FORD MOTOR CREDIT CO LLC - FORM 10-Q

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EX-15 - EXHIBIT 15 - FORD MOTOR CREDIT CO LLC	a6711015ex15.htm
EX-12 - EXHIBIT 12 - FORD MOTOR CREDIT CO LLC	a6711015ex12.htm
EX-31.2 - EXHIBIT 31.2 - FORD MOTOR CREDIT CO LLC	a6711015ex31_2.htm
EX-32.2 - EXHIBIT 32.2 - FORD MOTOR CREDIT CO LLC	a6711015ex32_2.htm
EX-32.1 - EXHIBIT 32.1 - FORD MOTOR CREDIT CO LLC	a6711015ex32_1.htm
EX-31.1 - EXHIBIT 31.1 - FORD MOTOR CREDIT CO LLC	a6711015ex31_1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

Commission file number 1-6368

Ford Motor Credit Company LLC

(Exact name of registrant as specified in its charter)

Delaware	38-1612444
(State of organization)	(I.R.S. employer identification no.)
One American Road, Dearborn, Michigan	48126
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code (313) 322-3000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer þ

Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes þ No

All of the limited liability company interests in the registrant (“Shares”) are held by an affiliate of the registrant. None of the Shares are publicly traded.

REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

EXHIBIT INDEX APPEARS AT PAGE 67

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

For the Periods Ended March 31, 2011 and 2010

(in millions)

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

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)

	March 31,		December 31,
	2011		2010
ASSETS
Cash and cash equivalents	$	8,591	$	8,347
Marketable securities		4,927		6,759
Finance receivables, net (Note 2)		73,200		71,302
Net investment in operating leases (Note 3)		9,976		9,956
Notes and accounts receivable from affiliated companies		1,307		1,095
Derivative financial instruments (Note 11)		949		1,246
Other assets (Note 7)		2,825		2,991
Total assets	$	101,775	$	101,696

LIABILITIES AND SHAREHOLDER’S INTEREST
Liabilities
Accounts payable
Customer deposits, dealer reserves and other	$	1,416	$	1,272
Affiliated companies		1,623		884
Total accounts payable		3,039		2,156
Debt (Note 8)		82,943		82,879
Deferred income taxes		1,475		1,494
Derivative financial instruments (Note 11)		305		534
Other liabilities and deferred income (Note 7)		3,807		4,311
Total liabilities		91,569		91,374

Shareholder’s interest
Shareholder’s interest		5,274		5,274
Accumulated other comprehensive income		1,154		821
Retained earnings (Note 9)		3,778		4,227
Total shareholder’s interest		10,206		10,322
Total liabilities and shareholder’s interest	$	101,775	$	101,696

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

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

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Periods Ended March 31, 2011 and 2010

(in millions)

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

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Periods Ended March 31, 2011 and 2010

(in millions)

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

Total cash flows from continuing operations		244			481

Cash and cash equivalents, beginning of period	$	8,347		$	10,882
Change in cash and cash equivalents		244			481
Cash and cash equivalents, end of period	$	8,591		$	11,363

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information, and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, these unaudited financial statements include all adjustments considered necessary for a fair statement of the results of operations and financial condition for interim periods for Ford Motor Credit Company LLC, its consolidated subsidiaries and consolidated VIEs in which Ford Motor Credit Company LLC is the primary beneficiary (collectively referred to herein as “Ford Credit”, “we”, “our” or “us”). Results for interim periods should not be considered indicative of results for any other interim period or for the full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2010 (“2010 10-K Report”). We are an indirect, wholly owned subsidiary of Ford Motor Company (“Ford”).

We reclassified certain prior year amounts in our consolidated financial statements to conform to current year presentation.

Provision for Income Taxes

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

Accounting Standards Issued But Not Yet Adopted

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

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES

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

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

●	Retail financing – retail installment contracts for new and used vehicles

●	Direct financing leases – direct financing leases with retail customers, government entities, daily rental companies, and fleet customers

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

●	Wholesale financing – loans to dealers to finance the purchase of vehicle inventory, also known as floorplan financing

●	Dealer loans – loans to dealers to finance working capital, and to finance the purchase of dealership real estate and/or make improvements to dealership facilities

●	Other financing – purchased receivables from Ford and its affiliates, primarily related to the sale of parts and accessories to dealers

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

Finance Receivables, net

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

	March 31, 2011									December 31, 2010
	North America			International			Total Finance Receivables			North America			International			Total Finance Receivables
Consumer
Retail, gross	$	38,601		$	9,362		$	47,963		$	39,129		$	9,124		$	48,253
Less: Unearned interest supplements (a)		(1,559	)		(293	)		(1,852	)		(1,580	)		(285	)		(1,865	)
Retail		37,042			9,069			46,111			37,549			8,839			46,388
Direct financing leases, gross		12			1,401			1,413			17			1,449			1,466
Less: Unearned interest supplements (a)		—			(17	)		(17	)		—			(16	)		(16	)
Direct financing leases		12			1,384			1,396			17			1,433			1,450
Consumer finance receivables (b)	$	37,054		$	10,453		$	47,507		$	37,566		$	10,272		$	47,838

Non-Consumer
Wholesale	$	14,146		$	9,870		$	24,016		$	13,273		$	8,663		$	21,936
Dealer loans		1,085			55			1,140			1,117			57			1,174
Other		724			482			1,206			738			383			1,121
Non-Consumer finance receivables (b)(c)		15,955			10,407			26,362			15,128			9,103			24,231
Total recorded investment	$	53,009		$	20,860		$	73,869		$	52,694		$	19,375		$	72,069

Recorded investment in finance receivables	$	53,009		$	20,860		$	73,869		$	52,694		$	19,375		$	72,069
Less: Allowance for credit losses (d)		(532	)		(137	)		(669	)		(625	)		(142	)		(767	)
Finance receivables, net (e)	$	52,477		$	20,723		$	73,200		$	52,069		$	19,233		$	71,302

Net finance receivables subject to fair value (f)							$	71,797								$	69,830
Fair value								73,486									71,547

(a)	Ford-sponsored special-rate financing attributable to retail contracts and direct financing leases.
(b)	At March 31, 2011 and December 31, 2010, includes North America consumer receivables of $28.3 billion and $28.7 billion and non-consumer receivables of $13 billion and $12.8 billion, respectively, and International consumer receivables of $6.7 billion and $7.1 billion and non-consumer receivables of $6.6 billion and $5.9 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be included in our consolidated financial statements, of which $103 million is reported as inventory by Ford at March 31, 2011. The cash flows generated from the collection of these receivables are available only for payment of the debt and other obligations issued or arising in the securitization transactions; they are not available to pay our other obligations or the claims of our other creditors. We hold the right to the excess cash flows not needed to pay the debt and other obligations issued or arising in each of these securitization transactions. Refer to Note 5 for additional information.
(c)	At March 31, 2011 and December 31, 2010, includes $52 million and $45 million, respectively, of North America wholesale receivables and $20 million and $24 million, respectively, of North America dealer loans with entities (primarily dealers) that are reported as consolidated subsidiaries of Ford. At March 31, 2011 and December 31, 2010, includes $466 million and $418 million, respectively, of International wholesale receivables with entities (primarily dealers) that are reported as consolidated subsidiaries of Ford. The associated vehicles that are being financed by us are reported as inventory on Ford’s balance sheet.
(d)	At March 31, 2011 and December 31, 2010, includes $622 million and $701 million, respectively, of allowance for credit losses attributable to consumer receivables and $47 million and $66 million, respectively, attributable to non-consumer receivables. See Note 4 for additional information related to our allowance for credit losses.
(e)	At March 31, 2011 and December 31, 2010, excludes $167 million and $176 million, respectively, of accrued uncollected interest receivable, which we report in Other assets on our balance sheet.
(f)	At March 31, 2011 and December 31, 2010, excludes $1.4 billion and $1.5 billion, respectively, of certain receivables (primarily direct financing leases) that are not subject to fair value disclosure requirements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

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

	31-60 Days Past Due		61-90 Days Past Due		91-120 Days Past Due		Greater Than 120 Days		Total Past Due		Current		Total Finance Receivables
North America
Consumer
Retail	$	633	$	64	$	26	$	77	$	800	$	36,242	$	37,042
Direct financing leases		3		0		0		0		3		9		12
Non-Consumer
Wholesale		6		0		0		2		8		14,138		14,146
Dealer loans		5		0		9		15		29		1,056		1,085
Other		—		—		—		—		—		724		724
Sub-total		647		64		35		94		840		52,169		53,009

International
Consumer
Retail	$	86	$	35	$	17	$	50	$	188	$	8,881	$	9,069
Direct financing leases		11		5		2		4		22		1,362		1,384
Non-Consumer
Wholesale		1		0		0		7		8		9,862		9,870
Dealer loans		—		—		—		—		—		55		55
Other		—		—		—		—		—		482		482
Sub-total		98		40		19		61		218		20,642		20,860

Total recorded investment	$	745	$	104	$	54	$	155	$	1,058	$	72,811	$	73,869

Credit Quality

Consumer

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

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

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

●	Pass – receivables that are current to 60 days past due

●	Special Mention – receivables 61 to 120 days past due and in aggressive collection status

●	Substandard – receivables greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged-off, as measured using the fair value of the collateral

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

	March 31, 2011				December 31, 2010
	Retail		Direct Financing Leases		Retail		Direct Financing Leases
North America
Pass	$	36,875	$	12	$	37,348	$	17
Special Mention		90		0		119		0
Substandard		77		0		82		0
Sub-total		37,042		12		37,549		17

International
Pass		8,967		1,373		8,762		1,423
Special Mention		52		7		58		7
Substandard		50		4		19		3
Sub-total		9,069		1,384		8,839		1,433
Total recorded investment	$	46,111	$	1,396	$	46,388	$	1,450

Non-Consumer

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

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

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

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

●	Group I – Dealers with strong to superior financial metrics

●	Group II – Dealers with fair to favorable financial metrics

●	Group III – Dealers with marginal to weak financial metrics

●	Group IV – Dealers with poor financial metrics, including dealers classified as uncollectible

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

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

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

	March 31, 2011				December 31, 2010
	Wholesale		Dealer Loan		Wholesale		Dealer Loan
North America
Group I	$	11,632	$	770	$	10,540	$	785
Group II		2,220		196		2,372		208
Group III		276		107		353		107
Group IV		18		12		8		17
Sub-total		14,146		1,085		13,273		1,117

International
Group I		6,163		28		5,270		29
Group II		2,325		16		1,939		15
Group III		1,374		10		1,454		12
Group IV		8		1		0		1
Sub-total		9,870		55		8,663		57
Total recorded investment	$	24,016	$	1,140	$	21,936	$	1,174

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

Non-Accrual

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

	March 31, 2011				December 31, 2010
	Retail		Direct Financing Leases		Retail		Direct Financing Leases
North America
Greater than 120 days past due	$	77	$	—	$	82	$	—
Less than 120 days past due		337		—		355		—
Sub-total		414		—		437		—

International
Greater than 120 days past due		50		4		19		3
Less than 120 days past due		4		—		26		1
Sub-total		54		4		45		4
Total recorded investment	$	468	$	4	$	482	$	4

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

Impaired Receivables

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

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

●	Delinquency in contractual payments of principal or interest

●	Deterioration of the borrower’s competitive position

●	Cash flow difficulties experienced by the borrower

●	Breach of loan covenants or conditions

●	Initiation of dealer bankruptcy or other insolvency proceedings

●	Fraud or criminal conviction

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

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

	March 31, 2011
	Recorded Investment in Impaired Receivables & Receivables in Non-Accrual Status		Unpaid Principal Balance		Related Allowance for Credit Losses		Average Recorded Investment		Financing Revenue Collected
North America
With no allowance recorded
Wholesale	$	18	$	18	$	—	$	19	$	0
Dealer loans		6		6		—		8		0

With an allowance recorded
Wholesale		—		—		—		—		—
Dealer loans		63		63		8		67		0

International
With no allowance recorded
Wholesale		20		20		—		22		0
Dealer loans		1		1		—		2		0

With an allowance recorded
Wholesale		4		4		1		4		0
Dealer loans		—		—		—		—		—

Total
Wholesale	$	42	$	42	$	1	$	45	$	0
Dealer loans		70		70		8		77		0
Total	$	112	$	112	$	9	$	122	$	0

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

	December 31, 2010
	Recorded Investment in Impaired Receivables & Receivables in Non-Accrual Status		Unpaid Principal Balance		Related Allowance for Credit Losses		Average Recorded Investment		Financing Revenue Collected
North America
With no allowance recorded
Wholesale	$	8	$	8	$	—	$	19	$	2
Dealer loans		2		2		—		9		0

With an allowance recorded
Wholesale		—		—		—		—		—
Dealer loans		64		64		10		69		3

International
With no allowance recorded
Wholesale		22		22		—		29		2
Dealer loans		1		1		—		2		0

With an allowance recorded
Wholesale		4		4		1		7		0
Dealer loans		—		—		—		—		—

Total
Wholesale	$	34	$	34	$	1	$	55	$	4
Dealer loans		67		67		10		80		3
Total	$	101	$	101	$	11	$	135	$	7

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES (Continued)

Troubled Debt Restructurings

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

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

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

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

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

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 3. NET INVESTMENT IN OPERATING LEASES

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

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

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

	March 31, 2011			December 31, 2010

Vehicles, at cost, including initial direct costs	$	13,637		$	14,046
Less: Accumulated depreciation		(3,586	)		(4,003	)
Net investment in operating leases before allowance for credit losses (a)		10,051			10,043
Less: Allowance for credit losses		(75	)		(87	)
Net investment in operating leases	$	9,976		$	9,956

(a)

At March 31, 2011 and December 31, 2010, includes net investment in operating leases of $5.4 billion and $6.2 billion, respectively, that have been included in securitization transactions but continue to be included in our consolidated financial statements. These net investment in operating leases are available only for payment of the debt and other obligations issued or arising in the securitization transactions; they are not available to pay our other obligations or the claims of our other creditors until the associated debt or other obligations are satisfied. Refer to Note 5 for additional information.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 4. ALLOWANCE FOR CREDIT LOSSES

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

Consumer

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

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

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

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

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 4. ALLOWANCE FOR CREDIT LOSSES (Continued)

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

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

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

Non-Consumer

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

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

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

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 4. ALLOWANCE FOR CREDIT LOSSES (Continued)

Allowance for Credit Losses

Following is an analysis of the allowance for credit losses related to finance receivables and investment in operating leases for the period ended March 31, 2011 (in millions):

	Finance Receivables									Net Investment in			Total
	Consumer			Non-Consumer			Total			Operating Leases			Allowance
Allowance for credit losses
Beginning balance	$	701		$	66		$	767		$	87		$	854
Charge-offs		(112	)		3			(109	)		(29	)		(138	)
Recoveries		57			1			58			25			83
Provision for credit losses		(31	)		(24	)		(55	)		(9	)		(64	)
Other (a)		7			1			8			1			9
Ending balance	$	622		$	47		$	669		$	75		$	744

Analysis of ending balance of allowance for credit losses
Collective impairment allowance	$	622		$	38		$	660		$	75		$	735
Specific impairment allowance		—			9			9			—			9
Ending balance	$	622		$	47		$	669		$	75		$	744

Analysis of ending balance of finance receivables and net investment in operating leases
Collectively evaluated for impairment	$	47,507		$	26,250		$	73,757		$	10,051
Specifically evaluated for impairment		—			112			112			—
Recorded investment (b)	$	47,507		$	26,362		$	73,869		$	10,051

Ending balance, net of allowance for credit losses	$	46,885		$	26,315		$	73,200		$	9,976

(a)	Represents principally amounts related to translation adjustments.
(b)	Finance receivables and net investment in operating leases before allowance for credit losses.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 5. TRANSFERS OF RECEIVABLES

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

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

The finance receivables and net investment in operating leases that have been included in securitization transactions are only available for payment of the debt and other obligations issued or arising in the securitization transactions. Cash and cash equivalents balances relating to securitization transactions are used only to support the on-balance sheet securitization transactions. We hold the right to the excess cash flows not needed to pay the debt and other obligations issued or arising in each of these securitization transactions. The asset-backed debt has been issued either directly by us or by consolidated entities.

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

	March 31, 2011
	Cash and Cash Equivalents		Finance Receivables & Net Investment in Operating Leases (a)						Related Debt
	Cash and Cash Equivalents		Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses		Related Debt
VIE (b)
Retail (c)	$	3.0	$	32.7	$	0.4	$	32.3	$	27.2
Wholesale		0.6		17.6		0.0		17.6		11.8
Finance receivables		3.6		50.3		0.4		49.9		39.0
Net investment in operating leases		0.8		5.4		0.1		5.3		2.4
Total	$	4.4	$	55.7	$	0.5	$	55.2	$	41.4

Non-VIE
Retail (c)	$	0.1	$	2.3	$	0.0	$	2.3	$	1.9
Wholesale		0.0		2.0		0.0		2.0		1.7
Finance receivables		0.1		4.3		0.0		4.3		3.6
Net investment in operating leases		—		—		—		—		—
Total	$	0.1	$	4.3	$	0.0	$	4.3	$	3.6

Total securitization transactions
Retail (c)	$	3.1	$	35.0	$	0.4	$	34.6	$	29.1
Wholesale		0.6		19.6		0.0		19.6		13.5
Finance receivables		3.7		54.6		0.4		54.2		42.6
Net investment in operating leases		0.8		5.4		0.1		5.3		2.4
Total	$	4.5	$	60.0	$	0.5	$	59.5	$	45.0

(a)	Unearned interest supplements are excluded from securitization transactions.
(b)	Includes assets to be used to settle the liabilities of the consolidated VIEs.
(c)	Includes direct financing leases.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 5. TRANSFERS OF RECEIVABLES (Continued)

	December 31, 2010
	Cash and Cash Equivalents		Finance Receivables & Net Investment in Operating Leases (a)						Related Debt
	Cash and Cash Equivalents		Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses		Related Debt
VIE (b)
Retail (c)	$	2.8	$	33.8	$	0.4	$	33.4	$	27.1
Wholesale		0.4		16.6		0.0		16.6		10.1
Finance receivables		3.2		50.4		0.4		50.0		37.2
Net investment in operating leases		0.8		6.2		0.1

FORD MOTOR CREDIT CO LLC - FORM 10-Q - May 10, 2011

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