Good day, ladies and gentlemen, and welcome to the First Quarter Ford Fixed Income Conference Call. My name is Chantellay and I will be your facilitator for today's call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Shawn Ryan, Manager Fixed Income, Investor Relations. Please proceed, sir.

Thank you, Chantellay, and good morning, ladies and gentlemen. Welcome to all of you who are joining us either by phone or webcast. On behalf of the entire Ford management team, I would like to thank you for spending time with us this morning. With me this morning are Bob Shanks, Ford Vice President and Controller; Michael Seneski, Ford Credit Chief Financial Officer; and David Brandi, Assistant Treasurer. We also have some other members of management who are joining us for the call, including K.R. Kent, Executive Director, Investor Relations; Brian Shoff [ph], Assistant Treasurer; and Paul Andonian, Director of Global Accounting. Before we begin, I would like to review a couple of items. A copy of this morning's earnings release and the slides we will be using today have been posted on Ford Motor Company's Investor and Media websites for your reference. The financial results discussed herein are presented on a preliminary basis. The final data will be included in our Form 10-Q. Additionally, the financial results presented here are on a GAAP basis, and in some cases, on a non-GAAP basis. Any non-GAAP financial measures discussed on this call are reconciled to the U.S. GAAP equivalent as part of the appendix to the slide deck. Finally, today's presentation includes some forward-looking statements about our expectation for Ford's future performance. Actual results could differ materially from those suggested by our comments here. The most significant factors that could affect future results are summarized at the end of this presentation. These risk factors and other key information are detailed in our SEC filings, including our annual, quarterly and current reports to the SEC. With that, I would like to turn the call over to Ford Vice President and Controller, Bob Shanks. Bob?

Thanks, Shawn, and good morning, everyone. Overall, our team delivered a great quarter of growth, profitability and positive automotive operating-related cash flow. Both volume and revenue were higher than a year ago and we earned a pretax operating profit for the seventh consecutive quarter. The results, in fact, were over 40% better than a year ago. In addition, each of our automotive operations was profitable, with results that were better than the first quarter of 2010. Financial services also was solidly profitable. We further strengthened our balance sheet by reducing debt during the quarter. And at the same time, we increased our overall liquidity and made further progress towards achieving investment grade. We also launched more great products our customers want and value, notably, the all new fuel-efficient Focus, in both North America and Europe. The impact of the tragic events in Japan continues to unfold and we're managing this on a day-by-day basis. Our first quarter performance is a step forward in our delivery of profitable growth for all, not only for 2011 but for the years ahead. We're investing for future growth and are focused on developing outstanding products with segment-leading quality, safety, fuel economy and technology. We're also adding capacity in emerging economies to increase dramatically our participation, while investing to build the strength of our brand around the world. While these actions and investments are increasing cost, all in line with our plan, they also are driving higher volumes, richer mix and stronger transaction prices. Slide 2 summarizes our first quarter business results compared with the year ago period. Vehicle wholesales were 1.4 million units, up 150,000 units or 12% from 2010. Revenue was $33.1 billion, an increase of $5 billion or 18% from 2010. For comparison purposes, we did exclude Volvo wholesales and revenues from…

Thanks, Bob. We'll move on to Slide 7, which shows Ford Credit’s operating results and key metrics for the first quarter of 2011. As shown in the left box, our first quarter pretax profit was $713 million compared with a pretax profit of $828 million in the first quarter of 2010. You can see in the right box, our March 31 on-balance sheet receivables are $83 billion or about $5 billion lower than the same period last year. Charge-offs for on-balance sheet receivables in the first quarter were $55 million and the worldwide loss-to-receivables ratio was a very low 27 basis points. I'll speak more on this in a few minutes. At March 31, the allowance for credit losses or reserves for on-balance sheet receivables was about $700 million or 87 basis points of receivables. We paid total distributions of $900 million in the first quarter and expect to pay distributions of about $3 billion in 2011, up from $2 billion that was previously announced. We'll continue to assess future distributions based on our available liquidity and managed leverage objectives. Our managed leverage was 7.0:1 at March 31, 2011, up from 6.9:1 at March 31, 2010, an increase from 6.7:1 at the end of last year. At the end of the first quarter, our equity was about $10 billion. Slide 8 shows the change in first quarter Ford Credit pretax results compared with a year ago. Overall, first quarter results decreased $115 million. The decrease is more than explained by lower market valuation adjustment to derivatives, included in other, and lower receivables volume. As shown on the memo, Ford Credit's results increased $141 million compared with the fourth quarter of 2010. This was primarily explained by a lower provision for credit losses and, included in other, lower net losses related…

Thanks, Mike. We're on track to achieve our 2011 funding plan. In the first quarter, we completed $7 billion of funding, including $4 billion in the public market and $3 billion in private securitizations. We have completed another $3 billion of public and private funding in April. Our funding strategy remains focused on access to a variety of markets, channels and investors. In April, we completed the first issuance of $1.5 billion of 5-year notes under our new FUEL program. FUEL stands for Ford Upgrade Exchange Link notes. FUEL notes are backed by retail assets and exchanged to unsecured notes when Ford Credit's ratings improve to investment grade. We have ended the tenure of our funding by issuing 10-year unsecured term debt and completing the FUEL transaction. Our borrowing spreads have decreased, reflecting improved credit profiles at Ford and Ford Credit, strong investor demand and support of capital markets. While liquidity remains strong, we will maintain cash balances and committed capacity that meet our business and funding requirements. Slide 13 shows the trends in funding for our managed receivables. At the end of the first quarter, managed receivables were $85 billion. We ended the quarter with $13 billion in cash, including about $5 billion to support on-balance sheet securitizations. Securitized funding was 53% of managed receivables at the end of the first quarter. We are projecting 2011 year end managed receivables in the range of $82 billion to $87 billion, slightly higher than the prior estimate, due to exchange rates. Securitized funding, which includes the FUEL notes is expected to represent about 53% to 57% of total managed receivables. We expect this percentage will decline over time with our ability to obtain term funding from the unsecured markets on increasingly favorable terms, and the effect of the FUEL notes exchanging…

Thank you, David. Ladies and gentlemen, we're going to start the question-and-answer session now.

Yes. Your first question comes from the line of Doug Carson [ph] of Bank of America.

Thanks. A couple quick questions. The new FUEL note program, previously been successful in the market. Is this a program that you think it grow it’d be kind of a meaningful portion in the next year or two’s funding?

Well, of course, we hope it's time-bounded by our upgrade to investment grade ratings. But yes, so this has worked very well for Ford Credit. It certainly allowed us to tap into investors who require investment grade rating. And of course, FUEL does carry investment grade rating. So we're very pleased with the results and hope that there's future transactions.

Right. And then, your second question. The managed leverage still remains pretty low at 7x. And I'm kind of remembering in the past, there was a, I think a rough target to take that up pretty significantly. Is that still something that you guys are considering to bring that leverage up? Is there more...

I think over time we'd like to see it back to the 10 to 11 range that we typically run for the credit company. We'll take the leverage up step-by-step and the $3 billion distribution that we're projecting for 2011 will help achieve some of that.

Okay. And then I guess last question. This is broader, I'm not sure how deep you’ll even get or even if you'd address it, but -- competitor Ally is aggressively trying to diversify away from GM, and given that major manufacturers have captives, like Ford, it's not clear what path they would take. Have you seen them getting more competitive in the market? Do they have a bigger presence in non-GM business? Have you seen them kind of approach any of the Ford customer? Just kind of getting color away.

Look, we've been competing against banks and all others for over 50 years and been pretty successful at that. We're committed to financing Ford and Lincoln vehicles around the world. Our share is very good and has been very consistent. We go to the market consistently with the Motor Company. So to whatever extent competition acts, I think we're ready for it and our results are continuing to hold up.

Great. That's it from me, guys. Thank you.

[Operator Instructions] Your next question comes from the line of Brian Jacoby of Goldman Sachs.

A couple quick questions. One, this is around Ford Motor Credit. What, right now -- I mean, from the perspective of sub-prime or let's just call it, lower quality clientele within the portfolio. Traditionally, last few years, you've certainly have been more prime. Are you now kind of maybe going to get more into or back into some of the sub-prime? Or are you guys still pretty much committed to try and go after stuff that's over 700 on the FICO score? And then, along those lines, how do you see the industry right now? There's been some evidence that others have been dipping down farther into riskier credits. Is that a trend that you're seeing just broadly? Maybe if you could just comment on that and then I have 1 other question to follow.

All right. Well, as you know, Brian, we originate across the entire spectrum. And we do it consistently and we've done it consistently through time. It's something that our dealers expect, that the Motor Company expects and that our investors expect. We believe that we are able to go much deeper into the spectrum than others, and have been, and that hasn't changed for us, and we believe that's one of our competitive advantages. Regarding the industry, it is true that we have seen a little bit of change as other players get back into auto financing and a little bit stronger growth of what you might call, traditional sub-prime. For us, we haven't seen a change because our underwriting practices have stayed consistent.

Okay and then my follow-up question, it’s just around -- obviously, you guys are -- every chance you get, you make a comment about your goal of achieving investment grade ratings. And all of us are getting questions on how can Ford do it when they're still rated substantially well in high-yield category. But obviously, your debt reduction goals have been pretty consistent all along. What -- I mean, at this point, what is the -- any color on how you intend to, I guess, attack the capital structure in terms of what's next? I mean -- presumably -- I would assume that you guys are trying to go after bank debt. But maybe if you can just talk around how you're thinking about your revolver. I mean I know that has fall away covenants with respect to collateral. But, I mean, is it something that you kind of think you need to perhaps re-approach the banks and put in a new facility? Any type of, kind of, time frame on that just because if that is -- from talking to the rating agencies, I think that is one of several things that they consider, clearly, when trying to peg an IG rating for Ford.

Yes. Brian, I think we probably won't get into a lot of detailed specifics about all our future transactions. Obviously, if you look at appendix 9 of our deck here, that shows what our debt levels have been at the Motor Company and where they are today. And the progress that we've been making on that, I think, you can think that, that trajectory will continue in some form or fashion. And with respect to the agencies, I think, time will tell. Obviously, some investors are very confident in where we're going. Our spreads are much improved, certainly, from a year ago when maybe they were, let's call it, 400 to 450 over base rates and today let's call it, 200 to 225 over base rate. So we've cut those spreads dramatically and I think, in the minds of the investors, we're well on our way. So it's probably be a matter of time when we prove to the agencies that we are, indeed, an investment grade company.

Okay. All right. Agreed on that part and thanks for the questions.

[Operator Instructions] Your next question comes from the line of Eric Selle of JPMorgan.

With $31 billion of liquidity at the auto company and the desire to reduce debt, why did you guys go out and increase the revolver capacity by $1.7 billion?

That's a great question, [indiscernible]. I think we've learned over the years, when the market is offering you additional liquidity and I think in this case, it was clearly the market offering us liquidity, we're inclined to take that up. Liquidity has served us well and I think allows us great flexibility as we go forward.

And then, your existing bank facilities. Do they have the security fall away upon obtaining IG? Is that in the covenants?

Yes.

It is. Okay. And then secondly, looking at the distributions from Ford Credit. $3 billion, does that include the tax reconciliation?

No, it doesn't, Eric. That's straight distributions.

And is that typically a third quarter, as I remember, type event or is that fourth quarter? Or is there any specific thing on timing to that?

For the tax?

Yes.

It would probably be around the fourth quarter, most likely. Maybe in the third. We'll sort that out. Certainly, in the latter part of the year.

And similar to what we saw in the last couple of years?

It's going to be consistent with our required tax obligations based on our profits in the last year, couple years.

Okay. And then finally, looking at Ford Credit. You had good, good quarter, but I was somewhat surprised by the sequential drop in cash and then the ensuing impact on liquidity. Is there anything there? I mean, I think, cash was down like -- I think liquidity was down like $3 billion sequentially and cash was down like $2 billion. Is there anything there or is that just a timing issue?

Oh, I think we had sufficient liquidity knowing that we had some heavy maturities coming up in the first quarter and took care of those unsecured debt maturities. That's the primary reason for you to see the sequential change.

And 22% liquidity is still an awful big number.

That is right, that is right. Well, I appreciate your time and great quarter.

Your next question comes from the line of Mark Altherr [ph] of Credit Suisse.

Thank you. I apologize if you mentioned this briefly. On Slide 11, the 24-month lease returns. What was going on -- what's going on there that sort of dried up?

Basically, Mark, back in 2008, 2009, the Motor Company -- we go to market jointly with the Motor Company. And a couple of things happened: 1, our overall amount of leases that we offered in the market went out substantially; and 2, they primarily switched to offering 36-month. So we have a real dearth of 24-month contracts coming back really throughout the course of this year.

Okay. Thank you, thank you.

At this time, there are no further questions in the queue. And I would like to turn the call back over to Mr. Shawn Ryan. Please proceed.

Thank you, ladies and gentlemen. That concludes today's call. Thank you for joining us.