DEARBORN, Mich., -- Ford Motor Credit Company reported net income of $556 million in the second quarter of 2010, an increase of $143 million from earnings of $413 million a year earlier. On a pre-tax basis, Ford Credit earned $888 million in the second quarter, compared with $646 million in the previous year. On a pre-tax basis, Ford Credit earned $1.7 billion in the first half of 2010, compared with $610 million in the first half of 2009.
The increase in pre-tax earnings was more than explained by a lower provision for credit losses and lower depreciation expense for leased vehicles due to higher auction values. These factors were offset partially by the non-recurrence of net gains related to unhedged currency exposure from cross-border intercompany lending and lower volume.
"Economic indicators are mixed, but overall continue to trend upward," Chairman and CEO Mike Bannister said. "More favorable external conditions combined with our own strong and consistent originations and servicing practices, continued to drive positive results in the second quarter. We are anticipating strong results for the full year."
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On June 30, 2010, Ford Credit's on-balance sheet net receivables totaled $85 billion, compared with $93 billion at year-end 2009. Managed receivables were $87 billion on June 30, 2010, down from $95 billion on December 31, 2009. The lower receivables primarily reflected the transition of Jaguar, Land Rover, Mazda, and Volvo financing to other finance providers, lower industry and financing volumes in 2009 and 2010 compared with prior years, and changes in currency exchange rates.
On June 30, 2010, managed leverage was 6.6 to 1. On June 30, 2010, Ford Credit paid $1.3 billion in cash to the UAW Retiree Medical Benefits Trust to settle a portion of the outstanding principal amount of Note A held by the trust and immediately transferred to Ford Motor Company the portion of Note A that it purchased from the trust to satisfy $1.3 billion of intercompany tax liabilities it owed to Ford Motor Company.
Ford Credit now expects full year 2010 profits to be higher than its 2009 profits. The second half of 2010 will be lower than the first half because Ford Credit expects smaller improvements in the provision for credit losses and depreciation expense for leased vehicles compared with the improvements during the first half. For full year 2011, Ford Credit expects to continue to be solidly profitable but at a lower level than in 2010 primarily reflecting the non-recurrence of lower depreciation expense for leased vehicles and the non-recurrence of credit loss reserve reductions of the same magnitude as 2010.
Ford Motor Credit Company LLC is one of the world's largest automotive finance companies and has provided dealer and customer financing to support the sale of Ford Motor Company products since 1959. Ford Credit is an indirect, wholly owned subsidiary of Ford. For more information, visit www.fordcredit.com.
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