Ford Mtr Co Del · NYSE:F
Ford Mtr Co Del — Ford Motor Credit Company — Debt Investor Presentation (June 2020)
30 slides from Ford Mtr Co Del's debt investor presentation, Jun 10, 2020
Slide 1: Ford Credit University
BUILT TO LEND A HAND BUILT rd PROUD FORD CREDIT UNIVERSITY June 2020
Slide 2: Ford Credit University Outline
Ford Credit University Outline • Ford Credit Strategic Value • Size and Scope of Operations • Ford Credit Business Model – Originations and Servicing – Funding (Including Capital Structure and Self-Liquidating Balance Sheet) • Relationship Agreement with Ford – Distributions to Parent • CECL and Sup
Slide 3: Further Information
Further Information Ford Fixed Income Investor Relations: Karen Rocoff 313-621-0965 krocoff@ford.com Kristi Jones 313-845-1522 kjone302@ford.com Information on Ford: • www.shareholder.ford.com • 10-K Annual Reports • 10-Q Quarterly Reports • 8-K Current Reports Information on Ford Motor Credit Compa
Slide 4: Strategic Value
Strategic Value
Slide 5: Retail Lease Financing
RETAIL LEASE FINANCING FINANCING MOBILITY INVENTORY AND FINTECH FINANCING | FORD CREDIT PERFORMANCE CONSULTING INVENTORY INSURANCE COMMERCIAL FINANCING VEHICLE OWNERSHIP PROTECTION CAPITAL AND FACILITY LOANS
Slide 6: Ford Credit's Value Proposition
Ford Credit’s Value Proposition Ensure competitive retail, lease and wholesale financing Support Sales Through All Economic Cycles Continue to drive higher satisfaction and loyalty to Ford Highest Customer Satisfaction Higher Satisfaction Lincoln AFS: 2012 – 2019 Ford Credit: 2015, 2016, 2017, 2
Slide 7: Ford Credit -- A Strategic Asset
Ford Credit -- A Strategic Asset Earnings Before Taxes Distributions $4.9 $3.7 $2.9 $3.1 $3.0 $2.6 $2.5 $2.5 $2.4 $2.0 $2.3 $2.0 $2.0 $2.1 $1.7 $1.8 $1.9 $1.9 $1.2 $(2.6) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Over The Last 20 Years, Ford
Slide 8: Size and Scope of Operations
Size and Scope of Operations
Slide 9: Ford Credit's Business
9 Ford Credit’s Business Ford indirectly owns 100% of Ford Credit Operates in more than 70 countries 6,800-plus employees 3,000 dealers 5 million customer contracts $146 billion in managed receivables (as of March 31, 2020) 9
Slide 10: Q1 2020 Net Receivables Mix ($B)
Q1 2020 Net Receivables Mix ($B) Net Investment in Operating Leases Consumer Financing Non-Consumer Financing $137.8 $27.0 $110.2 • Operating lease portfolio was Q1 2020 H / (L) 2019 20% of total net receivables $26.8 SUV / CUV 58% 1 ppts. Truck 31 3 Car 11 (4) • Receivables declined $9 billion $69.
Slide 11: Ford Credit Business Model
Ford Credit Business Model
Slide 12: Ford Credit Business Model
Ford Credit Business Model ORIGINATE SERVICE FUND • Support Ford and • High customer and dealer • Strong liquidity Lincoln sales satisfaction • Diverse sources and • Strong dealer relationships • World-class servicing channels • Full spread of business • Credit losses within • Cost effective expecta
Slide 13: Originations and Servicing Process Overview
Originations and Servicing Process Overview Process Discipline Technology Judgment Low Variability Speed Knowledge Consistent Approvals and Risk Management Efficiency Experience High Quality Decisions Control Dealer Support Centralized Process/Documentation Commonality Standards Accountability Combi
Slide 14: Origination Process
Origination Process • Ford Credit’s origination process is supported by proprietary scoring models and electronic decisioning - Analyze a number of factors for each credit application - Produce a proprietary risk score that is updated in real time throughout the evaluation process as inputs change •
Slide 15: Servicing Strategy
Servicing Strategy • Ford Credit uses proprietary behavioral scoring models to assess the probability of payment default for each receivable and implements collection efforts based on its determination of the credit risk of the customer on the payment due date • Output of the behavioral scoring mode
Slide 16: Ford Credit Funding Strategy
Ford Credit Funding Strategy • Our strong balance sheet and substantial liquidity provide Ford Credit considerable flexibility • Despite the impact of COVID-19, Ford Credit ended the first quarter at $28 billion in liquidity, exceeding target of about $25 billion; liquidity target established to wit
Slide 17: Funding Structure – Managed Receivables ($B)
Funding Structure – Managed Receivables* ($B) 2019 2020 Dec 31 Mar 31 Term Debt (incl. Bank Borrowings) $ 73 $ 72 Term Asset-Backed Securities 57 56 • Funding is diversified across Commercial Paper 4 3 platforms and markets Ford Interest Advantage / Deposits 7 6 • Well capitalized with a strong Othe
Slide 18: Liquidity Sources ($B)
Liquidity Sources* ($B) 2019 2019 2020 Mar 31 Dec 31 Mar 31 Liquidity Sources Cash $ 12.8 $ 11.7 $ 11.3 Committed asset-backed facilities 35.2 36.6 35.9 Other unsecured credit facilities 3.3 3.0 2.8 Ford corporate credit facility allocation 3.0 3.0 - • Given excess liquidity, Total liquidity sources
Slide 19: Cumulative Maturities at March 31, 2020 ($B)
Cumulative Maturities at March 31, 2020* ($B) • Strong balance sheet is Assets Debt inherently liquid with $155 $139 cumulative debt maturities $135 $116 having a longer tenor than $102 asset maturities $83 $72 • As of March 31, $80 billion $50 (including $2.9 billion cash) of $155 billion assets ar
Slide 20: Relationship Agreement with Ford
Relationship Agreement with Ford
Slide 21: Relationship Agreement with Ford
Relationship Agreement with Ford • Ford and Ford Credit have a relationship agreement that governs our interactions. This ensures that intercompany transactions are arm’s length and our financing activities are prudent and commercially reasonable. • Ford Credit will not guarantee more than $500 mill
Slide 22: Financial Statement Leverage Reconciliation To Managed Leverage ($B)
Financial Statement Leverage Reconciliation To Managed Leverage* ($B) 2019 2019 2020 Mar 31 Dec 31 Mar 31 Leverage Calculation Debt $ 142.9 $ 140.0 $ 136.8 Adjustments for cash (12.8) (11.7) (11.3) Adjustments for derivative accounting (0.1) (0.5) (1.6) Total adjusted debt $ 130.0 $ 127.8 $ 123.9 Eq
Slide 23: Distributions
Distributions • Distributions are a function of – Net income, – Balance sheet size, and – Leverage • Increases in net income and reductions in balance sheet size could result in larger distributions • We expect to maintain managed leverage in an 8:1 – 9:1x range in 2020 • A rule of thumb is $100 mil
Slide 24: Profit Impact of CECL and Supplemental Depreciation
Profit Impact of CECL and Supplemental Depreciation
Slide 25: Q1 2020 Credit Loss Reserve Adjustment ($M)
Q1 2020 Credit Loss Reserve Adjustment ($M) • Current Expected Credit Losses (CECL) accounting standard reflects forward- looking estimate of lifetime losses • $252M adjustment at adoption recorded through retained earnings • Increase in retail reserve driven by probability of default primarily refl
Slide 26: Lease Example With No Residual Gain / Loss
Lease Example With No Residual Gain / Loss Example Assumptions: Generally, depreciation for leases is the sum Acquisition Cost = MSRP $ 30,000 Contract Lease-end Value (LEV) 15,600 (52% MSRP) of base and supplemental depreciation, net of Ford Credit Projected Residual at Contract Inception 15,000 (5
Slide 27: Lease Example With Residual Gain / Loss
Lease Example With Residual Gain / Loss Example Assumptions: Auction value projections are assessed Acquisition Cost = MSRP $ 30,000 Contract Lease-end Value (LEV) 15,600 (52% MSRP) quarterly and changes are made Ford Credit Projected Residual at Contract Inception 15,000 (50% MSRP) accordingly Fo
Slide 28: Appendix
Gerd> Gord> Appendix
Slide 29: Understanding Credit Loss Terminology
Understanding Credit Loss Terminology BALANCE SHEET Allowance for Credit Losses (Reserve): Estimate of the lifetime credit losses inherent in finance receivables as of the date of the financial statements INCOME STATEMENT IMPACT Charge-offs (net): Actual losses incurred on our receivables plus recov
Slide 30: Definitions And Calculations
Definitions And Calculations Adjustments (as shown on the Liquidity Sources chart) • Includes asset-backed capacity in excess of eligible receivables; cash related to the Ford Credit Revolving Extended Variable-utilization program (“FordREV”), which can be accessed through future sales of receivable
Ford Motor Credit Company — Debt Investor Presentation (June 2020) on 6ix