily lower repossessions offset partially by lower recoveries.

Slide 12 shows the annual trends of the lease residual performance for our US Ford and Lincoln brands over the past five years. As we have been highlighting all year, lease return volumes in 2011 were almost 50% lower than last year, reflecting primarily the lower lease placements in 2008 and 2009. In addition, the 2011 lease return rate was 56%, down 9 percentage points compared with 2010, reflecting the increase in used vehicle prices.

In 2011, our strong auction values for 36-month vehicles continued, up $740 per unit from 2010. Again, we have included the fourth-quarter lease residual results in the appendix and they also show the same trends as the annual data. Our worldwide net investment in operating leases was $11.1 billion at the end of 2011, up from $10 billion in 2010.

With that, I will turn it over to Neil.

Thanks, Mike. Turning to slide 13, we delivered our 2011 full-year funding plan despite volatile market conditions, completing $35 billion of funding for the year including $11 billion in the fourth quarter. We also completed $19 billion in the public market and $16 billion in the private securitization market.

Our funding strategy remains focused on diversification. In 2011, we created and launched the FUEL Notes program, completing two transactions totaling $2.5 billion. We also reintroduced the Ford Credit US Retail Notes program and issued over $800 million during the year.

We plan to continue accessing a variety of markets, channels, and investors. We ended the year with about $33 billion of committed capacity, renewing $5 billion in the fourth quarter. Throughout 2011, we saw lower renewal costs across most facilities.

Our liquidity remains strong and we will maintain cash balances and committed capacity that meet our business and funding requirements in all global market conditions.

Slide 14 shows our trend in funding of our managed receivables. At the end of 2011, managed receivables were $85 billion. We ended the year with $12 billion in cash and securitized funding was 55% of managed receivables. We are projecting 2012 year-end managed receivables in the range of $85 billion to $95 billion and securitized funding is expected to represent 49% to 54% of total managed receivables.

The lower end of this range reflects in part FUEL Notes converting to unsecured debt. It is our expectation that the securitized funding as a percent of managed receivables will decline as we go forward.

Slide 15 shows our actual 2011 and projected 2012 term funding plan for Ford Credit, excluding our short term funding programs. As I mentioned earlier, we completed $35 billion of funding in 2011. About $19 billion of this was public funding in the US, Canada, and Europe, including over $8 billion of unsecured debt.

In addition, we completed about $16 billion of funding through our private securitization channels across all our major asset classes and regions. For 2012, we project full-year public term funding in the range of $18 billion to $23 billion, consisting of $8 billion to $11 billion of unsecured debt and $10 billion to $12 billion of public securitizations. We will also -- are projecting public issuance of -- private issuance of $10 billion to $13 billion from those sources.

Slide 16 details our liquidity programs and utilization. The top box shows Ford Credit's committed capacity, which includes unsecured credit facilities, FCAR asset-backed commercial paper lines, and other asset-backed bank capacity. At year-end, we had $44.7 billion of committed capacity and cash. After excluding securitization cash and adjusting for available assets, liquidity was $38.6 billion, of which $21.5 billion was utilized, leaving about $17 billion of liquidity available for use.

Committed capacity at year-end was $32.6 billion, about $1.4 billion higher than third quarter. We ended the year with about $2.4 billion of excess committed capacity, providing a funding source for future originations and flexibility to transfer capacity among markets and asset classes where most needed.

So in summary, on slide 17, Ford had a strong 2011 with pretax operating profits excluding special items of $8.8 billion for the full year. This was Ford's second straight year of pretax profits over $8 billion.

Full-year net income attributable to Ford was $20.2 billion, $12.4 billion of which was due to a favorable one-time non-cash special item related to our net deferred tax asset.

We ended the year with automotive gross cash of $22.9 billion and automotive liquidity of $32.4 billion including $9.5 billion of available automotive credit facilities. We reduced automotive debt in 2011 by $6 billion and ended the year with automotive cash net of debt of $9.8 billion, $8.4 billion better than year-end 2010.

Ford Credit had a strong full-year pretax profit of $2.4 billion and full-year net income of $1.8 billion. Ford Credit continued its significant contribution to Ford's business with $3 billion in distributions in 2011, including $300 million in the fourth quarter.

Ford Credit achieved its full-year funding plan with $35 billion in term funding and we ended the year with substantial liquidity available for use of about $17 billion. Importantly, the strength of our business positions us well to further improve our balance sheet as we progress to strong investment grade ratings at both Ford and Ford Credit.

With that, I will turn it back to Shawn to begin the Q&A session.

Thank you, Neil. Before starting the question-and-answer session, I would like to mention that for the next Fixed Income call, which will cover first-quarter results, we will no longer be including the first few slides that we have traditionally discussed at the beginning of the Fixed Income presentation. These slides will still be available in the earnings presentation.

We will start the first-quarter call with Ford Credit's results. We are making this change based on feedback we received from investors with the goal of making more efficient use of investors' time. There will be no changes to the management team attending the calls.

With that, we will start the question-and-answer session. Katina, can we please have the first question?

(Operator Instructions). Doug Karson, Merrill Lynch.

Great, guys. Thank you. I had a few questions. One was a follow-up from the earlier Ford call. You guys touch on South America and discuss issues around pricing. Can you give us a little more color around that business and maybe more importantly, the outlook for 2012?

This is Bob. Thanks for the question. As Lewis said and just kind of stepping back a bit, it's a great market for us, a great region for us. It has had over 30 quarters of consecutive profitability and I think we have to kind of understand where our business is at the moment. We are just at the point of getting ready, as Lewis said earlier, to completely transform the product line up from a lineup that was all legacy products to one that will be completely represented by Global ONE Ford products and that will start in the first half of the year with the introduction of the Ranger and then in the second half the EcoSport which is hugely important to the South American business will be launched.

When we look at the fourth quarter, about half of the profit decline was due to exchange rates. We priced for some of that, but it was a pretty big decline in the period. It fell off relatively quickly as the local currencies weakened.

As we look at next year, we've guided that we expect the profits to be solid. We expect them to be down somewhat. Some of that is related to the launch costs associated with the new products that I talked about. But also when you look at that fourth-quarter decline in terms of exchange rates and just sort of forecasting the effectiveness in 2012, at least at the moment, we are seeing a pretty significant impact in terms of exchange as we look at 2012 for the business in South America.

If you go back and look at that, that's not unusual. It's very volatile. Some years we get a lot of good news and some years we get a lot of bad news. It's just part of the business there but that's certainly going to be one of the headwinds for next year.

I just got a note telling me that I called you Dave instead of Doug, so I apologize.

No problem. Well, that's a good answer. Thank you for that. I wanted to just maybe touch on slide 10. I have never seen the charge off percentage at 24 basis points. I am wondering is that something we could expect to maybe go up as we grow the book? And what is really driving that? Is it the FICO scores of 738 or is it the economy better? Are you guys doing something different? Does it need to be that low?

Doug, it's Mike. We've never seen it that low either. It is really we think a function of a number of things. You know, first obviously we have not changed our underwriting standards. We have been consistent and we have been since 2003. What we are seeing is better and better performance of our portfolio combined with improvements in the auction values. Right? The auction values are going to affect severity.

As we've said before, I can't really explain why customers are paying their bills a little bit more. But some people have said, it's due in part to the fact that many people don't have equity any longer in their homes and they view transportation as a more important bill to pay.

Obviously these are near historic lows and we would not expect them to continue at those levels. But we will continue working our portfolio as we move forward.

Great, that was it for me. Thank you.

(Operator Instructions). Eric Selle, JPMorgan.

Good morning. Just have one broad question and some housekeeping. Himanshu I think asked the question about the consumer credit in Europe and you guys said it's stable. Was that a response to the availability of credit or actual delinquencies on the ground? And I would like just to know how have delinquencies trended fourth quarter versus third quarter? Is there any discernible trend there?

Okay, Eric, just a couple of things. Remember North America is a predominant share of Ford Credit's profits. In our presence in Europe, Germany and the UK are by far our largest markets, followed by Italy, France, and Spain. When you look at Europe in total and we look at quarter-over-quarter, quarter four '11 versus quarter four '10, our losses are lower and our delinquencies are lower.

If we look at quarter four versus quarter three, our losses are about flat at a very low level, obviously, and our delinquencies are actually lower on a total Europe basis. So I think a large part of that is driven by our footprint in Europe and some of the economies there that are, as Lewis said earlier, doing okay because that's where we are largest.

Your flat sequential pricing was impressive and obviously we have seen a rebound in Western European sales. So I guess that portends for what we are seeing here and that's good.

Eric, just in response to sort of the bank or the availability from the bank side, I think we are not seeing anything much changing. The committed facilities on the asset back side that are up for renewal are getting renewed. The ones that are in Europe are getting renewed and so we don't see anything yet. We keep having folks call us and tell us or wondering why we are not, but so far it has not changed from the standpoint of our availability.

I think there is a general demand for cash surrogates that actually have any yield above zero, so I think that's lifting a lot of risk within a lot of markets. So hopefully, hopefully that's a good sign.

Secondly, looking at that pension, I guess your contributions are around 1.1 or 1.5 this year you said you're going to get up to 3.5 next year. Is that incremental $2 billion special contribution, A, is it cash? And B, should we look at that -- obviously the agencies look at pension. Is that just going to reduce underfundedness? You guys are just going to make a big nut towards getting that thing funded?

Yes, it is cash. The billion is incremental voluntary and yes, it will reduce the underfunded status.

Okay, good. And then on the Ford Credit dividend, I think -- that is not -- that $500 million to $1 billion distribution is not inclusive of the tax reconciliation, correct?

That's correct.

So it's down from like $1.5 billion from in '11, something like that?

No, our distributions were $3 billion in '11. I'd say they are going to be about $500 million to $1 billion in '12. Our tax payments in '11 were $1.4 billion and we haven't given any guidance for 2012.

Okay, good. And I guess that answers my next question that your year over year funding -- it's down slightly while your assets grow. Is that basically because you're going to retain more of your earnings?

No, it is actually that we have less maturities both on the unsecured and secured side in 2012.

Okay, then you guys said that net interest is going to be flat. Does that mean that other automotive profit line is basically zero? Is there anything else in that line that we should be thinking about?

From a year-over-year?

Yes.

The only other thing in there would be the Mazda valuation and that obviously fluctuates based on the stock price of the Mazda shares. Just to remind everybody, we have 3.5% of Mazda.

Okay, so actually assuming the stock market goes up, that could be a positive. Then finally, just -- I don't mean to mince words, but the auto operating cash flow improvement, is that up year-over-year or just a positive hey we are going to generate cash comment?

The comment on the slide itself?

Yes, it says you know auto operating cash flow is going to improve. Does that mean it's going to improve from the --?

No, it says it's going to be strong. I think in this morning's call, Lewis provided a little bit more guidance from a standpoint of if you think of the 2011 performance and you adjust it for the increase in CapEx that we are projecting in 2012, that you will be pretty close to where operating cash guidance would be.

Okay, so you basically did $5.9 billion. CapEx is going up $1 billion so maybe like $5 billion in that top of the level?

We did $5.6 billion in 2011 and CapEx is going to grow from $4.3 billion to between $5.5 billion and $6 billion.

Perfect. I will cede it over. I really appreciate the time.

Brian Jacoby, Goldman Sachs.

Thanks. A couple questions on Ford Credit. The one being just on the leverage, you are at managed leverage now of around 8.3 and I know in the past you have said he will take up closer to 11.5. It kind of looks like given the clip it has been going up over the last couple of years that you will probably come pretty close to that presumably by the end of this year. Is that kind of a fair way to look at it?

Brian, actually what we said, remember we have an agreement with the Motor Company that we won't exceed an 11.5 to 1 leverage and we've given our mid decade guidance to say that we'd probably be in the range of 10 to 11 to 1. Obviously when we look at leverage we consider market conditions, risk characteristics of the business. And as we look forward to 2012, we have guided about $500 million to $1 billion of distributions this year and we think that's appropriate.

So for this year you will see manage increase -- managed leverage increase but probably not nearly as meaningfully as you did in 2011.

Okay and then just to get back to Eric's question, correct me if I'm wrong, but the way it sounded on the earnings call, it sounded like operating-related cash flow when you adjust -- if you were to kind of adjust for CapEx, that it would be up. But when you factor in the CapEx being higher, that it sounds like it will be flat year-over-year. Am I reading that right? I just want to be clear on this.

No, I think what he said is that if you take 2011 performance which had CapEx in it at $4.3 billion and adjust that for CapEx in 2012 of between $5.5 billion and $6 billion, you would get close to the cash operating cash flow number. So it's actually down year over year, reflecting our increase in CapEx.

Okay, makes sense. Then a couple quick housekeeping questions, one on DOE loans. So it looked like you took up another $400 million roughly in the quarter and if you could just remind us again what's left, I think there's another $800 million or something like that left. And kind of when that ends, I believe it's third quarter of this year?

And then the other housekeeping is just what's the percentage of the lease -- of leases in the portfolio now at Ford Credit? Where did you end the year for full year in total leases?

Let me take the first one and then, Mike, you can pick up the lease penetration question. You are correct that we basically have two more quarters of draw for the full amount and then they start paying off in the third quarter of this year as well. The way they work is each draw is an equivalent of a 10-year amortizing loan. And so the draws that we had I guess when the loan started, will start amortizing off. So it basically just the payoffs will build over time but will fully draw by the end of June and then start paying it off in the third quarter.

Okay, Brian, as it relates to leases, as we said before, we kind of ended 2011 at about a 10% lease share in the US. When you look at this past year, obviously leasing is going to be a function of how the Motor Company wants to go to market we will go jointly with them, but that actually increased to about 15% in the US for 2011.

Okay, great. Thank you.

(Operator Instructions) Dan Colonna, UBS.

Thanks for taking my call. Just to be clear, I think you guys have expressed that Ford Motor Credit's underlying run rate excluding the residual gains this year and the lower credit losses was probably closer to $1.6 billion.

Going into 2012, how should we think about the net effect from moving your funding more to unsecured verses secured as well as growing the managed receivable book? Should those fully offset and kind of think about 2012 as roughly flat year-over-year for Ford Motor Credit?

Well, Dan, when you think about it, we have obviously guided the $800 million as it relates to the credit loss and lease factors -- credit loss reserve and lease factors. And then what we have said is obviously we have a strategy to get back to an investment-grade balance sheet, which entails among other things an increase in our unsecured debt versus ABS, which is obviously higher cost. So there's going to be some margin pressure, as Lewis indicated in this morning's call.

Your question is will volume offset that? Remember, our revenue is really earned on average receivables, not end of period, so when you look at our receivables guidance of between $85 billion and $95 billion, on an average year basis, that can only be zero to five.

If you look at Credit University and we say we earn about 3% or so margin, on an average year basis that is not going to be a lot of money. And remember, every time we put the new receivable on you book the credit loss reserve right away. So at this stage I think we would see a little bit higher margin pressure not fully offsetting any volume growth.

Okay, that's fair. Thank you.

With no further questions at this time, I would now like to hand the call back to management to proceed to closing remarks.

Thank you, Katina. With that, I would like to conclude today's call. Thank you for joining us.

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