Even though Ford Motor Credit avoided the mortgage madness haunting GMAC, the credit crisis is taking its toll. Today's Wall Street Journal reports that FMC's delinquencies are up. Upside-down car and truck owners are giving up and giving back. With resale values falling through the floor, the bankers are stuck with monster truck-sized losses on repossessed vehicles. Even clean lease returns are a problem. Contemplating their ailing credit ops and DOA truck market, The Blue Oval Boyz have pushed out it's profitability date from 2009 to… someday. "Ford started the year expecting its credit arm to match the $1.2 billion in pretax profit it earned last year, but now has a much dimmer outlook. In the first quarter, Ford Credit earned just $36 million, $257 million less than in the year-earlier period." Unlike GM's sell-off of GMAC, Ford continues to say it "has reviewed the option of selling the unit many times over the years but has always come to the conclusion that Ford Credit is a strategic asset for the auto maker." Which is lucky; who'd buy it? Never one to miss the obvious, Ford share stalker Kirk Kerkorian's go-to guy Jerome York fingers Ford Credit as "an area of weakness." Ya think?
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I did some work for Ford Credit ten years ago during Ford’s most profitable years (late ’90s). Back then, they were annually spending tens of millions of dollars on reposessions, and that was during the boom time, when delinquencies were at their lowest point in the 20th century.
I have to imagine that in this environment they are spending at least $100 million per year with the nation’s repo men.
What I would give to be a fly on the wall of those customer service centers these days. Their old ways of beating up the delinquent customers have surely changed. Similar to the mortgage guys, their new script probably looks something like, “Sir, you haven’t been able to send your payment in a few months now. That’s okay. Don’t worry about it. When do you think you might be able to send us something? Anything?”
Just have Cerebus buy it and then they own part of all D2.8 Financial arms. I see FC on stronger ground as they do not have a rescap crisis. But they are hurting b/c of the greed in selling cars to those who simply cannot afford it or taking trades with substantial negative equity in order to move a retail sale. Plus FC has been trying to have better lease deals than their competitors who enjoy a much stronger resale value. FC has to eat the difference when they have to off load lease returns to wholesale b/c there’s no market for them.
Lease returns on SUVs are going to be UGLY.
I once worked for Ford (for the better part of 15 yearss) and this was foreseen by myself (and a few others) to a large degree but was met with utter disbelief and hilarity by those who should have known better.
Look who’s coming to dinner…
Remember it was Ford in 2006 that offered almost anyone with a pulse zero percent financing. I wonder how many of those deals have cratered?
So, a vast field of clean lease returns and repossessions to be cleared out. Good times should you find yourself with the need for one of these for occasional use, where the gas won’t kill you.
Had to laugh, drove by a Chrysler dealer the other day. There was a big sign screaming ‘$12,000 rebate on new Rams’. A $12,000 rebate?!!! I’d love to see the prices on the used ones.
Talk about being between a rock, a hard place, and rapidly descending comet.
At my dealership we rarely buy the off lease vehicles customer turn in to us. The residuals were invariably off and Ford wants too much for them. We wait til they hit the regualr auction and pick them up cheaper there. Ford takes the bath. I have noticed on certain vehicles with pending full makeovers, Ford has done away with the cheap lease rates and rebates – Ford wants customers to buy them and take the depreciation hit for themselves.
NickR: $12,000.00 rebate, that would have to be some sort of auto industry record on rebate amounts doesn’t it?
I can see the scams now. Someone goes in and buys the vehicle and and takes the $12K rebate instead of having it sent to the dealer. They stretch out the payment plan to 72 months to lower the payment amount and pay the first couple of months payments, get the $12K rebate and then file bankruptcy. I bet there are those who will do it.
RE: 12k rebate.
It’s not a true rebate. IE it’s not from the factory. You can see all the rebates (including the hidden rebates on imports) listed every week in Automotive News, which also lists the financing incentives offered.
My guess is the deal is the real rebate (up to 6k) plus some other shenanigens like a trade in “allowance”. You all remember the man screaming on your radio about the local dealer offering 2, 3, or 4 thousand on your trade “no matter what”? “Tow it in, push it in, we will give $X on your trade for a new ____!!!”
Good feedback from everyone.
For all you CPA’s out there. When will Ford be required to write down the asset value of all those leases?
If they are truly not able to resell vheicals for close to residual value then eventually they have to fix the book value.
I wonder if they sold these leases as securities…..? Now, that’s going to be a lawsuit!!
“When will Ford be required to write down the asset value of all those leases?”
Good question. A few weeks ago BMW announced a write-down of over $300M for just that reason.
From my little corner of the woods… My wife and I have two good Ford vehicles and because of depreciation and fuel prices, we will drive them until they rot. Of course, an R/C F150 can only hold three, and a 2nd might be on the way.