CREDIT UNIVERSITY March 13, 2015 CREDIT UNIVERSITY Outline Ford - - PowerPoint PPT Presentation

CREDIT UNIVERSITY

March 13, 2015

SLIDE 1

CREDIT UNIVERSITY

Outline

• Ford Credit Strategic Value, Virtuous Circle and Value

Proposition

• Scope of Operations
• Ford Credit Business Model and the Drivers of the Business

– Originate: Buy it Right – Service: Operate Efficiently, Collect Effectively – Fund: Fund Efficiently, Manage Risk

• Ford Credit Profit Reporting

Anything else is just credit.

Ford Credit Strategic Value, Virtuous Circle and Value Proposition

SLIDE 3

SLIDE 4

FORD CREDIT STRATEGIC VALUE

• Profitably support Ford, its dealers and customers through

economic cycles

• Strategic value delivered through:

– More than 55 years of automotive financing experience – Consistent vehicle inventory financing, supporting automotive production plans and dealer inventory requirements – Exclusive Ford and Lincoln retail and lease consumer financing products; integrated marketing strategies

SLIDE 5

FORD CREDIT STRATEGIC VALUE

• Ford Credit is integrally tied to Ford Motor Company
• Our profitability is based on competitive leverage and

return targets

• We have a relentless focus on driving value based on:

– A competitive funding structure – A world-class operating cost structure – A world-class risk management organization

• Our comprehensive customer relationship management process

enhances the sales and service experience, and drives repeat business for Ford and Lincoln

• Ford Credit’s processes and focus create the “Virtuous Circle”

SLIDE 6

A VIRTUOUS CIRCLE -- INTEGRATION CREATES A STRATEGIC ADVANTAGE

• Automotive specialist

with vested interest in Ford dealer success

• Training and

consulting

• Consistent market presence
• Fast, flexible, quality service
• Full array of products
• Incremental vehicle sales

(Spread of business and customer relationship management)

More products, faster

• Higher customer satisfaction

and loyalty

• Profits and dividends
• Trusted brand
• Access to dealer channel

Dealers

SLIDE 7

FORD CREDIT VALUE PROPOSITION -- CUSTOMER LOYALTY TO FORD

Customers Who Finance With Ford Credit Are More Loyal To Ford Compared With Customers Who Finance With Other Lenders

2010 2011 2012 2013 2014

U.S. ‐ % Loyal to Ford & Lincoln

Ford Credit Dealer Arranged Customer Arranged

2009 2010 2011 2012 2013

Europe (Big 5 Markets) ‐ % Loyal to Ford*

Ford Credit Dealer Arranged Customer Arranged Source: Maritz New Vehicle Customer Survey 2010-2014 Source: Internal * 2014 European Data will be available in 2Q 2015

17 ppts. 27 ppts.

SLIDE 8

FORD CREDIT VALUE PROPOSITION -- U.S. CUSTOMER SATISFACTION WITH DEALER-ARRANGED FINANCING

40% 90%

Customers Are More Satisfied With Ford Credit Than Other Dealer-Arranged Financing

Ford Credit Financing Other Dealer-Arranged Financing

6 ppts.

Source: Maritz New Vehicle Customer Survey 2010–2014

2010 2011 2012 2013 2014

SLIDE 9

Automotive Retail Market Share + 0.8 ppts

(within the dealer’s market area)

Ford Credit Share of Ford / Lincoln Retail Sales + 11.8 ppts Customer Satisfaction + 2.0 ppts Certified Pre-Owned Penetration + 5.4 ppts

(as a % of total used vehicle sales)

Extended Service Plan Penetration + 11.8 ppts

FORD CREDIT VALUE PROPOSITION -- FORD CREDIT U.S. FLOORPLAN DEALERS

Performance vs. Non-Ford Credit Dealers

Ford Credit, Through The Virtuous Circle, Delivers Higher Value To Ford, Our Dealers And Our Customers Than Other Finance Providers

SLIDE 10

Pre-tax Profits

FORD CREDIT VALUE PROPOSITION -- HISTORICAL PROFITABILITY

Over The Last 20 Years, Ford Credit Generated $42 Billion In Pre-Tax Profits And $28 Billion In Distributions

$2.3 $2.2 $1.8 $1.8 $2.1 $2.5 $2.5 $4.9 $2.0 $3.7 $2.9 $2.0 $1.2 $(2.6) $2.0 $3.1 $2.4 $1.7 $1.8 $1.9 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Distributions

Scope of Operations

SLIDE 12

FORD CREDIT GLOBAL PRESENCE

Ford Credit Supports Ford Everywhere It Operates Around The World -- With The Right Business Model For Each Market

Ford Credit Operations Joint Ventures Outsource Partners Ford Credit Export Finance

SLIDE 13

SIZE AND SCOPE OF OPERATIONS

• Ford indirectly owns 100% of Ford Credit
• Ford Credit offers a wide variety of automotive financing products

to and through automotive dealers around the world

• Ford Credit has about 6,500 full-time employees and provides

financing in approximately 100 countries

• As of year-end 2014, Ford Credit was financing worldwide:

– About 5,200 Ford and Lincoln dealers – About 4.2 million customer contracts

• Ford Credit generates about 100 million customer touch points

every year through websites, calls, e-mails, preapprovals, and invoices

SLIDE 14

WORLDWIDE MANAGED RECEIVABLES AND EQUITY AT YEAR-END 2014

* Managed receivables equals net receivables, excluding unearned interest supplements and residual support, allowance for credit losses, and other (primarily accumulated supplemental depreciation). See Appendix 1 for reconciliation to GAAP ** Equity equals shareholder’s interest reported on Ford Credit’s balance sheet

U.S. & Canada 81% $91 Billion International 19% $22 Billion

Regional View

Retail 49% $55 Billion Wholesale 27% $31 Billion Leases 21% $24 Billion

Product View

Dealer Loan and Other 3% $3 Billion $11.4 Billion Supporting Operations

Equity** Managed Receivables* Of $113 Billion

SLIDE 15

RELATIONSHIP AGREEMENT WITH FORD

• Any extension of credit to Ford will be on arm’s-length terms

and will be enforced in a commercially reasonable manner

• Ford Credit will not guarantee more than $500 million of

indebtedness of, or make equity investments in any of, Ford or its automotive affiliates

• Ford Credit can require Ford to make a capital contribution if

Ford Credit’s managed leverage is greater than 11.5 to 1

• Ford Credit will not be required to accept credit or residual risk

beyond what it would be willing to accept acting in a prudent and commercially reasonable manner

• Ford and Ford Credit are separate, legally distinct companies

and will continue to maintain separate books, accounts, assets and liabilities

• Up to $2 billion of borrowing capacity under Ford’s revolving

credit facility allocated to Ford Credit

Ford Credit Business Model and the Drivers of the Business

SLIDE 17

• Buy it Right
• Operate Efficiently
• Collect Effectively
• Fund Efficiently
• Manage Risks

Originate FORD CREDIT BUSINESS MODEL Service Fund

SLIDE 18

ORIGINATIONS STRATEGY

• Support Ford Motor Company brands
• Build strong relationships with dealers
• Segment credit applications and price appropriately for risk
• Use robust credit evaluation and verification process
• Ensure efficient use of capital
• Buy it Right
• Operate Efficiently
• Collect Effectively
• Fund Efficiently
• Manage Risks

Service Originate Fund

Technology And Judgment Combine To Buy It Right

SLIDE 19

• Ford Credit’s proprietary originations scoring models assess the

creditworthiness of an applicant using a number of variables, including information from the credit application, the proposed contract terms and credit bureau data

• Output of the origination scoring models is a proprietary risk

score referred to as Probability of Payment (POP) – The origination scoring models build on the predictive power

• f credit bureau and credit application data

– Internal studies show that POP is more effective than credit bureau data alone

• POP is used as a credit decisioning variable globally
• Process governance includes:

– Senior personnel regularly review decisions of credit analysts to ensure consistency with purchasing quality guidelines – Quarterly Risk Management portfolio performance analysis is performed

ORIGINATIONS SCORING MODELS

SLIDE 20

PURCHASING GUIDELINES AND CONTROL PROCESSES

• Ford Credit has originations policies and procedures that

leverage technology and use well established purchase guidelines to ensure consistent credit decisions – Portfolio Level: Purchase quality guidelines establish portfolio targets for the purchase of lower and marginal quality contracts and to manage the overall quality of the portfolio – Credit Application Level: Risk factor guidelines provide a framework for credit application evaluation criteria focused

• n the customer’s repayment ability, including for example,

loan-to-value, payment-to-income and contract term length

• Procedures are established for verification of income,

employment and residency if appropriate

These Capabilities Enable Predictability Of Portfolio Performance

SLIDE 21

Prior Originations 2011 Originations 2012 Originations 2013 Originations 2014 Originations

2014 Portfolio 2014 PORTFOLIO LARGELY REFLECTED BUSINESS ORIGINATED IN PRIOR YEARS

Year-End 2014 Managed Receivables Were $113 Billion

SLIDE 22

End of Period Managed Receivables (Bils.) Contract Placement Volume (000s)

$122 $97 $84 $85 $92 $103 $113 $126 ~$155 2008 2009 2010 2011 2012 2013 2015

HISTORICAL VOLUME AND RECEIVABLES

1,950 1,193 1,218 1,420 1,542 1,762 1,974 2008 2009 2010 2011 2012 2013 2014

Since 2010, Contract Volume And Receivables Have Been Growing

2014 $123 - $128 End of Decade

SLIDE 23

SERVICING STRATEGY

• Buy it Right
• Operate Efficiently
• Collect Effectively
• Fund Efficiently
• Manage Risks

Service Originate Fund

• Ford Credit has a world-class servicing organization
• Credit losses are an expected part of the business
• The objective is to collect within the portfolio loss expectation while

managing costs

• Customer and dealer satisfaction is critical

Technology And Judgment Combine To Minimize Credit Losses

SLIDE 24

SERVICING STRATEGY

• Ford Credit’s proprietary behavioral scoring models assess the

risk of a customer default using a number of variables, including origination characteristics, customer history, payment patterns and updated credit bureau data

• Output of the behavioral scoring models is a proprietary risk

score referred to as Probability of Default (POD) – Contracts are scored monthly on their due date to get an updated POD – Ford Credit’s behavioral scoring models differ based on contract characteristics and performance

• Ford Credit regularly monitors the behavioral scoring models

to ensure the predictability of the variables and confirm the continued business significance

Behavioral Scoring Models Support The Timely Resolution Of Payment Issues

SLIDE 25

SERVICING STRATEGY -- RISK SEGMENTATION

• Segmentation allows the matching of the account risk with the

appropriate collection strategy

• POD is the primary driver in determining risk segmentation
• Risk segmentation establishes:

– Assignment issuance timing – Follow-up intensity – Assignment transfers from an early stage delinquency to a late stage delinquency strategy – Segmentation ensures past due customer accounts are assigned to the right collection work queue at the right time

HIGH RISK LOW RISK ASSIGNMENT TIMING FOLLOW-UP INTENSITY MOVE TO LATE STAGE COLLECTIONS LATER LOWER LATER EARLIER HIGHER EARLIER

SLIDE 26

CREDIT LOSS KEY DRIVERS

• Purchase Practices

– Broad spread of business (credit quality mix) – New and used product mix – Term and loan-to-value ratio

• Collections Practices

– Proprietary risk score – Assignment timing / Follow-up intensity – Specialized departments based on delinquency stage

• Economy

– Unemployment – Growth – Bankruptcy rates – Used vehicle auction values

SLIDE 27

HISTORICAL CREDIT LOSS METRICS

$706 $523 $632 $1,135 $1,095 $415 $201 $136 $176 $209 0.57% 0.39% 0.46% 0.84% 1.07% 0.47% 0.24% 0.16% 0.18% 0.19% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Worldwide Charge-Offs (Mils.) and Loss-to-Receivables (LTR) Ratio (%)

LTR Ratio

$1,586 $1,110 $1,090 $1,668 $1,549 $854 $534 $408 $380 $359 1.19% 0.81% 0.77% 1.40% 1.61% 1.02% 0.63% 0.44% 0.37% 0.32% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Reserves as %

• f EOP Rec.

Worldwide Credit Loss Reserve (Mils.) and Reserves as a Pct.

• f End-of-Period (EOP) Managed Receivables

SLIDE 28

109 82 74 81 94 64 45 32 29 28 2.30% 1.94% 1.89% 2.30% 3.01% 2.41% 1.86% 1.35% 1.18% 1.06% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0.15% 0.16% 0.19% 0.24% 0.24% 0.15% 0.14% 0.15% 0.15% 0.14% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 715 710 714 719 726 730 738 737 738 741 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Average Placement FICO Score Repossessions (000)

Repo. Ratio

Charge-Offs (Mils.) and LTR (%) Over-60-Day Delinquencies

HISTORICAL U.S. RETAIL AND LEASE CREDIT LOSS DRIVERS*

* Includes Ford, Lincoln and Mercury Memo: New Bankruptcy Filings (000) 84 21 27 37 47 42 31 23 17 14 Memo: Severity

$6,100 $6,300 $7,400 $9,900 $8,300 $6,900 $6,500 $6,900 $7,600 $7,900

$433 $309 $431 $775 $635 $280 $144 $100 $127 $146 0.79% 0.56% 0.74% 1.36% 1.32% 0.68% 0.36% 0.23% 0.26% 0.27% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

LTR

SLIDE 29

HISTORICAL U.S. LEASE RESIDUAL PERFORMANCE

Memo: Ford and Lincoln U.S. Return Rates

65% 56% 62% 71% 78%

49 38 12 17 29 71 44 17 26 46 39 4 33 71 114

2010 2011 2012 2013 2014

Lease Return Volume (000)

Memo: Worldwide Net Investment in Operating Leases (Bils.)

$9.1 $10.1 $13.6 $18.3 $21.5

24-Month 36-Month 39-Month / Other

159 62 86 189

$18,765 $19,000 $19,875 $18,905 $19,740 $17,865 $17,385 $17,535 $16,540 $15,800

Auction Values (At Incurred Mix)

114

2013 2014 2010 2011 2012

24-Month 36-Month

SLIDE 30

LEASE ACCOUNTING -- BASE DEPRECIATION

– Generally, depreciation for leases is the sum of base and supplemental depreciation. – Base Depreciation reflects scheduled depreciation from the Acquisition Cost to the Contract Lease-End Value and does not change for the life of the contract. – In this example, base depreciation is $437.50 each month for the contract term (24 months) for a total of $10,500.

Assumptions: Lease Term: 24 Months MSRP: $21,000 Acquisition Cost Contract Lease- End Value Percent of MSRP 50.0 % Contract Termination Dollar Value $ 10,500 $ 21,000 Contract Inception T-0 T-3, T-6… T-24

SLIDE 31

LEASE ACCOUNTING -- SUPPLEMENTAL DEPRECIATION

– Supplemental Depreciation reflects additional depreciation to achieve expected actual residual (i.e., auction) values for the leased vehicles. – Supplemental depreciation can change based on expectations and it is assessed quarterly. – It can be negative, however, it can never “un-depreciate” above base depreciation. – In this example, supplemental depreciation is $40 each month for remaining term (21 months) for a total of $840.

Book Value Contract Lease- End Value Expected Actual Residual (i.e., Auction) Value at Lease Contract Termination Percent of MSRP 50.0 % 46.0 % Contract Termination Dollar Value $ 10,500

Additional Credit Co. Supplemental Depreciation Expense

$ 9,660 $ 19,687.50 Contract Inception T-0 T-3, T-6… T-24 Acquisition Cost $ 21,000 Assumptions: Lease Term: 24 Months MSRP: $21,000

SLIDE 32

EFFICIENT FUNDING

• Buy it Right
• Operate Efficiently
• Collect Effectively
• Fund Efficiently
• Manage Risks

Service Originate Fund

Ford Credit’s funding strategy is to:

• Maintain strong liquidity
• Access diverse and cost-effective funding sources

SLIDE 33

KEY COST DRIVERS

• Borrowing cost is our largest expense
• Borrowed funds are a finance company’s “raw material”
• Key factors that drive our borrowing cost are:

– Base interest rates – Credit ratings – Funding strategy – Market conditions Credit spreads Operating Costs Spreads Base Rates

Residual & Credit Losses

Borrowing Costs

SLIDE 34

250 500 1000

HOW DO RATINGS IMPACT PROFITABILITY?

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

750

Ford Credit U.S. Unsecured Debt Spreads vs. Issuer Rating

S&P Issuer Rating

Basis Points

Achieved Investment Grade Ratings from Fitch, Moody’s and DBRS in 2012 and S&P in 2013

Memo: Ford Credit ratings (at year-end) BB+ Ba1 B+ Ba2 B- B3 CCC+ Caa1 B B1 B B1 BB+ Baa3 BBB- A3 BB+ Baa3 S&P Moody’s BBB- Baa3

Spreads should continue to improve with our ratings

Investment Grade

Unsecured Spreads Are Inversely Correlated To Ratings; Spreads Have Improved Significantly Since Achieving Investment Grade

BBB- Baa3

SLIDE 35

FUNDING STRUCTURE

* The Ford Interest Advantage program consists of our floating rate demand notes ** Obligations issued in securitization transactions that are payable only out of collections on the underlying securitized assets and related enhancements *** Excludes marketable securities related to insurance activities

As We Continue To Strengthen Our Balance Sheet And Our Ratings Improve, Securitization As A Percent Of Managed Receivables Is Expected To Decline

SLIDE 36

PUBLIC TERM FUNDING PLAN

Unsecured $ 9 $ 11 $ 13 $ 12 – 15 Securitizations* 14 14 15 13 – 16 Total $ 23 $ 25 $ 28 $ 25 – 31 2012 Actual (Bils.) 2013 Actual (Bils.) 2014 Actual (Bils.) 2015 Forecast (Bils.)

* Includes Rule 144A offerings

Projected 2015 Public Issuance Largely Consistent With 2014; Continue To Maintain A Significant Presence In Both Unsecured And Securitization Markets

SLIDE 37

2014 LIQUIDITY PROGRAMS

Committed Capacity $37.3 billion

Available Liquidity Remains Strong At $26.5 Billion

* Cash, cash equivalents, and marketable securities (excludes marketable securities related to insurance activities) ** Committed ABS lines are subject to availability of sufficient assets and ability to obtain derivatives to manage interest rate risk *** Used only to support on-balance sheet securitization transactions **** Adjustments include other committed ABS lines in excess of eligible receivables and certain cash within FordREV available through future sales of receivables

SLIDE 38

BALANCE SHEET LIQUIDITY PROFILE

Cumulative Maturities -- As of December 31, 2014 (Bils.)

Ford Credit’s Balance Sheet Is Inherently Liquid As Assets Liquidate More Quickly Than Debt

(a) Includes finance receivables net of unearned income, investment in operating leases net of accumulated depreciation, cash and cash equivalents, and marketable securities (excludes marketable securities related to insurance activities). (b) Retail and lease ABS are treated as amortizing to match the underlying assets. (c) Includes all of the wholesale ABS term and conduit maturities of $9.7 billion that otherwise contractually extend to 2016 and beyond.

$72 $97 $113 $122 $49 $68 $82 $105 Assets (a) Debt (b)

(c)

Memo: Unsecured long-term debt maturities (Bils.) 2015 2016 2017 2018 & Beyond $9.1 $10.4 $11.1 $21.0

SLIDE 39

INTEREST RATE RISK -- ASSET LIABILITY MISMATCH

0-1 1-2 2-3 3-4 4-5 5+ Assets Liabilities Repricing (Years) Repricing (Years)

Floating Rate Assets, primarily Cash and Wholesale receivables Fixed Rate Assets, primarily Retail/Lease contracts Floating Rate Debt, primarily Ford Interest Advantage, Commercial Paper, and Wholesale securitization Fixed Rate Liabilities, primarily unsecured debt and Retail/Lease securitization

Interest Rate Risk Is Created When Repricing Characteristics Of Funding Sources Do Not Naturally Match Repricing Characteristics Of Assets

SLIDE 40

Step 1: Excess long-term fixed rate debt is swapped to floating rate debt Assets Liabilities, Derivatives & Equity 0-1 1-2 2-3 3-4 4-5 5+ Repricing (Years) Step 2: Excess floating rate debt is swapped to fixed rate debt to match asset repricing profile in line with risk tolerance 0-1 1-2 2-3 3-4 4-5 5+ Repricing (Years) Assets

INTEREST RATE RISK -- ASSET LIABILITY MISMATCH

Liabilities, Derivatives & Equity

Swaps Are Used To Manage Our Interest Rate Exposure In Line With Risk Management Strategy And Tolerances

SLIDE 41

FORD CREDIT DERIVATIVE NOTIONAL

Despite The Significant Derivative Notional Balance, Ford Credit’s Derivatives Had A Minimal Impact On Total Profit 2013 2014 (Bils.) (Bils.) Interest Rate Derivatives Pay-fix swaps 17 $ 15 $ Pay-float swaps 30 36 Securitization swaps 42 29 Subtotal interest rate derivatives $ 89 $ 80 Other Derivatives Cross-currency swaps 3 2 Foreign currency forwards 2 2 Total derivative notional 94 $ 84 $ Memo: Non-designated derivative notional (Bils.) 75 $ 61 $ Income/(loss) from Unallocated Risk Management (Mils.) (53) $ (6) $ Income/(Loss) as a % of non-designated notional (Pct.) (0.07) % (0.01) %

SLIDE 42

FUNDING A STRONG FORD CREDIT BALANCE SHEET

• Expanding and diversifying our funding programs globally

– Increasing mix of term debt, reducing annual financing requirements – Developing innovative funding platforms in mature and growth markets

• Maintaining strong liquidity to protect against funding disruptions

– Targeting total liquidity of $25 billion +

• Delivering around 10% return on equity with sustainable distributions

– Maintaining leverage between 8 and 9 to 1

• Targeting single-A credit rating profile

Strong Funding and Liquidity Profile Supports Growth in Receivables

Ford Credit Profit Reporting

SLIDE 44

$1,756 $1,854 $357 $(87) $(51) $(129) $8

Millions

$98

Lease Residual Volume 2014 2013 Credit Loss Financing Margin Other

2014 FULL YEAR PRE-TAX RESULTS COMPARED WITH 2013 -- METHODOLOGY USED IN 2014 10-K

SLIDE 45

2014 FULL YEAR PRE-TAX RESULTS COMPARED WITH 2013 -- REVISED METHODOLOGY

$1,756 $1,854 $429 $(135) $(55) $(128) $(49) $36

Millions

$98

Lease Residual Volume / Mix 2014 2013 Credit Loss Financing Margin Other Exchange

• New variance category to isolate

changes in pre-tax profit driven by changes in exchange rates

• Previously, pre-tax profit effect of

changes in exchange rates was reflected in each causal factor

• Added Mix to the Volume

category

• Previously, Mix (by default)

was included in Financing Margin

SLIDE 46

2014 FULL YEAR PRE-TAX RESULTS COMPARED WITH 2013 -- VOLUME (REVISED METHODOLOGY)

$1,756 $1,854 $429 $(135) $(55) $(128) $(49) $36

Millions

$98

Lease Residual 2014 2013 Credit Loss Financing Margin Other Exchange

• Volume represents the change in average receivables multiplied by the

prior period financing margin yield at prior period exchange rates

• Mix represents changes in net financing margin driven by changes in

the composition of our average managed receivables by product and by country or region

Volume / Mix

SLIDE 47

$92 $103 $113 $103 $113

VOLUME AND MIX PROFIT VARIANCES

Memo: Average Receivables at Incurred Exchange Rates $96.4 $108.4 ~$119 Average Receivables at Prior Year Exchange Rates $108.9 ~$122

Managed Receivables (Bils.)

Beginning of Period End of Period

2014 2015 2013

Volume and Mix Variances

$123-128

2014 Compared with 2013 Volume 2014 Average Receivables at 2013 Exchange Rates (Bils.) 108.9 $ 2013 Average Receivables 96.4 Increase / (Decrease) in Receivables 12.5 $ Average 2013 Financing Margin ~ 2.80 % Volume Variance (Mils.) ~ 350 $ Mix (Primarily Higher Leases and China Receivables) ~ 79 Total Volume and Mix 429 $ Directional 2015 Compared with 2014 Volume 2015 Average Receivables at 2014 Exchange Rates (Bils.) ~ 122.0 $ 2014 Average Receivables 108.4 Increase / (Decrease) in Receivables ~ 13.6 $ Average 2014 Financing Margin (similar to 2014) ~ 2.80 % Volume Variance (Mils.) ~ 380 $ Mix (similar to 2014) ~ 80 Total Volume and Mix ~ 460 $

SLIDE 48

2014 FULL YEAR PRE-TAX RESULTS COMPARED WITH 2013 -- FINANCING MARGIN (REVISED METHODOLOGY)

$1,756 $1,854 $429 $(135) $(55) $(128) $(49) $36

Millions

$98

Lease Residual 2014 2013 Credit Loss Financing Margin Other Exchange Volume / Mix

Financing Margin equals the change in revenue net of base depreciation less borrowing costs

SLIDE 49

FINANCING MARGIN FUNCTION OF FINANCING REVENUE AND BORROWING COST

Financing Margin – Financing margin is primarily reflected within Net financing margin on the income statement.

• Financing margin variance is the period-to-period change in financing

margin yield multiplied by the present period average receivables at prior period exchange rates. Financing margin yield equals revenue, less interest expense and base depreciation for the period, divided by average receivables for the same period.

• Financing margin changes are driven by changes in revenue and

interest expense. Changes in revenue are primarily driven by the level of market interest rates, cost assumptions in pricing, mix of business, and competitive environment. Changes in interest expense are primarily driven by the level of market interest rates, borrowing spreads, and asset-liability management.

2014 Versus 2013 Unfavorable Financing Margin Variance Of $135 Million Primarily Reflects Lower Portfolio Pricing In North America And A One-Time Reserve In Europe

SLIDE 50

2014 FULL YEAR PRE-TAX RESULTS COMPARED WITH 2013 -- CREDIT LOSSES (REVISED METHODOLOGY)

$1,756 $1,854 $429 $(135) $(55) $(128) $(49) $36

Millions

$98

Lease Residual 2014 2013 Credit Loss Financing Margin Other Exchange Volume / Mix

Credit Loss equals the change in:

• Charge-offs, plus
• Changes in the Allowance for Credit

Losses At prior period exchange rates

SLIDE 51

UNDERSTANDING CREDIT LOSS TERMINOLOGY

BALANCE SHEET Allowance for Credit Losses (Reserve): Estimate of the credit losses inherent in the finance receivables and operating leases as of the date of the financial statements INCOME STATEMENT IMPACT Charge-offs (net): Actual loss incurred on a receivable or lease net of recoveries. Recoveries are amounts collected from customers after the account has been charged off + Change in Reserves: Reflects the increase or decrease in Allowance for Credit Losses during the period, net of changes in reserves resulting from changes in exchange rates, which flow through Accumulated Other Comprehensive Income and not through the Income Statement. = Provision for Credit Losses: Expense that flows through the income statement to provide appropriate allowance for credit losses

SLIDE 52 $136 $176 $209 $408 $380 $359 Worldwide On-Balance Sheet Charge-Offs and Allowance for Credit Losses (Bils.)

$28 $21 $(33) $(7)

2014 FULL YEAR CREDIT LOSS VARIANCE EXPLANATION (REVISED METHODOLOGY)

Charge-Offs

2013 2012 2014

Reserves

MEMO: LTR (%) 0.16% 0.18% 0.19%

Profit Impact 2014 (Mils.) Change in Reserves $ (7) Exchange Rate Impact on Reserves* (11) Change in Reserves Variance $ (18) Charge-Offs (33) Exchange Rate Impact on Losses (4) Total Credit Loss Variance $ (55) * In the absence of a stronger dollar, Reserves would have been about $370 million -- $11 million higher.

SLIDE 53 $380 $359 $359 $176 $209 $209 Worldwide On-Balance Sheet Charge-Offs and Allowance for Credit Losses (Bils.)

2015 FULL YEAR PROVISION FOR CREDIT LOSSES DIRECTIONAL GUIDANCE

• Reserves are a function of receivables and

credit loss trends.

• Charge-offs are expected to increase in

2015 from near historical lows due to higher managed receivables and higher loss-to-receivable ratio; however, credit losses still remain below 10-year average of 46 bps.

Directional 2015 Compared with 2014

$21 $TBD - $21 $ TBD $TBD

Charge-Offs

2014 2013 2015

Reserves

$TBD

MEMO: LTR (%) 0.18% 0.19% Higher

$TBD

Credit Losses Are Expected To Increase From The Near Historical Lows In 2014. Reserves Are A Function Of Receivables And Credit Loss Trends

SLIDE 54

2014 FULL YEAR PRE-TAX RESULTS COMPARED WITH 2013 -- LEASE RESIDUAL (REVISED METHODOLOGY)

$1,756 $1,854 $429 $(135) $(55) $(128) $(49) $36

Millions

$98

Lease Residual 2014 2013 Credit Loss Financing Margin Other Exchange Volume / Mix

Lease Residual equals the change in:

• Residual performance, plus
• Change in Supplemental Depreciation

At prior period exchange rates

SLIDE 55

UNDERSTANDING LEASE RESIDUAL TERMINOLOGY -- INCOME STATEMENT

RESIDUAL PERFORMANCE IN THE FINANCIAL STATEMENTS Lease residual performance is included in depreciation in our financial statements, which is part of Net Financing Margin. For analytical purposes, we move the residual performance portion of depreciation from Net Financing Margin into its

• wn category

RESIDUAL PERFORMANCE Supplemental Depreciation: Reflects the increase or decrease in depreciation as a result of changes in the projected residual values beyond base depreciation at prior period exchange rates + Residual Gains / Losses: Reflects the difference between the auction value and the depreciated value (base + supplemental depreciation) at prior period exchange rates + Impairment (Rarely Used): Reflects a decrease in the book value of a lease due to significant decline in the value of the vehicles = Lease Residual: The sum of the change in supplemental depreciation, residual gains or losses, and impairment for the period

SLIDE 56

2014 LEASE RESIDUAL PERFORMANCE VARIANCE (REVISED METHODOLOGY)

282 199 124 174 261 125 47 2 2010 2011 2012 2013 2014

North America Lease Termination Volume (000)

Impaired Unimpaired

246 126 408

2014 Profit Impact

* See slide 29 for actual U.S. 24-month and 36-month auction values

Memo: North America Return Rates 69% 59% 60% 67% 74%

174 261

2013 2014 North America Average Gain / (Loss) on Terminated Unit* (300) $ (700) $ Volume 174,000 261,000 Gain / (Loss) on Terminated Units (Mils.) (52) (183) Other Global Markets / Other (Mils.) (50) $ (47) $ Total Lease Residual Incl. Other (Mils.) (102) $ (230) $ Change in Residual Gains/(losses) (Mils.) $(128)

SLIDE 57 199 124 174 261 47 2 2011 2012 2013 2014 2015

246 126 174

2015 LEASE RESIDUAL PERFORMANCE VARIANCE

Impaired Unimpaired

Directional 2015 Profit Impact

Memo: North America Return Rates 59% 60% 67% 74% TBD

* See slide 29 for actual U.S. 24 month and 36-month auction values

Lease Residual Performance Variance Is Dependent On Auction Values

261 ~ 260 ~ 260

North America Lease Termination Volume (000)

2014 2015 North America Average Gain / (Loss) on Terminated Unit* (700) $ $ (TBD) Volume 261,000 ~260,000 Gain / (Loss) on Terminated Units (Mils.) (183) $ $ (TBD) Other Global Markets / Other (Mils.) (47) $ $ (TBD) Total Lease Residual Incl. Other (Mils.) (230) $ $ (TBD) Change in Residual Gains/(losses) (Mils.) $ (TBD)

SLIDE 58

2014 FULL YEAR PRE-TAX RESULTS COMPARED WITH 2013 -- EXCHANGE (REVISED METHODOLOGY)

$1,756 $1,854 $429 $(135) $(55) $(128) $(49) $36

Millions

$98

Lease Residual 2014 2013 Credit Loss Financing Margin Other Exchange Volume / Mix

• Exchange equals the difference between present period

Profits at present period Exchange Rates and present period Profits at prior period Exchange Rates

• Over 30% of Ford Credit's Profits are generated outside of

the U.S.

SLIDE 59

2014 FULL YEAR PRE-TAX RESULTS COMPARED WITH 2013 -- OTHER (REVISED METHODOLOGY)

$1,756 $1,854 $429 $(135) $(55) $(128) $(49) $36

Millions

$98

Lease Residual 2014 2013 Credit Loss Financing Margin Other Exchange Volume / Mix

Primarily includes Operating expenses*, Other revenue**, and Insurance expenses

• n the income

statement at prior period exchange rates

* Changes in operating expenses are primarily driven by salaried personnel costs, facilities costs, and costs associated with the origination and servicing of customer contracts ** In general, other revenue changes are primarily driven by changes in earnings related to market valuation adjustments to derivatives (primarily related to movements in interest rates), which are included in unallocated risk management, and

• ther miscellaneous items

SLIDE 60

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

OPERATING COSTS -- MAIN DRIVER IN “OTHER”

End-of-Period Managed Receivables, Operating Cost and Global Operating Cost Ratio

Ford Credit Is Committed To Achieving An Operating Cost Ratio Among The Best In The Industry

Managed Receivables Operating Cost Operating Cost Ratio

SLIDE 61

• Decline in industry sales volume, particularly in the United States, Europe, or China, due to financial crisis, recession, geopolitical events, or other factors;
• Decline in Ford’s market share or failure to achieve growth;
• Lower-than-anticipated market acceptance of Ford’s new or existing products;
• Market shift away from sales of larger, more profitable vehicles beyond Ford’s current planning assumption, particularly in the United States;
• An increase in or continued volatility of fuel prices, or reduced availability of fuel;
• Continued or increased price competition resulting from industry excess capacity, currency fluctuations, or other factors;
• Fluctuations in foreign currency exchange rates, commodity prices, and interest rates;
• Adverse effects resulting from economic, geopolitical, or other events;
• Economic distress of suppliers that may require Ford to provide substantial financial support or take other measures to ensure supplies of components or materials and

could increase costs, affect liquidity, or cause production constraints or disruptions;

• Work stoppages at Ford or supplier facilities or other limitations on production (whether as a result of labor disputes, natural or man-made disasters, tight credit markets or
• ther financial distress, production constraints or difficulties, or other factors);
• Single-source supply of components or materials;
• Labor or other constraints on Ford’s ability to maintain competitive cost structure;
• Substantial pension and postretirement health care and life insurance liabilities impairing liquidity or financial condition;
• Worse-than-assumed economic and demographic experience for postretirement benefit plans (e.g., discount rates or investment returns);
• Restriction on use of tax attributes from tax law “ownership change;”
• The discovery of defects in vehicles resulting in delays in new model launches, recall campaigns, or increased warranty costs;
• Increased safety, emissions, fuel economy, or other regulations resulting in higher costs, cash expenditures, and/or sales restrictions;
• Unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, perceived environmental impacts, or otherwise;
• A change in requirements under long-term supply arrangements committing Ford to purchase minimum or fixed quantities of certain parts, or to pay a minimum amount to

the seller (“take-or-pay” contracts);

• Adverse effects on results from a decrease in or cessation or clawback of government incentives related to investments;
• Inherent limitations of internal controls impacting financial statements and safeguarding of assets;
• Cybersecurity risks to operational systems, security systems, or infrastructure owned by Ford, Ford Credit, or a third-party vendor or supplier;
• Failure of financial institutions to fulfill commitments under committed credit and liquidity facilities;
• Inability of Ford Credit to access debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts, due to credit rating downgrades,

market volatility, market disruption, regulatory requirements, or other factors;

• Higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles;
• Increased competition from banks, financial institutions, or other third parties seeking to increase their share of financing Ford vehicles; and
• New or increased credit, consumer, or data protection or other regulations resulting in higher costs and/or additional financing restrictions.

Statements included or incorporated by reference herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation: We cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be

• realized. It is to be expected that there may be differences between projected and actual results. Our forward-looking statements speak only as of the date of their

initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. For additional discussion, see "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2014, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

RISK FACTORS

APPENDIX

NET FINANCE RECEIVABLES AND OPERATING LEASES

APPENDIX 1 of 3

• Dec. 31, 2013
• Dec. 31, 2014

Receivables*

(Bils.) (Bils.)

Net Receivables Finance Receivables Finance receivables – North America Segment Consumer retail financing 40.9 $ 44.1 $ Non-Consumer Dealer financing** 22.1 22.5 Other 1.0 1.0 Total finance receivables – North America Segment 64.0 $ 67.6 $ Finance receivables – International Segment Consumer retail financing 10.8 $ 11.8 $ Non-Consumer Dealer financing ** 8.3 9.3 Other 0.4 0.3 Total finance receivables – International Segment 19.5 $ 21.4 $ Unearned interest supplements (1.5) (1.8) Allowance for credit losses (0.4) (0.3) Finance receivables, net 81.6 $ 86.9 $ Net investment in operating leases 18.3 21.5 Total net receivables 99.9 $ 108.4 $ Managed Receivables Total net receivables 99.9 $ 108.4 $ Unearned interest supplements and residual support 3.1 3.9 Allowance for credit losses 0.4 0.4 Other, primarily accumulated supplemental depreciation 0.0 0.1 Total managed receivables 103.4 $ 112.8 $

* Includes finance receivables (retail and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance sheet and are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations of Ford Credit or the claims of Ford Credit’s other creditors ** Dealer financing primarily includes wholesale loans to dealers to finance the purchase of vehicle inventory

RECONCILIATION OF MANAGED LEVERAGE TO FINANCIAL STATEMENT LEVERAGE

APPENDIX 2 of 3

2013 2014

• Dec. 31
• Dec. 31

(Bils.) (Bils.) Leverage Calculation Total Debt* $ 98.7 $ 105.0 Adjustments for Cash, Cash Equivalents, and Marketable Securities** (10.8) (8.9) Adjustments for Derivative Accounting*** (0.2) (0.4) Total Adjusted Debt $ 87.7 $ 95.7 Equity**** $ 10.6 $ 11.4 Adjustments for Derivative Accounting*** (0.3) (0.4) Total Adjusted Equity $ 10.3 $ 11.0 Financial Statement Leverage (to 1) 9.3 9.2 Managed Leverage (to 1)***** 8.5 8.7

* Includes debt reported on Ford Credit's balance sheet that is issued in securitization transactions and payable only out of collections on the underlying securitized assets and related enhancements. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions ** Excludes marketable securities related to insurance activities *** Primarily related to market valuation adjustments to derivatives due to movements in interest rates. Adjustments to debt are related to designated fair value hedges and adjustments to equity are related to retained earnings **** Shareholder's interest reported on Ford Credit's balance sheet ***** Equals total adjusted debt over total adjusted equity

IMPACT OF ON-BALANCE SHEET SECURITIZATION

Impact of On-Balance Sheet Securitization – receivables include finance receivables (retail and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance sheet and are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the

• ther obligations of Ford Credit or the claims of Ford Credit’s other creditors. Total debt

includes debt reported on Ford Credit’s balance sheet that is issued in securitization transactions and payable only out of collections on the underlying securitized assets and related enhancements. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions.

APPENDIX 3 of 3

SLIDE 66

FURTHER INFORMATION

Ford Investor Relations Contacts: Fixed Income Investors: Stephen Dahle (U.S.-based) 313.621.0881 Fixedinc@ford.com Information on Ford:

• www.shareholder.ford.com
• 10-K Annual Reports
• 10-Q Quarterly Reports
• 8-K Current Reports
• Ford University
• 2013/2014 Sustainability Report

– www.corporate.ford.com/microsites/sustainability-report-2013-14/default.html

Information on Ford Motor Credit Company:

• www.fordcredit.com/investor-center
• 10-K Annual Reports
• 10-Q Quarterly Reports
• 8-K Current Reports
• Ford Credit University