Wednesday, Aug. 01, 2007, 08:00 PM UPDATED 11:59 AMBy Nick Zulovich
DEARBORN, Mich. — Ford Motor Credit announced net income of $62 million in the second quarter, down $242 million from earnings of $304 million a year earlier.
The decrease in earnings primarily reflected higher borrowing costs, lower credit loss reserve reductions, higher depreciation expense for leased vehicles and higher net losses related to market valuation adjustments from derivatives, executives explained. Lower expenses, primarily reflecting improved operating costs, were a partial offset.
Ford Credit said it expects to earn on a pre-tax basis $1.3 billion to $1.4 billion this year, excluding the impact of gains and losses related to market valuation adjustments from derivatives, up from the previous estimate of $1.2 billion.
"Our operating results for the second quarter were slightly better than our expectations," said Mike Bannister, chairman and chief executive officer. "We're increasing our earnings outlook due to higher average receivables, improved operating costs and continued good performance in our credit losses.
"Our commitment to solid risk management principles that support Ford vehicle sales worldwide has produced a high-quality portfolio that is performing very well," he added.
On June 30, Ford Credit's on-balance sheet net receivables totaled $140 billion, compared with $135 billion at year-end 2006. Managed receivables were $149 billion, compared with $148 billion on Dec. 31, officials concluded.