Ford Motor Credit Company - [PDF Document] (2024)

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K(Mark One)

≤ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

For the Ñscal year ended December 31, 2002

n TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission Ñle number 1-6368

Ford Motor Credit Company(Exact name of registrant as speciÑed in its charter)

Delaware 38-1612444(State of incorporation) (I.R.S. employer identiÑcation no.)

One American Road, Dearborn, Michigan 48126(Address of principal executive oÇces) (Zip code)

Registrant's telephone number, including area code (313) 322-3000

Securities registered pursuant to Section 12(b) of the Act:

Name of each Exchange

Title of each class on which registered

63/8% Notes due November 5, 2008 New York Stock Exchange73/8% Notes due October 15, 2031 New York Stock Exchange7.60% Notes due March 1, 2032 New York Stock Exchange

Indicate by check mark whether the registrant (1) has Ñled all reports required to be Ñled by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to Ñle such reports), and (2) has been subject to such Ñling requirements for the past90 days.

Yes $ No

Indicate by check mark if disclosure of delinquent Ñlers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of Registrant's knowledge, in deÑnitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ≤

Indicate by check mark whether the registrant is an accelerated Ñler (as deÑned in Exchange Act Rule 12b-2).

Yes No $

As of March 17, 2003, the registrant had outstanding 250,000 shares of Common Stock. No voting stock of theregistrant is held by non-aÇliates of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

This Report incorporates by reference into Items 1 and 3 hereof Sections of Items 1, 3, 6, 7 and 7A of FordMotor Company's Annual Report on Form 10-K for the year ended December 31, 2002.

The registrant meets the condition set forth in General Instruction I(1)(a) and (b) of Form 10-K and istherefore Ñling this Form with the reduced disclosure format.

PART I

ITEM 1. OUR BUSINESS

Overview

We are the world's largest automotive Ñnance company based on the dollar value of the portfolio ofÑnance receivables we own and manage. We provide vehicle and dealer Ñnancing in 36 countries to more than11 million customers and more than 12,500 automotive dealers. We were incorporated in Delaware in 1959and are an indirect wholly-owned subsidiary of Ford Motor Company (Ford). Our principal executive oÇcesare located at One American Road, Dearborn, Michigan 48126, and our telephone number is (313) 322-3000.

All of our periodic report Ñlings with the Securities and Exchange Commission (SEC) pursuant toSection 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended, are made available, free ofcharge, through our website located at www.fordcredit.com/investorcenter/, including our annual report onForm 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and any amendments to thosereports. These reports and amendments are available through our website as soon as reasonably practicableafter we electronically Ñle such report or amendment with the SEC.

Products and Services. We oÅer a wide variety of automotive Ñnancing products to and throughautomotive dealers throughout the world. Our primary Ñnancing products fall into three categories:

‚ Retail Ñnancing Ì purchasing retail installment sale contracts and retail lease contracts from dealers,and oÅering Ñnancing to commercial customers, primarily vehicle leasing companies and Öeetpurchasers, to purchase or lease vehicle Öeets.

‚ Wholesale Ñnancing Ì making loans to dealers to Ñnance the purchase of vehicle inventory, alsoknown as Öoorplan Ñnancing.

‚ Other Ñnancing Ì making loans to dealers for working capital, improvements to dealership facilities,and to purchase and Ñnance dealership real estate.

We also service the Ñnance receivables and leases we originate and purchase, make loans to Ford aÇliates,purchase certain receivables of Ford and its subsidiaries and provide insurance services related to our Ñnancingprograms.

We earn our revenue primarily from the following:

‚ Payments made under retail installment sale contracts and retail leases that we purchase, includinginterest supplements and other support payments from Ford on special-rate retail Ñnancing programs;

‚ Investment and other income related to sold receivables; and

‚ Payments made under wholesale and other dealer loan Ñnancing programs.

See Item 6 for quantitative information concerning the amount of revenue generated by the diÅerent types ofservices we provide.

Geographic Scope of Operations and Segment Information. We conduct our Ñnancing operations directlyor through our subsidiaries and aÇliates. We oÅer substantially similar products and services throughout manydiÅerent regions, subject to local legal restrictions and market conditions. We divide our business segmentsbased on geographic regions: Ford Credit North America (North America Segment) and Ford CreditInternational (International Segment). The North America Segment includes our operations in the UnitedStates and Canada. The International Segment includes our operations in all other countries in which we dobusiness directly and indirectly. Additional Ñnancial information regarding our operations by businesssegments and operations by geographic regions are shown in Note 17 of our Notes to Financial Statementsand see Item 7A for a discussion of currency exchange rate risks and of our hedging strategy.

ITEM 1. OUR BUSINESS (Continued)

North America Segment

We do business in all 50 states of the United States through about 165 dealer automotive Ñnancingbranches and 7 regional service centers. We do business in all provinces in Canada through 16 dealerautomotive Ñnancing branches and 2 regional service centers. Our United States operations accounted for 76%and 80% of our total managed receivables in 2002 and 2001, respectively, and our Canadian operationsaccounted for about 5% and 4% of our total managed receivables in 2002 and 2001, respectively.

In the United States and Canada, under the Ford Credit brand name, we provide Ñnancing services toand through dealers of Ford, Lincoln and Mercury brand vehicles and non-Ford vehicles also sold by thesedealers. We provide similar Ñnancial services under the Jaguar, Land Rover and Mazda brand names to andthrough Jaguar, Land Rover and Mazda dealers, respectively. Under the PRIMUS label, we provide Ñnancingservices to Aston Martin and non-Ford dealers in the United States and Canada. Volvo dealers in the UnitedStates obtain Ñnancing services from our U.S. Volvo Ñnancing subsidiary.

To a limited extent, we also oÅer Ñnancing products through dealers to consumers who generally wouldnot qualify for traditional Ñnancing provided by commercial banks or other automobile manufacturers' captiveÑnance companies. Our Fairlane Credit Ñnancing division oÅered non-prime Ñnancing through Ford, Lincolnand Mercury dealers by purchasing retail installment sale contracts, mainly for used vehicles. Our wholly-owned indirect subsidiary, Triad Financial Corporation (Triad), oÅers similar services primarily to non-Forddealerships. As part of the Revitalization Plan announced by Ford and Ford Credit on January 11, 2002, weindicated that we would renew our focus on supporting primarily new vehicle Ñnancing of Ford's brands.Consistent with our renewed focus, we dissolved our Fairlane Credit Ñnancing division. We largely completedthis dissolution by July of 2002 and we did not incur signiÑcant transition costs. Triad remains a separateoperation, which, at December 31, 2002, had $3.2 billion in managed receivables, representing 2% of our totalmanaged receivables.

International Segment

Our International Segment includes operations in three main regions: Europe, Asia/PaciÑc and LatinAmerica. Our Europe region is our largest international operation, accounting for 14% and 12% of our totalmanaged receivables in 2002 and 2001, respectively. Within the International Segment, our Europe regionaccounted for 74% and 70% of our managed receivables in 2002 and 2001, respectively. Most of our Europeanoperations are managed through a U.K.-based subsidiary, FCE Bank plc (FCE), which operates in the UnitedKingdom and on a branch basis in all member states of the European Union and in Norway and Switzerland.In addition, FCE has subsidiaries in the United Kingdom, The Netherlands, Finland, Italy, Hungary, Polandand the Czech Republic that provide wholesale, leasing and retail vehicle Ñnancing. In our largest Europeanmarkets, Germany and the United Kingdom, FCE oÅers most of our products and services under the FordCredit/Bank, Volvo Car Finance, Land Rover Financial Services, Jaguar Financial Services and MazdaCredit/Bank brands, except for Volvo-branded products in Germany, which we oÅer through a diÅerentsubsidiary. FCE generates most of our European revenue and contract volume from Ford Credit/Bank brandproducts and services. FCE also has entered into cooperation agreements with Ñnancial institutions to permitdealers to oÅer Ñnancing under a variety of our brands in Croatia, Slovenia, Russia and Romania. ThroughFCE, we also manage Ford's vehicle Ñnancing operations in countries where Ford and FCE do not have localoperations but still sell and Ñnance vehicles to dealers. In addition to oÅering Ñnancing products in Europethrough FCE, Ford Credit oÅers Ñnancing in Sweden for our Volvo brand vehicles through a joint venturewith Swedish Volvo dealers.

In the Asia/PaciÑc region, we operate in Australia, Japan, Taiwan, Thailand and New Zealand. We havejoint ventures with local Ñnancial institutions in India, Indonesia and the Philippines. We maintain a limitedpresence in China through a representative oÇce. In the Latin America region, we presently operate inMexico, Puerto Rico, Brazil, Chile, Venezuela, and Argentina.

ITEM 1. OUR BUSINESS (Continued)

Our business model and the structure of our operations throughout the International Segment haveevolved as a result of implementation of the Revitalization Plan and local economic and political factors.Consistent with our focus on our core business of supporting Ford brands, during 2002 we agreed to sell ourall-makes Öeet leasing operations in Europe, Australia and New Zealand, which did business in somejurisdictions under the name Axus or Hertz Leasing, that was managed by an aÇliate of Ford. We completedthe sale of our all-makes Öeet leasing operations in Australia and New Zealand in December of 2002 and wecompleted the sale of our all-makes Öeet leasing operations in Europe in February of 2003.

In addition, during 2002 we completed our private label partnering arrangements in Brazil with localÑnancial institutions. These arrangements involved the sale of the majority of our existing retail receivablesand our leasing business to local Ñnancial institutions and granting such Ñnancial institutions the right toÑnance and service retail receivables we continue to originate in Brazil. These Ñnancial institutions also act asan alternative distribution network for our products and services. As a result of the economic crisis inArgentina, we suspended new Ñnancing activity in Argentina in the Ñrst quarter of 2002. Similarly, as a resultof the political and economic crisis in Venezuela, during the fourth quarter of 2002 we also suspended newÑnancing activity in Venezuela.

Competition. The automotive Ñnancing business is highly competitive. Our principal competitors forretail and wholesale Ñnancing are:

Retail Wholesale

‚ Credit unions and savings and loan associations ‚ Other automobile manufacturers' aÇliated‚ Banks Ñnance companies‚ Independent commercial Ñnance companies ‚ Independent commercial Ñnance companies‚ Leasing companies ‚ Banks‚ Other automobile manufacturers' aÇliated

Ñnance companies

We compete mainly on the basis of service and Ñnancing rates. A key foundation of our service isproviding broad and consistent purchasing policies for retail installment sale and lease contracts and consistentsupport for dealer Ñnancing requirements across economic cycles. These policies have built strong relation-ships with Ford's dealer network that enhance our competitiveness. Our ability to provide competitiveÑnancing rates depends on eÅectively and eÇciently originating, purchasing and servicing our receivables, andaccessing the capital markets. We routinely monitor the capital markets and develop funding alternatives tomaximize our competitive position. The integration of our Ñnancing services with Ford's vehicle productionand marketing plans gives us a competitive advantage in providing Ñnancing to Ford dealers and theircustomers. In addition, our size allows us to take advantage of economies of scale in both purchasing andservicing our receivables and leases.

No single company is a dominant force in the industry. Recently, some of our bank competitors havedeveloped credit aggregation systems that permit dealers to send, through a single standard system, retailcredit applications to multiple Ñnance sources and to evaluate diÅerent Ñnancing options oÅered by theseÑnance sources. This process has resulted in greater competition based on Ñnancing rates. We, along withother automobile manufacturers' aÇliated Ñnance companies, have formed a joint venture, RouteOne LLC,that is developing a similar credit aggregation system. RouteOne LLC will also provide special rate and otherincentive program information only oÅered by automobile manufacturers.

Seasonal Variations. As a Ñnance company, we own and manage a large portfolio of Ñnance receivablesand operating leases that are generated throughout the year and are collected over a number of years, primarilyin Ñxed monthly payments. As a result, our overall Ñnancing revenues do not exhibit seasonal variations.However, throughout the automotive Ñnancing industry, credit losses are typically higher in the Ñrst and fourthquarters of the year due to competing Ñnancial demands on customers and lower vehicle resale values.

ITEM 1. OUR BUSINESS (Continued)

Dependence on Ford Motor Company

The Ñnancing of Ford vehicles and support of Ford dealers account for the predominant share of ourbusiness. Any extended reduction or suspension of Ford's production or sale of vehicles due to a decline inconsumer demand, work stoppage, governmental action, negative publicity or other event, or signiÑcantchanges to marketing programs sponsored by Ford could have an eÅect on our business. A description ofFord's business is included as an exhibit to this Report and incorporated by this reference. Additionalinformation about Ford's business, operations, production, sales and risks can be found in Ford's AnnualReport on Form 10-K for the year ended December 31, 2002, Ñled separately with the SEC.

Ford has periodically sponsored special-rate Ñnancing programs available only through us. Similarprograms may be oÅered in the future. Under these programs, Ford makes interest supplement or othersupport payments to us. These programs may increase our Ñnancing volume and share of Ford vehicles.Worldwide payments from Ford for interest supplements and other support costs totaled about $4.7 billion and$4.8 billion in 2002 and 2001, respectively. We recorded $3.7 billion and $4.1 billion in interest supplementsand other support payments from Ford in 2002 and 2001, respectively, as Ñnancing revenues, including about$3.1 billion and $3.8 billion for receivables and leases purchased in the United States and Canada. AtDecember 31, 2002, Ford has accrued approximately $4.7 billion of interest supplements and other supportpayments for receivables and leases, in the United States and Canada, about the same as of December 31,2001. We will receive this amount over the term of the related contracts. For further discussion regardinginterest supplement and other support payments see Note 13 of our Notes to Financial Statements.

Retail Financing

Overview and Purchasing Process

We provide Ñnancing services to retail customers through automotive dealers that have establishedrelationships with us. Our primary business consists of purchasing retail installment sale and lease contractsfor new and used vehicles mainly through dealers of Ford vehicles. Worldwide in 2002, we Ñnanced about3.3 million vehicles through installment sales and Ñnance leases, and we Ñnanced about 800,000 vehiclesthrough operating leases. We report in our Ñnancial statements the receivables from customers underinstallment sale contracts and certain leases with Öeet customers as Ñnance receivables. We report in ourÑnancial statements most of our retail leases as operating leases with the capitalized cost of the vehiclesrecorded as depreciable assets, and we report these assets in our Ñnancial statements as net investment inoperating leases. At December 31, 2002, worldwide, our retail Ñnance receivables net of allowances for creditlosses totaled $68.4 billion and our net investment in operating leases was $31.6 billion.

In general, we purchase from dealers retail installment sale contracts and lease contracts that meet ourcredit standards. Most of these contracts relate to the purchase of new vehicles, but some are for used vehicles.Dealers typically submit applications electronically to one of our branch oÇces. Some of the applications areautomatically evaluated and either approved or rejected based on our origination scorecard and credit policycriteria. In other cases, our credit analysts evaluate applications using our written guidelines. As part of thejudgmental process, we generally conduct a credit investigation prior to purchasing a retail installment salecontract or lease contract. This investigation includes a review of the applicant's credit report supplied from anational credit bureau and an internal review and veriÑcation process. Typically, we are able to determinewhether or not we will purchase a retail installment sale contract or lease contract within two hours of receiptof an application. We utilize electronic data imaging of documentation related to our consumer retail contractsto increase our accuracy, eÇciency and as part of our comprehensive disaster recovery plan. In evaluating loanapplications from commercial customers, we consider the borrower's Ñnancial condition, collateral, debtservicing capacity, and numerous other Ñnancial and qualitative factors.

ITEM 1. OUR BUSINESS (Continued)

Installment Sale Contracts

The amount we pay for a retail installment sale contract is based on a negotiated vehicle purchase priceagreed to between the dealer and the retail customer, plus any additional products, such as insurance andextended service plans, that are included in the contract, less any vehicle trade-in allowance or down paymentfrom the customer applied to the purchase price. The net purchase price owed by the customer typically ispaid over a speciÑed number of months with interest at a Ñxed rate negotiated between the dealer and theretail customer. The dealer may retain a portion of the Ñnance charge.

We oÅer a variety of retail installment sale Ñnancing products. We generally purchase retail installmentsale contracts with terms ranging from 12 to 60 months. During 2002, in response to actions taken by retailbanks and other Ñnance companies, we began to purchase retail installment sale contracts with terms up to72 months in the United States. The average original term of our retail installment sale contracts was55 months in the United States in 2002, compared with 54 months in 2001.

In the United States, the average amount Ñnanced for new Ford, Lincoln, and Mercury brand vehiclesunder retail installment sale contracts was $25,130 in 2002, compared with $23,595 in 2001 and $21,205 in2000. The corresponding average monthly payment was about $520 in 2002, $505 in 2001, and $495 in 2000.

Some of our retail installment sale contracts have non-uniform payment periods and payment amounts toaccommodate special cash Öow situations such as those of recent college graduates. We also oÅer a RedCarpet Option (RCO) program under which the retail customer may Ñnance their vehicle with an installmentsale contract with a series of relatively lower monthly payments followed by paying the amount owed in asingle balloon payment. The RCO customer can satisfy the balloon payment obligation by payment in full ofthe amount owed, by reÑnancing the amount owed, or by returning the vehicle to us and paying additionalcharges for mileage and excess wear and use, if any. Customers who choose our RCO program may alsoqualify for special-rate Ñnancing oÅers from Ford. Through the end of 2002, our RCO program was onlyavailable in Texas. During 2003, we are expanding our RCO program to Connecticut, New Jersey, New York,Rhode Island and Pennsylvania, and we will consider oÅering this product instead of lease Ñnancing in otherstates.

We hold a security interest in the vehicles purchased through retail installment sale contracts. Thissecurity interest provides us certain rights and protections. As a result, if our collection eÅorts fail to bring adelinquent customer's payments current, we generally can repossess the customer's vehicle, after satisfyinglocal legal requirements, and sell it at auction. The customer typically remains liable for any deÑciencybetween net auction proceeds and the defaulted contract obligations. We require retail customers to carry Ñre,theft and collision insurance on Ñnanced vehicles.

Retail Lease Plans

We oÅer leasing plans to retail customers through our dealers. Our highest volume retail leasing plan iscalled Red Carpet Lease, which is oÅered in the United States and Canada through dealers of Ford, Lincolnand Mercury brands. We oÅer similar lease plans through dealers of other Ford brands (Jaguar, Land Rover,Mazda and Volvo) and through a limited number of non-Ford dealers under the PRIMUS brand. Under theseplans, dealers originate the leases and oÅer them to us for purchase. Upon our purchase of a lease, we takeownership of the lease and title to the leased vehicle from the dealer. After we purchase a lease from a dealer,that dealer generally has no further obligation to us in connection with the lease. The customer is responsiblefor properly maintaining the vehicle and is obligated to pay for excess wear and use as well as excess mileage,if any. At the end of the lease, the customer has the option to purchase the vehicle for the customer purchaseoption price speciÑed in the lease contract or return the vehicle to the dealer. If the customer returns thevehicle to the dealer, the dealer may buy the vehicle from us for the speciÑed lease-end value or return it to us.We sell vehicles returned to us to other Ford and non-Ford dealers through the same auction process that weuse for repossessed vehicles.

ITEM 1. OUR BUSINESS (Continued)

The amount we pay to a dealer for a retail lease, also called the acquisition cost, is based on thenegotiated price for the vehicle plus any additional products, such as insurance and extended service plans,that are included in the contract, less any vehicle trade-in allowance or down payment from the customer. Thecustomer makes monthly lease payments, in an amount equal to the acquisition cost less the estimatedresidual value of the vehicle at the lease end, plus lease charges. Some of our lease programs, such as our RedCarpet Lease Advance Payment Plan, provide certain pricing advantages to customers who make all or somemonthly payments at lease inception or purchase refundable higher mileage allowances. We require leasecustomers to carry Ñre, theft, liability and collision insurance on leased vehicles.

In the United States, retail operating lease terms for new Ford, Lincoln and Mercury brand vehiclesrange primarily from 12 to 48 months. In 2002, the average original lease term was 33 months compared with32 months in 2001; the average monthly payment was about $445 in 2002, $420 in 2001, and $395 in 2000.

Several states have vicarious liability laws that hold the lessor of a vehicle liable for accidents involvingthe leased vehicle. Partly in response to these laws, we are expanding our RCO program and discontinuing ourpurchase of lease contracts in some of these states. As a retail installment sale, the RCO program eliminatesthe risk of vicarious liability for us, while providing customers many of the payment beneÑts associated withleasing.

Other Retail Financing

We also oÅer vehicle Ñnancing programs to commercial customers, which includes leasing companies,daily rental companies, government entities and Öeet customers. These Ñnancings include both lease plans andinstallment purchase plans and are generally for terms of 12 to 84 months. The Ñnancing obligations arecollateralized by perfected liens on Ñnanced vehicles in almost all instances and, where appropriate, anassignment of rentals under any related leases. At the end of the Ñnance term, a lease customer may berequired to pay us any shortfall between the fair market value and the speciÑed end of term value of thevehicle. If the fair market value of the vehicle at the end of the Ñnance term exceeds the speciÑed end of termvalue, we may pay the lease customer the excess amount. In the United States, these Ñnancings totaled about$4.5 billion as of December 31, 2002, and are included in retail Ñnance receivables and net investment inoperating leases in our Ñnancial statements.

Wholesale Financing

We oÅer a wholesale Ñnancing program for qualifying dealers to purchase new and used vehicles held ininventory. We generally Ñnance 100% of the vehicle's wholesale price for new vehicles and up to 100% of thevehicle's auction price for used vehicles. Dealers generally pay a Öoating interest rate on wholesale receivablesbased on the prime rate. The dealer pays oÅ each wholesale receivable as the related vehicle is sold or leased.In the United States in 2002, the average wholesale receivable was outstanding for 71 days, including the timethe vehicle was in transit from the assembly plant to the dealership. In 2002, we Ñnanced about 5 millionvehicles worldwide through wholesale Ñnancing. At December 31, 2002, our wholesale portfolio totaled$16.4 billion net of allowance for credit losses. Our wholesale Ñnancing program includes Ñnancing of largemulti-brand national dealer groups that are some of our largest wholesale customers based on the amountÑnanced.

When a dealer uses our wholesale Ñnancing program to purchase vehicles from Ford, another manufac-turer or other vehicle source, we obtain a security interest in the vehicles and, in many instances, other assetsof the dealer. We generally are able to repossess the Ñnanced vehicles if the dealer does not make timelypayments or meet its obligations under the Ñnancing program. However, once a vehicle is sold or leased to aretail customer, our right to repossess the vehicle to satisfy wholesale obligations is no longer eÅective. Oursubsidiary, The American Road Insurance Company, provides insurance for vehicle damage and theft ofvehicles held in dealer inventory.

ITEM 1. OUR BUSINESS (Continued)

Since 1998, we have provided more than 83% of the wholesale Ñnancing on new Ford, Lincoln andMercury brand vehicles acquired by dealers in the United States and more than 95% of the wholesaleÑnancing on new Ford brand vehicles acquired by dealers in Europe.

Other Financing

We make loans to vehicle dealers for facilities improvements, working capital and to enable them topurchase and Ñnance dealership real estate. For dealers in the United States and Canada, these loans totaledabout $3.8 billion at December 31, 2002 and were included in other Ñnance receivables in our Ñnancialstatements. These loans typically are secured by liens on real estate, other dealership assets and sometimespersonal guarantees of the individual owners of the dealership.

We also purchase certain receivables generated by divisions and aÇliates of Ford, primarily in connectionwith the delivery of vehicle inventories from Ford vehicle assembly plants in the United States to dealers andthe sale of parts and accessories by Ford to dealers. At December 31, 2002, these purchased receivablestotaled about $3.5 billion, of which about $1.6 billion was included in wholesale Ñnance receivables and$1.9 billion was included in other Ñnance receivables.

Marketing and Special Programs

We actively market our Ñnancing products and services to automotive dealers and customers. Throughpersonal sales contacts, targeted advertisem*nts in trade publications, participation in dealer-focused conven-tions and organizations and support from manufacturers, we seek to demonstrate to dealers the value ofentering into business relationships with us. We base our marketing strategy on our belief that we can betterassist dealers in achieving their sales, Ñnancial and customer satisfaction goals by being a stable committedÑnance source with knowledgeable automotive and Ñnancial professionals oÅering accessible personal care andinteraction. We demonstrate our commitment to dealer relationships with a variety of materials, measure-ments and analyses showing the advantages of a full range of automotive Ñnancing products that allowsconsistent and predictable single source Ñnancing. In addition, from time to time, we promote increased dealertransactions through incentives, bonuses, contests and selected program and rate adjustments.

We promote our retail Ñnancing products primarily through pre-approved credit oÅers to prospectivecustomers, point-of-sale information, ongoing communications and contacts with existing customers andsponsorships of selected racing teams. Our communications to these customers promote the advantages of ourÑnancing products, the availability of special plans and programs and the beneÑts of aÇliated products, such asextended warranties, service plans, insurance coverage gap protection and excess wear and use waivers. Inaddition, we emphasize the quality of our customer service and the ease of making payments and transactingbusiness with us. For example, through the Ford Credit North America web site, a customer can makeinquiries, review an account balance, examine current incentives, schedule an electronic payment or qualify fora pre-approved credit oÅer. We also market our non-consumer Ñnancial services described above in ""OtherRetail Financing'' with a specialized group of employees who make direct sales calls on dealers, and, often atthe request of such dealers, on potential high-volume commercial customers. This group also uses variousmaterials and venues to explain our Öexible programs and services speciÑcally directed at the needs ofcommercial and Öeet vehicle customers.

Servicing

General. After we purchase retail installment sale contracts and leases from dealers and othercustomers, we manage the receivables during their contract terms. This management process is calledservicing. We service both our owned and sold receivables. Our servicing duties include the following:

‚ applying monthly payments from customers;

‚ contacting delinquent customers for payment;

ITEM 1. OUR BUSINESS (Continued)

‚ maintaining the security interest in the Ñnanced vehicle;

‚ monitoring insurance coverage for selected lease vehicles;

‚ providing billing statements to customers;

‚ responding to customer inquiries;

‚ releasing liens on paid-oÅ Ñnance contracts;

‚ arranging for the repossession of vehicles; and

‚ selling repossessed and returned vehicles at auction.

Service Center Locations. In June of 1999, we began to centralize our servicing functions, which werepreviously conducted at each branch oÇce, to improve servicing processes and better leverage our technologyand economies of scale. This process was completed in the United States and Canada in May of 2001 and willbe completed by the end of 2003 in the United Kingdom and Germany. Centralization of our servicingfunctions has resulted in 9 regional service centers in North America (7 Ó United States; 2 Ó Canada) and willresult in 3 regional service centers in Europe.

Our North American regional service centers are located in:

United States: Colorado Springs, Colorado; Greenville, South Carolina;

Tampa, Florida; Nashville, Tennessee;

Baltimore, Maryland; Irving, Texas; and

Henderson, Nevada.

Canada: Edmonton, Alberta; and Ottawa, Ontario.

Each of these service centers generally services customers located in their region, but all of our NorthAmerican service centers are electronically linked and workload can be allocated across service centers.

We also have four specialty service centers in North America that focus on speciÑc servicing activities:

‚ Customer Service Center Ì Omaha, Nebraska;

‚ Volvo Customer Service Center Ì Richardson, Texas;

‚ National Bankruptcy Service Center Ì Livonia, Michigan; and

‚ National Recovery Center Ì Mesa, Arizona.

Within Europe, we have centralized our servicing activities in St. Albans and Watford, England tosupport our U.K. operations and customers, and in Cologne, Germany to support our German operations andcustomers. In smaller countries, we provide servicing through our local branch network.

Customer Payment Operations. In the United States and Canada, customers are directed in theirmonthly billing statements to mail payments to a bank for deposit in a lockbox account. Customers may alsomake payments through electronic payment services, a direct debit program or a telephonic payment system.

Servicing Activities Ì Consumer Credit. We design our collection strategies and procedures to keepaccounts current and to collect on delinquent accounts. We employ a combination of proprietary and non-proprietary tools to assess the probability and severity of default for all of our receivables and leases andimplement our collection eÅorts based on our determination of the credit risk associated with each customer.As each customer develops a payment history, we use an internally developed behavioral model to assist indetermining the best collection strategies. Based on data from this scoring model, we group contracts by riskcategory for collection. Our centralized collection operations are supported by state-of-the-art auto-dialingtechnology and proprietary collection and workÖow operating systems. Our U.S. systems also employ a web-based network of outside contractors who support the repossession process. Through our auto-dialer program

ITEM 1. OUR BUSINESS (Continued)

and our monitoring and call log systems, we target our eÅorts to contact customers about missed payments anddeveloping satisfactory solutions to bring accounts current.

Outsourced Operations. We engage third-party vendors to perform several of our servicing processes.These processes include applying monthly payments from customers, monitoring the perfection of securityinterests in Ñnanced vehicles, monitoring insurance coverage on lease vehicles, imaging of contracts andelectronic data Ñle maintenance, generation of retail and lease billing statements, telephonic payment systemsfor retail customers, the handling of some inbound customer service calls and the recovery of deÑciencies inselected accounts. In addition, certain collection activities related to contracts purchased by Fairlane Creditare handled by third party vendors.

Payment Extensions. At times, we oÅer payment extensions to customers who have encounteredtemporary Ñnancial diÇculty that limits their ability to pay as contracted. A payment extension allows thecustomer to move a delinquent payment to the end of the term of the contract, usually by paying a fee that iscalculated in a manner speciÑed by applicable law. Before agreeing to a payment extension, the servicerepresentative reviews the customer's past payment history, current Ñnancial situation and assesses thecustomer's desire and capacity to make future payments. The service representative considers whether theproposed payment extension complies with our policies and guidelines. Higher levels of service centermanagement review, and generally must approve, payment extensions.

Repossessions and Auctions

We view repossession of a Ñnanced or leased vehicle as a Ñnal step that we undertake only after all othercollection eÅorts have failed or if the customer otherwise defaults under the retail installment sale or leasecontract. We sell repossessed vehicles at auction and apply the proceeds to the amount owed on the customer'saccount. At our National Recovery Center, we continue to attempt collection of any remaining amounts afterrepossession until the account is paid in full, we obtain mutually satisfactory payment arrangements with thedebtor or we determine that the account is uncollectible.

Ford's Vehicle Remarketing Department, in conjunction with our regional service centers and ourNational Recovery Center, manage the sale of repossessed vehicles and returned leased vehicles. We attemptto maximize net auction proceeds by selling vehicles in geographic markets that will result in the highestresale value, net of transportation, reconditioning and auction costs. The determination of the sale location isbased on an analysis of historical auction price data and market trends. We inspect and recondition the vehicleto maximize the net auction value of the vehicle. Vehicles are then oÅered for sale through open auctions, inwhich any licensed dealer can participate, and closed auctions, in which only Ford, Lincoln and Mercurydealers may participate. Our open auctions are mainly physical auctions, while our closed auctions are bothphysical auctions and on-line auctions. We decide to use an open or closed auction based upon factors such asvehicle age, mileage, and condition. In 2002, two-thirds of all of the vehicles sold through auctions werereturned leased vehicles and one-third of all vehicles sold through auctions were repossessed vehicles. In 2002,we took, on average, 39 days to dispose of vehicles sold at auction, compared with 45 days in 2001.Repossessed vehicles are reported in other assets on our balance sheet and are valued at expected auctionvalues.

Wholesale and Commercial. We require most dealers to submit monthly Ñnancial statements, and wemonitor for potential credit deterioration. We assign an evaluation rating to each dealer and we performphysical audits of vehicle inventory periodically, with more frequent audits for higher risk dealers. In addition,we monitor dealer inventory Ñnancing payoÅs daily to detect adverse deviations from typical repaymentpatterns, in which case we take appropriate actions. Within the United States and Canada, eight commerciallending oÇces provide services to Öeet purchasers, leasing companies and daily rental companies includingadministration and collections. We generally review our exposure under these credit arrangements at leastannually. In our international markets, this business is managed within the head oÇce of the local marketarea.

ITEM 1. OUR BUSINESS (Continued)

Insurance

We conduct insurance operations primarily through The American Road Insurance Company(TARIC) and its subsidiaries in the United States and Canada and through various other insurancesubsidiaries outside the United States and Canada. TARIC oÅers a variety of products and services, including:

‚ Extended service plan contracts, mainly through Ford dealers for new and used vehicles,

‚ Physical damage insurance covering vehicles and equipment Ñnanced by us at wholesale, and

‚ Physical damage/liability coverage on Ford dealer daily rental vehicles.

We also oÅer various Ford branded insurance products throughout the world underwritten by non-aÇliated insurance companies from which we receive fee income but do not retain the underwriting risk. Inaddition, in December 2002, Ford and its subsidiaries (other than TARIC) began to use TARIC to providevarious types of surety bonds, including bonds generally required as part of any appeals of litigation, Ñnancialguarantee bonds and self-insurance workers' compensation bonds. Previously, Ford had met all of its suretybond requirements with bonds issued by third party insurance companies. Our insurance business generatedless than 1% of our total revenues in 2002 and 2001.

OUR EMPLOYEE RELATIONS

At December 31, 2002, we had about 20,000 full-time employees, and 2,000 part-time and agencypersonnel. Most of our employees are salaried, and most are not represented by a union. We consideremployee relations to be satisfactory.

OUR GOVERNMENTAL REGULATIONS

As a Ñnance company, we are highly regulated by the governmental authorities in the locations where weoperate.

United States

Within the United States, our operations are subject to regulation, supervision and licensing under variousfederal, state and local statutes, ordinances and regulations.

Federal Regulation. We are subject to extensive federal regulation, including the Truth-in-Lending Act,the Equal Credit Opportunity Act and the Fair Credit Reporting Act. These laws require us to provide certaindisclosures to prospective borrowers and lessees in consumer retail and lease Ñnancing transactions andprohibit discriminatory credit practices. The principal disclosures required under the Truth in Lending Act forretail Ñnance transactions include the terms of repayment, the amount Ñnanced, the total Ñnance charge andthe annual percentage rate. For retail lease transactions, we are required to disclose the amount of payments atconsummation of the lease, the terms for payment, and information about lease charges, insurance, excessmileage and liability on early termination. The Equal Credit Opportunity Act prohibits creditors fromdiscriminating against credit applicants on a variety of factors, including race, color, sex, age or marital status.Pursuant to Regulation B promulgated under the Equal Credit Opportunity Act, creditors are required tomake certain disclosures regarding consumer rights and advise consumers whose credit applications are notapproved of the reasons for being denied. In addition, any of the credit scoring systems we use during theapplication process or other processes must comply with the requirements for such systems as set forth in theEqual Credit Opportunity Act and Regulation B. The Fair Credit Reporting Act requires us to provide certaininformation to consumers whose credit applications are not approved on the basis of a consumer credit reportobtained from a national credit bureau. We are also subject to the Soldiers' and Sailors' Civil Relief Act, thatrequires us to reduce the interest rate charged on transactions with customers who subsequently enter into full-time service with the military. In addition, we are subject to other federal regulation, including the Gramm-Leach-Bliley Act, which requires us to maintain privacy with respect to certain consumer data in ourpossession and to communicate periodically with consumers on privacy matters.

ITEM 1. OUR BUSINESS (Continued)

State Regulation Ì Licensing. In most states, a consumer credit regulatory agency regulates andenforces laws relating to Ñnance companies. Such rules and regulations generally provide for licensing ofÑnance companies, limitations on the amount, duration and charges, including interest rates, that can beincluded in Ñnance contracts, requirements as to the form and content of Ñnance contracts and otherdocumentation, and restrictions on collection practices and creditors' rights. We must renew these licensesperiodically. In certain states, we are subject to periodic examination by state regulatory authorities. Moreover,several states have laws that limit interest rates on consumer Ñnancing generally. In periods of high interestrates, these rate limitations can have an adverse eÅect on our operations if we are unable to purchase retailinstallment sale contracts with Ñnance charges that reÖect our increased costs. In some other states, we are notrequired to obtain special licenses and are not subject to extensive regulation of our business.

State Regulation Ì Repossessions. To mitigate our credit losses, sometimes we must repossess aÑnanced or leased vehicle. Repossessions are subject to prescribed legal procedures, including peacefulrepossession, one or more customer notiÑcations, a prescribed waiting period prior to disposition of therepossessed vehicle and return of personal items to the customer. Some states provide the customer withreinstatement or redemption rights. Our ability to sell a repossessed vehicle is restricted if a customer declaresbankruptcy. The independent repossession Ñrms we use to repossess vehicles for us also are subject toregulatory requirements.

International

In some countries outside the United States, certain of our subsidiaries, including FCE, are regulatedbanking institutions and are required, among other things, to maintain minimum capital reserves. FCE isregulated by the U.K. Financial Services Authority as an institution authorized as a deposit taking businessunder the Financial Services Market Act of 2000. FCE also holds a standard license under the U.K.Consumer Credit Act of 1974. Since 1993, FCE has obtained authorizations from the Bank of England(which role is now undertaken by the Financial Services Authority) pursuant to the Banking ConsolidationDirective entitling it to operate on a branch basis in all member states of the European Union. In many of theother locations where we operate, governmental authorities require us to obtain licenses to conduct ourÑnancing business.

Our Regulatory Compliance Status

We believe that we maintain all material licenses and permits required for our current operations and arein substantial compliance with all applicable U.S. local, state and federal regulations, as well as regulations innon-U.S. jurisdictions. However, we can provide no assurance that we, dealers who sell us contracts, orrepossession Ñrms that we engage, will be able to maintain all requisite licenses and permits. Failure to satisfythose and other regulatory requirements could have a material adverse eÅect on our operations, Ñnancialcondition and liquidity. Further, the adoption of new laws or regulations, or the revision of existing laws andregulations, could have a material adverse eÅect on our operations, Ñnancial condition and liquidity.

We actively monitor proposed changes to relevant legal and regulatory requirements in order to maintainour compliance. Through our governmental relations eÅorts, we also attempt to participate in the legislativeand administrative rule-making process on regulatory initiatives that impact Ñnance companies. Our ongoingcompliance eÅorts have not had a material adverse eÅect on our operations, Ñnancial condition or liquidity.

OUR TRANSACTIONS WITH FORD AND AFFILIATES

We have a proÑt maintenance agreement with Ford that requires Ford to make payments to us tomaintain our earnings at speciÑed minimum levels. In addition, we have an agreement to maintain a minimumcontrol interest in FCE and to maintain FCE's net worth above a minimum level, and we have included a copyof this agreement as an exhibit to this Report. No payments were made under these agreements.

ITEM 1. OUR BUSINESS (Continued)

We also formally documented our long-standing business practices with Ford in an agreement datedOctober 18, 2001, a copy of which was Ñled with the SEC on that date. The principal terms of this agreementinclude the following:

‚ Any extension of credit from us to Ford and any of Ford's automotive aÇliates will be on arm's lengthterms and will be enforced in a commercially reasonable manner.

‚ We will not be required to guarantee the indebtedness or make equity investments in Ford or any ofFord's automotive aÇliates.

‚ We and Ford agree to maintain our stockholder's equity at a commercially reasonable level to supportthe amount, quality and type of receivables in light of prevailing economic circ*mstances.

‚ We will not be required to accept credit or residual risk beyond what we would be willing to acceptacting in a prudent and commercially reasonable manner.

‚ We and Ford are separate, legally distinct companies and will continue to maintain separate books,accounts, assets and liabilities.

More information about transactions between us and Ford and other aÇliates, is contained in Note 13 ofour Notes to Financial Statements, ""Our Business Ì Overview'', ""Our Business Ì Retail Financing''; ""OurBusiness Ì Other Financing'' and the description of Ford's business included as an exhibit to this report.

ITEM 2. OUR PROPERTIES

We own our world headquarters in Dearborn, Michigan and our PRIMUS oÇces in Nashville,Tennessee. FCE leases its corporate oÇces in Brentwood, England from an aÇliate of Ford. Most of ourautomotive Ñnance branches and service centers are located in leased properties. The continued use of any ofthese leased properties is not material to our operations. At December 31, 2002, our total obligation underleases of real property was about $211 million.

ITEM 3. OUR LEGAL PROCEEDINGS

We are subject to legal actions, governmental investigations and other proceedings and claims relating tostate and federal laws concerning Ñnance and insurance, employment-related matters and other contractualrelationships. Some of these matters are class actions or are seeking class action status. Some of these mattersmay involve compensatory, punitive or treble damage claims and attorneys' fees in very large amounts, orother requested relief which, if granted, would require very large expenditures. Our signiÑcant pending mattersare summarized below:

Lease Residual Class Action. In January 1998, in connection with a case pending in Illinois state court,we and Ford were served with a summons and intervention counterclaim complaint relating to our leasingpractices (Higginbotham v. Ford Credit). The counterclaim plaintiÅ, Carla Higginbotham, is a member of aclass that has been conditionally certiÑed for settlement purposes in Shore v. Ford Credit. In the Shore case,we commenced an action for deÑciency against Virginia Shore, our lessee. Shore counterclaimed for purportedviolations of the Truth-in-Leasing Act (alleging that certain lease charges were excessive) and the Truth-in-Lending Act (alleging that the lease lacked clarity). Shore purported to represent a class of all similarlysituated lessees. Ford was not a party to the Shore case. Higginbotham objected to the proposed settlement ofthe Shore case, intervened as a named defendant, Ñled separate counterclaims against us, and joined Ford asan additional counterclaim defendant. Higginbotham asserts claims against us for violations of the ConsumerLeasing Act, seeks a declaratory judgment concerning the enforceability of early termination provisions in ourleases, and asserts fraud. She also asserts a claim against us and Ford for conspiracy to violate the Truth-in-Lending Act. The Higginbotham counterclaims allege that we inÖate the residual values of our leasedvehicles, which results in lower monthly lease payments but higher termination fees for lessees who exercisetheir right of early termination. Higginbotham claims that the early termination fees were not adequately

ITEM 3. OUR LEGAL PROCEEDINGS (Continued)

disclosed on the lease form and that the fees are excessive and illegal because of the allegedly inÖated residualvalues. She also alleges that Ford dictated the residual values to us and thereby participated in an unlawfulconspiracy. This case was stayed pending the approval or rejection of the settlement in Shore. We havereached individual settlements with the Shore plaintiÅs.

The Illinois court in Higginbotham found that the lease end residual value of Ms. Higginbotham's vehiclewas properly valued and, as a result, Ms. Higginbotham was an inadequate representative for the class.Subsequently, Ms. Higginbotham voluntarily dismissed her intervention counterclaim without prejudice in theIllinois state court and has reactivated her initial suit in the Florida federal court, pursuing substantiallysimilar claims on behalf of herself and others similarly situated. Consequently, the Higginbotham case isproceeding in Florida. In addition, we have Ñled a response to plaintiÅ's motion for class certiÑcation and haverenewed our motion for summary judgment based on information obtained in discovery. PlaintiÅs have Ñled aRequest for Judicial Notice of Newly Discovered Evidence to support their motion for class certiÑcation andto oppose our motions for summary judgment.

Fair Lending Class Action. A purported class action in federal court in New York (Jones) alleges thatour pricing practices discriminate against African-Americans. SpeciÑcally, plaintiÅs allege, ""although FordCredit's initial analysis applies objective criteria to calculate the risk-related 'Buy Rate,' Ford Credit thenauthorizes a subjective component in its credit pricing system Ì the Mark-up Policy Ì to impose additionalnon-risk charges.'' A second case, pending in federal court in Nashville (Claybrook v. PRIMUS), containssimilar allegations concerning PRIMUS accounts. A third case was Ñled in the Pennsylvania federal districtcourt (Ceiba, Inc. v. Ford Credit, et al.) in which a Latino community-based organization, Ceiba, Inc., hasmade similar allegations on behalf of Latino Americans. We are only one of several defendants in thePennsylvania case.

Litigation is subject to many uncertainties and the outcome is not predictable. It is reasonably possiblethat some of the matters described above could be decided unfavorably to us. Although the amount of liabilityat December 31, 2002 with respect to these matters cannot be ascertained, we believe that any resultingliability should not materially aÅect our consolidated Ñnancial position or results of operations.

In addition, any litigation, investigation, proceeding or claim against Ford that results in Ford incurringsigniÑcant liability, expenditures or costs could also have a material adverse aÅect on our business, results ofoperations and Ñnancial condition. For a discussion of pending cases against Ford see Item 3 in Ford's AnnualReport on Form 10-K for the year ended December 31, 2002, Ñled with the SEC and included as an exhibit toour Report and incorporated by this reference.

PART II

ITEM 5. MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

At December 31, 2002, all shares of our common stock were owned by Ford FSG, Inc., a wholly-ownedsubsidiary of Ford. We did not issue or sell any equity securities during 2002, 2001 or 2000. There is no marketfor our stock. In January 2002, we received a capital contribution of $700 million. In the second half of 2002,we paid cash dividends of $1.15 billion, resulting in a net dividend of $450 million for 2002. During 2001, wepaid cash dividends of $400 million. We also paid dividends in 2000, 1999, and 1998. We may pay additionaldividends from time to time depending on the amount and mix of our receivables, capital requirements, andproÑtability.

ITEM 6. SELECTED FINANCIAL DATA

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIESFIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA

2002 2001 2000 1999 1998

Selected Income StatementFinancing revenue (in millions)

Operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $10,432 $11,364 $10,463 $ 9,404 $ 9,339Retail installment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,695 8,492 7,943 6,931 6,210Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 953 2,187 2,713 1,683 1,620Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 363 477 526 421 399

Total Ñnance revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,443 22,520 21,645 18,439 17,568Depreciation on operating leasesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8,512) (8,464) (7,495) (7,267) (7,128)Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6,929) (8,922) (8,912) (7,143) (6,870)

Net Ñnancing margin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,002 5,134 5,238 4,029 3,570Investment and other income related to sales of receivablesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,610 1,433 557 433 610Insurance premiums earnedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 261 231 226 236 293Other income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 656 661 653 795 501

Total Ñnancing margin and revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,529 7,459 6,674 5,493 4,974Operating expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,385) (2,406) (2,297) (2,034) (1,711)Provision for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,972) (3,352) (1,665) (1,162) (1,178)Other insurance expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (202) (205) (208) (207) (296)

Total expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,559) (5,963) (4,170) (3,403) (3,185)

Income before income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,970 1,496 2,504 2,090 1,789Provision for income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (732) (664) (929) (786) (672)Minority interests in net income of subsidiaries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3) (1) (33) (52) (48)

Income from continuing operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,235 831 1,542 1,252 1,069Income/(loss) from discontinued/held-for-sale operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30 8 (6) 9 15Loss on disposal of discontinued/held-for-sale operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (31) Ì Ì Ì Ì

Net IncomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,234 $ 839 $ 1,536 $ 1,261 $ 1,084

Net income (excluding SFAS No. 133) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,375 $ 996 $ 1,536 $ 1,261 $ 1,084Cash dividends ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,150 400 120 2,317 500Return on equityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9% 7% 13% 11% 10%Earnings-to-Ñxed charges ratio ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.28 1.17 1.28 1.19 1.13

Selected Balance SheetFinance receivables (in billions)

Retail installment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 70.8 $ 85.5 $ 81.1 $ 76.4 $ 67.9Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16.6 15.6 33.8 26.2 22.5Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9.8 9.2 8.4 7.1 6.7

Total Ñnance receivables, net of unearned income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 97.2 110.3 123.3 109.7 97.1Deduct: Allowance for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2.6) (2.3) (1.3) (1.1) (1.3)

Finance receivables, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 94.6 108.0 122.0 108.6 95.8Operating leases, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31.6 37.5 36.8 31.5 33.5

Total net Ñnance receivables and operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 126.2 145.5 158.8 140.1 129.3All other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44.0 27.6 15.5 16.5 7.9

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 170.2 $ 173.1 $ 174.3 $ 156.6 $ 137.2

Memo:Total managed receivables*ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 197.6 $ 204.2 $ 187.3 $ 159.7 $ 142.8

CapitalizationShort-term debt (in billions)

Commercial paper ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8.2 $ 15.7 $ 42.3 $ 43.1 $ 46.2All other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.0 6.9 7.6 6.7 7.2

Total short-term debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16.2 22.6 49.9 49.8 53.4Long-term debt

Notes payable within one year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22.8 21.1 12.6 19.3 9.5Notes payable after one yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 101.3 102.1 83.1 63.0 51.2

Total long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 124.1 123.2 95.7 82.3 60.7

Total debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 140.3 145.8 145.6 132.1 114.1Stockholder's equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13.6 12.0 12.2 10.9 10.6

Total capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 153.9 $ 157.8 $ 157.8 $ 143.0 $ 124.7

Debt-to-equity ratio ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.3 12.2 11.9 12.1 10.7Short-term debt and notes payable within one year as percent of total

capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25% 28% 40% 48% 51%

Memo:Debt-to-equity ratio on a managed basis (to 1) as deÑned in the MD&A

(see explanation of calculation) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12.8 14.8 13.9 13.0 11.4

* Managed receivables includes receivables sold in securitizations and excludes receivables sold in whole-loan sale transactions.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

Overview

The principal factors that inÖuence our earnings are the amount and mix of diÅerent types of Ñnancereceivables and net investment in operating leases and Ñnancing margins. The performance of thesereceivables and leases over time, mainly through credit losses and variations in the residual value of leasedvehicles, also aÅects our earnings.

The amount of our Ñnance receivables and net investment in operating leases depends on:

‚ The number of new and used vehicle sales and leases;

‚ The extent to which we purchase retail installment sale and lease contracts and the extent to which weprovide wholesale Ñnancing;

‚ The cost of vehicles Ñnanced;

‚ The level of dealer inventories;

‚ Ford-sponsored special Ñnancing programs available exclusively through us; and

‚ The availability of cost-eÅective funding for the purchase of retail installment sale and lease contractsand to provide wholesale Ñnancing.

For Ñnance receivables, Ñnancing margins equal the diÅerence between revenue earned on Ñnancereceivables and the cost of borrowed funds. For operating leases, Ñnancing margins equal revenue earned onoperating leases, less depreciation expense and the cost of borrowed funds. Interest rates earned on mostreceivables and rental charges on operating leases generally are Ñxed at the time the contracts are originated.On some receivables, primarily wholesale Ñnancing, we charge interest at a Öoating rate that varies withchanges in short-term interest rates. We borrow funds at various maturities at both Ñxed and Öoating interestrates. External market conditions and our debt ratings aÅect these interest rates. As an alternative source offunding, we sell Ñnance receivables in securitizations, retaining an interest in the sold receivables andcontinuing to service such receivables for a fee. Securitization provides us a stable source of funding at lowercost than our debt funding sources. During 2002, we also began selling receivables in whole-loan saletransactions.

We review our business performance on an owned basis, a managed basis and a serviced basis. The ownedbasis includes only the receivables we own and report on our balance sheet. The managed basis includes ownedreceivables and receivables that we sold in securitizations and continue to service. The serviced basis includesmanaged receivables and our serviced-only receivables, which are receivables that we sold in whole-loan saletransactions where we retained no interest and continue to service.

We analyze our performance primarily on an owned and managed basis. We retain interests in receivablessold in securitizations, and with respect to subordinated retained interests, we have credit risk. As a result, weevaluate credit losses, receivables and leverage on a managed basis as well as an owned basis. In contrast, wedo not have the same Ñnancial interest in the performance of receivables sold in whole-loan sale transactions,and as a result we generally review the performance of our serviced portfolio only to evaluate the eÅectivenessof our origination and collection activities. We do not believe that balance sheet measures of serviced-onlyreceivables are as meaningful in analyzing our Ñnancial performance because we are not exposed to creditlosses associated with serviced-only receivables and we only derive on-going revenue related to thesereceivables in our capacity as servicer.

Results of Operations

Revitalization Plan. On January 11, 2002, Ford announced a Revitalization Plan. Included in theRevitalization Plan charges identiÑed by Ford were costs related to us. We recorded charges to our earnings inthe fourth quarter of 2001 for the cost of strategic partnering actions in Brazil, including losses related to the

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

disposition of businesses and the write-down of certain assets ($126 million), government initiatives inArgentina related to currency devaluation and consumer debt ($65 million) and voluntary employeeseparation costs in North America ($13 million). In addition, we announced we would renew our focus onsupporting vehicle Ñnancing of Ford's brands. During 2002, we implemented a number of initiatives thatcontributed to a reduction in the amount of our receivables, and a shift in our product mix. These initiativesincluded the dissolution of Fairlane Credit Ñnancing division discussed in Item 1 and the sale of our all makesÖeet leasing business as discussed below.

SFAS No. 133. Our Ñnancial results include the eÅects of SFAS No. 133, Accounting for DerivativeInstruments and Hedging Activities, as amended (SFAS No. 133), that we adopted on January 1, 2001,requiring us to recognize all derivative instruments on our balance sheet at fair value. Further information onSFAS No. 133 and its impact on our results is contained in Notes 1 and 15 of our Notes to FinancialStatements.

Discontinued Operations. Consistent with our focus on the core business of supporting Ford's brands,during 2002 we agreed to sell our all-makes Öeet leasing operations in Europe, Australia and New Zealand,which did business in some jurisdictions under the name Axus or Hertz Leasing, that was managed by anaÇliate of Ford. We completed the sale of our all-makes Öeet leasing operations in Australia and NewZealand in December of 2002 and we completed the sale of our all-makes Öeet leasing operations in Europe inFebruary of 2003. The following discussion of our results in Item 7 and 7A excludes the results of thesediscontinued and held-for-sale operations, as deÑned by SFAS No. 144, Accounting for the Impairment orDisposal of Long-Lived Assets, which are described in Note 9 of the Notes to our Financial Statements.

Fourth Quarter 2002 Compared with Fourth Quarter 2001

Our consolidated income from continuing operations in the fourth quarter of 2002 was $372 million, up$673 million compared with a loss of $301 million a year ago. Excluding the Revitalization Plan charges in thefourth quarter of 2001 and the continuing eÅects of SFAS No. 133, our operating income from continuingoperations in the fourth quarter of 2002 was $400 million compared with $2 million, up $398 million from ayear ago.

Results of our operations by business segment for the fourth quarter of 2002 and 2001 are shown below:

Fourth Quarter

2002Over(Under)

2002 2001 2001

(in millions)

Ford Credit North America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $298 $ (53) $351Ford Credit InternationalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 97 59 38Eliminations/reclassiÑcations (Note 17)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 (4) 9

Operating income from continuing operationsÏÏÏÏÏÏ $400 $ 2 $398Revitalization Plan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (204) 204SFAS No. 133 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (28) (99) 71

Consolidated income/(loss) from continuingoperations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $372 $(301) $673

Income from discontinued/held-for-sale operations ÏÏÏÏÏ 13 4 9Loss on disposal of discontinued/held-for-sale operations ÏÏ (31) Ì (31)

Total net income/(loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $354 $(297) $651

Ford Credit North America operating income from continuing operations in the fourth quarter of 2002was $298 million, up $351 million compared with a loss of $53 million a year ago. This improvement reÖected

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

primarily a lower provision for credit losses due to the non-recurrence of a substantial increase in ourallowance for credit losses in 2001 and the net favorable impact of receivable sales, oÅset partially by lower netÑnancing margins.

Ford Credit International operating income from continuing operations in the fourth quarter of 2002 was$97 million, up $38 million from earnings of $59 million a year ago. This increase reÖected primarily highernet Ñnancing margins due to our reduced focus on relatively lower margin Öeet Ñnancing products, as well as alower provision for credit losses.

Full Year 2002 Compared with Full Year 2001

Our consolidated income from continuing operations in 2002 was $1,235 million, up $404 million or 49%from 2001. Excluding the charges associated with the Revitalization Plan in 2001 and the continuing eÅects ofSFAS No. 133, our operating income from continuing operations in 2002 was $1,376 million, up $184 millionor 15% from a year ago.

Results of our operations by business segment for 2002 and 2001 are shown below:

Full Year

2002 Over/Under) 2001

2002 2001 Amount Percentage

(in millions)

Ford Credit North AmericaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,025 $ 958 $ 67 7%Ford Credit International ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 351 254 97 38Eliminations/reclassiÑcations (Note 17) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (20) 20

Operating income from continuing operations ÏÏÏÏÏÏÏÏÏ $1,376 $1,192 $184 15%

Revitalization Plan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (204) 204SFAS No. 133ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (141) (157) 16

Consolidated income from continuing operations ÏÏÏÏÏÏ $1,235 $ 831 $404 49%

Income from discontinued/held-for-sale operations ÏÏÏÏÏÏÏÏ 30 8 22Loss on disposal of discontinued/held-for-sale operations ÏÏÏ (31) Ì (31)

Total net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,234 $ 839 $395 47%

Ford Credit North America operating income from continuing operations in 2002 was $1,025 million, up$67 million or 7% compared with 2001. This increase reÖected primarily a lower provision for credit losses dueto the non-recurrence of a substantial increase in our allowance for credit losses late in 2001, oÅset partially bythe net unfavorable impact of receivable sales and lower net Ñnancing margins.

Ford Credit International operating income from continuing operations in 2002 was $351 million, up$97 million or 38% compared with 2001. This increase resulted primarily from higher net Ñnancing margins,due to our reduced focus on relatively lower margin Öeet Ñnancing products, as well as a lower provision forcredit losses, and the favorable impact of higher amounts of receivables.

Full Year 2001 Compared with Full Year 2000

Our consolidated income from continuing operations in 2001 was $831 million, down $711 millioncompared with 2000. Our 2001 results included unusual charges related to the Revitalization Plan, whichtotaled $204 million, and the full year impact of SFAS No. 133, which totaled $157 million. Together, thesecharges reduced income from continuing operations by $361 million in 2001.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

Results of our operations by business segment for 2001 and 2000 are shown below:

Full Year

2001 Over/Under) 2000

2001 2000 Amount Percentage

(in millions)

Ford Credit North AmericaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 958 $1,369 $(411) (30)%Ford Credit International ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 254 212 42 20Eliminations/reclassiÑcations (Note 17) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (20) (39) 19

Operating income from continuing operations ÏÏÏÏÏÏÏÏÏ $1,192 $1,542 $(350) (23)%

Revitalization Plan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (204) Ì (204)SFAS No. 133ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (157) Ì (157)

Consolidated income from continuing operations ÏÏÏÏÏÏ $ 831 $1,542 $(711) (46)%

Income/(loss) from discontinued/held for-sale operations ÏÏ 8 (6) 14

Total net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 839 $1,536 $(697) (45)%

Ford Credit North America operating income from continuing operations in 2001 was $958 million, down$411 million or about 30% compared with 2000. This decline reÖected primarily a higher provision for creditlosses, oÅset partially by favorable earnings eÅects related to securitizations, higher placement volumes ofÑnance receivables and operating leases and improved Ñnancing margins. We signiÑcantly increased ourallowance for credit losses based on weakened economic conditions in the United States following the eventsof September 11, 2001.

Ford Credit International operating income from continuing operations in 2001 was $254 million, up$42 million or about 20% compared with 2000. This increase resulted primarily from higher retail Ñnancingplacement volumes and improved Ñnancing margins in Europe.

Financial Condition

Placement Volume and Financing Share

Total worldwide Ñnancing contract placement volumes for new and used vehicles are shown below:

Fourth Quarter Full Year

2002 2001 2002 2001 2000 1999 1998

(in thousands)

WorldwideRetail installment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 710 1,299 3,322 4,495 3,777 3,428 3,030Operating and Ñnance leasesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 148 178 775 1,050 1,228 1,065 1,138

Total Ñnancing volume ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 858 1,477 4,097 5,545 5,005 4,493 4,168

North America SegmentUnited States ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 490 1,054 2,512 3,819 3,525 3,139 2,794Canada ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 47 51 212 227 210 198 234

Total North America SegmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 537 1,105 2,724 4,046 3,735 3,337 3,028

International SegmentEurope ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 211 247 917 988 795 829 800Other international ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 110 125 456 511 475 327 340

Total International Segment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 321 372 1,373 1,499 1,270 1,156 1,140

Total Ñnancing volume ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 858 1,477 4,097 5,545 5,005 4,493 4,168

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

Shown below are our Ñnancing shares of new Ford, Lincoln and Mercury brand vehicles sold by dealers inthe United States and Ford brand vehicles sold by dealers in Europe. Also shown below are our wholesaleÑnancing shares of new Ford, Lincoln and Mercury brand vehicles acquired by dealers in the United Statesand of new Ford brand vehicles acquired by dealers in Europe:

FourthQuarter Full Year

2002 2001 2002 2001 2000 1999 1998

United StatesFinancing share Ì Ford, Lincoln and Mercury

Retail installment and lease ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36% 69% 41% 54% 51% 47% 42%WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 86 84 84 84 84 84 83

EuropeFinancing share Ì Ford

Retail installment and lease ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34% 43% 34% 37% 32% 33% 33%WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 99 98 97 97 97 96 95

Worldwide. Our Ñnancing contract placement volumes were 858,000 in the fourth quarter of 2002,down 619,000 contracts or 42% compared with a year ago. For the full year of 2002, Ñnancing contractvolumes were 4.1 million, down about 1.4 million contracts or 26% compared with a year ago.

North America

Our total Ñnancing contract placement volumes were 537,000 contracts in the fourth quarter of 2002,down 568,000 contracts or 51% compared with a year ago. This decline resulted primarily from Ford'sincreased use of cash rebate marketing programs and our reduction of used and non-Ford retail installmentÑnancing. Unlike Ford sponsored special-rate Ñnancing, Ford's use of cash rebate marketing programs doesnot require the use of our Ñnancing products. Our lower used and non-Ford vehicle Ñnancing reÖected ourrenewed focus on supporting Ford's brands. Financing share of new Ford, Lincoln and Mercury brand cars andlight trucks sold by dealers in the United States was 36% in the fourth quarter of 2002 compared with 69% ayear ago. Our lower Ñnancing share resulted from changes in Ford's marketing programs, as described above,including the curtailment of the comprehensive low-rate Ñnancing programs oÅered during the fourth quarterof 2001.

For the full year of 2002, our total Ñnancing contract placement volumes were 2.7 million, down about1.3 million contracts or 33% compared with a year ago. This decline reÖected primarily Ford's increased use ofcash rebate marketing programs, which do not require use of our Ñnancing products, and our reduction of usedand non-Ford retail installment Ñnancing. Our Ñnancing share for the full year of 2002 was 41% comparedwith 54% a year ago. This overall decrease resulted from the same factors discussed above.

International

In the fourth quarter of 2002, our total Ñnancing contract placement volumes were 321,000, down 51,000contracts or 14% compared with a year ago. This decrease reÖected primarily lower Öeet contract volumes inBritain and lower used and non-Ford contract volumes in Mexico and Puerto Rico, and changes to Ford'smarketing programs in various countries. Our Ñnancing share of all new Ford brand vehicles sold by dealers inEurope was 34% in the fourth quarter of 2002, compared with 43% in the prior year.

For the full year of 2002, our total Ñnancing contract placement volumes were about 1.4 million contracts,down 126,000 contracts or 8% compared with a year ago. This overall decrease resulted primarily from thesame factors discussed above for the fourth quarter of 2002. Our Ñnancing share for the full year of 2002 was34%, compared with 37% in the prior year.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

Finance Receivables and Operating Leases

Our Ñnancial condition is signiÑcantly impacted by the performance of our owned and managed Ñnancereceivables. Our managed Ñnance receivables include receivables that we own and receivables that we havesold in securitizations and continue to service. Our owned Ñnance receivables, net of allowance for creditlosses, and net investment in operating leases, and our managed Ñnance receivables and net investment inoperating leases, are shown below. Our serviced receivables, which includes our managed receivables andreceivables that we have sold in whole-loan sale transactions and continue to service, are also noted:

2002 December 31,

December 31, September 30, 2001 2000 1999 1998

(in billions)

Outstanding Receivables, Net Ì OwnedFinance receivables

Retail installmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 68.4 $ 77.2 $ 83.4 $ 79.9 $ 75.4 $ 66.7Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16.4 15.9 15.4 33.7 26.1 22.4OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9.8 9.1 9.2 8.4 7.1 6.7

Total Ñnance receivables, net ÏÏÏÏ $ 94.6 $102.2 $108.0 $122.0 $108.6 $ 95.8Net investment in operating leases 31.6 33.5 37.5 36.8 31.5 33.5

Total owned ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $126.2 $135.7 $145.5 $158.8 $140.1 $129.3

Memo: Allowance for credit lossesincluded above ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 3.2 $ 3.2 $ 2.8 $ 1.6 $ 1.5 $ 1.5

Outstanding Receivables Ì ManagedFinance receivables

Retail installmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $117.3 $124.3 $124.7 $105.9 $ 89.9 $ 74.5Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38.9 34.7 32.8 36.1 31.1 28.1OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9.8 9.1 9.2 8.4 7.1 6.7

Total Ñnance receivablesÏÏÏÏÏÏÏÏ $166.0 $168.1 $166.7 $150.4 $128.1 $109.3Net investment in operating leases ÏÏÏ 31.6 33.5 37.5 36.9 31.6 33.5

Total managed ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $197.6 $201.6 $204.2 $187.3 $159.7 $142.8

Outstanding Receivables Ì ServicedÏÏ $202.6 $201.6 $204.2 $187.3 $159.7 $142.8

Owned Receivables. On an owned basis, Ñnance receivables and net investment in operating leases, netof allowances for credit losses, at December 31, 2002 were $126.2 billion, $9.5 billion lower than Septem-ber 30, 2002 and down $19.3 billion or about 13% from a year ago. These decreases resulted primarily fromhigher sales of U.S. retail Ñnance receivables in securitizations and whole-loan sale transactions in 2002.Lower net investment in operating leases resulted from changes in Ford's marketing programs, which includedFord sponsored special-rate retail installment Ñnancing or cash rebates, that caused leasing to be a lessattractive Ñnancing alternative.

Managed Receivables. Total managed receivables at December 31, 2002 were $197.6 billion, down$4 billion from September 30, 2002 and down $6.6 billion from December 31, 2001. These decreases reÖectedprimarily lower levels of retail Ñnance receivables, oÅset partially by higher wholesale Ñnance receivables.Retail Ñnance receivables were lower reÖecting primarily the sale of U.S. retail Ñnance receivables in whole-loan sale transactions, which are described below. Wholesale Ñnance receivables were higher because ofincreased dealer inventory levels.

Serviced Receivables. Serviced receivables includes our managed receivables and receivables that wesold in whole-loan sale transactions. We continue to service the receivables sold in whole-loan saletransactions, however we retain no interest and all associated credit risk is transferred to the buyer. We sold

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

approximately $5 billion of U.S. retail Ñnance receivables in December 2002 through two whole-loan saletransactions.

Credit Risk

Credit risk is the possibility of loss from a customer's failure to make payments according to contractterms. Credit risk has a signiÑcant impact on our business. As discussed in Item 1, we actively manage thecredit risk of our consumer and non-consumer portfolios to balance our level of risk and return. The allowancefor credit losses reÖected on our balance sheets is our estimate of the probable credit losses for receivables andleases that are impaired at the points in time of such balance sheet.

Credit Loss Experience

The following tables show actual credit losses net of recoveries, which is referred to as net credit losses,and loss-to-receivables ratios, which equals net credit losses divided by average amount of net receivables, forour worldwide owned and managed portfolios, for the various categories of Ñnancing during the yearsindicated:

2002 2001 2000 1999 1998

(in millions)OwnedNet Credit Losses

Retail installment and lease ÏÏÏÏÏÏÏÏÏ $2,292 $2,052 $1,283 $ 994 $1,031 Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40 33 14 3 9Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30 24 Ì 2 (1)

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,362 $2,109 $1,297 $ 999 $1,039

Loss-to-receivablesRetail installment and lease ÏÏÏÏÏÏÏÏÏ 2.04% 1.74% 1.10% 0.96% 1.09%Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.25 0.12 0.05 0.01 0.04

Total including other ÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.72% 1.36% 0.84% 0.74% 0.86%

ManagedNet Credit Losses

Retail installment and lease ÏÏÏÏÏÏÏÏÏ $2,740 $2,272 $1,410 $1,164 $1,166Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46 34 15 3 11Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30 24 Ì 2 (1)

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,816 $2,330 $1,425 $1,169 $1,176

Loss-to-receivablesRetail installment and lease ÏÏÏÏÏÏÏÏÏ 1.73% 1.45% 1.00% 0.97% 1.07%Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.13 0.10 0.05 0.01 0.04

Total including other ÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.39% 1.20% 0.81% 0.78% 0.86%

The majority of our credit losses are related to retail installment sale and lease contracts. Credit lossesdepend on the number of vehicle repossessions, the unpaid balance outstanding at the time of repossession,and the net resale value of repossessed vehicles. We also incur credit losses on our wholesale loans, but defaultrates for these receivables historically have been substantially lower than those for retail installment sale andlease contracts. Other credit losses reÖect primarily account charge-oÅs for dealer capital loans.

Full Year 2002 Compared with Full Year 2001

The loss-to-receivables ratio for our managed portfolio was 1.39% in 2002, up from 1.20% in 2001,reÖecting higher net credit losses that resulted largely from a continuation of a weak economy in the UnitedStates and growth in both retail consumer prime and non-prime receivables and retail commercial receivablesduring previous years. Higher unemployment and an increase in bankruptcy Ñlings in the United States

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

increased the number of vehicle repossessions. At the same time, a decline in used vehicle values and anincrease in the average amount Ñnanced increased the average loss per unit repossessed.

The loss-to-receivables ratio for our owned portfolio was 1.72% in 2002, up from 1.36% in 2001, reÖectingan increase in net credit losses, for reasons discussed above, and an increase in securitization of wholesalereceivables because credit losses on wholesale receivables are substantially lower than those for retailinstallment sale and lease contracts.

In general, the loss-to-receivables ratio for our owned portfolio is higher than that for our managedportfolio reÖecting the mix of receivables that we securitize. To date, we have securitized primarily retailconsumer and wholesale receivables. DiÅerences between the loss-to-receivables ratio for owned and managedportfolios also reÖect the criteria we use to select assets for securitization. As is typical for most securitizations,we exclude receivables that have had payment extensions, are delinquent more than 30 days or are inbankruptcy. For a discussion of selection criteria associated with securitization and sales of receivables inwhole-loan sale transactions, see ""Sales of Receivables, Securitization and OÅ-Balance Sheet Arrangements.''

Full Year 2001 Compared with Full Year 2000

In 2001, higher net credit losses compared with 2000 resulted largely from increases in our volume ofreceivables, a conversion to regional service centers in the United States and Canada, and an overall decline inthe economy in the United States, with a signiÑcant increase in personal bankruptcy Ñlings. During the lastquarter of 2001, we also experienced an increase in account delinquencies and vehicle repossessions reÖectingsigniÑcantly weakening economic conditions in the United States following the events of September 11, 2001.

The loss-to-receivables ratio for our owned portfolio increased from 0.84% in 2000 to 1.36% in 2001,resulting from higher net credit losses in 2001, for the reasons discussed above, and an increase insecuritization of wholesale receivables because credit losses on wholesale receivables are substantially lowerthan those for retail installment sale and lease contracts.

Delinquencies and Repossessions

The following table shows delinquency and repossession statistics for our managed Ford, Lincoln andMercury brand U.S. retail and lease portfolio. Our ability to collect amounts owed to us on delinquentaccounts from customers is substantially impacted if a customer declares bankruptcy. Therefore, when weevaluate our portfolio of delinquent accounts, we divide such accounts into delinquent accounts where thecustomer has declared bankruptcy and delinquent accounts where the customer has not declared bankruptcy.Delinquencies are expressed as a percent of the end-of-period accounts outstanding for both bankrupt andnon-bankrupt accounts. Repossessions are shown in aggregate and as a percent of the average number ofaccounts outstanding, deÑned as the repossession ratio.

December 31,

2002 2001 2000

Over-60-Day Delinquency RatioNon-bankrupt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.36% 0.40% 0.30%Bankrupt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.30 0.25 0.21

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.66% 0.65% 0.51%

Full Year

2002 2001 2000

Repossession StatisticsRepossessions (in thousands) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 199 174 141Repossession ratioÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.89% 2.45% 2.19%Memo: Average loss per repossession ÏÏÏÏÏÏÏÏÏÏÏÏÏ $6,960 $6,600 $5,800

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

In 2002, the over-60-day delinquency ratio, excluding accounts where the borrower has Ñled forbankruptcy was 0.36%, down from 0.40% in 2001. Including accounts where the borrower has Ñled forbankruptcy, the over-60-day delinquency ratio was 0.66% in 2002, about the same as 2001.

In 2002, repossessions totaled about 199,000, up 25,000 units or 14% from 2001. In 2002, our repossessionratio was 2.89%, compared with 2.45% in 2001. In 2002, our average loss per repossession, which we refer to asseverity, was $6,960, up $360 per unit or 5.5% from $6,600 in 2001. The increase in repossessions in 2002compared to 2001 reÖected the continued impact of a weak economy in the United States. The increase inseverity reÖected an increase in amount Ñnanced and a decline in used vehicle values.

Allowance for Credit Losses

Our allowance for credit losses and our allowance for credit losses as a percentage of end-of-period netreceivables, for our owned portfolio, are shown below:

December 31,

2002 2001 2000 1999 1998

(in billions)

Allowance for Credit LossesRetail installment and leaseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2.9 $2.5 $1.5 $1.4 $1.4WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.2 0.2 0.1 0.1 0.1Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.1 0.1 0.0 0.0 0.0

Total allowance for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3.2 $2.8 $1.6 $1.5 $1.5

As a Percentage of End-of-Period Net ReceivablesRetail installment and leaseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.88% 2.10% 1.28% 1.25% 1.43%WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.37 1.03 0.37 0.41 0.40Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.68 0.66 0.24 0.29 0.39

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.51% 1.89% 1.03% 1.05% 1.19%

In 2002, we increased our allowance for credit losses for our owned portfolio about $400 millioncompared with year-end 2001 levels. We took this action to reÖect the impact of continuing weak economicconditions in the United States on our portfolio of Ñnance receivables and leases. We consider our year-end2002 allowance for credit losses of $3.2 billion to be adequate to cover the probable losses on our impairedreceivables and leases. A description of our process for setting this allowance is provided in ""CriticalAccounting Estimates.'' Our allowance for credit losses does not include any allowance for receivables that wehave sold. Instead, when we sell receivables in securitizations, we retain an interest-only strip asset included inour retained interest in securitized assets. In establishing the fair value of this asset, we include an estimatedamount of expected future credit losses related to securitized receivables.

Residual Risk on Retail Leases

Our risk on retail leases is composed of two types of risk: residual value risk and return rate risk. Residualvalue risk is the possibility that the actual net auction proceeds we realize upon the sale of returned vehicles atlease termination, which is referred to as the residual value of these vehicles, will be lower than our projectionof these values. Return rate risk is the possibility that the percentage of oÅ-lease vehicles returned to us will behigher than we expect. These topics are discussed in more detail in ""Critical Accounting Estimates.''

Retail Operating Lease Experience

We use various statistics to monitor our residual value risk and return rate risk. Placement volumemeasures the number of leases we purchase each year. Termination volume is a measure of the number ofvehicles for which the lease has ended in each year. Return rates are the percentage of leased vehicles that are

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

returned at the end of the lease to us and not purchased by either the customer or the dealer. The followingtable shows historical placement volumes, termination volumes and return rates for Ford Credit NorthAmerica, which accounts for 94% of our total net investment in operating leases at December 31, 2002:

2002 2001 2000 1999 1998

Placement Volume (in thousands)Ford, Lincoln and Mercury Cars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 104 163 205 187 207Ford, Lincoln and Mercury Trucks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 261 408 538 493 440Jaguar, Land Rover and Volvo*ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 95 90 53 39 12Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 17 23 32 71

Total North AmericaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 469 678 819 751 730

Termination Volume (in thousands)Ford, Lincoln and Mercury Cars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 169 151 154 244 288Ford, Lincoln and Mercury Trucks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 486 366 360 499 410Jaguar, Land Rover and Volvo*ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48 34 28 14 9Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34 80 87 107 120

Total North AmericaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 737 631 629 864 827

Return RateFord, Lincoln and Mercury Cars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 62% 58% 62% 70% 68%Ford, Lincoln and Mercury Trucks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66 66 63 71 65Jaguar, Land Rover and Volvo*ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43 45 51 45 45Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50 60 69 67 58

Total North AmericaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 63% 62% 63% 70% 65%

* We Ñrst reported placement and termination volumes for Volvo in 1999 and Ñrst reported placement volumes for LandRover in 2001.

In 2002, termination volumes totaled 737,000 units, up 106,000 units compared with 2001, largely relatedto higher contract volumes for leases originated in 1999 and 2000 and the growth in 36-month leases. Returnrates remained relatively constant at 63%. In 2003, termination volumes likely will be slightly lower than in2002 because of lower contract volumes for leases we purchased in 2001. However, future return rates willdepend on a variety of factors including used vehicle values and new vehicle Ñnancing incentives, and wecannot be certain that return rates will continue to decline as they did from 1999 to 2002.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

Credit Ratings

Overview

Our short- and long-term debt funding sources are rated by three nationally recognized statistical ratingorganizations:

‚ Fitch, Inc. (Fitch);

‚ Moody's Investors Service, Inc. (Moody's); and

‚ Standard & Poor's Rating Services, a division of McGraw-Hill Companies, Inc. (S&P).

In several markets, locally recognized rating agencies also rate us. A credit rating reÖects an assessmentby the rating agency of the credit risk associated with particular securities we issue, based on informationprovided by Ford, us and other sources. Credit ratings are not recommendations to buy, sell or hold securitiesand are subject to revision or withdrawal at any time by the assigning rating agency. Each rating agency mayhave diÅerent criteria for evaluating company risk, and therefore ratings should be evaluated independently foreach rating agency. Lower ratings generally result in higher borrowing costs and reduced access to capitalmarkets. More information about the rating categories used by the nationally recognized statistical ratingorganizations can be obtained from Fitch, Moody's and S&P.

Fitch Ratings. On January 11, 2002, Fitch lowered our long-term debt ratings from A- to BBB°,conÑrmed our short-term debt rating at F2, and conÑrmed our rating outlook as negative. On October 31,2002, Fitch aÇrmed our long-term debt rating at BBB°, our short-term debt rating at F2 and our ratingoutlook as negative.

Moody's Ratings. On January 16, 2002, Moody's lowered our long- and short-term debt ratings from A2to A3 and from Prime-1 to Prime-2, respectively, and conÑrmed our rating outlook as negative. OnNovember 13, 2002, Moody's conÑrmed our long-term and short-term debt ratings at A3 and Prime-2,respectively, and conÑrmed our rating outlook as negative. On March 7, 2003, Moody's conÑrmed our creditratings for both long- and short-term debt at A3 and Prime-2, respectively and conÑrmed our rating outlook asnegative.

S&P Ratings. On January 11, 2002, S&P conÑrmed our long-term and short-term debt ratings at BBB°and A-2, respectively, and changed our rating outlook from stable to negative. On October 16, 2002, S&Pplaced our long-term debt ratings on CreditWatch with negative implications and reaÇrmed our short-termdebt rating at A-2. On October 25, 2002, S&P lowered our long-term debt rating from BBB° to BBB andaÇrmed our rating outlook as negative. On March 7, 2003, S&P aÇrmed our credit ratings for both long- andshort-term debt at BBB and A-2 respectively, and aÇrmed our rating outlook as negative.

The following chart summarizes our credit ratings and the outlook assigned by the rating agencies as ofMarch 7, 2003:

Short-term Long-termDebt Debt Outlook

Fitch ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ F2 BBB° NegativeMoody's ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Prime-2 A3 NegativeS&P ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A-2 BBB Negative

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

Funding

Funding Sources

Our funding sources include debt and sales of receivables in securitizations.

Debt consists of short-term and long-term unsecured debt placed directly by us or through securitiesdealers or underwriters, and bank borrowings. We consider any debt with an original maturity of 12 months orless to be short-term debt. We obtain short-term debt funding primarily through the sale of commercial papermostly to qualiÑed institutional investors. We have commercial paper programs in the United States, Europe,Canada and other international markets. We also obtain short-term funding from the sale of demand notes toretail investors through the Ford Money Market Account (FMMA). FCE also issues certiÑcates of depositprimarily to a broad range of institutional investors in various markets to obtain short-term funding. Bankborrowings by several of our international aÇliates in the ordinary course of business are an additional sourceof short-term funding.

We obtain long-term debt funding through the issuance of a variety of debt securities in the United Statesand international capital markets. Long-term debt is debt with an original maturity of more than 12 months.We use several long-term funding programs, including GlobLSTM notes oÅered with a variety of maturities oftwo years and longer, and medium-term notes sold through sales agents in smaller amounts in variouscurrencies. We reach both retail and institutional investors in our long-term funding programs. During 2002,we launched our Continuously OÅered Bonds for Retail Accounts program, further increasing our ability toaccess retail investors in the United States. We launched a similar program in Canada in January 2003 andplan to expand our retail bond oÅerings in other selected European markets by the end of the Ñrst quarter of2003.

We also sell receivables in securitizations to obtain funding, which can be structured to provide bothshort- and long-term funding. Securitization involves the sale of receivables to a special purpose entity (SPE),typically a trust. The SPE issues interest-bearing securities, commonly called asset-backed securities, that aresecured by future collections on the sold receivables. The SPE uses proceeds from the sale of these securitiesto pay the purchase price for the sold receivables. Generally, the asset-backed securities are rated byindependent rating agencies and sold in public oÅerings or in private transactions. We oÅer asset-backedsecurities primarily to institutional investors in a number of diÅerent capital markets, including the UnitedStates, Canada, Japan and Europe. We use both amortizing and revolving structures in our securitizations. Weoften retain interests in the securitized receivables. For a more complete discussion of securitization, see""Sales of Receivables, Securitization and OÅ-Balance Sheet Arrangements.''

Funding Strategy

Our funding strategy is to maintain liquidity and access to diversiÑed funding sources that are costeÅective. In December 1988, we began selling a portion of our receivables in securitizations to fund ouroperations, and we have been a regular participant in the securitization market since then. During 2002, wecontinued to meet a signiÑcant portion of our funding requirements through securitizations because of thestability of the market for asset-backed securities, their lower relative costs (as described below), and thediversiÑcation of funding sources that they provide.

During 2001 and 2002, we focused our eÅorts on further diversiÑcation of funding sources. As a result, wereduced our reliance on short-term funding, especially unsecured commercial paper. During 2002, welaunched new asset-backed commercial paper and retail unsecured bond programs, and we expanded oursecuritization channels, including transactions by foreign aÇliates and expansion of our bank-sponsored asset-backed commercial paper issuers program.

As a result of our funding strategy, the lowering of our credit ratings in 2001 and 2002 has not had amaterial impact on our ability to fund our operations. In 2003, our funding strategy will continue to focus onimproving liquidity and sustaining diverse and competitive funding sources. We believe that our funding

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

strategy will allow us to fund our operations through diÇcult economic conditions. Any further lowering of ourcredit ratings would increase our borrowing costs and potentially constrain certain funding sources. This couldcause us to increase our use of securitization or other sources of liquidity or to reduce our managedreceivables.

Cost of Funding Sources

The cost of both debt and funding in securitizations is based on a margin or spread over a benchmarkinterest rate. Spreads are typically measured in basis points. Our unsecured commercial paper and FMMAfunding costs are based on spreads over the London Interbank OÅered Rate (LIBOR), a commonly usedbenchmark interest rate. Our unsecured long-term debt and securitized funding costs are based on spreadsover United States Treasury securities (U.S. Treasury) of similar maturities, LIBOR or other benchmarkrates.

In addition to enhancing our liquidity, one of the main reasons that we increased our use of securitizationsas a funding source over the last few years has been that spreads on securitized funding have been more stablethan unsecured term-debt funding spreads. Over the last two years, spreads on securitized funding haveÖuctuated between 46 and 102 basis points above comparable U.S. Treasury securities, while our unsecuredlong-term debt funding spreads have Öuctuated between 123 and 662 basis points above comparable U.S.Treasury securities. In 2002, Our unsecured term-debt spreads Öuctuated between 195 and 662 basis pointsabove comparable U.S. Treasury securities, with an average spread of 357 basis points and a year-end spreadof 447 basis points; securitized funding spreads have Öuctuated between 61 and 86 basis points with an averagespread of 71 basis points and a year-end spread of 62 basis points.

Funding Spreads Compared to 3-Year U.S. Treasury*

2002 December 31,

Dec. 31 Sept. 30 June 30 Mar. 31 2001 2000 1999 1998

(basis points)

Unsecured debt funding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 447 499 213 242 264 157 86 79Securitized fundingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 62 69 68 76 84 97 70 84

Unsecured over/(under) securitizedÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 385 430 145 166 180 60 16 (5)

* The spreads listed are indicative only and do not reÖect speciÑc trades.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

Our outstanding debt and securitized funding was as follows at December 31:

2002 2001 2000 1999 1998

(in billions)

DebtCommercial paperÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8.2 $ 15.7 $ 42.3 $ 43.1 $ 46.2Ford Money Market Account ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.1 4.0 3.7 2.8 2.5Other short-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.9 2.9 3.9 3.9 4.7

Short-term debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16.2 22.6 49.9 49.8 53.4Long-term debt (including notes payable within one

year)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 124.1 123.2 95.7 82.3 60.7

Total debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 140.3 $ 145.8 $145.6 $132.1 $114.1

Securitized fundingSecuritized portfolio ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 71.4 $ 58.7 $ 28.4 $ 19.5 $ 13.5Retained interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (17.6) (12.5) (3.7) (3.5) (1.3)

Total securitized funding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53.8 46.2 24.7 16.0 12.2

Total debt plus securitized fundingÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 194.1 $ 192.0 $170.3 $148.1 $126.3

Back-up credit facilitiesFord Credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8.6 $ 9.0 $ 20.0 $ 18.5 $ 20.0FCE ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.3 4.6 4.7 4.9 5.2Bank lines shared with Ford ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.2 8.1 8.1 8.3 8.3Asset-backed commercial paper linesÏÏÏÏÏÏÏÏÏÏÏÏÏ 13.6 12.5 1.4 1.4 1.5

Total back-up facilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34.7 34.2 34.2 33.1 35.0Drawn amounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.9) (0.7) (0.9) (0.8) (1.9)

Total available back-up facilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 33.8 $ 33.5 $ 33.3 $ 32.3 $ 33.1

Memo:Additional available funding through bank-

sponsored asset-backed commercial paperissuersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 7.3 $ 6.8 Ì Ì Ì

RatiosCommercial paper coverageÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H 100% H 100% 57% 54% 53%Short-term debt and notes payable within one year

to total debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28 30 43 52 55Short-term debt and notes payable within one year

to total capitalization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25 28 40 48 50

At December 31, 2002, our commercial paper balance was $8.2 billion ($3.4 billion net of overborrowingand including commercial paper sold to other Ford aÇliates), down $7.5 billion from year-end 2001 levels.Total long-term debt at December 31, 2002 was $124.1 billion, compared with $123.2 billion a year ago. Theincrease in our long-term debt, particularly compared with year-end 2000 levels, reÖects our funding strategyto reduce short-term debt and improve our liquidity.

At December 31, 2002, our total debt was $140.3 billion, down $5.5 billion from a year ago, while debtplus securitized funding totaled $194.1 billion, up $2.1 billion compared with a year ago, reÖecting ourincreased use of securitization as a funding source.

At December 31, 2002, the ratio of our short-term debt and notes payable within one year to totalcapitalization was 25% compared with 28% and 40% at December 31, 2001 and December 31, 2000,respectively. This reduction reÖects our strategy to improve liquidity.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

During 2002, we issued $13.5 billion of long-term debt with maturities of one to thirty years. Theseissuances included $4.4 billion of Eurodollar bonds, $2.8 billion under our Continuously OÅered Bonds forRetail Accounts program, $2 billion under our GlobLSTM program, and $4.3 billion in other transactionsdenominated in various currencies. In addition, we realized $36.4 billion in proceeds from sales of receivablesin securitizations.

For the full year 2003, we plan to maintain our commercial paper balances around $5 billion to $7 billion,net of overborrowing. We plan to raise $7 billion to $10 billion through long-term debt issuances and $12billion to $15 billion through public term securitizations. Our total funding requirements, estimated to bebetween $19 billion to $25 billion of long-term transactions for the year, will be down from 2002. Our fundingrequirements for next year are lower than the amount of our long term debt that will mature during next yearand the amount of our public term asset-backed securities that will amortize during next year (totaling about$40 billion) because we plan to further reduce the amount of our managed receivables and to increase our useof asset-backed commercial paper programs. Our estimated funding requirements take into account a whole-loan sale transaction of approximately $2 billion, which is contractually committed for the Ñrst quarter of2003. Any additional whole-loan sale transactions could further reduce our funding requirements. We canoÅer no assurance that we will not change our funding plan, and our funding plan and ability to meet ourfunding plan are subject to risk and uncertainties, many of which are beyond our control.

Liquidity

Maintaining liquidity through access to diversiÑed funding sources has always been a key factor in ourfunding strategy. We deÑne liquidity as our ability to meet our funding needs, which includes purchasing retailinstallment sale and lease contracts, funding other Ñnancing programs and repaying our debt obligations asthey become due. In addition to unsecured debt oÅerings and securitizations described above, we have accessto the following other sources of liquidity:

Overborrowing. In the normal course of our funding transactions, we may generate more proceeds thanare necessary for our immediate funding needs. These excess amounts are maintained primarily as highlyliquid investments. We consider a portion of the invested amounts as an overborrowing portfolio to provideliquidity primarily for our commercial paper program and to give us Öexibility in our other funding programs.We increased our overborrowing levels during 2002 to pre-fund debt maturing in 2003. We monitor ouroverborrowing levels daily and adjust them as necessary to support our short-term liquidity needs.

Bank-Sponsored Asset-Backed Commercial Paper Issuers Program. We have entered into agreementswith several bank-sponsored asset-backed commercial paper issuers under which such issuers are contractu-ally committed to purchase from us, at our option, up to $12.5 billion of receivables. These agreements havevarying maturity dates between March 31, 2003 and October 31, 2003. As of December 31, 2002, we hadutilized approximately $5.2 billion of these commitments. This program does not contain restrictive Ñnancialcovenants (for example, debt-to-equity limitations or minimum net worth requirements) or material adversechange clauses that could preclude us from selling receivables, but does contain provisions that wouldterminate the unused portion of those commitments if the performance of the sold receivables deterioratesbeyond speciÑed levels. None of these arrangements may be terminated based on a change in our credit rating.

Whole-Loan Sale Transactions. During 2002, we began a program to sell retail installment salecontracts in whole-loan sale transactions in which we retain no interest. This program provides liquidity byenabling us to reduce our managed receivables and our need for debt or securitized funding to support thosereceivables. In 2002, we sold $5 billion of retail Ñnance receivables through whole-loan sales. We expect toexecute other whole-loan sale transactions in 2003.

Alternative Business Models. To enhance liquidity further, we may enter into agreements with banks orother Ñnancial institutions to permit such institutions to originate, Ñnance, service or any combination thereof,for our operations in certain markets. These arrangements enhance our liquidity by reducing funding needs in

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

regions in which Ñnancial markets are less stable or less readily available to us. During 2002, we entered intosuch an arrangement with two banks in Brazil to both Ñnance and service retail receivables we originate inBrazil.

Back-up Credit Facilities. At December 31, 2002, we had $34.7 billion of back-up facilities, of which$33.8 billion remains available to us, about the same as a year ago. We maintain committed credit facilitieswith large Ñnancial institutions that totaled $13.9 billion at December 31, 2002 (Ford Credit $8.6 billion andFCE $5.3 billion). The majority of these facilities are available through June 30, 2007 and $0.9 billion was inuse at December 31, 2002 (primarily by aÇliates outside of the United States and Europe). In addition, wemay use, at Ford's option, $7.2 billion of Ford's committed credit facilities, including $543 million available forFCE, which also are available through June 30, 2007. At December 31, 2002, of the $34.7 billion of totalback-up facilities, $13.3 billion served as a liquidity facility for our FCAR Owner Trust (FCAR) asset-backedcommercial paper program, $250 million served as a liquidity facility for our Motown NotesSM program, and$20.2 billion supported our unsecured commercial paper program and other liquidity. Our credit facilities donot contain restrictive Ñnancial covenants (for example, debt-to-equity limitations or minimum net worthrequirements) or material adverse change clauses that could preclude borrowing under the credit facilities.None of these facilities may be terminated based on a change in our credit rating.

Liquidity Risks

Despite our diverse sources of liquidity, our ability to maintain our liquidity may be aÅected by thefollowing factors:

‚ Our credit rating;

‚ Disruption of Ñnancial markets;

‚ Market capacity for Ford- and Ford Credit-sponsored investments;

‚ General demand for the type of securities we oÅer;

‚ Our ability to sell receivables;

‚ Performance of receivables in our previous receivables sale transactions;

‚ Accounting and regulatory changes; and

‚ Our ability to maintain back-up bank credit facilities.

Leverage

We use leverage, or the debt-to-equity ratio, to make various business decisions, including establishingpricing for retail, wholesale and lease Ñnancing and/or appropriate capital structure. For a discussion of ourcapital structure, see ""Capital Adequacy.'' We calculate leverage on a Ñnancial statement basis and on amanaged basis using the following formulas:

Total DebtFinancial

EquityStatementLeverage

RetainedCash SFAS No. 133

Securitized Interest onTotal Debt ∏ ∂ ∂ and Cash ∂ Adjustments

Receivables SecuritizedEquivalent on Total Debt

ReceivablesManaged

LeverageSFAS No. 133

MinorityEquity ∏ ∂ Adjustment on

InterestEquity

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

We calculate managed leverage by making several adjustments to our Ñnancial statement leverage toreÖect the way we manage our business. We add the total amount of receivables sold in securitizations, net ofretained interests, to our debt because we consider securitization to be an alternative source of funding. Wealso deduct cash and cash equivalents because they generally correspond to excess debt beyond the amountrequired to support our Ñnancing operations. In addition, we add our minority interests to our Ñnancialstatement equity, because all of the debt of such consolidated entities is included in our total debt.

SFAS No. 133 requires us to make fair value adjustments to our assets, debt and equity positions toreÖect the impact of interest rate instruments we use in connection with our term debt issuances andsecuritizations. SFAS No. 133 adjustments vary over the term of the underlying debt and securitized fundingobligations based on changes in market rates. We generally repay our debt funding obligations as they mature.As a result, we exclude the impact of SFAS No. 133 on both the numerator and denominator in order toexclude the interim eÅects of changes in market rates. For a discussion of our use of interest rate instrumentsand other derivatives, see Item 7A.

The following table illustrates the calculation of our Ñnancial statement leverage:

2002 2001 2000 1999 1998

(in billions)

Total debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $140.3 $145.8 $145.6 $132.1 $114.1

Total stockholder's equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13.6 12.0 12.2 10.9 10.6

Debt-to-equity ratio (to 1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.3 12.2 11.9 12.1 10.7

At December 31, 2002, our Ñnancial statement leverage was 10.3 to 1 compared with 12.2 to 1 a year ago.This decrease in leverage resulted primarily from our improved earnings and a reduction in owned receivables.

The following table illustrates the calculation of our managed leverage:

2002 2001 2000 1999 1998

(in billions)

Total debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $140.3 $145.8 $145.6 $132.1 $114.1Total securitized receivables outstanding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 71.4 58.7 28.4 19.5 13.5Retained interest in securitized receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏ (17.6) (12.5) (3.7) (3.5) (1.3)Adjustments for cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏ (6.8) (2.9) (1.1) (0.9) (0.8)Adjustments for SFAS No. 133 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6.2) (2.1) Ì Ì Ì

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $181.1 $187.0 $169.2 $147.2 $125.5

Total stockholder's equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 13.6 $ 12.0 $ 12.2 $ 10.9 $ 10.6Adjustment for SFAS No. 133 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.5 0.6 Ì Ì ÌAdjustment for minority interestÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ * * * 0.4 0.4

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 14.1 $ 12.6 $ 12.2 $ 11.3 $ 11.0

Managed debt-to-equity ratio (to 1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12.8 14.8 13.9 13.0 11.4

* Less than $100 million

Leverage Strategy

Our managed leverage strategy involves establishing a leverage level that we believe reÖects the riskcharacteristics of our underlying assets. In establishing a target leverage level, we consider the characteristicsof the receivables in our managed portfolio and the prevailing market conditions. In the fourth quarter of 2001,we established our current managed leverage target range at 13 to 14 to 1. To maintain managed leverage inour target range, we eliminated planned dividends in the Ñrst half of 2002 and on January 11, 2002, Ford madea capital contribution of $700 million to us. As a result of improved proÑtability, and lower receivables levels

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

we resumed our dividend payments during the third quarter 2002. We paid dividends of $450 million onSeptember 27, 2002 and $700 million on December 26, 2002.

At December 31, 2002, our managed leverage was 12.8 to 1 compared with 14.8 to 1 a year ago. Thisdecrease resulted primarily from our improved earnings and a reduction in managed receivables.

Sales of Receivables, Securitization and OÅ-Balance Sheet Arrangements

Overview

We sell receivables in securitizations and whole-loan sales. These types of arrangements are not reÖectedon our balance sheet in the same way as debt funding, but these types of arrangements have had and couldreasonably have an eÅect on our Ñnancial condition, operating results and liquidity. Many Ñnance companiesand banks use securitization to fund their operations.

Securitization

The United States securitization market is well developed and highly liquid with more than $1.5 trillionof asset-backed securities outstanding at December 31, 2002. The securitization market is also well developedin a number of other countries, including Canada, the United Kingdom, Germany, Australia and Japan.

We actively participate in the asset-backed securitization market and have been a frequent participantsince December 1988. We were the largest securitizer of automobile Ñnance receivables in 2002 and 2001. Wesecuritize our receivables because the highly liquid and eÇcient market for securitization of Ñnancial assetsprovides us with a cost-eÅective source of funding.

We securitize three types of assets:

‚ Retail installment sale contracts;

‚ Wholesale receivables; and

‚ Retail operating leases.

Use of Special Purpose Entities

Securitization involves the sale of receivables to a special purpose entity (SPE), typically a trust. TheSPE issues interest-bearing securities, commonly called asset-backed securities that are secured by futurecollections on the sold receivables. The SPE uses proceeds from the sale of these securities to pay thepurchase price for the sold receivables. We retain interests in the securitized receivables. These retainedinterests may include senior and subordinated securities, undivided interests in wholesale receivables,restricted cash held in reserve funds for the beneÑt of the SPEs and interest-only strips. Our use of SPEs inour securitizations is consistent with conventional practices in the securitization industry. The sale to the SPEachieves isolation of the sold receivables for the beneÑt of securitization investors and, assuming accountingrules are met, the sold receivables are removed from our balance sheet.

We sponsor the SPEs used in all but one of our securitization programs. None of our oÇcers, directors oremployees hold any equity interests in our SPEs or receives any direct or indirect compensation from theSPEs. These SPEs do not own our stock or stock of any of our aÇliates.

Most of our SPEs are classiÑed as qualifying SPEs consistent with the requirements of Statement ofFinancial Accounting Standards No. 140 (SFAS No. 140), Accounting for Transfers and Servicing ofFinancial Assets and Extinguishments of Liabilities, because of the nature of the assets held by these entitiesand the limited nature of their activities. Basically, the activities of a qualifying SPE must be limited to passiveinvestment in Ñnancial assets and issuing beneÑcial interests in those assets.

We also sponsor one securitization SPE, FCAR that is not a qualifying SPE under SFAS No. 140because its permitted activities are not suÇciently limited. However, because FCAR maintains substantive

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

third-party equity, it was not consolidated in our Ñnancial statements at December 31, 2002 under applicableaccounting rules. See Note 6 of our Notes to Financial Statements for a further discussion of the impact ofFASB Interpretation No. 46, Consolidation of Variable Interest Entities, on FCAR.

Finally, third-party banking institutions sponsor the SPEs that we use in one of our securitizationprograms as described in ""Securitization Programs Ì Bank Sponsored Asset-Backed Commercial PaperIssuers Program.''

Typical Securitization Structure

In our typical U.S. securitizations, we sell a pool of our retail installment sale contract receivables to awholly-owned bankruptcy remote special purpose subsidiary that establishes a separate SPE, usually a trust,and transfers the receivables to the SPE in exchange for the proceeds from securities issued by the SPE.Following the transfer of the sold receivables to the SPE, the receivables are no longer our assets and they nolonger appear on our balance sheet. The securities issued by the trust, usually notes or certiÑcates of variousmaturities and interest rates, are paid by the SPE from future collections on the receivables it owns. Thesesecurities, commonly referred to as asset-backed securities, are structured into senior and subordinated classes.The senior classes have priority over the subordinated classes in receiving collections from the sold receivables.

The following Öow chart diagrams our typical securitization transaction:

Receivables

Bankruptcy RemoteTransaction

Off-BalanceSheet Transaction

Receivables

Proceeds

Securities

ProceedsProceeds

Ford CreditSecuritization

Trust(Qualifying Special

Purpose Entity)

Special PurposeSubsidiary

Investors

We select receivables for our securitization transactions using selection criteria designed for the speciÑctransaction. For securitizations of retail installment sale contracts, the selection criteria are based on factorssuch as location of the obligor, contract term, payment schedule, interest rate, Ñnancing program and the typeof Ñnanced vehicle. In general, the criteria also require receivables to be active and in good standing. In ourFord Credit and PRIMUS retail transactions, we typically exclude receivables where the obligor is havingcredit problems, including more than 30-day delinquency, bankruptcy or payment extensions. We makerepresentations and warranties to the SPE about the selection criteria as well as other eligibility requirementsof the receivables relating to the legal status and enforceability of the receivable, security interest in theÑnanced vehicle, and its origination in compliance with law. We also make representations and warranties tothe SPE about the accuracy of data provided on the receivables and characteristics of the overall pool ofreceivables.

We provide various forms of credit enhancements and payment enhancements to reduce the risk of lossfor senior classes of securities and enhance the likelihood of timely payment of interest and principal whendue. These enhancements include the following:

‚ Over-collateralization. Over-collateralization occurs when the principal balance of receivables ownedby the SPE exceeds the principal amount of asset-backed securities issued by the SPE. Over-collateralization levels are established by independent rating agencies at levels necessary to support thecredit ratings for the asset-backed securities issued by the SPE. Many of our securitizations of retailinstallment sale contracts require payments of principal on the asset-backed securities in excess ofprincipal collections on the receivables resulting in increasing amounts of over-collateralization. TheSPE makes these payments until a targeted level of over-collateralization is reached and continues to

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

the extent necessary to maintain this level. If the pool of receivables contains low interest ratecontracts, the targeted over-collateralization level is set higher to compensate for such contracts. Afterthe targeted level of over-collateralization is reached, we have the right to receive ""excess spread,'' orthe collections on the sold receivables in excess of amounts needed to make required payments ofprincipal and interest to investors, servicing fees and interest rate swap payments, if any. Excess spreadis recorded as an interest-only strip asset on our balance sheet. In addition, many of our securitizationstructures have a ""turbo'' feature that requires excess spread to be used to make principal payments oncertain senior securities until they are paid in full.

‚ Cash reserve funds or restricted cash. A portion of proceeds from the sale of asset-backed securitiesare held in segregated reserve funds and may be used to pay principal and interest to investors andother obligations of the SPE if collections on the sold receivables are insuÇcient.

‚ Subordinated securities. The SPE typically issues subordinated securities that generally do notreceive payments of principal until more senior securities are paid in full.

‚ Interest rate swaps. If the SPE issues Öoating rate securities, it enters into an interest rate swap with ahighly rated swap counterparty to hedge the interest rate risk between the Ñxed rate (or Öoating ratewith a diÅerent market index) paid on the receivables and the Öoating rate paid on the securities. Thisswap ensures that the SPE will have suÇcient funds over the life of the securitization transaction tomake timely payments of interest on the asset-backed securities, regardless of changes in interest rates.

We retain interests in receivables sold through securitizations. The retained interests may include seniorand subordinated securities issued by the SPE, undivided interests in wholesale receivables, restricted cashheld for the beneÑt of the SPE (for example, a reserve fund) and an interest-only strip. Retained interests,including a portion of our undivided interest in wholesale receivables, are subordinated and serve as creditenhancements for the more senior securities issued by the SPE to help ensure that adequate funds will beavailable to pay investors that hold senior securities. Our ability to realize the carrying amount of our retainedinterests largely depends on actual credit losses and prepayment speeds on the sold receivables.

The asset-backed securities are rated by independent rating agencies and sold in public oÅerings or inprivate transactions. The holders of asset-backed securities have no recourse to us or our assets as a result ofthe credit performance of the receivables and have no ability to require us to repurchase their securities. Wedo not guarantee any securities issued by the SPE.

We use both amortizing and revolving structures in our securitizations. In most amortizing structures, theSPE issues securities that receive monthly payments of principal and therefore amortize down as collectionson the sold receivables are received. In some so-called ""bullet'' structures, the SPE may issue a variable payterm note at the targeted maturity of a class of securities. The proceeds of this note are applied to pay thematuring securities in full in a single lump-sum payment and the new note receives the amortizing payments.In revolving structures, the SPE issues securities that receive only monthly interest payments for a set periodof time, called the revolving period, before receiving repayments of principal. During the revolving period,principal collections on the sold receivables are used to purchase additional receivables for the SPE. At theend of the revolving period, investors may receive principal payments in a number of monthly payments or in asingle lump sum payment.

The SPE engages us as servicer to collect and service the sold receivables for a servicing fee of generally1% of the principal amount of receivables plus fees such as late charges and extension fees collected fromobligors. Our servicing duties include collecting payments on receivables and generally paying them to theSPE within two business days of receipt. We also prepare monthly investor reports on the performance of thesold receivables, including collections, delinquencies and credit losses, and payment reports that are used bythe trustee of the SPE to distribute payments. While servicing the sold receivables for the SPE we apply thesame servicing policies and procedures that we apply to our owned receivables and maintain our normal

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

relationship with our Ñnancing customers. We also perform administrative services for most of the SPEs,including Ñling periodic reports, preparing notices and tax reporting.

The SPE has limited purposes and may only be used to purchase the receivables, issue asset-backedsecurities and make payments on the securities. The SPE has a limited duration and generally terminateswhen investors holding the asset-backed securities have been paid all amounts owed to them. As servicer wehave a ""clean-up call'' option allowing us to purchase the receivables from the SPE at their principal balanceplus accrued interest when the receivables balance declines to 10% or less of the original receivables balance.This purchase results in payment in full of all the outstanding asset-backed securities issued by the SPE.

We may also enter into derivative transactions to facilitate our securitizations. Generally, we enter into aback-end swap with the swap counterparty to the SPE that puts us in the same economic position as if wewere the swap counterparty directly with the SPE, less an intermediation fee. Since January 2002, in our FordCredit and PRIMUS retail securitization programs, we enter into a back-end swap with the swap counterpartyto the SPE that protects the counterparty against the risk that the sold receivables will prepay faster or slowerthan an assumed rate.

Securitization Programs

We sell receivables through the following securitization programs:

Retail Securitization Ì Ford Credit and PRIMUS. We sell pools of retail installment sale contractsoriginated through Ford Credit and PRIMUS to SPEs that issue securities, most of which are sold to investorsin public oÅerings or private transactions. These transaction structures are similar to the typical securitizationstructure described above.

Retail Securitization Ì Triad. In 2002, we began securitizing our retail installment sale contractsoriginated through Triad. In these transactions, we sell pools of non-prime credit quality retail installment salecontracts to SPEs that issue securities, most of which are sold to investors in public oÅerings or privatetransactions. These transaction structures are similar to the typical securitization structure described above.We purchase a Ñnancial guaranty insurance policy from a highly rated insurance company that insures thepayment of scheduled interest and certain principal payments on the senior securities in these transactions.

Wholesale Securitization. We sell wholesale Ñnance receivables from speciÑed dealer accounts to SPEsthat issue notes that are sold to investors in public oÅerings. We continue to own the dealer accounts, but weare required to sell to the SPE all eligible receivables generated under these dealer accounts as the dealersacquire vehicles that are Ñnanced by us. The SPE issues notes that are secured by an undivided proportionateinterest in the receivables and we retain the remaining undivided interest. Part of our retained interest issubordinated to senior investors and serves as credit enhancement. The other part has the same priority to thecollections on sold receivables as the senior noteholders. Our retained interest Öuctuates as the amount ofreceivables held by the SPE increases or decreases over time due to changes in levels of dealer Öoorplaninventories and as additional series of notes are issued by the SPE and notes are paid oÅ. Our retained interestmust be maintained at a minimum required level for credit enhancement.

FCAR. FCAR is a limited purpose trust established to issue asset-backed commercial paper. FCARpurchases highly rated asset-backed securities issued by Ford Credit-sponsored securitization SPEs. AlthoughFCAR may hold asset-backed securities secured by retail installment sale contracts, wholesale receivables andlease receivables, as of December 31, 2002, FCAR held only asset-backed securities secured by retailinstallment sale contracts. FCAR raises the funds to purchase these asset-backed securities by issuing asset-backed commercial paper and equity certiÑcates. At December 31, 2002, FCAR held about $12.2 billion ofasset-backed securities and had about $11.8 billion of asset-backed commercial paper outstanding. Inaddition, FCAR has about $410 million of equity certiÑcates outstanding of which $404 million, or about98.5%, is owned by investors not aÇliated with us but who have business relationships with us and Ford. Weact as administrator for FCAR and oversee its limited operations. At December 31, 2002, about $13.4 billion

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

of our bank credit facilities are available to provide liquidity to FCAR's issuance of asset-backed commercialpaper.

Motown NotesSM Program. The Motown Notes program, launched in January 2002, is an asset-backedcommercial paper program we administer. The Motown Notes are issued by an SPE that owns a pool ofwholesale receivables and are secured by an undivided proportionate interest in these receivables. The SPE isalso used for wholesale securitization as described above. The Motown Notes program is supported by a bankliquidity facility equal to at least 5% of the principal amount of the Motown Notes. On December 31, 2002,the Motown Notes program totaled $5.0 billion. In January 2003, we reallocated bank liquidity facilities tosupport the Motown Notes program, increasing its capacity from $5.0 billion to $8.5 billion.

Bank-Sponsored Asset-Backed Commercial Paper Issuers Program. We sell pools of retail installmentsale contracts to bank-sponsored asset-backed commercial paper issuers that are SPEs of the sponsoring bankand that are committed to purchase such receivables. These issuers purchase Ñnance receivables and otherassets from numerous other sellers and issue commercial paper backed by these assets to investors. We retaininterests in the receivables we have sold including restricted cash held in reserve funds and interest-only strips.

Foreign AÇliate Securitization. In 2002, we signiÑcantly expanded securitization of assets by foreignsubsidiaries in Canada and Japan and foreign branches of FCE in Germany, the United Kingdom, Spain andItaly. These transaction structures are substantially similar to the transaction structures discussed above, withappropriate adjustments principally for local market conditions, product diÅerences and local laws, especiallyrelated to bankruptcy, tax and accounting considerations. We use both retail securitizations and bank-sponsored asset-backed commercial paper issuers in our foreign aÇliate securitizations.

Our Continuing Obligations

We have no obligation to repurchase any receivable sold to a SPE that subsequently becomes delinquentin payment or otherwise is in default. Investors holding securities issued by a SPE have no recourse to us orour other assets for credit losses on the sold receivables and have no right to require us to repurchase thesecurities. We do not guarantee any asset-backed securities and have no obligation to provide liquidity or makemonetary contributions or contributions of additional receivables to our SPEs either due to the performance ofthe sold receivables or the overall credit rating of our short-term or long-term debt. However, as the seller andservicer of the Ñnance receivables to the SPE, we are obligated to provide certain kinds of support to oursecuritizations. These support obligations are customary in the securitization industry and consist of thefollowing:

As Seller

‚ IndemniÑcation. In most of our securitization programs, we provide indemniÑcation to SPEs, thetrustees for the SPEs and other parties, including the banks that sponsor SPEs used in our bank-sponsored asset-backed commercial paper issuers program. We are obligated to indemnify the SPE forcertain tax liabilities related to the receivables and for any liabilities related to our use as servicer of aÑnanced vehicle. We are also obligated to indemnify the trustees for the SPEs with respect to anyliabilities they may incur in the performance of their duties other than through their own negligence orwillful misconduct. In addition, as is customary in all capital markets transactions, we indemnify theunderwriters on the accuracy of the disclosures made in the oÅering documents for the asset-backedsecurities. Based on our experience, we do not expect to make any indemniÑcation payments.

‚ Receivable Repurchase Obligations. We make representations and warranties to the SPE that thesold receivables meet certain eligibility criteria at the time the receivables are sold. In addition tostandard legal requirements including that each receivable be properly secured by a Ñnanced vehicleand originated in compliance with applicable law, the primary economic eligibility criteria are that thereceivable is not delinquent or defaulted and has never been extended and that the obligor is not in

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

bankruptcy. We also make representations and warranties on the accuracy of data about the receivablesand the characteristics of the pool of receivables. If a breach of any of our representations andwarranties is later discovered, the SPE's only remedy is to require us to repurchase any aÅectedreceivable. The repurchase price is the principal balance of the receivable plus a full month of accruedinterest. In 2002, no sold receivables were repurchased for eligibility breaches.

‚ Mandatory Sale of Additional Receivables. In revolving structures, the SPE issues securities thatreceive only monthly interest payments for a Ñxed period of time, called the revolving period, beforereceiving repayment of principal. Because the principal amount of the issued securities remainsconstant during the revolving period while the principal balance of the underlying Ñnance receivablesare declining as monthly payments on the receivables are collected, we replenish or ""top-up'' the SPEwith new receivables each month during the revolving period and receive additional proceeds. In ourwholesale securitizations, we are required to sell all eligible receivables from certain dealer accounts tothe SPE on a daily basis in exchange for an increased undivided interest in the SPE. We expect tomeet all requirements to sell additional receivables in our securitizations.

As Servicer

‚ Receivable Repurchase Obligations. As servicer of the sold receivables, we are entitled to grantextensions to the obligor and make adjustments to receivables if such extensions and adjustments areconsistent with our servicing policies and procedures. If we make material changes to a receivableincluding changing the interest rate, amount or number of monthly payments or extend the Ñnalpayment date beyond a speciÑed number of months, typically we are required to repurchase thereceivable from the SPE at the principal balance of the receivable plus a full month of accrued interest.These servicer repurchase requirements are typical in receivable sale transactions. In 2002, theprincipal amount of receivables repurchased due to servicer modiÑcations was about $340 million forall retail securitization programs. See Note 6 of our Notes to Financial Statements for moreinformation about these repurchases.

‚ Advancing Requirements. As servicer in our retail installment sale contract securitizations, we arerequired to advance any shortfall of obligor interest payments to the SPE to the extent we believe theadvance will be recovered from future collections of that receivable. The SPE reimburses us for theseadvances from collections on all receivables before making other required payments.

‚ IndemniÑcation. As servicer, we are obligated to indemnify the SPEs, the trustees for the SPEs andbank sponsors of SPEs for any liabilities related to negligence or willful misconduct in our performanceof our servicing obligations. Based on our experience, we do not expect to make any indemniÑcationpayments.

Risks to Continued Funding under Securitization Programs

Some of our securitization programs contain structural features that could prevent us from using thesesources of funding if the credit losses or delinquencies on a pool of sold receivables or our overall managedportfolio of receivables exceed speciÑed levels or if payment rates on wholesale receivables or amount ofwholesale receivables are lower than speciÑed levels. These features are discussed below. Based on ourexperience, we do not expect that any of these features will have a material adverse impact on our ability touse securitization to fund our operations.

Retail Securitization. Most of our retail securitization transactions use Ñxed pools of receivables inamortizing structures. In these transactions, no additional receivables are added to the SPE during the term ofthe deal and the asset-backed securities begin receiving principal payments immediately. In revolvingstructures, however, as long as certain conditions are met, we continue to receive incremental funding as wesell additional receivables to the SPE in exchange for proceeds. If the pool of receivables held by the SPE is

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

experiencing credit losses and delinquencies in excess of speciÑed levels, an early amortization event willoccur. This means that the revolving period will end, no further receivables may be transferred to the SPE andno further funding will be received and the asset-backed securities will begin to receive principal payments andwill be paid oÅ earlier than expected.

Wholesale Securitization and Motown NotesSM Program. In our wholesale receivables securitizationprograms, an early amortization event will occur if the payment rate on the receivables falls below adesignated level or if the dealer accounts in the SPE do not generate suÇcient receivables to maintain the poolbalance at a level necessary to provide required subordination levels for the asset-backed securities. If theseevents occur, collections on the receivables no longer will be applied to purchase additional receivables andinstead will be used to pay oÅ the asset-backed securities.

Bank-sponsored Asset-Backed Commercial Paper Issuers Program. In contrast to an early amortizationevent, our bank-sponsored asset-backed commercial paper issuer program contains provisions that terminatethe sponsor bank's unused commitment to purchase additional receivables from us if the credit loss anddelinquency performance of the sold receivables exceeds speciÑed levels. This event would eliminate a fundingsource for future receivables.

FCAR. In FCAR, if credit losses or delinquencies in our managed portfolio of retail, wholesale or leasereceivables exceed speciÑed levels, FCAR is not permitted to purchase additional asset-backed securities ofthe aÅected type for so long as such levels are exceeded. FCAR is permitted to purchase only highly ratedasset-backed securities rated at issuance, and if the credit enhancement on any asset-backed securitypurchased by FCAR is reduced to zero, FCAR may not purchase any additional asset-backed securities andwill wind down its operations as principal payments on the securities previously purchased are applied to payits maturing commercial paper and any loans drawn to provide liquidity to the program. Because FCAR hascapacity as of December 31, 2002 to purchase asset-backed securities with an aggregate principal balance of$13.2 billion, of which $12.2 billion was utilized as of December 31, 2002, a wind down of FCAR wouldadversely aÅect the availability of this funding source.

General. In addition to the speciÑc transaction-related structural features discussed above, our ability tosell receivables in securitizations may be aÅected by the following factors:

‚ Amount and credit quality of receivables available to sell,

‚ Performance of receivables in our previous receivables sales,

‚ General demand for the type of receivables supporting the asset-backed securities,

‚ Market capacity on Ford Credit and Ford Credit-sponsored investments,

‚ Accounting and regulatory changes,

‚ Our credit rating, and

‚ Our ability to maintain back-up bank liquidity facilities for certain securitization programs.

If as a result of any of these or other factors the cost of securitized funding were to increase signiÑcantlyor funding through receivables sales were no longer available to us, it would have a material adverse impact onour operations, Ñnancial condition and liquidity.

Whole-Loan Sale Transactions

We have sold pools of retail installment sale contracts from time to time in whole-loan sale transactions.In the fourth quarter of 2002, we launched our new Whole-Loan Sale Program and sold about $5 billion ofretail installment sale contracts in two whole-loan sale transactions. Some of the receivables sold in the Ñrsttransaction were combined by the buyer with receivables from another automotive Ñnance company and soldin a subsequent asset-backed securitization sponsored by the buyer. This transaction was the Ñrst time we

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

included contracts originated through our Volvo Finance subsidiary in a receivables sale or securitization. Thebuyer of the receivables sold in our second whole-loan sale transaction has indicated its intention to retain thereceivables for its own account. We are contractually committed to sell, and this buyer is contractuallycommitted to purchase, an additional $2 billion of retail installment sale contracts in the Ñrst quarter of 2003.

We use the same selection criteria used in securitizations to choose retail installment sale contracts forwhole-loan sales. Unlike our securitizations, in whole-loan sale transactions we do not retain any interests inthe sold receivables and do not have any risks of loss related to the sold receivables. The sold receivables areno longer our assets, and they no longer appear on our balance sheet. Similar to securitizations, in whole-loansale transactions, the purchaser has no recourse to us or our other assets for credit losses on the soldreceivables and has no right to require us to repurchase the sold receivables and we do not guarantee theperformance of the receivables. We retain servicing rights to the receivables sold in whole-loan saletransactions and earn a negotiated servicing fee. Our servicing standard for receivables sold in whole-loan saletransactions is substantially similar to that used for securitizations and our owned portfolio. We have the sameindemniÑcation, repurchase and other continuing obligations in whole-loan sale transactions as we have insecuritizations. We do not use SPEs in our whole-loan sale transactions.

Sales of Receivables Activity

The following table illustrates our worldwide receivables sales activity in 2002 and 2001 in bothsecuritizations and whole-loan sale transactions:

Types of Receivables

Full Year 2002 Full Year 2001

Retail Wholesale Total Retail Wholesale Total

(in billions)

Net Proceeds from Receivable Sales

Retail securitizationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

North America Segment (excluding Triad)ÏÏÏ $15.5 $ Ì $15.5 $16.7 $ Ì $16.7

Triad ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.2 Ì 1.2 Ì Ì Ì

International SegmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.7 Ì 2.7 0.5 Ì 0.5

Total retail securitization ÏÏÏÏÏÏÏÏÏÏÏÏ $19.4 $ Ì $19.4 $17.2 $ Ì $17.2

Wholesale securitization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 5.3 5.3

Motown NotesSM program ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 4.8 4.8 Ì Ì Ì

FCARÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.3 Ì 8.3 8.6 3.5 12.1

Bank-sponsored commercial paper issuers ÏÏÏÏ 3.9 Ì 3.9 6.2 Ì 6.2

Net proceeds from securitizations ÏÏÏÏÏÏÏ $31.6 $ 4.8 $36.4 $32.0 $ 8.8 $40.8

Whole-loan sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.9 Ì 4.9 Ì Ì Ì

Total net proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $36.5 $ 4.8 $41.3 $32.0 $ 8.8 $40.8

Retained interest and other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.4 (3.0) (0.6) 1.5 10.2 11.7

Total receivables sold ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $38.9 $ 1.8 $40.7 $33.5 $19.0 $52.5

Prior period sold receivables, net of paydownactivity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15.0 20.6 35.6 7.8 (1.6) 6.2

Total sold receivables outstanding atDecember 31,ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $53.9 $22.4 $76.3 $41.3 $17.4 $58.7

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

Our worldwide proceeds from the sale of retail and wholesale Ñnance receivables through securitizationsand whole-loan sales are shown below for the years ended December 31:

Full Year

Receivable Type 2002 2001 2000 1999 1998

(in billions)

Retail ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $31.6 $32.0 $19.2 $9.4 $7.9

WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.8 8.8 0.3 0.5 Ì

Net proceeds from securitizationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $36.4 $40.8 $19.5 $9.9 $7.9

Whole-loan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.9 Ì Ì Ì Ì

Total Net ProceedsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $41.3 $40.8 $19.5 $9.9 $7.9

While the total amount of receivable sales was about the same in 2001 and 2002, we have expanded oursecuritization activity to include some of our foreign aÇliates and foreign branches of FCE. During 2002, wereceived about $3 billion of proceeds through securitizations in Canada, Germany, the United Kingdom,Spain, Italy and Japan.

In January and February of 2003, we received $5 billion of securitization proceeds, including $3.3 billionfrom securitization of U.S. retail installment sale contracts, $1 billion from the Motown NotesSM program,$500 million from the sale of retail installment sale contracts in Japan and $200 million related to the top-upof revolving retail deals in Europe.

The EÅect of Receivables Sales Activity on Financial Reporting

We report the following items in investment and other income related to sales of receivables on ourincome statement:

‚ Gain or loss on sales of Ñnance receivables;

‚ Interest income from retained securities Ì including from our undivided interest in wholesalereceivables;

‚ Servicing fee income from sold receivables that we continue to service; and

‚ Excess spread.

In 2002, investment and other income related to sales of receivables in securitizations and whole-loan saletransactions was $2,610 million, an increase of $1,177 million, or 82%, compared with a year ago. This increaseresulted from the growth in our outstanding sold receivables balance over the last two years.

In 2002, net gain on sales of receivables totaled $529 million, $117 million higher than a year ago. Thisincrease resulted from lower SFAS No. 133 fair value basis adjustments and a higher amount of retailreceivables sold, oÅset partially by a lower gain per dollar of retail receivable sold. The gain per dollar of retailreceivables sold (excluding SFAS No. 133 fair value basis adjustments) was 1.9%, down from 2.2% in 2001.

The net impact of sales of receivables on our results include income eÅects in addition to the investmentand other income related to sales of receivables reported in our income statement. This impact will varydepending on the type of receivable sold, the type of sale transaction used and the timing of our sales in thecurrent year and the preceding two-to-three year period, as well as the interest rate environment at the timethe Ñnance receivables were originated and sold.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

The sale of receivables reduces our Ñnancing margins in the year the receivables are sold as well as infuture years. The following table shows the estimated net after-tax impact of receivables sales in securitiza-tions and whole-loan sale transactions on our earnings on a managed basis for the periods indicated:

Full-Year

2002 2001 2000 1999

(in millions)

Gain or loss on sales of receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 728 $ 739 $ 14 $ 83

SFAS No. 133 fair value basis adjustments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (199) (327) Ì Ì

Net gain on sales of receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 529 $ 412 $ 14 $ 83

Servicing fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 700 456 190 136

Interest income from retained securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 606 379 152 173

Excess spread and other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 775 186 201 41

Total investment and other income related to sales ofreceivablesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,610 $ 1,433 $ 557 $ 433

Impact of securitizations on net Ñnancing margin on amanaged basis

Relevant period securitizations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (968) $(1,059) $ (243) $ (218)

Securitizations prior to the relevant period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,967) (611) (521) (158)

Total impact of securitizations on net Ñnancing margin ÏÏÏ $(2,935) $(1,670) $ (764) $ (376)

Pre-tax impact of receivables sales on a managed basis ÏÏÏÏÏ $ (325) $ (237) $ (207) $ 57

Taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 120 88 77 (21)

After-tax impact of receivables sales on a managed basisÏÏÏÏ $ (205) $ (149) $ (130) $ 36

Memo:

2002 compared with 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (56) Ì Ì Ì

2001 compared with 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (19) Ì Ì

Receivables sold ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40,712 52,533 21,618 12,910

Servicing portfolio as of period-end ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 76,346 58,748 28,366 19,471

Pre-tax gain (excluding SFAS No. 133) per dollar of retailreceivables soldÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.9% 2.2% 0.1% 0.6%

After-tax impact of receivables sales on a managed basisexcluding SFAS No. 133 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (79) $ 57 $ (130) $ 36

The net impact of securitization on net Ñnancing margins was calculated on a basis using a borrowing costequal to the actual Ñnancing rate paid to securitization investors, which was signiÑcantly lower than ouraverage borrowing cost for unsecured debt for the years presented. If calculated on a basis using our averageborrowing cost for unsecured debt, the reduction in Ñnancing margin from securitization would be signiÑcantlylower and the estimated after-tax impact of receivable sales would be signiÑcantly higher than shown.

New Accounting Interpretation Ì Variable Interest Entities

In January 2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation of Variable InterestEntities. As presently structured, to comply with FIN 46, it is reasonably possible that we will be required toconsolidate FCAR in our Ñnancial results. We continue to assess structures that would maintain FCAR oÅ-balance sheet under FIN 46. Our equity investment and retained beneÑcial interest related to FCAR isapproximately $1.7 billion, which is reÖected on our consolidated balance sheet. At December 31, 2002,

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

FCAR had gross assets of $12.2 billion and gross liabilities of $11.8 billion. We continue to analyze the impactof FIN 46 on our Ñnancial statements and on FCAR. If FCAR were to be consolidated in our Ñnancialstatements, we believe it would not have a material adverse impact on our back-up credit facilities, ourunsecured debt funding programs or our other securitization programs.

In addition, we also sell receivables to bank-sponsored asset-backed commercial paper issuers that areSPEs of the sponsor bank. FIN 46 might also require the sponsor banks to consolidate the assets and liabilitiesof the SPEs into their Ñnancial results or restructure these SPEs. If this occurs, the sponsor banks mayincrease the program fees for our use of these SPEs or fail to renew their commitment to purchase additionalreceivables from us. At December 31, 2002, these SPEs held about $6 billion of retail installment salecontracts previously owned by us. We believe we would not be required to consolidate any portion of theseSPEs in our Ñnancial results. We are continuing to evaluate the impact of FIN 46 on the bank sponsors ofthese SPEs and on the continued availability and costs of this program. We believe the bank sponsors will notterminate their SPEs or reduce their commitments to purchase receivables from us.

Capital Adequacy

Underlying our risk and capital management strategies is the need to leverage capital in a way that:

‚ Allows creditors to be repaid even in the event of unexpected losses; and

‚ Provides adequate shareholder returns by pricing our products and services commensurate with thelevel of risk.

We use capital management processes to set the amount of our equity in proportion to our risk. Wemanage our capital structure and make adjustments as economic conditions and the level of our portfolio riskchange. In maintaining our capital structure, we may pay dividends to or receive capital contributions fromFord.

Sources of Cash to Meet Contractual Obligations

In evaluating the sources of cash to meet contractual obligations, we look at all of our assets on thebalance sheet and their ability to generate cash.

We evaluate our portfolio semi-annually with statistical models to determine potential losses in extremecirc*mstances. Potential losses are calculated at a 99.9% conÑdence level, consistent with bond default levelsfor single-A rated companies. All identiÑed sources of risk in the portfolio are evaluated, including thelikelihood that all segments of the portfolio will experience worst-case losses at the same time. Ourmethodology for evaluating consumer credit risk and leasing residual loss risk, our two major sources of risk isas follows:

‚ Consumer credit risk evaluation is based on our historical experience with nearly 25 million fully- andpartially-liquidated retail installment sale contracts. We divide the historical portfolio into segmentsand we analyze the distribution and correlations of defaults for each segment. Finally, a simulationmodel is used to replicate potential retail portfolio behavior in worst-case scenarios.

‚ Leasing residual loss risk evaluation is based on our historical experience with vehicle dispositions since1993 and a 20-year history of industry-wide used vehicle price volatility. We assume that all of thevehicles from non-defaulting leases will be returned to us at the end of the lease term. We divide thehistorical portfolio into segments and use a statistical model to estimate the volatility of vehicle auctionvalues.

In addition to considering borrowing and operating costs, our pricing model includes factors related tocredit and residual risks, proÑts and related income taxes. These items provide the Ñrst line of defense againstlosses. Our committed lines of credit facilities from major banks and the available bank-sponsored

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

asset-backed commercial paper capacity described in ""Liquidity'' provide additional levels of liquidity. About70% of these facilities have Ñve-year terms.

Capital Adequacy Study Conclusions

At December 31, 2002, we believe that our creditors had risk protection of close to 150% of modeledpotential losses calculated at a 99.9% conÑdence level in addition to the committed credit lines and availablebank-sponsored asset-backed commercial paper capacity mentioned above. We adjust our capital as economicconditions, the level of risk, and other sources of creditor risk protection change.

Aggregate Contractual Obligations

We are party to many contractual obligations involving commitments to make payments to third parties.We record these obligations in our Ñnancial statements or disclose them in the notes to our Ñnancialstatements. Our aggregate contractual obligations are shown below:

Payments Due by Period

Less than More thanTotal 1 year 1-3 years 3-5 years 5 years

(in millions)

Long-term debt obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $124,069 $22,841 $54,799 $22,604 $23,825

Operating lease obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 368 120 173 42 33

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $124,437 $22,961 $54,972 $22,646 $23,858

Critical Accounting Estimates

We consider an accounting estimate to be critical if:

‚ The accounting estimate requires us to make assumptions about matters that were highly uncertain atthe time the accounting estimate was made; and

‚ Changes in the estimate that are reasonably likely to occur from period to period, or the use of diÅerentestimates that we reasonably could have used in the current period, would have a material impact onour Ñnancial condition or results of operations.

The accounting estimates that are most important to our business involve:

‚ Allowance for credit losses;

‚ Accumulated depreciation on operating leases; and

‚ Sale of receivables in securitizations.

Management has discussed the development and selection of these critical accounting estimates withFord's and our audit committees, and these audit committees have reviewed these estimates and disclosures.

Allowance for Credit Losses

The allowance for credit losses is our estimate of the probable credit losses related to impaired Ñnancereceivables and operating leases as of the date of the Ñnancial statements. We exercise signiÑcant judgment inestimating this amount because credit losses vary substantially over time, and estimating probable lossesrequires a number of assumptions about matters that are uncertain. Note 5 of our Notes to FinancialStatements contains additional information regarding our allowance for credit losses.

Nature of Estimates Required. We estimate the probable credit losses related to impaired Ñnancereceivables and operating leases by evaluating several diÅerent factors using econometric models. These

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

factors include historical credit loss trends, the credit quality of our present portfolio, trends in historical andprojected used vehicle values, and general economic measures.

Assumptions Used. We use the factors listed above to make projections of two key assumptions:

‚ Frequency Ì the percentage of Ñnance receivables and operating leases that we expect to default overa period of time, measured principally by the repossession rate; and

‚ Loss severity Ì the expected diÅerence between the amount a customer owes us when we charge oÅthe Ñnance contract and the amount we receive, net of expenses, from selling the repossessed vehicle,including any recoveries from the customer.

We use these assumptions to assist us in setting our allowance for credit losses.

Sensitivity Analysis. We believe the present level of our allowance for credit losses adequately reÖectsprobable losses related to impaired Ñnance receivables and operating leases. However, changes in theassumptions used to derive frequency and severity would have an impact on the allowance for credit losses.Over the past twenty years, repossession rates for our U.S. retail and lease portfolio have varied between 2%and 4%. For Ford, Lincoln and Mercury brand vehicles in the United States, a 10 basis point (0.10%) increaseor decrease in our assessment of the repossession rate could increase or decrease our allowance by about$80 million. Similarly, a 1% increase or decrease in loss severity for the same portfolio could increase ordecrease our allowance by about $25 million. Changes in our assumptions aÅect the provision for credit losseson our income statement and the allowance for credit losses on our balance sheet. We monitor credit lossperformance monthly and we assess the adequacy of our allowance for credit losses quarterly.

Accumulated Depreciation on Operating Leases

Accumulated depreciation on operating leases reÖects the cumulative amount of depreciation that hasbeen recorded to date, reducing the value of the vehicles in our operating lease portfolio from their originalacquisition value to their projected residual value at the end of the lease term. See Note 4 of our Notes toFinancial Statements for information on net investment in operating leases, including the amount ofaccumulated depreciation.

Nature of Estimates Required. Each operating lease in our portfolio represents a vehicle we own thathas been leased to a customer. When we purchase the lease, we establish an estimated residual value for thevehicle at lease end. We exercise signiÑcant judgment in estimating the expected lease-end residual valuebecause future market values of used vehicles are diÇcult to predict. We depreciate leased vehicles on astraight-line basis to estimated residual value.

We monitor residual value performance by vehicle model each month and we review the adequacy of ouraccumulated depreciation on a quarterly basis. If we believe that the residual values for our vehicles havedecreased, we revise depreciation for the aÅected vehicles to ensure that our net investment in the operatinglease (equal to our acquisition value of the vehicle minus accumulated depreciation) will be reduced to ourrevised estimate of residual value at the end of the lease term. Such adjustments to depreciation expense arerecorded over the remaining life of the aÅected vehicles in our portfolio.

Each lease customer has the option to buy the leased vehicle at the end of the lease or to return thevehicle to the dealer. The dealer has the option to purchase the vehicle at the contractual lease-end value orreturn it to us. For returned vehicles, we face a risk that the amount we obtain from the vehicle sold at auctionwill be less than our most recent estimate of the residual value for the vehicle. Over the last Ñve years, about60% to 70% of leased vehicles have been returned to us.

Assumptions Used. Our accumulated depreciation on operating leases is based on our assumptions of:

‚ Auction value Ì the market value of the vehicles when we sell them at the end of the lease; and

‚ Return rates Ì the percentage of vehicles that will be returned to us at lease end.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

We estimate expected auction values and return rates using econometric models. These models usehistorical auction values, historical return rates for our leased vehicles, industry-wide used vehicle prices,Ford's marketing plans and vehicle quality data.

Sensitivity Analysis. If future auction values for all of the Ford, Lincoln and Mercury brand vehicles inour U.S. operating lease portfolio at year-end 2002 were to decrease by $100 per unit from our presentestimates, the total impact would be to increase our depreciation on these vehicles by about $70 million, whichwould be charged to depreciation expense during the 2003 through 2005 period so that the net investment inoperating lease at the end of the lease term for these vehicles is equal to the revised residual value. Similarly, iffuture return rates for our existing portfolio of Ford, Lincoln and Mercury brand vehicles in the U.S. were toincrease by one percentage point from our present estimates, the total impact would be to increase ourdepreciation on these vehicles by about $15 million, which would be charged to depreciation expense duringthe 2003 through 2005 period. Adjustments to our accumulated depreciation on operating leases will bereÖected on our income statement in depreciation expense. Accumulated depreciation is included in ourbalance sheet in net investment in operating leases.

Sale of Receivables in Securitizations

In a securitization, we sell Ñnance receivables to an SPE in exchange for the proceeds from the sale ofsecurities backed by the receivables that the SPE sells to investors. We are required to recognize a gain or losson the sale of receivables in the period the sale occurs. We also record our retained interests in securitizationsas assets on our balance sheet at fair value. These retained interests include interest-only strips, also referred toas excess spread, which represent our right to receive collections on sold receivables in excess of amountsneeded to pay principal and interest payments to investors, servicing fees and other required amounts.Retained interests may also include senior and subordinated securities, undivided interests in wholesalereceivables and restricted cash held for the beneÑt of securitization trusts.

Nature of Estimates Required. In determining the gain or loss on each sale of Ñnance receivables andthe amount of our retained interests, we allocate the carrying amount of the sold receivables between theportion sold and the portion retained based on their relative fair value at the date of sale.

Assumptions Used. The most signiÑcant factors aÅecting the fair value of assets retained related to thesale of receivables through securitizations that requires us to make estimates and judgments are:

‚ Expected credit losses over the life of the sold receivables, commonly called lifetime credit losses;

‚ Prepayments of sold receivables occurring earlier than scheduled maturities, commonly calledprepayment speeds; and

‚ Discount rates used to estimate the present value of interest-only strips.

To estimate expected lifetime credit losses on the sold receivables, we use statistical models that dividereceivables into segments by credit risk quality, contractual term and whether the vehicle Ñnanced is new orused. Prepayment speeds and discount rates are subject to less variation, and we make estimates based on ourhistorical experience and other factors. These estimates are made separately for each securitizationtransaction.

We evaluate the fair value of our retained interests on a quarterly basis and adjust as necessary theestimated market value. These fair value adjustments are reÖected, net of tax, as a separate component ofother comprehensive income included in stockholder's equity. The fair value analysis for our interest-onlystrips largely depends on updating our estimate of lifetime credit losses and prepayment speeds. We adjust thefair value of securities we retain based on quoted market prices of securities with similar characteristics. If wedetermine, based on this updated information, these retained interests are other than temporarily impaired, wewould record fair value adjustments in earnings and not stockholder's equity. The recorded amount of ourrestricted cash retained interest normally does not have to be adjusted.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

Sensitivity Analysis. The fair value of the interest-only strip is sensitive to variation in our assumptionsof lifetime credit losses, estimated prepayments and discount rates. Note 6 of our Notes to FinancialStatements identiÑes the sensitivity of this asset to changes in each of these assumptions. Changes in theseassumptions will also result in a proportional change in the gain or loss recorded in the time period the relatedreceivables are sold.

Changes in Accounting Standards

On January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142changes the method of accounting for goodwill and intangible assets. Goodwill and intangible assets that haveindeÑnite useful lives are no longer amortized, but are subject to at least an annual impairment test. As ofDecember 31, 2002, our net goodwill and intangible assets, having various amortization periods, was about$200 million. Adoption of this statement did not have a material eÅect on our Ñnancial statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement superseded SFAS No. 121, Accounting for the Impairment of Long-Lived Assetsand for Long-Lived Assets to Be Disposed Of, and addresses Ñnancial accounting and reporting for impairmentof long-lived assets to be held and used, and long-lived assets and components of an entity to be disposed of.We adopted this statement on January 1, 2002, with no material eÅect on our Ñnancial statements.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or DisposalActivities. This statement requires obligations associated with disposing of operations to be recognized andmeasured at fair value when certain liabilities are incurred. The current accounting guidance allows forrecognition of liabilities on the commitment date of a disposal or exit plan. We adopted this Statement onJanuary 1, 2003. We do not expect adoption of this statement to have a material eÅect on our Ñnancialstatements.

Outlook

We expect our income in 2003 to be about the same as in 2002. Compared with 2002, we anticipate lowerrevenues as a result of a lower amount of new retail Ñnancing contracts; at year-end 2003, we expect managedreceivables to be in the $180 to $185 billion range. We expect these lower Ñnancing revenues to be oÅset bythe favorable impact of receivables sales. We are continuing to evaluate alternative FCAR structures toachieve compliance with FIN 46. The impact on earnings, if any, will be dependent upon the structureselected.

Cautionary Statement Regarding Forward Looking Statements

Statements included in this Report or incorporated by reference into this Report may constitute""forward-looking statements'' within the meaning of the federal securities laws, including the PrivateSecurities Litigation Reform Act of 1995. The words ""anticipate,'' ""believe,'' ""estimate,'' ""expect,'' ""intend,''""may,'' ""plan,'' ""will,'' ""project,'' ""future'' and ""should'' and similar expressions are intended to identifyforward-looking statements, and these statements are based on our current expectations and assumptionsconcerning future events. These statements involve a number of risks, uncertainties, and other factors thatcould cause actual results to diÅer materially from those expressed or implied by such statements, includingthe following:

Automotive Related:

‚ Greater price competition in the United States and Europe resulting from currency Öuctuations,industry overcapacity or other factors;

‚ SigniÑcant decline in automotive industry sales and our Ñnancing of those sales, particularly in theUnited States or Europe, resulting from slowing economic growth, geo-political events or other factors;

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (Continued)

‚ Lower-than-anticipated market acceptance of new or existing Ford products;

‚ Increased safety, emissions, fuel economy or other regulations resulting in higher costs and/or salesrestrictions;

‚ Work stoppages at key Ford or supplier facilities or other interruptions of supplies;

‚ Discovery of defects in Ford vehicles resulting in delays in new model launches, recall campaigns,increased warranty costs or litigation;

‚ Unusual or signiÑcant litigation or governmental investigations arising out of alleged defects in Fordproducts or otherwise;

‚ Reduced availability of or higher prices for fuel;

‚ Increased price competition in the rental car industry and/or a general decline in business or leisuretravel due to terrorist attacks, acts of war or measures taken by governments in response thereto thatnegatively aÅect the travel industry;

‚ Market shift from truck sales in the United States;

‚ Changes in Ford's requirements under long-term supply arrangements under which Ford is obligated topurchase minimum quantities or pay minimum amounts;

‚ Change in the nature or mix of automotive marketing programs and incentives;

Ford Credit Related:

‚ Inability to access debt or securitization markets around the world at competitive rates or in suÇcientamounts;

‚ Higher-than-expected credit losses;

‚ Collection and servicing problems related to our Ñnance receivables and net investment in operatingleases;

‚ Lower-than-anticipated residual values and higher-than-expected lease return rates;

‚ New or increased credit, consumer protection or other regulations resulting in higher costs and/oradditional Ñnancing restrictions;

‚ Changes in Ford's marketing programs that de-emphasize Ñnancing incentives, which could result in adecline in our share of Ñnancing Ford vehicles;

General:

‚ Ford's or our inability to implement the Revitalization Plan;

‚ A further credit rating downgrade;

‚ Major capital market disruptions that could prevent Ford or us from having access to the capitalmarkets or that would limit our liquidity;

‚ Availability of securitization as a source of funding;

‚ Labor or other constraints on Ford's or our ability to restructure Ford's or our business;

‚ Worse-than-assumed economic and demographic experience for our post-retirement beneÑt plans(e.g., investment returns, interest rates, health care trends, beneÑt improvements);

‚ Economic diÇculties in South America or Asia; and

‚ Currency, commodity or interest rate Öuctuations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Overview

We are exposed to a variety of risks in the normal course of our business. The extent to which weeÅectively identify, assess, monitor and manage these risks is critical to our Ñnancial condition andproÑtability. The principal types of risk to our business include:

‚ Market risk Ì the possibility that changes in interest and currency exchange rates will adverselyimpact our income;

‚ Counterparty risk Ì the possibility that a counterparty may default on a derivative contract;

‚ Credit risk Ì the possibility of loss from a customer's failure to make payments according to contractterms;

‚ Residual risk Ì the possibility that the actual proceeds we receive at lease termination will be lowerthan our projections or return rates will be higher than our projections;

‚ Liquidity risk Ì the possibility that we may be unable to meet all of our current and future obligationsin a timely manner; and

‚ Operating risk Ì the possibility of fraud by our employees or outside persons, errors relating totransaction processing and systems and actions that could result in compliance deÑciencies withregulatory standards.

We manage each of these types of risk in the context of its contribution to our overall global risk. Wemake business decisions on a risk-adjusted basis and price our services consistent with these risks.

Credit, residual, and liquidity risks are discussed in Items 1 and 7. A discussion of market risk,counterparty risk, and operating risk follows.

Market Risk Overview

Given the unpredictability of Ñnancial markets, we seek to reduce volatility in our operating results fromchanges in interest rates and currency exchange rates. We use various Ñnancial instruments, commonlyreferred to as derivatives, to manage market risks. We do not engage in any trading, market-making, or otherspeculative activities in the derivative markets.

Our strategies to manage market risks are established by the Ford Global Risk Management Committee(GRMC). The GRMC is responsible for developing our overall risk management objectives and reviewingperformance against these objectives. The GRMC is chaired by the Chief Financial OÇcer of Ford, and itsmembers include the Treasurer of Ford and our Chief Financial OÇcer.

Direct responsibility for the execution of our market risk management strategies resides with Ford'sTreasurer's OÇce and is governed by written polices and procedures. Separation of duties is maintainedbetween the development and authorization of derivative trades, the transaction of derivatives, and thesettlement of cash Öows. Regular audits are conducted to ensure that appropriate controls are in place and thatthey remain eÅective. In addition, the GRMC and the Audit Committee of Ford and Ford Credit's Boards ofDirectors review our market risk exposures and use of derivatives to manage these exposures.

Currency Exchange Rate Risk

Our policy is to minimize exposure to our operating results from changes in currency exchange rates. Tomeet funding objectives, we borrow in a variety of currencies, principally U.S. dollars or Euros. We faceexposure to currency exchange rates if a mismatch exists between the currency of our receivables and thecurrency of the debt funding those receivables. When possible, we fund receivables with debt in the samecurrency, minimizing exposure to exchange rate movements. When a diÅerent currency is used, we executethe following foreign currency derivatives to convert substantially all of our foreign currency debt obligationsto the local country currency of the receivables:

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK(Continued)

‚ Cross-currency swaps Ì an agreement to convert non-U.S. dollar long-term debt to U.S. dollardenominated payments or non-local market debt to local market debt for our international aÇliates; or

‚ Foreign currency forwards Ì an agreement to buy or sell an amount of funds in an agreed currency at acertain time in the future for a certain price.

As a result of this policy, we believe our market risk exposure relating to changes in currency exchangerates is immaterial. For additional information on our derivatives, please refer to the section ""DerivativeNotional Values'', and Notes 1 and 15 of our Notes to Financial Statements.

Interest Rate Risk

Nature of Exposure

Our primary market risk exposure is interest rate risk, and the particular market to which we are mostexposed is U.S. dollar LIBOR. Our interest rate risk exposure results principally from ""re-pricing risk'' ordiÅerences in the re-pricing characteristics of assets and liabilities. An instrument's re-pricing period is a termused by Ñnancial institutions to describe how an interest rate-sensitive instrument responds to changes ininterest rates. It refers to the time it takes an instrument's interest rate to reÖect a change in market interestrates. For Ñxed-rate instruments, the re-pricing period is equal to the maturity of the instrument's principal,because the principal is considered to re-price only when re-invested in a new instrument. For a Öoating-rateinstrument, the re-pricing period is the period of time before the interest rate adjusts to the market rate. Forinstance, a Öoating-rate loan whose interest rate is reset to a market index annually on December 31st wouldhave a re-pricing period of one year on January 1st, regardless of the instrument's maturity.

Re-pricing risk arises when assets and the debt funding those assets have diÅerent re-pricing periods, andconsequently, respond diÅerently to changes in interest rates. As an example, consider a hypothetical portfolioof Ñxed-rate assets that is funded with Öoating-rate debt. If interest rates increase, the interest paid on debtincreases while the interest received on assets remains Ñxed. In this case, the hypothetical portfolio's earningsare exposed to changes in interest rates because its assets and debt have a re-pricing mismatch.

Our receivables consist primarily of Ñxed-rate retail installment sale and lease contracts and Öoating-ratewholesale receivables. Fixed-rate retail installment sale and lease contracts are originated principally withmaturities ranging between two and six years and generally require customers to make equal monthlypayments over the life of the contract. Wholesale receivables are originated to Ñnance new and used vehiclesheld in dealers' inventory and generally require dealers to pay a Öoating rate.

Funding sources consist primarily of short and long-term unsecured debt and sales of receivables insecuritizations. In the case of unsecured term debt, and in an eÅort to have funds available throughoutbusiness cycles, we often borrow longer-term, with Ñve to ten year maturities. These debt instruments areprincipally Ñxed-rate and require Ñxed and equal interest payments over the life of the instrument and a singleprincipal payment at maturity.

We are exposed to interest rate risk to the extent that a diÅerence exists between the re-pricing proÑle ofour assets and our debt. SpeciÑcally, without derivatives, our assets would re-price more quickly than our debt.

Risk Management Objective

Our interest rate risk management objective is to maximize our Ñnancing margin while limiting theimpact of changes in interest rates. We achieve this objective by setting an established risk tolerance range andstaying within the tolerance through the following risk management process.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK(Continued)

Risk Management Process

Our risk management process involves a short-term and a long-term evaluation of interest rate risk byconsidering potential impacts on our earnings as well as the economic value of our portfolio of interest rate-sensitive assets and liabilities (our economic value). Our economic value is a measure of the present value ofall future expected cash Öows, discounted by market interest rates, and is equal to the present value of ourinterest rate-sensitive assets minus the present value of our interest rate-sensitive liabilities. Measuring theimpact on our economic value is important because it captures the potential long-term eÅects of interest ratechanges.

The Ñnancial instruments used in our interest rate risk management process are called interest rate swaps;interest rate swaps are agreements to convert Ñxed-rate interest payments to Öoating or Öoating-rate interestpayments to Ñxed. Interest rate swaps are a common tool used by Ñnancial institutions to manage interest raterisk. For additional information on our derivatives, please refer to the section ""Derivative Notional Values'',and Notes 1 and 15 of our Notes to Financial Statements.

On a monthly basis, we determine the sensitivity of our economic value to hypothetical changes ininterest rates. We then enter into interest rate swaps, eÅectively converting portions of our Öoating-rate debt orassets to Ñxed or our Ñxed-rate debt or assets to Öoating, to ensure that the sensitivity of our economic valuefalls within an established target. As part of our monthly process, we also monitor the sensitivity of ourearnings to interest rates by using earnings simulation techniques. These simulations estimate the one-yearearnings of our portfolio of interest rate-sensitive assets and liabilities under various interest rate scenarios,including both parallel and non-parallel shifts in the yield curve. These quantiÑcations of interest rate risk arereported to the GRMC each month.

The process described above is used to measure and manage the interest rate risk of our operations in theUnited States and Canada, which together represented approximately 74% of our total owned Ñnancereceivables at December 31, 2002. For our other international aÇliates we use a technique, commonly referredto as ""gap analysis,'' to measure re-pricing mismatch. This process uses re-pricing schedules that group assets,debt, and swaps into time-bands based on their re-pricing period. Under this process we enter into interest rateswaps, eÅectively changing the re-pricing proÑle of our assets and debt, to ensure that any re-pricing mismatchexisting in a particular time-band falls within an established tolerance.

Quantitative Disclosure

As a result of our interest rate risk management process, including derivatives, our debt re-prices slightlyfaster than our assets. Other things equal, this means that during a period of rising interest rates, the interestrates paid on our debt will increase more rapidly than the interest rates earned on our assets, thereby initiallyreducing our earnings by a small amount. Correspondingly, during a period of falling interest rates, we wouldexpect our earnings to initially increase by a small amount. To provide a quantitative measure of the sensitivityof our earnings to changes in interest rates, we use interest rate scenarios that assume a hypothetical,instantaneous increase or decrease in interest rates of 100 basis points (or 1%) across all maturities, as well asa base case that assumes that interest rates remain constant at existing levels. These interest rate scenarios arepurely hypothetical and do not represent our view of future interest rate movements. The diÅerences in pre-taxearnings between these scenarios and the base case over a one year horizon represent an estimate of the

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK(Continued)

sensitivity of our pre-tax earnings over the following year. This sensitivity as of year-end 2002 and 2001 is asfollows:

Pre-tax EarningsImpact Given 100

Basis Point Changein Interest Rates

Increase Decrease

(in millions)

December 31, 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(153) $156

December 31, 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (120) 121

Methodology Applied to International Operations

For the disclosures presented above, we calculated the sensitivity of our Canadian operations using thesame earnings simulation technique that is used for the United States. We calculated the sensitivity of ourother international operations using re-pricing schedules. Under this process we assume the instruments in thevarious time-bands re-price given the speciÑed interest rate scenarios. This technique is commonly used tomeasure sensitivity to interest rate changes but incorporates less precision compared to our simulationtechnique primarily because all instruments grouped in a particular time-band are expected to re-price on thesame date rather than at their actual re-pricing date. Previously, in determining our worldwide sensitivity, wecalculated the sensitivity of our operations in the United States and applied this sensitivity to our operationsoutside of the United States, weighted by relative balance sheet size.

Additional Model Assumptions

While the sensitivity analysis presented is our best estimate of the impacts of the speciÑed assumedinterest rate scenarios, our actual results could diÅer from those projected. The model we use to conduct thisanalysis is heavily dependent on assumptions. Embedded in the model are assumptions regarding thereinvestment of maturing asset principal, reÑnancing of maturing debt, and predicted repayment of retailinstallment sale and lease contracts ahead of contractual maturity. We base our projections of repayment ofretail installment sale contracts and lease contracts ahead of contractual maturity on historical experience. Ifinterest rates change, actual prepayments could deviate from assumptions used in the model. Additionally, asnoted previously, the sensitivity analysis presented assumes interest rate changes are instantaneous, parallelshifts in the yield curve. In reality, changes are rarely instantaneous or parallel. The sensitivity analysis is alsoindependent of any adjustments related to SFAS No. 133. We have presented our sensitivity analysis in thisReport using the methodology applied to international operations discussed above and on a pre-tax rather thanan after-tax basis, to exclude the potentially distorting impact at assumed tax rates.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK(Continued)

Derivative Notional Values

The outstanding notional value of our derivatives at the end of each of the years indicated was as follows:

December 31,

2002 2001

(in billions)

Interest rate swaps

Pay Ñxed, receive Öoating ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 65.6 $ 81.6

Pay Öoating, receive Ñxed, excluding securitization swaps ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 60.2 61.5

Pay Öoating, receive Öoating (basis), excluding securitization swaps ÏÏÏÏÏÏÏ 0.6 0.9

Securitization swapsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43.1 26.0

Total interest rate swaps ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $169.5 $170.0

Other Derivatives

Cross-currency swapsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30.0 26.3

Foreign currency forwardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.5 5.1

Total notional value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $208.0 $201.4

The derivatives identiÑed above as securitization swaps are interest rate swaps we entered into to facilitatecertain of our securitization transactions. Under these swap agreements, we pay a Öoating-rate interestpayment and, depending on the related securitization transaction, receive either a Ñxed-rate interest paymentor a Öoating rate interest payment with a diÅerent market index. The sensitivity analysis presented aboveincludes all derivatives, including our securitization swaps.

At December 31, 2002, our total derivative notional value was $208 billion, approximately $6.6 billionhigher than a year ago. The notional value of securitization and cross-currency swaps increased, reÖecting ourincreased use of securitization and foreign currency denominated debt as funding sources. This increase wasoÅset by a decline in the notional value of our pay-Ñxed, receive-Öoating interest rate swaps, reÖectingprimarily our lower commercial paper balance.

Counterparty Risk

The use of derivatives to manage market risk results in counterparty risk, or the risk of a counterpartydefaulting on a derivative contract. We, on a combined basis with Ford, establish exposure limits for eachcounterparty to minimize risk and provide counterparty diversiÑcation. We monitor our exposures on a regularbasis and report them to the GRMC monthly.

Our approach to managing counterparty risk is forward-looking and proactive, allowing us to take riskmitigation actions before risks become losses. We establish exposure limits for both mark-to-market andfuture potential exposure, based on our overall risk tolerance and ratings-based historical default probabilities.The exposure limits are lower for lower-rated counterparties and for longer-dated exposures. We use a MonteCarlo simulation technique to assess our potential exposure by tenor, deÑned at 95% conÑdence level.

Substantially all of our counterparty exposures are with counterparties that are rated single-A or better.Our guideline for counterparty minimum credit ratings is BBB-. Exceptions to these guidelines require priorapproval by management.

Operating Risk

We operate in many locations and rely on the abilities of our employees and computer systems to processa large number of transactions. Improper operation of systems or improper employee actions could result inÑnancial loss, regulatory action and damage to our reputation. To address this risk, we maintain internal

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK(Continued)

control processes that identify transaction authorization requirements, safeguard assets from misuse or theft,and protect the reliability of Ñnancial and other data. We also maintain system controls to maintain theaccuracy of information about our operations. These controls are designed to manage operating riskthroughout our operation.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by Item 8 is set forth at pages FC-1 through FC-31 of this Report, isincorporated herein by reference and is listed in the Index to Financial Statements as set forth inItem 14(a)(1) and 14(a)(2).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL DISCLOSURE

None.

PART III

ITEM 14. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. Our chief executive oÇcer and chief Ñnancial oÇcerhave each reviewed and evaluated the eÅectiveness of our disclosure controls and procedures (as deÑned inSecurities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of a date within 90 days before theÑlling date of this Report. Based on that evaluation, our chief executive oÇcer and chief Ñnancial oÇcer haveeach concluded that our current disclosure controls and procedures are eÅective to ensure that informationrequired to be disclosed in our periodic reports Ñled under the Exchange Act is:

‚ recorded;

‚ processed;

‚ summarized; and

‚ reported;

in each case, within the time period speciÑed by the SEC's rules and regulations.

Changes in internal controls. There have not been any signiÑcant changes in our internal controls or inother factors that could signiÑcantly aÅect these controls subsequent to the date of their evaluation. Therewere no signiÑcant deÑciencies or material weakness, and therefore no corrective actions were taken.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

Report of Independent Accountants

Ford Motor Credit Company and Subsidiaries

Consolidated Statement of Income for the Years Ended December 31, 2002, 2001 and 2000

Consolidated Balance Sheet, December 31, 2002 and 2001

Consolidated Statement of Stockholder's Equity, December 31, 2002, 2001 and 2000

Consolidated Statement of Cash Flows for the Years Ended December 31, 2002, 2001 and 2000.

Notes to Financial Statements.

The Financial Statements and Notes to Financial Statements listed above are incorporated by referencein Item 8 of this report from pages FC-1 through FC-31 of this report.

Information regarding signiÑcant restrictions on the ability of subsidiaries to transfer funds to theregistrant, and condensed Ñnancial information of the registrant are omitted because the amounts related tosuch restrictions are not suÇcient to require submission.

(a) 2. Financial Statement Schedules

Schedules have been omitted because the information required to be contained in them is disclosedelsewhere in the Financial Statements or the amounts involved are not suÇcient to require submission.

(a) 3. Exhibits

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K(Continued)

Designation Description Method of Filing

Exhibit 3-A Restated CertiÑcate of Incorporation Filed as Exhibit 3-A to Ford Motorof Ford Motor Credit Company. Credit Company Report on Form 10-K

for the year ended December 31, 1987and incorporated herein by reference. FileNo. 1-6368.

Exhibit 3-B By-Laws of Ford Motor Credit Filed as Exhibit 3-B to Ford MotorCompany as amended through Credit Company Report on Form 10-KMarch 2, 1988. for the year ended December 31, 1987

and incorporated herein by reference. FileNo. 1-6368.

Exhibit 4-A Form of Indenture dated as of Filed as Exhibit 4-A to Ford MotorFebruary 1, 1985 between Ford Credit Company Registration StatementMotor Credit Company and No. 2-95568 and incorporated herein byManufacturers Hanover Trust reference.Company relating to DebtSecurities.

Exhibit 4-A-1 Form of First Supplemental Filed as Exhibit 4-B to Ford MotorIndenture dated as of April 1, 1986 Credit Company Current Report on Formbetween Ford Motor Credit 8-K dated April 29, 1986 andCompany and Manufacturers incorporated herein by reference. FileHanover Trust Company No. 1-6368.supplementing the Indenturedesignated as Exhibit 4-A.

Exhibit 4-A-2 Form of Second Supplemental Filed as Exhibit 4-B to Ford MotorIndenture dated as of September 1, Credit Company Current Report on Form1986 between Ford Motor Credit 8-K dated August 28, 1986 andCompany and Manufacturers incorporated herein by reference. FileHanover Trust Company No. 1-6368.supplementing the Indenturedesignated as Exhibit 4-A.

Exhibit 4-A-3 Form of Third Supplemental Filed as Exhibit 4-E to Ford MotorIndenture dated as of March 15, Credit Company Registration Statement1987 between Ford Motor Credit No. 33-12928 and incorporated herein byCompany and Manufacturers reference.Hanover Trust Companysupplementing the Indenturedesignated as Exhibit 4-A.

Exhibit 4-A-4 Form of Fourth Supplemental Filed as Exhibit 4-F to Post-EÅectiveIndenture dated as of April 15, 1988 Amendment No. 1 to Ford Motor Creditbetween Ford Motor Credit Company Registration StatementCompany and Manufacturers No. 33-20081 and incorporated herein byHanover Trust Company reference.supplementing the Indenturedesignated as Exhibit 4-A.

Exhibit 4-A-5 Form of Fifth Supplemental Filed as Exhibit 4-G to Ford MotorIndenture dated as of September 1, Credit Company Registration Statement1990 between Ford Motor Credit No. 33-36946 and incorporated hereby byCompany and Manufacturers reference.Hanover Trust Companysupplementing the Indenturedesignated as Exhibit 4-A.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K(Continued)

Designation Description Method of Filing

Exhibit 4-A-6 Form of Sixth Supplemental Filed as Exhibit 4.1 to Ford Motor CreditIndenture dated as of June 1, 1998 Company Current Report on Form 8-Kbetween Ford Motor Credit dated June 15, 1998 and incorporatedCompany and The Chase herein by reference. File No. 1-6368.Manhattan Bank supplementing theIndenture designated asExhibit 4-A.

Exhibit 4-A-7 Form of Seventh Supplemental Filed as Exhibit 4-I to Amendment No. 1Indenture dated as of January 15, to Ford Motor Credit Company2002 between Ford Motor Credit Registration Statement No. 333-75274Company and JPMorgan Chase and incorporated herein by reference.Bank supplementing the Indenture.

Exhibit 4-B Indenture dated as of November 1, Filed as Exhibit 4-A to Ford Motor1987 between Ford Motor Credit Credit Company Current Report on FormCompany and Continental Bank, 8-K dated December 10, 1990 andNational Association relating to incorporated herein by reference. FileDebt Securities. No. 1-6368.

Exhibit 4-C Indenture dated as of August 1, Filed as Exhibit 4-A to Ford Motor1994 between Ford Motor Credit Credit Company Registration StatementCompany and First Union National No. 33-55237.Bank relating to Debt Securities.

Exhibit 10-A Copy of Amended and Restated Filed as Exhibit 10-A to Ford MotorProÑt Maintenance Agreement Credit Company Report on Form 10-Kdated as of January 1, 2002 between for the year ended December 31, 2001Ford Motor Credit Company and and incorporated herein by reference. FileFord Motor Company. No. 1-6368.

Exhibit 10-B Copy of Agreement dated as of Filed as Exhibit 10-X to Ford MotorFebruary 1, 1980 between Ford Credit Company Report on Form 10-KMotor Company and Ford Motor for the year ended December 31, 1980Credit Company. and incorporated herein by reference. File

No. 1-6368.

Exhibit 10-C Copy of Agreement dated as of Filed as Exhibit 10 to Ford Motor CreditOctober 18, 2001 between Ford Company Current Report on Form 8-KMotor Credit Company and Ford dated October 18, 2001 and incorporatedMotor Company. by reference. File No. 1-6368.

Exhibit 10-D Copy of Support Agreement as of Filed with this Report.August 13, 2002 between FordMotor Credit Company and FCEBank plc.

Exhibit 12 Computation of Ratio of Earnings Filed with this Report.to Fixed Charges of Ford Credit.

Exhibit 23 Consent of Independent Filed with this Report.Accountants.

Exhibit 24 Powers of Attorney. Filed with this Report.

Exhibit 99.1 Sections of Items 1, 3, 6, 7 and 7A Filed with this Report.of Ford Motor Company's AnnualReport on Form 10-K for 2002.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K(Continued)

Designation Description Method of Filing

Exhibit 99.2 Chief Financial OÇcer Filed with this Report.CertiÑcations Pursuant toSection 906 of the Public CompanyAccounting Reform and InvestorProtection Act.

Exhibit 99.3 Chief Executive OÇcer Filed with this Report.CertiÑcations Pursuant toSection 906 of the Public CompanyAccounting Reform and InvestorProtection Act.

Instruments deÑning the rights of holders of certain issues of long-term debt of the registrant have notbeen Ñled as exhibits to this Report because the authorized principal amount of any one of such issues doesnot exceed 10% of the total assets of the registrant. The registrant agrees to furnish a copy of each of suchinstruments to the SEC upon request.

(b) Reports on Form 8-K

Ford Credit Ñled the following Reports on Form 8-K during the quarter ended December 31, 2002, whichdid not contain Ñnancial statements:

Date of Report Item

October 1, 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other Events

October 2, 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other Events

October 7, 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other Events

October 16, 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other Events

October 21, 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other Events

November 1, 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other Events

November 18, 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other Events

December 3, 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other Events

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorizedoÇcers and directors.

Ford Motor Credit Company

By /s/ GREGORY C. SMITH*

(Gregory C. Smith,Chairman of the Board, Chief Executive OÇcer

and President)

Date: March 17, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed belowby the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature Title Date

GREGORY C. SMITH* Director, Chairman of the Board, Chief March 17, 2003Executive OÇcer and President(Gregory C. Smith)(principal executive oÇcer)

BIBIANA BOERIO* Director, Executive Vice President, Chief March 17, 2003Financial OÇcer and Treasurer(Bibiana Boerio)(principal Ñnancial oÇcer and principalaccounting oÇcer)

TERRY D. CHENAULT* Director March 17, 2003

(Terry D. Chenault)

MICHAEL E. BANNISTER* Director March 17, 2003

(Michael E. Bannister)

ALLAN D. GILMOUR* Director and Audit Committee March 17, 2003Chairman(Allan D. Gilmour)

MALCOLM S. MACDONALD* Director and Audit Committee Member March 17, 2003

(Malcolm S. Macdonald)

*By /s/ SUSAN J. THOMAS Attorney-in-Fact March 17, 2003

(Susan J. Thomas)

CERTIFICATIONS

I, Bibiana Boerio, certify that:

1. I have reviewed this annual report on Form 10-K of Ford Motor Credit Company;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omitto state a material fact necessary to make the statements made, in light of the circ*mstances under whichsuch statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the Ñnancial statements, and other Ñnancial information included in this annualreport, fairly present in all material respects the Ñnancial condition, results of operations and cash Öows ofthe registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying oÇcer and I are responsible for establishing and maintaining disclosurecontrols and procedures (as deÑned in Exchange Act Rules 13a-14 and 15d-14) for the registrant and wehave:

a) designed such disclosure controls and procedures to ensure that material information relating to theregistrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this annual report is being prepared;

b) evaluated the eÅectiveness of the registrant's disclosure controls and procedures as of a date within90 days prior to the Ñling date of this annual report (the ""Evaluation Date''); and

c) presented in this annual report our conclusions about the eÅectiveness of the disclosure controls andprocedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying oÇcer and I have disclosed, based on our most recent evaluation, to theregistrant's auditors and the audit committee of registrant's board of directors (or persons performing theequivalent function):

a) all signiÑcant deÑciencies in the design or operation of internal controls which could adversely aÅectthe registrant's ability to record, process, summarize and report Ñnancial data and have identiÑed forthe registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have asigniÑcant role in the registrant's internal controls; and

6. The registrant's other certifying oÇcer and I have indicated in this annual report whether or not there weresigniÑcant changes in internal controls or in other factors that could signiÑcantly aÅect internal controlssubsequent to the date of our most recent evaluation, including any corrective actions with regard tosigniÑcant deÑciencies and material weaknesses.

Date: March 12, 2003

By /s/ BIBIANA BOERIO

Bibiana BoerioExecutive Vice President,

Chief Financial OÇcer and Treasurer

I, Gregory C. Smith, certify that:

1. I have reviewed this annual report on Form 10-K of Ford Motor Credit Company;

b) evaluated the eÅectiveness of the registrant's disclosure controls and procedures as of a date within90 days prior to the Ñling date of this annual report (the ""Evaluation Date''); and

c) presented in this annual report our conclusions about the eÅectiveness of the disclosure controls andprocedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have asigniÑcant role in the registrant's internal controls; and

Date: March 12, 2003

By /s/ GREGORY C. SMITH

Gregory C. Smith,Chairman of the Board,

Chief Executive OÇcer and President

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholder ofFord Motor Credit Company:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements ofincome, stockholder's equity and cash Öows present fairly, in all material respects, the Ñnancial position ofFord Motor Credit Company and its subsidiaries at December 31, 2002 and 2001, and the results of theiroperations and their cash Öows for each of the three years in the period ended December 31, 2002 inconformity with accounting principles generally accepted in the United States of America. These Ñnancialstatements are the responsibility of the Company's management; our responsibility is to express an opinion onthese Ñnancial statements based on our audits. We conducted our audits of these statements in accordancewith auditing standards generally accepted in the United States of America, which require that we plan andperform the audit to obtain reasonable assurance about whether the Ñnancial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the Ñnancial statements, assessing the accounting principles used and signiÑcant estimates made bymanagement, and evaluating the overall Ñnancial statement presentation. We believe that our audits provide areasonable basis for our opinion.

As discussed in Note 9, eÅective January 1, 2002, the Company changed its method of accounting fordiscontinued operations in accordance with Statement of Financial Accounting Standards No. 144, Account-ing for the Impairment of Long-lived Assets. In addition, as discussed in Note 1, eÅective January 1, 2001, theCompany adopted Statement of Financial Accounting Standards No. 133, Accounting for DerivativeInstruments and Hedging Activities, as amended and interpreted.

/s/ PRICEWATERHOUSECOOPERS LLP

Detroit, MichiganJanuary 17, 2003

FC-1

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME(in millions)

For the Years Ended December 31,

2002 2001 2000

Financing revenue

Operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $10,432.2 $11,364.1 $10,463.4

RetailÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,694.9 8,492.4 7,942.7

Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 953.2 2,186.4 2,713.1

Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 362.6 477.3 525.3

Total Ñnancing revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,442.9 22,520.2 21,644.5

Depreciation on operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8,512.6) (8,464.0) (7,494.6)

Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6,928.7) (8,922.4) (8,911.5)

Net Ñnancing marginÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,001.6 5,133.8 5,238.4

Other revenue

Investment and other income related to sales of receivables(Note 6)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,609.9 1,432.9 557.3

Insurance premiums earned ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 260.8 231.4 225.6

Other income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 656.5 661.0 653.1

Total Ñnancing margin and revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,528.8 7,459.1 6,674.4

Expenses

Operating expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,384.5 2,406.0 2,297.1

Provision for credit losses (Note 5)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,972.2 3,351.6 1,665.0

Other insurance expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 202.4 205.6 208.7

Total expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,559.1 5,963.2 4,170.8

Income from continuing operations before income taxes ÏÏÏ 1,969.7 1,495.9 2,503.6

Provision for income taxes (Note 11)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 731.3 663.5 928.6

Income from continuing operations before minority interests 1,238.4 832.4 1,575.0

Minority interests in net income of subsidiaries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.0 1.4 32.9

Income from continuing operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,235.4 831.0 1,542.1

Income/(loss) from discontinued/held-for-sale operations (Note 9) 29.8 7.5 (5.6)

Loss on disposal of discontinued/held-for-sale operations (Note 9) ÏÏ (31.2) Ì Ì

Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,234.0 $ 838.5 $ 1,536.5

The accompanying notes are an integral part of the Ñnancial statements.

FC-2

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET(in millions)

December 31,

2002 2001

ASSETS

Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 6,800.1 $ 2,939.3

Investments in securities (Note 2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 655.1 525.9

Finance receivables, net (Note 3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 94,636.0 107,966.6

Net investment in operating leases (Note 4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,631.2 37,460.7

Retained interest in securitized assets (Note 6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,618.0 12,548.4

Notes and accounts receivable from aÇliated companies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,671.9 2,528.8

Derivative Ñnancial instruments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,364.9 1,568.3

Assets of discontinued and held-for-sale operations (Note 9) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,398.8 2,134.6

Other assets (Note 7)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,393.1 5,423.8

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $170,169.1 $173,096.4

LIABILITIES AND STOCKHOLDER'S EQUITY

Liabilities

Accounts payable

Trade, customer deposits, and dealer reserves ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,435.8 $ 1,065.0

AÇliated companies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 782.7 1,003.9

Total accounts payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,218.5 2,068.9

Debt (Note 8) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 140,262.8 145,834.3

Deferred income taxes, net (Note 11) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,409.7 4,571.5

Derivative Ñnancial instruments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 772.4 2,058.4

Liabilities of discontinued and held-for-sale operations (Note 9) ÏÏÏÏÏÏÏÏÏÏÏ 820.9 801.1

Other liabilities and deferred income (Note 7) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,115.9 5,760.6

Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 156,600.2 161,094.8

Minority interests in net assets of subsidiaries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18.9 17.8

Stockholder's Equity

Capital stock, par value $100 a share, 250,000 shares authorized, issuedand outstanding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25.0 25.0

Paid-in surplus (contributions by stockholder)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,116.8 4,457.7

Accumulated other comprehensive lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (386.6) (1,209.7)

Retained earningsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,794.8 8,710.8

Total stockholder's equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,550.0 11,983.8

Total liabilities and stockholder's equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $170,169.1 $173,096.4

The accompanying notes are an integral part of the Ñnancial statements.

FC-3

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY(in millions)

Accumulated OtherComprehensive Income/(Loss)

UnrealizedGain/(Loss)on RetainedInterest in Foreign

Capital Paid in Retained Securitized Currency DerivativeStock Surplus Earnings Assets Translation Instruments Total

Balance at January 1, 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $25.0 $4,341.6 $6,855.5 $ 71.5 $(369.5) Ì $10,924.1

Comprehensive income

Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 1,536.5 Ì Ì Ì 1,536.5

Retained interest in securitized assets (net of tax of $66.8)ÏÏ Ì Ì Ì 113.3 Ì Ì 113.3

Foreign currency translation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì (208.4) Ì (208.4)

Unrealized gain (net of tax of $7.0) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 19.6 Ì Ì 19.6

Less: reclassiÑcation adjustment for gains realized in netincome (net of tax of $6.0) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì (10.2) Ì Ì (10.2)

Total comprehensive income, net of tax ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 1,536.5 122.7 (208.4) Ì 1,450.8

Paid in SurplusÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (68.6) Ì Ì Ì Ì (68.6)

Cash dividends ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (119.7) Ì Ì Ì (119.7)

Year ended December 31, 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $25.0 $4,273.0 $8,272.3 $194.2 $(577.9) Ì $12,186.6

Comprehensive income

Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 838.5 Ì Ì Ì 838.5

Transition adjustment (net of tax of $126.5) ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì (214.5) (214.5)

Net loss on derivative instruments (net of tax of $350.8) ÏÏ Ì Ì Ì Ì Ì (380.3) (380.3)

Less: reclassiÑcation adjustment for losses realized in netincome (net of tax of $68.2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì 115.7 115.7

Retained interest in securitized assets (net of tax of$104.3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì (176.9) Ì Ì (176.9)

Foreign currency translation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì (165.1) Ì (165.1)

Unrealized gain (net of tax of $11.2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 19.0 Ì Ì 19.0

Less: reclassiÑcation adjustment for gains realized in netincome (net of tax of $14.1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì (23.9) Ì Ì (23.9)

Total comprehensive income, net of tax ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 838.5 (181.8) (165.1) (479.1) 12.5

Paid in SurplusÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 184.7 Ì Ì Ì Ì 184.7

Cash dividends ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (400.0) Ì Ì Ì (400.0)

Year ended December 31, 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $25.0 $4,457.7 $8,710.8 $ 12.4 $(743.0) $(479.1) $11,983.8

Comprehensive income

Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 1,234.0 Ì Ì Ì 1,234.0

Net loss on derivative instruments (net of tax of $48.1) ÏÏÏ Ì Ì Ì Ì Ì (81.6) (81.6)

Less: reclassiÑcation adjustment for losses realized in netincome (net of tax of $202.9) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì 344.0 344.0

Retained interest in securitized assets (net of tax of$129.6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 219.7 Ì Ì 219.7

Foreign currency translation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 335.0 Ì 335.0

Unrealized gain (net of tax of $14.9) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 25.3 Ì Ì 25.3

Less: reclassiÑcation adjustment for gains realized in netincome (net of tax of $11.4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì (19.3) Ì Ì (19.3)

Total comprehensive income, net of tax ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 1,234.0 225.7 335.0 262.4 2,057.1

Paid in SurplusÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 659.1 Ì Ì Ì Ì 659.1

Cash dividends ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (1,150.0) Ì Ì Ì (1,150.0)

Year ended December 31, 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $25.0 $5,116.8 $8,794.8 $238.1 $(408.0) $(216.7) $13,550.0

The accompanying notes are an integral part of the Ñnancial statements.

FC-4

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS FROM CONTINUING OPERATIONS(in millions)

For the Years Ended December 31,

2002 2001 2000

Cash Öows from operating activities

Net income from continuing operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,235.4 $ 831.0 $ 1,542.1

Adjustments to reconcile net income to net cash provided byoperating activities:

Provision for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,972.2 3,351.6 1,665.0

Depreciation and amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,889.5 8,536.7 7,982.1

Gain on sales of Ñnance receivables (Note 6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (529.1) (411.9) (13.8)

Increase in deferred income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 676.6 278.5 752.9

Increase in other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (458.3) (499.0) (128.1)

Increase/(decrease) in other liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,796.8 (1,668.7) 1,822.9

All other operating activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 60.1 115.5 447.9

Net cash provided by operating activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,643.2 10,533.7 14,071.0

Cash Öows from investing activities

Purchase of Ñnance receivables (other than wholesale) ÏÏÏÏÏÏÏ (53,567.2) (71,076.9) (62,216.2)

Collection of Ñnance receivables (other than wholesale) ÏÏÏÏÏÏ 28,320.2 28,463.2 33,377.5

Purchase of operating lease vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (19,749.8) (26,306.4) (25,985.0)

Liquidation of operating lease vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,048.7 16,466.2 14,985.4

Net change in wholesale receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,825.5) (2,112.0) (7,136.9)

Proceeds from sale of receivables (Note 6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41,288.5 40,830.5 19,544.4

Net change in retained interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,340.0) 5,648.0 1,194.0

Decrease in note receivable with aÇliate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 347.3 599.8 3,619.2

Purchase of investment securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (604.4) (726.1) (559.2)

Proceeds from sale/maturity of investment securities ÏÏÏÏÏÏÏÏÏ 475.2 747.5 550.6

Acquisition of minority interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (659.4)

All other investing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 58.9 (230.0) (484.9)

Net cash provided by/(used in) investing activities ÏÏÏÏÏÏÏÏÏÏ 4,451.9 (7,696.2) (23,770.5)

Cash Öows from Ñnancing activities

Proceeds from issuance of long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,478.9 41,110.6 34,013.1

Principal payments on long-term debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (22,132.8) (15,704.5) (21,881.6)

Change in short-term debt, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6,380.0) (26,139.1) (775.2)

Cash dividends paidÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,150.0) (400.0) (269.7)

All other Ñnancing activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 659.1 306.2 (382.6)

Net cash (used in)/provided by Ñnancing activities ÏÏÏÏÏÏÏÏÏÏ (15,524.8) (826.8) 10,704.0

EÅect of exchange rate changes on cash and cash equivalents ÏÏÏ 290.5 (134.8) (837.6)

Net change in cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,860.8 1,875.9 166.9

Cash and cash equivalents, beginning of yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,939.3 1,063.4 896.5

Cash and cash equivalents, end of yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 6,800.1 $ 2,939.3 $ 1,063.4

Supplementary cash Öow information

Interest paid ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 6,890.8 $ 8,146.4 $ 8,533.0

Taxes paidÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 242.0 177.2 178.5

The accompanying notes are an integral part of the Ñnancial statements.

FC-5

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

NOTE 1. ACCOUNTING POLICIES

Principles of Consolidation

The consolidated Ñnancial statements include Ford Motor Credit Company and its controlled domesticand foreign subsidiaries and joint ventures (""Ford Credit''). AÇliates that are 20-50 percent owned areincluded in the consolidated Ñnancial statements on an equity basis. Ford Credit is an indirect wholly-ownedsubsidiary of Ford Motor Company (""Ford''). Use of estimates, as determined by management, is required inthe preparation of consolidated Ñnancial statements in conformity with generally accepted accountingprinciples. Because of the inherent uncertainty involved in making estimates, actual results reported in futureperiods may be based upon amounts that diÅer from those estimates. Certain amounts in prior years' Ñnancialstatements have been reclassiÑed to conform with current year presentation.

Nature of Operations

Ford Credit operates in many locations around the world, the most signiÑcant of which are the UnitedStates and Europe. Ford Credit's reportable operating segments include Ford Credit North America and FordCredit International. Ford Credit North America consists of the United States and Canada. Ford CreditInternational consists of all other countries.

Ford Credit's Ñnancing operations primarily consist of: the purchase of retail installment sale contractsand retail leases from franchised Ford vehicle dealers; wholesale Ñnancing and capital loans to franchised Fordvehicle dealers and other franchises associated with such dealers; and loans to vehicle leasing companies. FordCredit conducts insurance operations through its wholly-owned subsidiary, The American Road InsuranceCompany (""TARIC'').

The business of Ford Credit is substantially dependent on Ford Motor Company. Any protractedreduction or suspension of Ford's production or sale of vehicles, resulting from a decline in demand, a workstoppage, governmental action, negative publicity or other event, or signiÑcant changes to marketing programssponsored by Ford could have an eÅect on Ford Credit.

The majority of Ford Credit's Ñnance receivables are geographically diversiÑed throughout the UnitedStates. Outside the United States Ñnance receivables are concentrated in Europe, Canada, and Australia. FordCredit controls its credit risk through credit standards, limits on exposure and by monitoring the Ñnancialcondition of counterparties. TARIC has credit risk related to receivables from reinsurers that are collateral-ized by trust funds, letters of credit or custodial accounts.

Revenue Recognition

Revenue from Ñnance receivables including direct Ñnancing leases is recognized using the interestmethod. Certain origination costs on receivables are deferred and amortized, using the interest method, overthe term of the related receivable as a reduction in Ñnancing revenue. Rental revenue on operating leases isrecognized on a straight-line basis over the term of the lease. Initial direct costs related to leases are deferredand amortized over the term of the lease. The accrual of interest on receivables is discontinued at the time areceivable is determined to be uncollectible. Subsequent payments are applied as a reduction of principal untilsuch time the receivable becomes contractually current.

Agreements with Ford and other aÇliates provide for interest supplements and other support payments toFord Credit on certain Ñnancing and leasing transactions. These payments are collected and recognized asincome over the period that the related Ñnance receivables and leases are outstanding.

Insurance premiums are earned over their respective policy periods. Premiums from extended serviceplan contracts and other contractual liability coverages are earned over the life of the policy based on historicalloss experience. Physical damage insurance premiums, including vehicles Ñnanced at wholesale by Ford Credit

FC-6

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 1. ACCOUNTING POLICIES Ì Continued

and its Ñnance subsidiaries, are recognized as income on a monthly basis as billed. Credit life and creditdisability premiums are earned over the life of the related policies in proportion to the amount of the insuranceprotection provided. Certain costs of acquiring new business are deferred and amortized over the terms of therelated polices on the same basis on which premiums are earned.

Sales of Receivables

Ford Credit periodically sells Ñnance receivables in securitization and whole-loan sale transactions tofund its operations and to maintain liquidity, respectively. Securitization transactions involve Ford Creditsurrendering control over these assets by selling Ñnance receivables to oÅ-balance sheet securitization entities.Securitization entities are a common, required element of securitization transactions to meet certain legal andtransaction requirements that assure that the sold assets have been isolated from Ford Credit and its creditors.The securitization entities issue interest-bearing securities collateralized by future collections on the soldreceivables.

Estimated gains or losses from the sale of Ñnance receivables are recognized in the period in which thesale occurs. Ford Credit retains certain interests in receivables sold in securitization transactions. Indetermining the gain or loss on each sale of Ñnance receivables, the investment in the sold receivables pool isallocated between the portion sold and the portion retained based on their relative fair values at the date ofsale. Retained interests include senior and subordinated securities, undivided interests in wholesale receiv-ables, interest only strips and restricted cash held for the beneÑt of securitization entities. These interests arerecorded at fair value with unrealized gains or losses recorded, net of tax, as a separate component ofaccumulated other comprehensive income in stockholder's equity. In securitization transactions, Ford Creditretains the servicing rights and receives a servicing fee, which is recognized as collected over the remainingterm of the related sold Ñnance receivables.

Whole-loan sale transactions involve Ford Credit selling retail installment sale contracts to a buyer whoeither retains them or sells them in a subsequent asset-backed securitization. We do not retain any interests inthe sold receivables but continue to service such receivables for a fee.

Depreciation

Depreciation expense on operating leases is provided on a straight-line basis over the term of the lease inan amount necessary to reduce the leased vehicle to its estimated residual (salvage) value at the end of thelease term. Ford Credit's policy is to promptly sell returned oÅ-lease vehicles. Ford Credit evaluates itsdepreciation policy for leased vehicles on a regular basis taking into consideration various assumptions, whichinclude estimated residual values at lease termination and the estimated number of vehicles that will bereturned to Ford Credit. Adjustments to reÖect revised estimates of residual values at the end of the leaseterms are included in depreciation expense on a straight-line basis over the remaining terms of the leases.

Allowance for Credit Losses

The allowance for credit losses is our estimate of probable credit losses related to impaired receivablesand operating leases as of the date of the Ñnancial statements. This allowance is based on econometric modelsthat consider historical credit loss trends, the credit quality of our present portfolio, trends in historical andprojected used vehicle values and general economic measures. Finance receivables and lease investments arecharged to the allowance for credit losses when an account is deemed to be uncollectible, taking intoconsideration the Ñnancial condition of the borrower or lessee, the value of the collateral, recourse toguarantors and other factors. Recoveries on Ñnance receivables and lease investments previously charged oÅ asuncollectible are credited to the allowance for credit losses.

FC-7

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 1. ACCOUNTING POLICIES Ì Continued

Cash Equivalents

Ford Credit considers investments purchased with a maturity of three months or less to be cashequivalents. The book value of these instruments approximates fair value because of the short maturity. As ofDecember 31, 2002, approximately $900 million of Ford Credit's cash balance had been designated to be usedsolely to acquire leases.

Derivative Financial Instruments

Ford Credit operates in many countries, and is exposed to various market risks, including the eÅects ofchanges in interest rates and foreign currency exchange rates. Interest rate and currency exposures aremonitored and managed by Ford Credit as an integral part of its overall risk management program, whichrecognizes the unpredictability of Ñnancial markets and seeks to reduce potential adverse eÅects on FordCredit's operating results. Risk is reduced two ways: 1) through the use of funding instruments that haveinterest and maturity proÑles similar to the assets they are funding, and 2) through the use of interest rate andforeign exchange derivatives. Ford Credit's derivatives strategy is defensive; derivatives are not used forspeculative purposes. Interest rate swaps are used to manage the eÅects of interest rate Öuctuations. Foreigncurrency exchange agreements, including forward contracts and swaps are used to manage foreign exchangeexposure. The diÅerential paid or received on swap agreements is recognized on an accrual basis as anadjustment to interest expense.

Ford Credit adopted Statement of Financial Accounting Standard No. 133 (SFAS No. 133), Accountingfor Derivative Instruments and Hedging Activities, as amended, on January 1, 2001. All derivatives arerecognized on the balance sheet at fair value. Ford Credit designates derivatives as a hedge of the fair value ofa recognized asset or liability (""fair value'' hedge) or of the variability of cash Öows to be received or paidrelated to a recognized asset or liability (""cash Öow'' hedge). Ford Credit also enters into derivatives thateconomically hedge certain of its risks, even though hedge accounting is not allowed by SFAS No. 133 or isnot applied by Ford Credit.

Changes in the value of a derivative that is designated as a fair value hedge, along with oÅsetting changesin the fair value of the underlying hedged exposure, are recorded in earnings. Changes in the value of aderivative that is designated as a cash Öow hedge are recorded in other comprehensive income, a component ofstockholder's equity. The fair value of interest rate swaps is calculated using current market rates for similarinstruments with the same remaining maturities. Unrealized gains and losses are netted for individualcounterparties where legally permissible. In years prior to the adoption of SFAS No. 133, gains and losses oninterest rate and currency derivatives were deferred and recognized through earnings with the relatedunderlying transactions.

When the terms of an underlying transaction are modiÑed, or when the underlying hedged item is settledprior to maturity, all changes in the fair value of the derivative instrument are marked-to-market with changesin the fair value included in earnings each period until the instrument matures, unless the derivative issubsequently included in another hedge relationship. In situations where assets that were included in fair valuehedging relationships have been sold in securitization or whole-loan sale transactions, the accumulated basisadjustments related to the sold assets are reversed and included in earnings in the same period in which theassets were sold.

Ford Credit manages its foreign currency and interest rate counterparty credit risks by establishing limitsand by monitoring the Ñnancial condition of counterparties. The amount of exposure Ford Credit may have toa single counterparty on a worldwide basis is limited by company policy. In the unlikely event that acounterparty fails to meet the terms of a foreign currency or an interest rate instrument, risk is limited to thefair value of the instrument.

FC-8

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 1. ACCOUNTING POLICIES Ì Continued

Insurance Liabilities

A liability for reported insurance claims and an estimate of unreported insurance claims, based on pastexperience, is included in other liabilities and deferred charges.

Foreign Currency Translation

Revenues, costs and expenses of foreign subsidiaries are translated to U.S. dollars at average-periodexchange rates. Assets and liabilities of foreign subsidiaries are translated to U.S. dollars at year-end exchangerates and the eÅects of these translation adjustments are reported as a separate component of accumulatedother comprehensive income in stockholder's equity. Gains and losses arising from transactions denominatedin a currency other than the functional currency of the subsidiary involved are included in income.

Paid-In Surplus

Changes to paid-in surplus represent activity from Ford related to Ford Credit and its consolidatedsubsidiaries.

FC-9

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 2. INVESTMENTS IN SECURITIES

Investments in securities consist of municipal, corporate, mortgage-backed and other securities. Availa-ble-for-sale securities are recorded at fair value with unrealized gains and losses excluded from income andreported, net of tax, as a separate component of accumulated other comprehensive income in stockholder'sequity. Held-to-maturity securities are recorded at amortized cost. Equity securities that do not have readilydeterminable fair values are recorded at cost. The basis of cost used in determining realized gains and losses isspeciÑc identiÑcation.

The fair value of substantially all securities was estimated based on quoted market prices. For securitiesfor which there were no quoted market prices, the estimate of fair value was based on similar types ofsecurities that are traded in the market.

Balance at December 31, 2002:

Gross GrossAmortized Unrealized Unrealized Fair

Cost Gains Losses Value

(in millions)

Available-for-sale securities

U.S. government and agency ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $162.7 $ 9.2 $ Ì $171.9

MunicipalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.3 0.3 Ì 0.6

Government Ì non U.S. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17.1 0.4 Ì 17.5

Corporate debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 166.5 9.5 (0.3) 175.7

Mortgage-backedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 215.4 8.9 Ì 224.3

EquityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 45.8 19.4 (6.5) 58.7

Held-to-maturity securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.4 0.0 0.0 6.4

Total investments in securitiesÏÏÏÏÏÏÏÏÏÏÏ $614.2 $47.7 $(6.8) $655.1

Balance at December 31, 2001:

Gross GrossAmortized Unrealized Unrealized Fair

Cost Gains Losses Value

(in millions)

Available-for-sale securities

U.S. government and agency ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 77.7 $ 1.5 $(0.5) $ 78.7

MunicipalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.3 Ì Ì 0.3

Government Ì non U.S. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15.3 0.5 Ì 15.8

Corporate debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 158.8 5.4 (0.6) 163.6

Mortgage-backedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 207.0 3.4 (1.6) 208.8

EquityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28.8 27.1 (3.7) 52.2

Held-to-maturity securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.5 0.0 0.0 6.5

Total investments in securitiesÏÏÏÏÏÏÏÏÏÏÏ $494.4 $37.9 $(6.4) $525.9

FC-10

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 2. INVESTMENTS IN SECURITIES Ì Continued

The amortized cost and fair value of investments in available-for-sale securities and held-to-maturitysecurities at December 31, 2002, by contractual maturity, were as follows:

Balance at December 31, 2002:

Available-for-Sale Held-to-Maturity

Amortized Fair Amortized FairCost Value Cost Value

(in millions)

Due in one year or less ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 5.8 $ 5.9 $0.3 $0.3

Due after one year through Ñve years ÏÏÏÏÏÏÏÏÏÏÏÏ 160.6 165.9 3.3 3.3

Due after Ñve years through ten years ÏÏÏÏÏÏÏÏÏÏÏÏ 95.0 101.0 0.8 0.8

Due after ten yearsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 85.2 92.8 2.0 2.0

Mortgage-backed securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 215.5 224.3 Ì Ì

Equity securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 45.7 58.8 Ì Ì

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $607.8 $648.7 $6.4 $6.4

Balance at December 31, 2001:

Available-for-Sale Held-to-Maturity

Amortized Fair Amortized FairCost Value Cost Value

(in millions)

Due in one year or less ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4.3 $ 4.4 $0.1 $0.1

Due after one year through Ñve years ÏÏÏÏÏÏÏÏÏÏÏÏ 87.4 89.6 1.3 1.3

Due after Ñve years through ten years ÏÏÏÏÏÏÏÏÏÏÏÏ 82.1 83.7 3.1 3.1

Due after ten yearsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 78.3 80.6 2.0 2.0

Mortgage-backed securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28.8 52.2 Ì Ì

Equity securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 207.0 208.9 Ì Ì

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $487.9 $519.4 $6.5 $6.5

Proceeds from sales of available-for-sale securities were $483 million and $739 million in 2002 and 2001,respectively. Gross realized gains and losses were $9.8 million and $4.3 million, respectively in 2002,$14.5 million and $3.8 million, respectively in 2001, and $9.5 million and $6.7 million, respectively in 2000.

FC-11

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 3. FINANCE RECEIVABLES

Net Ñnance receivables at December 31 were as follows:

2002 2001

(in millions)

RetailÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 70,836.5 $ 85,478.3

Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,571.4 15,610.3

Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,840.1 9,154.7

Total Ñnance receivables, net of unearned incomeÏÏÏÏÏÏÏÏÏÏÏÏ 97,248.0 110,243.3

Less: Allowance for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,612.0) (2,276.7)

Finance receivables, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 94,636.0 $107,966.6

Net Ñnance receivables subject to fair value* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 86,712.8 $100,771.2

Fair value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 88,239.8 100,924.7

Memo: Managed receivables (including net investment inoperating leases) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $197,628.3 $204,175.3

* Excludes certain leases that are not Ñnancial instruments of $7,923.2 million and $7,195.4 million atDecember 31, 2002 and 2001, respectively.

The fair value of most Ñnance receivables is calculated by discounting future cash Öows using anestimated discount rate that reÖects the current credit, interest rate and prepayment risks associated withsimilar types of instruments. For receivables with short maturities, the book value approximates fair value.

At December 31, 2002, Ñnance receivables included $843.1 million owed by three customers with thelargest receivables balances.

The contractual maturities of total Ñnance receivables outstanding at December 31, 2002, net of unearnedincome, were as follows (excludes $812 million related to SFAS No. 133 fair value adjustments included inRetail):

DueDue in Year Ending December 31, After

2003 2004 2005 2005 Total

(in millions)

RetailÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $34,284.4 $19,394.3 $9,246.0 $ 7,099.8 $70,024.5

Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,987.6 386.3 169.0 28.5 16,571.4

Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,204.4 390.2 343.9 3,901.6 9,840.1

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $55,476.4 $20,170.8 $9,758.9 $11,029.9 $96,436.0

It is Ford Credit's experience that a substantial portion of Ñnance receivables are repaid beforecontractual maturity dates. The above table, therefore, is not to be regarded as a forecast of future cashcollections.

FC-12

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 3. FINANCE RECEIVABLES Ì Continued

The aggregate receivables balances related to accounts past due more than 60 days, excluding accountswhere the obligor has Ñled for bankruptcy, at December 31 were as follows:

2002 2001

(in millions)

RetailÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,091.1 $1,254.2

Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 206.8 270.7

Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 65.6 217.7

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,363.5 $1,742.6

Included in retail receivables are investments in direct Ñnancing leases related to the leasing of motorvehicles.

2002 2001

(in millions)

Net investment in direct Ñnancing leases

Minimum lease rentals to be receivedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $5,157.8 $4,794.8

Estimated residual values ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,689.0 3,288.8

Less: Unearned incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (988.7) (955.3)

Origination costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43.6 54.3

Less: Allowance for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (32.1) (42.3)

Net investment in direct Ñnancing leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $7,869.6 $7,140.3

Minimum direct Ñnancing lease rentals for each of the Ñve succeeding years are as follows (in millions):2003 Ì $1,873.8; 2004 Ì $1,504.6; 2005 Ì $1,110.1; 2006 Ì $584.5; 2007 Ì $69.9; thereafter Ì $14.9.

NOTE 4. NET INVESTMENT IN OPERATING LEASES

Operating leases at December 31 were as follows:

2002 2001

(in millions)

Investment in operating leases

Vehicles, at cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $43,465.3 $48,388.5

Lease initial direct costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 158.4 139.1

Less: Accumulated depreciationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (11,430.8) (10,588.9)

Allowance for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (561.7) (478.0)

Net investment in operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $31,631.2 $37,460.7

Future minimum rentals on operating leases are as follows (in millions): 2003 Ì $7,333.8; 2004 Ì$4,238.5; 2005 Ì $3,778.3; 2006 Ì $1,157.6; 2007 Ì $128.2.

FC-13

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 5. ALLOWANCE FOR CREDIT LOSSES

Following is an analysis of the allowance for credit losses related to Ñnance receivables and operatingleases for the years ended December 31:

2002 2001 2000

(in millions)

Balance, beginning of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,754.7 $1,634.9 $1,468.7

Provision charged to operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,972.2 3,351.6 1,665.0

Deductions

Losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,847.8 2,482.5 1,595.6

RecoveriesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (485.8) (373.7) (299.2)

Net losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,362.0 2,108.8 1,296.4

Other changes, principally amounts related to Ñnancereceivables sold and translation adjustmentsÏÏÏÏÏÏÏÏÏ 191.2 123.0 202.4

Net deductions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,553.2 2,231.8 1,498.8

Balance, end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3,173.7 $2,754.7 $1,634.9

NOTE 6. SALES OF RECEIVABLES

Servicing Portfolio

Ford Credit retains servicing rights for receivables sold in securitization and whole-loan sale transactions.The servicing portfolio is summarized in the following table:

Retail Wholesale Total

(in millions)

Servicing portfolio at December 31, 2000ÏÏÏÏÏÏÏÏÏÏÏÏ $26,007.8 $ 2,357.9 $28,365.7

2001 activity

Receivable sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 33,491.1 19,041.7 52,532.8

(Collections)/net ÑnancingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (18,187.0) (3,963.5) (22,150.5)

Servicing portfolio at December 31, 2001ÏÏÏÏÏÏÏÏÏÏÏÏ $41,311.9 $17,436.1 $58,748.0

2002 activity

Receivable sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,857.2 1,855.1 40,712.3

(Collections)/net ÑnancingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (26,276.8) 3,162.6 (23,114.2)

Servicing portfolio at December 31, 2002ÏÏÏÏÏÏÏÏÏÏÏÏ $53,892.3 $22,453.8 $76,346.1

Retained Interest

Components of retained interest in securitized assets for the years ended December 31 include:

2002 2001

(in millions)

Wholesale receivables sold to securitization entities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $12,453.7 $ 7,586.0

Subordinated securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,845.2 2,039.1

Interest only strips ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,695.7 1,235.4

Restricted cash held for beneÑt of securitization entities ÏÏÏÏÏÏÏÏÏÏ 623.4 377.0

Senior securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 1,310.9

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $17,618.0 $12,548.4

FC-14

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 6. SALES OF RECEIVABLES Ì Continued

Most of the retained interest in sold wholesale receivables ($11.4 billion and $6.5 billion at December 31,2002 and December 31, 2001, respectively) represents Ford Credit's undivided interest in wholesalereceivables that are available to support the issuance of additional securities by a securitization entity; thebalance represents credit enhancements. Interest-only strips represent the present value of monthly collectionson the sold Ñnance receivables in excess of amounts needed by the SPE (securitization trust) to pay principaland interest to investors, servicing fees and other required amounts that will be realized by Ford Credit.Investments in subordinated securities and restricted cash are senior to interest-only strips for creditenhancement purposes.

Retained interests are recorded at fair value. For wholesale receivables, book value approximates fairvalue because of their short-term maturities. The fair value of the senior notes and subordinated certiÑcatesare estimated based on market prices. In determining the fair value of the interest-only strips, Ford Creditdiscounts the present value of the projected cash Öows retained at various discount rates based on economicfactors in individual countries.

Investment and Other Income

The following table summarizes the activity related to the sales of receivables reported in investment andother income for the years ended December 31:

2002 2001 2000

(in millions)

Gain on sales of receivablesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 728.0 $ 738.5 $ 13.8

SFAS No. 133 fair value basis adjustments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (198.9) (326.6) Ì

Net gain on sales of receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 529.1 411.9 13.8

Servicing feesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 700.2 456.3 190.2

Interest income on sold wholesale receivables andretained securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 605.9 378.5 152.3

Excess spread and otherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 774.7 186.2 201.0

Total investment income related to sales of receivables $2,609.9 $1,432.9 $557.3

For the year ended December 31, 2002, Ford Credit utilized certain point-of-sale assumptions, whichincluded a discount rate of 12%, a prepayment speed of 1.5% (which represents expected payments earlierthan scheduled maturity dates) and credit losses of 1% to 1.7% over the life of sold receivables. Theseassumptions do not include those utilized by Triad Financial Corporation (Triad), a subsidiary of Ford Credit,which oÅers non-prime Ñnancing primarily through dealers to consumers. For the year ended December 31,2002, Triad utilized certain point-of-sale assumptions, which included a discount rate of 16%, a prepaymentspeed of 1.6% to 1.7% and credit losses of 13% to 14% over the life of sold receivables. The securitizationtransactions utilized to sell Ñnance receivables included public term, a single-seller asset-backed commercialpaper program (FCAR), the Motown NotesSM program, and a bank-sponsored asset-backed commercialpaper issuers program.

FC-15

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 6. SALES OF RECEIVABLES Ì Continued

Cash Flow

The following table summarizes the cash Öow movements between Ford Credit and the transferees:

2002 2001 2000

(in millions)

Proceeds from sales of receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $37,660.1 $37,047.5 $18,918.3

Proceeds from revolving-period securitizations ÏÏÏÏÏÏÏÏ 3,628.4 2,789.7 626.1

Proceeds from sale of retained notes and certiÑcatesÏÏÏ Ì 993.3 Ì

Total proceeds from the sale of receivables ÏÏÏÏ $41,288.5 $40,830.5 $19,544.4

Cash Öows related to retained interest

Retail receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,489.1 $ 1,511.5 $ 1,194.0

Wholesale receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,829.1) 4,136.5 Ì

Total principal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(5,340.0) $ 5,648.0 $ 1,194.0

Servicing fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 700.2 456.3 190.2

Interest income and excess spreadÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,149.5 601.0 155.9

Repurchased receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (340.3) (224.3) (108.7)

Other Disclosures

The following table summarizes key assumptions used in estimating cash Öows from sold receivables andthe corresponding sensitivity of the current fair values to 10% and 20% adverse changes:

Impact on Fair ValueBased on Adverse ChangeAssumption

Percentage 10% Change 20% Change

(annual rate) (in millions)

Cash Flow Discount RateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12.0% - 16.0% $(22.1) $(43.7)

Estimated Net Credit Loss Rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.8% - 14.0% (90.4) (180.8)

Prepayment SpeedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.5% - 2.0% (56.7) (117.4)

The eÅect of a variation in a particular assumption on the fair value of the interest only strips werecalculated without changing any other assumptions and changes in one factor may result in changes inanother.

Outstanding delinquencies over 30 days on Ford Credit's securitized portfolio were $1,296.7 million and$823.5 million at December 31, 2002 and 2001, respectively. Credit losses, net of recoveries, were$453.9 million and $222 million for the years ended December 31, 2002 and 2001, respectively. Expectedstatic pool credit losses related to outstanding securitized retail receivables were 2.25% at December 31, 2002.To calculate the static pool credit losses, actual and projected future credit losses are added together anddivided by the original balance of each pool of assets.

Variable Interest Entities

In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46),Consolidation of Variable Interest Entities. Under FIN 46, companies are required to consolidate variableinterest entities for which they are deemed to be the primary beneÑciary, and disclose information about thosein which they have a signiÑcant variable interest.

FC-16

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 6. SALES OF RECEIVABLES Ì Continued

Ford Credit has activities with a limited purpose trust, FCAR Owner Trust (""FCAR''), owned by a FordCredit subsidiary and outside investors. FCAR's activities are limited to issuance of asset-backed commercialpaper and the purchase of highly rated asset-backed securities issued by Ford Credit sponsored securitizationSPEs. As presently structured, to comply with FIN 46, it is reasonably possible that Ford Credit will berequired to consolidate FCAR in its Ñnancial results. Ford Credit continues to assess structures that wouldmaintain FCAR oÅ balance sheet under FIN 46. Ford Credit's equity investment and retained beneÑcialinterest related to FCAR is approximately $1.7 billion, which is reÖected on Ford Credit's consolidatedbalance sheet. At December 31, 2002, FCAR had gross assets of $12.2 billion and gross liabilities of$11.8 billion. Ford Credit is continuing to analyze the impact of FIN 46 on its Ñnancial statements and onFCAR.

In addition, Ford Credit also sells receivables to bank-sponsored asset-backed commercial paper issuersthat are SPEs of the sponsor bank. FIN 46 might also require the sponsor banks to consolidate the assets andliabilities of these SPEs into their Ñnancial results or restructure these SPEs. If this occurs, the sponsor banksmay increase the program fees for Ford Credit's use of these SPEs or fail to renew their commitment topurchase additional receivables from Ford Credit. At December 31, 2002, these SPEs held about $6 billion ofretail installment sale contracts previously owned by Ford Credit. Ford Credit believes it would not be requiredto consolidate any portion of these SPEs in its Ñnancial results. Ford Credit is continuing to evaluate theimpact of FIN 46 on the bank sponsors of these SPEs and on the continued availability and costs of thisprogram. Ford Credit believes the bank sponsors will not terminate their SPEs or reduce their commitments topurchase receivables from Ford Credit.

NOTE 7. OTHER ASSETS AND OTHER LIABILITIES AND DEFERRED INCOME

Other assets at December 31 were as follows:

2002 2001

(in millions)

Deferred charges and other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,810.2 $1,557.0

Prepaid reinsurance premiums ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,644.0 1,541.2

Investment in used vehicles held for resale, at estimated fair value ÏÏÏ 1,502.4 892.4

Collateral held for resaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,039.2 955.2

Property and equipment, net of accumulated depreciation of $213.1 in2002 and $200.2 in 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 397.3 478.0

Total other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $6,393.1 $5,423.8

Other liabilities and deferred income at December 31 were as follows:

2002 2001

(in millions)

Deferred income and other liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,679.4 $1,789.9

Long-term interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,231.9 1,896.9

Unearned premium reserveÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,800.4 1,694.8

Post retirement health care reserve ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 404.2 379.0

Total other liabilities and deferred income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $7,115.9 $5,760.6

FC-17

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 8. DEBT

Debt at December 31 was as follows:

Weighted-Average (a)

Interest Rates

2002 2001 2002 2001

(in millions)

Short-Term Debt

Commercial paper ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8,179.8 $ 15,664.0

Ford Money Market AccountÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,078.9 4,051.4

Other short-term debt (b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,935.1 2,911.6

Total short-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.31% 4.19% 16,193.8 22,627.0

Long-Term Debt

Senior indebtedness

Notes payable within one year (c) ÏÏÏÏÏÏÏÏÏÏÏÏ 22,841.4 21,091.4

Notes payable after one year (d)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 101,298.5 102,163.2

Unamortized discount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (70.9) (47.3)

Total long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.76% 5.84% 124,069.0 123,207.3

Total debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.70% 5.55% $140,262.8 $145,834.3

Estimated Fair Value of Debt

Net short-term debt subject to fair value ÏÏÏÏÏÏÏ $ 16,193.8 $ 22,627.0

Short-term debt fair value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,193.8 22,627.0

Net long-term debt subject to fair value (e) ÏÏÏÏÏ 117,828.9 121,090.5

Long-term debt fair valueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 121,052.0 127,244.3

Total estimated fair value of debt ÏÏÏÏÏÏÏ 137,245.8 149,871.3

Interest Rate Characteristics of Debt PayableAfter One Year (f)

Fixed interest ratesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 84,952.9 $ 77,129.5

Variable interest rates (generally based onLIBOR or other short-term rates)ÏÏÏÏÏÏÏÏÏÏÏ 16,274.7 24,986.4

Total payable after one year ÏÏÏÏÏÏÏÏÏÏÏÏ $101,227.6 $102,115.9

(a) Includes the eÅect of interest rate swap agreements.

(b) Includes $519.7 million and $288 million with aÇliated companies at December 31, 2002 and 2001,respectively.

(d) Includes $208.1 million and $963.2 million with aÇliated companies at December 31, 2002 and 2001,respectively.

(e) Excludes adjustments related to SFAS No. 133 of $6,240.1 million and $2,116.8 million at December 31,2002 and 2001, respectively.

(f) Excludes the eÅect of interest rate swap agreements.

FC-18

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 8. DEBT Ì Continued

The Ford Money Market Account consists of variable denomination Öoating rate demand notes issuedand oÅered by Ford Credit. Interest is accrued daily at a rate at least 1/4 point higher than the average yieldfor all taxable money funds as reported weekly in the Money Fund ReportTM and published in the Wall StreetJournal. The nominal interest rate as of December 31, 2002 ranged from 3.0% to 3.4% depending on theamount invested.

Ford Credit's overall weighted-average eÅective interest rate (borrowing cost), including the eÅect ofinterest rate swap agreements, for full year 2002 and 2001 was 5.06% and 6.05%, respectively.

The average remaining maturities of Ford Credit's commercial paper were 34 days at December 31, 2002and 48 days at December 31, 2001 for our U.S., Canada and Europe programs. Senior notes mature at variousdates through 2078 (about $1.5 billion matures between 2031 and 2078). Maturities are as follows (inmillions): 2003 Ì $22,841.4; 2004 Ì $29,368.3; 2005 Ì $25,430.1; 2006 Ì $13,826.3; 2007 Ì $8,777.7;thereafter Ì $23,825.2. Certain of these obligations are denominated in currencies other than the currency ofthe issuing country. Foreign currency swap and forward agreements are used to hedge exposure to changes inexchange rates of these obligations.

The fair value of debt is estimated based upon quoted market prices or current rates for similar debt withthe same remaining maturities. For maturities of three months or less, the book value approximates fair valuebecause of the short maturities of these instruments.

NOTE 9. DISCONTINUED AND HELD-FOR-SALE OPERATIONS

During the fourth quarter of 2002, Ford Credit's all-makes Öeet leasing business operations in NewZealand and Australia were sold. We completed the sale of these operations in Europe in February of 2003.These assets were classiÑed as held-for-sale under SFAS No. 144, Accounting for the Impairment or Disposalof Long-lived Assets. Ford Credit has recognized an after tax charge of $31.2 million, reÖected in net loss ondisposal of discontinued operations. This amount represents the diÅerence between the expected selling priceof these assets less costs to sell them, and their recorded book value.

The operating results of the discontinued and held-for-sale Axus operations are as follows:

2002 2001 2000

(in millions)

Total Ñnancing margin and revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $209.6 $179.3 $115.5

Income/(loss) before income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 36.4 $ 11.6 $ (8.6)

Provision for income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.6 4.1 (3.0)

Net income/(loss) from discontinued/ held-for-sale operations $ 29.8 $ 7.5 $ (5.6)

NOTE 10. SUPPORT FACILITIES

Support facilities represent additional sources of funds, if required. At December 31, 2002, Ford Credithad approximately $8.6 billion of contractually committed facilities. Ford Credit also has the ability to use$7.2 billion of Ford lines of credit at Ford's option. These lines have various maturity dates through June 30,2007 and may be used, at Ford Credit's option, by any of its direct or indirect majority-owned subsidiaries.Ford Credit will guarantee any such borrowings. Banks also provide $13.6 billion of contractually committedliquidity facilities to support two asset-backed commercial paper programs; $13.3 billion for FCAR OwnerTrust and $0.3 billion for Motown NotesSM program at December 31, 2002.

In addition, Ford Credit has entered into agreements with several bank-sponsored, asset-backedcommercial paper issuers under which such issuers are contractually committed to purchase from Ford Credit,

FC-19

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 10. SUPPORT FACILITIES Ì Continued

at Ford Credit's option, up to an aggregate of approximately $12.5 billion of receivables. These agreementshave varying maturity dates between March 31, 2003 and October 31, 2003. As of December 31, 2002,approximately $7.3 billion of these commitments are unused and available.

At December 31, 2002, there were approximately $5.3 billion of contractually committed facilitiesavailable for FCE Bank plc's (""FCE'') use. In addition, $543 million of Ford lines of credit may be used byFCE at Ford's option. These lines have various maturity dates through June 30, 2007 and may be used, atFCE's option, by any of its direct or indirect majority-owned subsidiaries. Any such borrowings will beguaranteed by FCE.

NOTE 11. INCOME TAXES

Ford Credit and certain of its domestic subsidiaries are included in Ford's consolidated United Statesfederal and state income tax returns. In accordance with its intercompany tax sharing agreement with Ford,United States income tax liabilities or credits are allocated to Ford Credit generally on a separate return basis.The provision for income taxes was estimated as follows:

2002 2001 2000

(in millions)

Currently payableU.S. federal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ Ì $ Ì $ ÌForeign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 131.7 184.2 225.7State and localÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì

Total currently payableÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 131.7 184.2 225.7Deferred tax (beneÑt)/liability

U.S. federal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 437.8 415.6 670.5Foreign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 85.0 44.4 (62.7)State and localÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 76.8 19.3 95.1

Total deferred ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 599.6 479.3 702.9

Total provisionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $731.3 $663.5 $928.6

A reconciliation of the provision for income taxes with the United States statutory tax rate as apercentage of income before income taxes, excluding equity in net income of aÇliated companies, minorityinterest in net income of a joint venture and discontinued/held-for-sale operations, for the last three years isshown below:

2002 2001 2000

U.S. statutory tax rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35.0% 35.0% 35.0%EÅect of (in percentage points):

Taxes attributable to foreign source income ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 7.2 ÌState and local income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.5 2.2 2.1Investment income not subject to tax or subject to tax at

reduced rates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.3) (0.5) (0.2)Rate adjustments on deferred taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 0.4Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.1) 0.5 (0.2)

EÅective tax rateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37.1% 44.4% 37.1%

In 2001, included in taxes attributable to foreign source income was the write-oÅ of deferred tax assetsrelated to strategic partnering actions in Brazil.

FC-20

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 11. INCOME TAXES Ì Continued

Deferred tax assets and liabilities reÖect the estimated tax eÅect of accumulated temporary diÅerencesbetween assets and liabilities for Ñnancial reporting purposes and those amounts as measured by tax laws andregulations. The components of deferred tax assets and liabilities at December 31 were as follows:

2002 2001

(in millions)

Deferred Tax AssetsNet operating losses and foreign tax credits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $4,803.2 $4,360.6Provision for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,871.2 1,517.9Alternative minimum tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 298.0 298.0Employee beneÑt plans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 187.8 173.7Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 90.4 310.5

Total deferred tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,250.6 6,660.7Deferred Tax Liabilities

Leasing transactionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,418.0 7,632.4Finance receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,836.8 2,388.1Sales of receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 820.1 669.4Purchased tax beneÑtsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 254.8 260.1Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 330.6 282.2

Total deferred tax liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,660.3 11,232.2

Net deferred tax liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $5,409.7 $4,571.5

Ford Credit has an inter-company tax sharing agreement with Ford. Under this agreement, United Statesincome tax liabilities or credits are allocated to Ford Credit, generally on a separate return basis. In thisregard, the deferred tax assets related to net operating losses and foreign tax credits represent amounts duefrom Ford.

NOTE 12. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS

Ford Credit and certain of its subsidiaries provide selected health care and life insurance beneÑts forretired salaried employees under unfunded plans sponsored by Ford and certain of its subsidiaries. FordCredit's U.S. and Canadian salaried employees may become eligible for those beneÑts if they retire whileworking for Ford Credit; however, beneÑts and eligibility rules may be modiÑed from time to time. Theestimated cost for post-retirement health care beneÑts is accrued on an actuarial basis over the period ofemployee's service.

Increasing the assumed health care cost trend rate by one percentage point is estimated to increase theaggregate service and interest cost components of net post-retirement beneÑt expense for 2002 by about$9.4 million and the accumulated post-retirement beneÑt obligation at December 31, 2002 by about$82.2 million. A decrease of one percentage point would reduce service and interest costs by about $7 millionand decrease the December 31, 2002 post-retirement beneÑt obligation by about $65.9 million.

FC-21

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 12. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS Ì Continued

Net post-retirement beneÑt expense for U.S. and Canadian salaried employees included the following asof January 1:

2002 2001 2000

(in millions)

Costs Recognized in IncomeService cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $20.2 $18.9 $16.6Interest cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29.6 32.8 27.4Curtailments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 4.7 41.6Amortization of prior service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (16.8) (7.0) (0.5)Amortization of losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.2 2.7 0.9

Net post-retirement beneÑt expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $40.2 $52.1 $86.0

Discount rate for expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.25% 7.50% 7.75%Initial health care cost trend rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.0% 9.4% 9.0%Ultimate health care cost trend rateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.0% 5.0% 5.0%Number of years to ultimate trend rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 7 8

The status of these plans were as follows for the years ended December 31:

2002 2001

(in millions)

Change in BeneÑt ObligationBeneÑt obligation at January 1ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 416.8 $ 468.8

Service costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20.2 18.9Interest cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29.6 32.8AmendmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (15.0) (94.0)Curtailments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 4.7Plan participant contributionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.6 ÌBeneÑts paidÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (16.5) (13.7)Actuarial loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 54.2 (0.7)

BeneÑt obligation at December 31ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 489.9 $ 416.8

Status of the PlanProjected beneÑt obligationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(489.9) $(416.8)Unamortized prior service costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (107.3) (109.0)Unamortized net losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 142.9 95.9

Net amount recognized ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(454.3) $(429.9)

Amounts recognized in the Balance Sheet consist of:Accrued liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(454.3) $(429.9)

Assumptions as of December 31Discount rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.75% 7.25%Initial health care cost trend rateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.5% 10.0%Ultimate health care cost trend rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.0% 5.0%Number of years to ultimate trend rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 6

FC-22

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 13. TRANSACTIONS WITH AFFILIATED COMPANIES

An agreement with Ford provides for payments by Ford to Ford Credit that would maintain Ford Credit'sconsolidated income before income taxes and net income at speciÑed minimum levels. No payments weremade under the agreement during 2002, 2001, or 2000. Ford Credit and Ford formally documented their long-standing business practices in an Agreement dated as of October 18, 2001, which was included in Form 8-KÑlings of both companies. IdentiÑed below are transactions that Ford Credit undertook with Ford (and otheraÇliates) within the framework of the Agreement.

Income Statement

The eÅect of transactions with aÇliated companies included in Ford Credit's income statement were asfollows for the years ended December 31:

2002 2001 2000

(in millions)

Interest supplements and other support costs earnedfrom Ford and other aÇliate (a) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3,658.0 $4,125.2 $3,522.6

Earned insurance premiums ceded to a Ford-ownedaÇliateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (617.6) (580.6) (400.5)

Loss and loss adjustment expenses recovered from aFord-owned aÇliate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 377.8 339.0 221.4

Interest income earned from tax sharing agreementwith Ford (b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 130.0 140.0 100.0

Cost of Ford provided advice and services (c)ÏÏÏÏÏÏÏ (114.9) (135.9) (164.1)Interest expense on debt with Ford and aÇliated

companies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (76.1) (113.6) (180.5)Interest income earned on loans to FordÏÏÏÏÏÏÏÏÏÏÏÏ 33.9 48.9 85.6Employee retirement plan costs allocated to Ford

Credit from Ford (d)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.4) (0.5) (53.1)

(a) Ford Credit and its subsidiaries charge Ford for interest supplements and other support costs as they areearned, and are recorded in Ñnancing revenue. In addition to the amounts shown above, Ford Credit alsoreceived about $1 billion in 2002, $0.7 billion in 2001, and $0.3 billion in 2000, related to receivables thatwere sold in securitizations or whole-loan sale transactions. Included in the amounts reÖected in the tableabove, Ford Credit earned about $3.1 billion in 2002 and $3.8 billion in 2001 of interest supplements andother support payments in the United States and Canada. At December 31, 2002, in the United Statesand Canada, approximately $4.7 billion of interest supplements were accrued by Ford and will be receivedby Ford Credit over the terms of the related Ñnance contracts.

(b) Ford Credit and Ford revised their intercompany tax sharing agreement in 1997 eÅective for years endedafter December 31, 1994. Ford Credit recorded a deferred tax asset for amounts due from Ford under therevised agreement. Ford compensates Ford Credit for the temporary use of these funds. The interestincome earned by Ford Credit is included in other income.

(c) Ford Credit and its subsidiaries receive technical and administrative advice and services from Ford and itssubsidiaries, occupy oÇce space furnished by Ford and its subsidiaries and utilize data processingfacilities maintained by Ford. The costs for such advice and services is charged to operating expenses.

(d) Retirement beneÑts are provided under deÑned beneÑt plans for employees of Ford Credit and itssubsidiaries in the United States by the Ford General Retirement Plan and for employees of certainforeign subsidiaries by other Ford retirement plans. Employee retirement plan costs allocated to FordCredit and its subsidiaries from Ford are charged to operating expenses.

FC-23

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 13. TRANSACTIONS WITH AFFILIATED COMPANIES Ì Continued

Balance Sheet

The eÅect of transactions with aÇliated companies included in Ford Credit's balance sheet were asfollows at December 31:

2002 2001

(in millions)

Receivables purchased from certain divisions and subsidiariesof Ford ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3,454.5 $4,695.5

Investment in vehicles leased to employees of Ford and otheraÇliates (a) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 988.7 1,191.9

Outstanding loans to Ford and other aÇliates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 623.0 947.7Outstanding loans from Ford and other aÇliates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,372.8) (1,728.5)Fair values of vehicles held for resale that were purchased from

Ford and its subsidiaries (b)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,502.4 892.4

Additionally, Ford and other aÇliates provide guarantees to Ford Credit and its subsidiaries of$346.6 million and $246.7 million at December 31, 2002 and 2001, respectively, for certain Ñnancereceivables.

(a) Ford Credit has entered into a sale-leaseback agreement with Ford for vehicles leased to employees ofFord and its subsidiaries. The net investment in these vehicles is included in operating leases.

(b) Ford Credit and its subsidiaries purchase from Ford and its aÇliates certain vehicles that were previouslyacquired by Ford principally from its Öeet and rental car customers. The fair values of these vehicles heldfor resale are included in other assets.

NOTE 14. COMMITMENTS AND CONTINGENCIES

Various legal actions, governmental investigations and other proceedings and claims relating to state andfederal laws concerning Ñnance and insurance, employment-related matters and other contractual relation-ships are pending or may be instituted or asserted in the future against Ford Credit and its subsidiaries. Someof these matters are class actions or seeking class action status. Some of these matters may involvecompensatory, punitive or treble damage claims and attorneys' fees in very large amounts, or other reliefwhich, if granted, would require very large expenditures.

Litigation is subject to many uncertainties, the outcome of individual litigated matters is not predictablewith assurance and it is reasonably possible that some of the foregoing matters could be decided unfavorably toFord Credit or the subsidiary involved. Although the amount of liability at December 31, 2002 with respect tothese matters cannot be ascertained, Ford Credit believes that any resulting liability should not materiallyaÅect the consolidated Ñnancial position or results of operations of Ford Credit and its subsidiaries.

Certain subsidiaries are subject to regulatory capital requirements requiring maintenance of certainminimum capital levels that limit the abilities of the subsidiaries to pay dividends.

At December 31, 2002 Ford Credit had the following minimum rental commitments under non-cancelable operating leases (in millions): 2003 Ì $120; 2004 Ì $96; 2005 Ì $77; 2006 Ì $26; 2007 Ì $16;thereafter Ì $33. These amounts include rental commitments for certain land, buildings, machinery andequipment. In addition, Ford Credit is contractually committed to sell $2 billion of retail installment salecontracts in the Ñrst quarter of 2003 in a whole-loan sale transaction.

FC-24

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 14. COMMITMENTS AND CONTINGENCIES Ì Continued

Guarantees

On November 26, 2002, the FASB issued FIN 45, Guarantor's Accounting and Disclosure Requirementsfor Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 clariÑes the requirements ofSFAS No. 5, Accounting for Contingencies, related to a guarantor's accounting for, and disclosure of, theissuance of certain types of guarantees. For certain guarantees issued after December 31, 2002, FIN 45requires a guarantor to recognize, upon issuance of a guarantee, a liability for the fair value of the obligations itassumes under the guarantee. Guarantees issued prior to January 1, 2003 are not subject to liabilityrecognition but are subject to expanded disclosure requirements.

At December 31, 2002, the following guarantees and indemniÑcations were issued and outstanding. Theseguarantees and indemniÑcations have not been subjected to liability recognition under FIN 45 and their fairvalue is not included in the Ñnancial statements:

Guarantees of certain obligations of unconsolidated and other aÇliates: In some cases, Ford Credit hasguaranteed debt and other Ñnancial obligations of unconsolidated aÇliates, including joint ventures and Ford.Expiration dates vary from May 2003 to December 2004 or terminate on payment and/or cancellation of theobligation. A payment under these guarantees would be triggered by failure of the guaranteed party to fulÑll itsguaranteed obligations. Generally, Ford Credit is entitled to collect from the guaranteed party amounts itwould have to pay pursuant to a guarantee. However, Ford Credit's ability to collect these amounts issometimes deferred until the third party is paid in full. The maximum potential future payment under theseguarantees is approximately $60 million.

IndemniÑcations: In the ordinary course of business, Ford Credit executes contracts that includeindemniÑcations typical in the industry, which are related to diÅerent types of transactions, such as debtfunding, derivatives, the sale of receivables and the sale of businesses. These indemniÑcations might includeany of the following matters: intellectual property and privacy rights; governmental regulations and employ-ment-related issues; dealer, supplier, and other commercial contractual relationships; Ñnancial status; and taxrelated issues. Performance under these indemnities would generally be triggered by a breach of terms of thecontract or by a third party claim. Ford Credit regularly evaluates the probability of having to incur costs forothers and has appropriately accrued for expected losses that are probable. Ford Credit is party to numerousindemniÑcations and many of these indemnities do not limit potential payments, therefore Ford Credit isunable to estimate a maximum potential amount of future payments that could result from claims made underthese indemnities.

Extended Service Plans: Extended service plans are contracts Ford Credit enters into with vehiclecustomers where the customer pays a fee to extend warranty coverage beyond the base warranty period. Thesefees are reported and recognized in income over the contract period in proportion to the costs expected to beincurred in performing services under the contract. This revenue recognition methodology is based on FASBTechnical Bulletin 90-1, Accounting for Separately Priced Extended Warranty and Product MaintenanceContracts.

The following is a reconciliation of the extended service plan deferred revenue account:

2002

(in millions)

Balance, beginning of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $74Written revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 56Less: earned revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (41)

Balance, end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $89

FC-25

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 15. DERIVATIVE FINANCIAL INSTRUMENTS

Ford Credit adopted SFAS No. 133 which establishes accounting and reporting standards for derivativeinstruments and requires that all derivatives be recorded at fair value on the balance sheet, includingembedded derivatives.

Ford Credit's operations are exposed to global market risks, including the eÅects of changes in interestrates and currency exchange rates. Ford Credit uses derivatives as an integral part of its overall riskmanagement program to manage Ñnancial exposures that occur in the normal course of business. Ford Credit'sobjective is to minimize the Ñnancial exposure arising from these risks.

Adjustments to income and to stockholder's equity for the years ended December 31:

2002 2001

(in millions)

Loss before income taxes (a) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(224.6) $(250.9)Net lossÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (141.1) (157.2)Stockholder's equity (b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 262.4 (479.1)

(a) Recorded in other income

(b) Recorded in accumulated other comprehensive income/(loss)

Cash Flow Hedges

Ford Credit uses cash Öow hedges to minimize its exposure to interest rate risks. The impact to earningsassociated with discontinuance of cash Öow hedges and hedge ineÅectiveness was a gain of $0.6 million in2002 and a loss of $26.7 million in 2001.

Changes in the value of derivatives are included in other comprehensive income/(loss), a component ofstockholder's equity, and reclassiÑed to earnings at the time the associated hedged transaction impacts netincome.

Ford Credit expects to reclassify losses of approximately $163 million from stockholder's equity to netincome during the next twelve months. Consistent with Ford Credit's comprehensive, non-speculative risk-management practices, neither these nor future reclassiÑcations are anticipated to have a material eÅect onnet income.

Fair Value Hedges

Ford Credit uses derivative instruments designated as fair value hedges to hedge its exposure to interestrate risk. Changes in the value of these derivatives, along with the changes in the fair value of the underlyinghedged exposure, are recognized in net income. The impact to earnings from changes in hedging relationshipsand hedge ineÅectiveness was a charge of $141.9 million in 2002 and $132.2 million 2001.

Other Derivative Instruments

In accordance with corporate risk management policies, Ford Credit uses derivative instruments, such asforward contracts and swaps that economically hedge certain exposures (foreign currency and interest rates).In certain instances, hedge accounting is not allowed by SFAS No. 133 or is not applied by Ford Credit, whichresults in unrealized gains and losses that are recognized currently in net income and are included in theamounts reÖected above in Fair Value Hedges.

FC-26

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 16. STOCK OPTIONS

Certain Ford Credit employees participate in the stock option plans of Ford under Ford's 1990 Long-Term Incentive Plan and 1998 Long-Term Incentive Plan (""Plans''). Grants may be made under the 1998Plan through April 2008. No further grants may be made under the 1990 Plan. Options granted in 1997 underthe 1990 Plan and options granted under the 1998 Plan become exercisable 33% after one year from the dateof grant, 67% after two years and in full after three years. In general, options granted prior to 1997 under the1990 Plan became exercisable 25% after one year from the date of grant, 50% after two years, 75% after threeyears and in full after four years. Options under both Plans expire after 10 years.

The estimated fair value as of date of grant of options granted in 2002, 2001, and 2000 using the Black-Scholes option-pricing model, was as follows:

2002 2001 2000

Estimated fair value per share of options granted duringthe year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $5.76 $8.88 $6.27

Assumptions:Annualized dividend yield ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.5% 4.0% 4.9%Common stock price volatilityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34.8% 43.9% 38.8%Risk-free rate of returnÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.1% 5.1% 6.3%Expected option term (in years)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 6 5

Ford Credit applies the recognition and measurement principles of Accounting Principles Board OpinionNo. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for the plans. Nostock-based employee compensation expense is reÖected in net income as all options granted under the planshad an exercise price equal to the market value of the underlying common stock on the date of grant. Ifcompensation cost had been determined based on the estimated fair value of options granted since 1995, thepro forma eÅects on Ford Credit's net income would not have been material.

Information concerning stock options for Ford Credit's employees is as follows (shares in thousands):

2002 2001 2000

Weighted Weighted WeightedAverage Average AverageExercise Exercise Exercise

Shares Subject to Option Shares Price Shares Price Shares Price

Outstanding at beginning of period ÏÏÏÏÏÏÏÏÏÏ 8,195 $22.63 7,287 $19.95 3,773 $34.56New grants (based on fair value of common

stock at dates of grant)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,810 16.30 1,989 30.17 1,647 23.02Visteon adjustment (a)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 140 ÌValue Enhancement Plan (b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 2,927 ÌTransferred in to Ford Credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 342 25.19 54 26.25 359 15.43Exercised (c) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (88) 14.46 (638) 27.83 (262) 27.89Transferred out of Ford CreditÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (305) 25.52 (105) 26.41 (887) 17.72Terminated and expired ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (329) 24.21 (392) 25.95 (410) 30.09

Outstanding at end of period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,625 21.02 8,195 22.63 7,287 19.95Outstanding but not exercisable ÏÏÏÏÏÏÏÏÏÏÏÏÏ (4,388) Ì (3,291) Ì (2,995) Ì

Exercisable at end of period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,237 $21.29 4,904 $18.87 4,292 $16.00

(a) Outstanding stock option grants were adjusted to restore the option holder's economic position as a resultof the Visteon spin-oÅ on June 28, 2000.

FC-27

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 16. STOCK OPTIONS Ì Continued

(b) Outstanding stock option grants were adjusted to restore the option holder's economic position as a resultof the Value Enhancement Plan (VEP) on August 2, 2000.

(c) Exercised at prices ranging from $8.58 to $17.92 during 2002, $17.19 to $31.25 during 2001, and $24.44 to$31.43 during 2000.

Details on various option price ranges are as follows (shares in thousands):

Outstanding Exercisable Options

Weighted Weighted WeightedOption Price Average Life Average Average

Range Shares (Years) Price Shares Price

$ 9.72 Ì 9.78ÏÏÏÏÏÏÏÏÏÏÏ 237 9.8 $ 9.77 0 $ 0.0011.06 Ì 12.53ÏÏÏÏÏÏÏÏÏÏÏ 2,242 3.1 12.17 2,242 12.1615.11 Ì 16.91ÏÏÏÏÏÏÏÏÏÏÏ 2,566 9.0 16.88 33 15.7117.61 Ì 26.78ÏÏÏÏÏÏÏÏÏÏÏ 2,670 6.2 22.67 2,206 22.6728.36 Ì 33.14ÏÏÏÏÏÏÏÏÏÏÏ 2,910 7.3 30.86 1,756 31.32

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,625 $21.02 6,237 $21.29

NOTE 17. SEGMENT INFORMATION

Ford Credit manages its operations through two segments, Ford Credit North America and Ford CreditInternational. Ford Credit North America includes the operations in the United States and Canada. FordCredit International includes all other countries. In the Third Quarter of 2000, Ford Credit merged thePersonal Financial Services segment into these segments.

Ford Credit Ford CreditNorth Ford Credit Eliminations/ Financial

America International ReclassiÑcations Statements

(in millions)

2002Revenue (a)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $23,166.8 $3,571.1 $(3,767.8) $22,970.1Income (b)Income before income taxesÏÏÏÏÏÏÏÏ 1,669.9 540.9 (241.1) 1,969.7Provision for income taxes ÏÏÏÏÏÏÏÏÏ 644.9 189.3 (102.9) 731.3Income from continuing operationsÏÏ 1024.9 351.6 (141.1) 1,235.4Other disclosures (a)Depreciation on operating leases ÏÏÏÏ 7,964.5 548.1 Ì 8,512.6Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,417.5 1,501.7 (1,990.5) 6,928.7Finance receivables (including net

investment operating leases) ÏÏÏÏÏ 158,658.2 39,248.5 (71,639.5) 126,267.2Total assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 175,973.8 41,802.7 (47,607.4) 170,169.1

FC-28

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 17. SEGMENT INFORMATION Ì Continued

Ford Credit Ford CreditNorth Ford Credit Eliminations/ Financial

America International ReclassiÑcations Statements

(in millions)

2001Revenue (a)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $24,524.3 $3,578.5 $(3,257.3) $24,845.5Income (b)Income before income taxesÏÏÏÏÏÏÏÏ 1,527.2 390.2 (421.5) 1,495.9Provision for income taxes ÏÏÏÏÏÏÏÏÏ 569.0 136.6 (42.1) 663.5Income from continuing operationsÏÏ 958.2 253.6 (380.8) 831.0Other disclosures (a)Depreciation on operating leases ÏÏÏÏ 7,966.2 496.8 1.0 8,464.0Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,968.3 1,752.7 (1,798.6) 8,922.4Finance receivables (including net

investment operating leases) ÏÏÏÏÏ 175,370.8 33,585.0 (63,528.5) 145,427.3Total assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 183,278.3 34,277.0 (44,458.9) 173,096.42000Revenue (a)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $21,361.1 $3,713.9 $(1,994.5) $23,080.5Income (b)Income before income taxesÏÏÏÏÏÏÏÏ 2,182.6 317.4 3.6 2,503.6Provision for income taxes ÏÏÏÏÏÏÏÏÏ 813.0 111.1 4.5 928.6Income from continuing operationsÏÏ 1,369.6 206.3 (33.8) 1,542.1Other disclosures (a)Depreciation on operating leases ÏÏÏÏ 7,016.9 808.3 (330.6) 7,494.6Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,640.3 1,594.5 (1,323.3) 8,911.5Finance receivables (including net

investment operating leases) ÏÏÏÏÏ 159,961.1 29,279.1 (30,445.6) 158,794.6Total assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 165,301.8 31,429.1 (22,473.1) 174,257.8

(a) Revenue and Other Disclosures Ì operating segments are presented on a managed asset basis (managedassets include owned and securitized receivables) for these items; therefore eliminations/reclassiÑcationsincludes adjustments to reconcile to Ñnancial statement amounts.

(b) Income Ì in 2001, eliminations/reclassiÑcations largely reÖects the impact of SFAS No. 133 andRevitalization Plan charges related to strategic partnering actions in Brazil, government initiatives inArgentina related to currency devaluation and consumer debt, and voluntary employee separation costs inNorth America. In 2000, eliminations/reclassiÑcations largely reÖects minority interest in income ofconsolidated subsidiaries; minority interest was acquired in the fourth quarter of 2000.

FC-29

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 17. SEGMENT INFORMATION Ì Continued

Total revenue, income before income taxes, income from continuing operations, Ñnance receivables, andassets identiÑable with operations in the United States, Europe, and other foreign locations were as follows:

2002 2001 2000

(in millions)

RevenueUnited States operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 18,212.0 $ 20,163.9 $ 18,421.3European operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,228.5 2,057.8 2,029.5Other foreign operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,529.6 2,623.8 2,629.7

Total revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 22,970.1 $ 24,845.5 $ 23,080.5

Income before income taxesUnited States operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,244.4 $ 1,113.1 $ 2,069.4European operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 338.4 296.9 286.2Other foreign operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 386.9 85.9 148.0

Total income before income taxes ÏÏÏÏÏÏÏÏÏÏÏ $ 1,969.7 $ 1,495.9 $ 2,503.6

Income from continuing operationsUnited States operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 747.8 $ 720.4 $ 1,278.6European operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 214.4 155.5 192.5Other foreign operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 273.2 (44.9) 71.0

Total income from continuing operations ÏÏÏÏÏ $ 1,235.4 $ 831.0 $ 1,542.1

Finance receivables at December 31 (including netinvestment in operating leases)United States operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 86,010.3 $107,908.5 $123,602.2European operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,459.4 19,885.7 18,182.4Other foreign operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,797.5 17,633.1 17,010.0

Total Ñnance receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $126,267.2 $145,427.3 $158,794.6

Assets at December 31United States operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $124,544.1 $130,078.4 $133,899.7European operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28,667.6 25,076.6 22,268.0Other foreign operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,957.4 17,941.4 18,090.1

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $170,169.1 $173,096.4 $174,257.8

FC-30

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì Continued

NOTE 18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected Ñnancial data by calendar quarter were as follows:

First Second Third FourthQuarter Quarter Quarter Quarter Full Year

(in millions)

2002Total Ñnancing revenue ÏÏÏÏÏÏÏÏÏ $5,074.2 $4,900.6 $4,858.0 $4,610.1 $19,442.9Depreciation on operating leases 2,151.5 2,111.0 2,089.5 2,160.6 8,512.6Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,874.4 1,741.3 1,737.1 1,575.9 6,928.7Total Ñnancing margin

and revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,916.5 1,877.5 1,792.3 1,942.5 7,528.8Provision for credit losses ÏÏÏÏÏÏÏ 890.9 660.1 711.5 709.7 2,972.2Income from

continuing operationsÏÏÏÏÏÏÏÏÏ 248.8 326.1 288.2 372.3 1,235.4

2001Total Ñnancing revenue ÏÏÏÏÏÏÏÏÏ $5,727.3 $5,777.0 $5,610.8 $5,405.1 $22,520.2Depreciation on operating leases 2,024.9 2,154.7 2,121.1 2,163.3 8,464.0Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,417.3 2,339.5 2,140.2 2,025.4 8,922.4Total Ñnancing margin

and revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,879.5 1,731.9 2,017.4 1,830.3 7,459.1Provision for credit losses ÏÏÏÏÏÏÏ 616.1 484.4 801.5 1,449.6 3,351.6Income from

continuing operationsÏÏÏÏÏÏÏÏÏ 391.6 366.4 374.2 (301.2) 831.0

FC-31

Exhibit 10-D

SUPPORT AGREEMENT dated as of August 13, 2002 (this ""Agreement'') between FORD MOTORCREDIT COMPANY, a Delaware corporation (""Ford Credit'') and FCE BANK PLC, a corporationorganized under the laws of England (""FCE Bank'') Ford Credit is an indirect wholly owned subsidiary ofFord Motor Company (""Ford''). Ford Credit International, Inc. (""FCII'') a wholly owned subsidiary of FordCredit, owns a 100% ownership interest in FCE Bank. FCE Bank's primary business is to support the sale ofFord vehicles in Europe through the Ford dealer network. In order to facilitate FCE Bank's continued supportof Ford's sales in Europe, Ford Credit and FCE Bank agree as follows:

1. The terms of this Agreement shall commence on January 1, 2003 and terminate by its terms,unless otherwise extended by the parties hereto in writing, at the close of business on December 31, 2005.

2. Ford Credit shall, at all times during the term of this Agreement, maintain, either directly orindirectly through one or more subsidiaries, a control interest of not less than 75% of the capital of FCEBank.

3(a). Ford Credit shall make a payment contribution, to the extent required, to FCE Bank for eachquarterly accounting period during the term of this Agreement in an amount suÇcient to cause the networth (paid-in capital plus retained earnings) of FCE Bank for such calendar quarter, as shown on theÑnancial statements on a U.S. basis (prepared in accordance with U.S. generally accepted accountingprinciples) of FCE Bank for such quarter, to be not less than US$500 million. Such paymentcontribution, if required, will be made not later than 30 days after the end of such quarterly accountingperiod.

3(b). In the event that Ford Credit shall have made a contribution to FCE Bank underparagraph 3(a) with respect to any quarterly accounting period of, and FCE Bank thereafter shall have,at the end of the calendar year in which the contribution has been made, a net worth in excess ofUS$500 million after giving eÅect to any dividends paid by FCE Bank to its shareholders during or at theend of such year, then FCE Bank shall, at Ford Credit's discretion, make a repayment to Ford Creditequal to the lesser of (i) such excess or (ii) the aggregate of any contribution made by Ford Credit toFCE Bank under paragraph 3(a) during such year.

4. FCE Bank shall continue to make wholesale inventory and retail Ñnancing accommodationsgenerally available to dealers in vehicles manufactured or sold by Ford and other manufacturers and totheir customers during the term of this Agreement to no less an extent than such services were madeavailable during 1999 by the companies or businesses that are now included as part of FCE Bank.

5. All determinations hereunder shall be made in accordance with U.S. generally acceptedaccounting principles.

6. This Agreement contains the entire agreement between the parties hereto with respect to thetransactions contemplated hereby and shall supersede all prior agreements between the parties heretowith respect to the subject matter hereto.

7. This Agreement shall be governed by and construed under the laws of England.

8. The terms of this Agreement shall not be waived, altered, modiÑed, amended, supplemented orterminated in any manner whatsoever except by a written instrument signed by each of the parties hereto,provided, however, that Ford Credit unilaterally, may orally waive any obligation of FCE Bank to make arepayment under paragraph 3(b) hereof.

9. No person shall have any right by virtue of the Contracts (Rights of Third Parties) Act 1999 toenforce any term (express or implied) of this Agreement.

10-1

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be fully executed as of theday and year Ñrst above written.

FORD MOTOR CREDIT COMPANY

By: /s/ DAVID COSPER

Dave Cosper

FCE BANK PLC

By: /s/ SCOTT STEVENS

Scott Stevens

10-2

Exhibit 12

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIESCALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES

For the Years Ended December 31,

2002 2001 2000 1999 1998

(in millions)

Earnings

Income before income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,969.7 $ 1,495.9 $ 2,503.6 $1,374.7 $1,918.5

Less equity in net income/

(loss) of aÇliated companies ÏÏÏÏÏÏÏÏÏÏÏÏ 13.0 4.9 (22.0) (24.9) 2.3

Fixed charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,905.0 8,893.7 8,920.7 7,206.7 6,935.9

Earnings before Ñxed charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $8,861.7 $10,384.7 $11,446.3 $8,606.3 $7,852.1

Fixed charges

Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $6,867.3 $ 8,856.7 $ 8,890.4 $7,182.0 $6,910.4

Rents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37.7 37.0 30.3 24.7 25.5

Total Ñxed chargesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $6,905.0 $ 8,893.7 $ 8,920.7 $7,206.7 $6,935.9

Ratio of earnings to Ñxed charges ÏÏÏÏÏÏÏÏÏÏ 1.28 1.17 1.28 1.19 1.13

12-1

Exhibit 23

CONSENT OF PRICEWATERHOUSECOOPERS LLP

Re: Ford Motor Credit Company Registration StatementNos. 333-91953, 333-92595, 333-45015, 333-50090, 333-75234 and 333-86832 on Form S-3

We hereby consent to the incorporation by reference in the above Ford Motor Credit CompanyRegistration Statements of our report dated January 17, 2003 on our audits of the consolidated Ñnancialstatements of Ford Motor Credit Company and Subsidiaries at December 31, 2002 and 2001 and for each ofthe three years in the period ended December 31, 2002, which appears in this Form 10-K.

/s/ PRICEWATERHOUSECOOPERS LLP

Detroit, MichiganMarch 17, 2003

23-1

Exhibit 24

FORD MOTOR CREDIT COMPANY

CERTIFICATE OF SECRETARY

The undersigned, Adam B. Frankel, Assistant Secretary of FORD MOTOR CREDIT COMPANY, aDelaware corporation (the ""Company''), DOES HEREBY CERTIFY that the following resolutions wereduly adopted by the Board of Directors of the Company on March 10, 2003 by unanimous written consent, andsuch resolutions have not been amended, modiÑed, rescinded or revoked and are in full force and eÅect on thedate hereof.

WITNESS my hand and the seal of the Company this 17th day of March, 2003.

/s/ ADAM B. FRANKEL

Adam B. FrankelAssistant Secretary

®Corporate Seal©

24-1

FORD MOTOR CREDIT COMPANY

CONSENT OF DIRECTORS

The undersigned, constituting all the directors of Ford Motor Credit Company (the ""Company'') herebyconsent, as of the 10th day of March, 2003, to the adoption of the resolutions set forth below:

RESOLUTIONS

RESOLVED, That preparation of an annual report of the Company on Form 10-K for the year 2002,including exhibits or Ñnancial statements and schedules and other documents in connection therewith(collectively, the ""Annual Report''), to be Ñled with the Securities and Exchange Commission (the""Commission'') under the Securities Exchange Act of 1934, as amended, be and it hereby is in all respectsauthorized and approved; that the directors and appropriate oÇcers of the Company, and each of them, be andhereby are authorized to sign and execute on their own behalf, or in the name and on behalf of the Company,or both, as the case may be, such Annual Report, and any and all amendments thereto, with such changestherein as such directors and oÇcers may deem necessary, appropriate or desirable, as conclusively evidencedby their execution thereof; and that the appropriate oÇcers of the Company, and each of them, be and herebyare authorized to cause such Annual Report and any such amendments, so executed, to be Ñled with theCommission.

RESOLVED, That each oÇcer and director who may be required to sign and execute such AnnualReport or any amendment thereto or document in connection therewith (whether in the name and on behalfof the Company, or as an oÇcer or director of the Company, or otherwise), be and hereby is authorized toexecute a power of attorney appointing G.C. Smith, B. Boerio, T. J. Kuehn, D. Korman, S. J. Thomas andA. B. Frankel, and each of them, severally, his or her true and lawful attorney or attorneys to sign in his or hername, place and stead in any such capacity such Annual Report and any and all amendments thereto, and toÑle the same with the Commission, each of said attorneys to have power to act with or without the other, andto have full power and authority to do and perform in the name and on behalf of each of said oÇcers anddirectors who shall have executed such power of attorney, every act whatsoever which such attorneys, or any ofthem, may deem necessary, appropriate or desirable to be done in connection therewith as fully and to allintents and purposes as such oÇcers or directors might or could do in person.

Signature Title Date

/s/ GREGORY C. SMITH Director, Chairman of the Board March 10, 2003

(Gregory C. Smith)

/s/ BIBIANA BOERIO Director March 10, 2003

(Bibiana Boerio)

/s/ TERRY D. CHENAULT Director March 10, 2003

(Terry D. Chenault)

/s/ MICHAEL E. BANNISTER Director March 10, 2003

(Michael E. Bannister)

/s/ ALLAN D. GILMOUR Director March 10, 2003

(Allan D. Gilmour)

/s/ MALCOLM S. MACDONALD Director March 10, 2003

(Malcolm S. Macdonald)

24-2

POWER OF ATTORNEY WITH RESPECT TO

ANNUAL REPORT ON FORM 10-KOF FORD MOTOR CREDIT COMPANY

KNOW ALL MEN BY THESE PRESENTS that each person that is a director of FORD MOTORCREDIT COMPANY, does hereby constitute and appoint G.C. Smith, B. Boerio, T. J. Kuehn, D. Korman,S. J. Thomas and A. B. Frankel, and each of them, severally, his or her true and lawful attorney and agent atany time and from time to time to do any and all acts and things and execute, in his or her name (whether onbehalf of FORD MOTOR CREDIT COMPANY, or as an oÇcer or director of FORD MOTOR CREDITCOMPANY, or by attesting the seal of FORD MOTOR CREDIT COMPANY, or otherwise) any and allinstruments which said attorney and agent may deem necessary or advisable in order to enable FORDMOTOR CREDIT COMPANY to comply with the Securities Exchange Act of 1934, as amended, and anyrequirements of the Securities and Exchange Commission in respect thereof, in connection with the AnnualReport of FORD MOTOR CREDIT COMPANY on Form 10-K for the year 2002 and any and allamendments thereto, as heretofore duly authorized by the Board of Directors of FORD MOTOR CREDITCOMPANY, including speciÑcally but without limitation thereto, power and authority to sign his name(whether on behalf of FORD MOTOR CREDIT COMPANY, or as an oÇcer or director of FORDMOTOR CREDIT COMPANY, or by attesting the seal of FORD MOTOR CREDIT COMPANY, orotherwise) to such Annual Report and to any such amendments to be Ñled with the Securities and ExchangeCommission, or any of the exhibits or Ñnancial statements and schedules Ñled therewith, and to Ñle the samewith the Securities and Exchange Commission; and such person does hereby ratify and conÑrm all that saidattorneys and agents, and each of them, shall do or cause to be done by virtue hereof. Any one of saidattorneys and agents shall have, and may exercise, all the powers hereby conferred.

24-3

Exhibit 99.1

Sections of Items 1, 3, 6, 7 and 7A of Ford Motor Company's Annual Report on Form 10-K for the yearended December 31, 2002. (EXCLUDES INFORMATION DIRECTLY CONCERNING FORD MO-TOR CREDIT COMPANY THAT IS ALREADY DISCLOSED IN FORD MOTOR CREDIT COM-PANY'S ANNUAL REPORT ON FORM 10-K. ALL REFERENCES TO WE, OUR AND US IN THISEXHIBIT 99.1 REFER TO FORD MOTOR COMPANY.)

ITEM 1. BUSINESS

Ford Motor Company (referred to herein as ""Ford'', the ""Company'', ""we'', ""our'' or ""us'') wasincorporated in Delaware in 1919. We acquired the business of a Michigan company, also known as FordMotor Company, incorporated in 1903 to produce and sell automobiles designed and engineered by HenryFord. We are the world's second-largest producer of cars and trucks combined. We and our subsidiaries alsoengage in other businesses, including Ñnancing and renting vehicles and equipment.

All of our periodic report Ñlings with the Securities and Exchange Commission (""SEC'') pursuant toSection 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available, free ofcharge, through our website located at www.ford.com, including our annual report on Form 10-K, quarterlyreports on Form 10-Q, and current reports on Form 8-K, and any amendments to those reports. These reportsand amendments are available through our website as soon as reasonably practicable after we electronicallyÑle such report or amendment with the SEC.

To access our SEC reports or amendments, log onto our website and click on the following link on eachsuccessive screen.

‚ ""Investor Information''

‚ ""Company Financials''

‚ ""U.S. S.E.C. EDGAR''

‚ ""Click here to continue to view SEC Filings''

You will then see a list of reports Ñled by us with the SEC. Click on the report you desire to access.

Overview

Segments. Our business is divided into two business sectors: the Automotive sector and the FinancialServices sector. We have managed these sectors as three primary operating segments as described below.

Business Sectors Operating Segments Description

Automotive: Automotive design, development, manufacture, sale, and serviceof cars and trucks

Financial Services: Ford Motor Credit Company vehicle-related Ñnancing, leasing, and insurance

The Hertz Corporation renting of cars and light trucks and renting industrialand construction equipment, and other activities

We provide Ñnancial information (such as, revenues, income, and assets) for each of these businesssectors and operating segments in three areas of this Report: (1) Item 6. ""Selected Financial Data'' onpages 38 through 40; (2) Item 7. ""Management's Discussion and Analysis of Financial Condition and Resultsof Operations'' on pages 41 through 64, and (3) Notes 21 and 22 of the Notes to our Financial Statementslocated at the end of this Report. Financial information relating to certain geographic areas is also included inthe above-mentioned areas of this Report.

Since our adoption of Statement of Financial Accounting Standard (""SFAS'') No. 131 in 1998, we havepresented a single Automotive segment in the Notes to our Financial Statements. This presentation is basedon the organizational structure established under ""Ford 2000'', a management and business initiative we Ñrstimplemented in 1996. Ford 2000 envisioned a global automotive business that captured in full the synergy and

99.1-1

scale advantages of a multi-line, multi-jurisdiction, large volume manufacturer. Thus, Ford 2000 establishedglobal Automotive functions, including product development, purchasing, manufacturing and sales andmarketing, that were managed centrally across our various brands and markets. Our experience withFord 2000 has conÑrmed the value of a global perspective, and certain of our core functions, such as productdevelopment and purchasing, have remained under central direction. In other areas, however, our managementstructure has evolved toward a greater alignment with brands and markets. That evolution is reflected in our recentannouncement of a new management structure for our Automotive operations under the leadership of JamesPadilla, Executive Vice President for North American Automotive Operations, and David Thursfield, ExecutiveVice President for International Automotive Operations. Messrs. Padilla and Thursfield will continue to pursue thesynergies and scale advantages available from global coordination and integration. At the same time, they each willhave independent responsibility for the performance of the Automotive operations under their control, and thefinancial results of those operations will be separately measured, stated and evaluated.

In line with this new management structure, we will, beginning with our Quarterly Report on Form 10-Qfor the quarter ended March 31, 2003, expand the number of operating segments we present in the Notes toour Financial Statements by creating two segments within our Automotive sector Ì North America andInternational. The North America segment will include Automotive operations in the U.S., Canada andMexico involving the design, development, manufacture, sale and service of cars and trucks under our Ford,Lincoln and Mercury brands. The International segment will include these Automotive operations outside ofNorth America under our Ford brand, as well as the global operations (including North America) of ourPremier Automotive Group brands (i.e., Volvo, Jaguar, Land Rover and Aston Martin). Our intention is todiscuss the results of operations of the business units within the International Automotive segment (i.e, Ford-brand Europe, Ford-brand South America, Ford-brand Asia PaciÑc and Premier Automotive Group) infuture periodic reports, beginning with our Quarterly Report on Form 10-Q for the quarter ended March 31,2003. This discussion will occur in the ""Management's Discussion and Analysis of Financial Condition andResults of Operations'' section.

Revitalization Plan

Following an extensive review of all of our operations, in particular those in North and South America, onJanuary 11, 2002, we announced a revitalization plan (the ""Revitalization Plan'') that includes the followingelements:

‚ New products: A product-led revitalization program that will result in the introduction of 20 new orfreshened products in the United States annually between January 2002 and mid-decade.

‚ Plant capacity: Reduction of North American installed Ñnal assembly capacity by about one millionvehicles by mid-decade to realign capacity with market conditions. Manufacturing plans over the nextseveral years include closing Ñve plants (Edison Assembly, Ontario Truck Plant, St. Louis Assembly,Cleveland Aluminum Casting and Vulcan Forge) and downsizing and shift and line speed changes atother plants.

‚ Hourly workforce: About 12,000 hourly employees in North America will be aÅected by actions to becompleted by mid-decade.

‚ Salaried workforce: Our 2001 voluntary separation program for salaried employees and other relatedactions resulted in a 3,500-person workforce reduction in North America. An additional 1,500-personsalaried workforce reduction was achieved in 2002 to reach the goal of 5,000.

‚ Global workforce: More than 35,000 employees will be aÅected by combined actions around theworld by mid-decade, including selected actions prior to 2002. These include: 21,500 in NorthAmerica Ì 15,000 hourly, 5,000 salaried and 1,500 agency employees Ì and 13,500 in the rest of theworld.

‚ Cost Reductions: A total of $6 billion of cost reductions related to material costs, overhead reductionsand improvements in capacity utilization by mid decade.

99.1-2

‚ Discontinued low-margin models: The Mercury Cougar, Mercury Villager, Lincoln Continental andmost models of the Ford Escort were discontinued in 2002.

‚ Beyond North America: Revitalization plans beyond North American automotive operations includethe continued implementation of the European transformation strategy, the Premier AutomotiveGroup strategy, the turnaround in South America and a revised direction for Ford Motor CreditCompany.

‚ Divestitures: We sold non-core assets and businesses that resulted in cash proceeds received in 2002of $930 million and entered into commitments from third parties to receive more than $70 million in2003.

Progress on Revitalization Plan. Overall, we are on track to achieve the objectives contained in ourRevitalization Plan. For a discussion of our progress with respect to the Revitalization Plan, see Item 7.""Management's Discussion and Analysis of Financial Condition and Results of Operations Ì Outlook''.

AUTOMOTIVE SECTOR

Generally. We sell cars and trucks throughout the world. In 2002, we sold 6,973,000 vehiclesthroughout the world. Our automotive vehicle brands include Ford, Mercury, Lincoln, Volvo, Jaguar, LandRover, and Aston Martin.

Substantially all of our cars, trucks and parts are marketed through retail dealers in North America, andthrough distributors and dealers outside of North America. At December 31, 2002, the approximate numberof dealers and distributors worldwide distributing our vehicle brands was as follows: Ford, 13,000; Mercury,2,141; Lincoln, 1,561; Volvo, 2,500; Jaguar, 787; Land Rover, 1,808; Aston Martin, 100. Because manydealerships distribute more than one of our brands from the same sales location, a single dealership may becounted under more than one brand in the previous sentence. In addition to the products we sell to our dealersfor retail sale, we also sell cars and trucks to our dealers for sale to Öeet customers, including daily rentalcompanies, commercial Öeet customers, leasing companies and governments. Sales to all of our Öeetcustomers in the United States in the aggregate have represented between 22% and 23% of our total UnitedStates car and truck sales for the last Ñve years. We do not depend on any single customer or small group ofcustomers to the extent that the loss of such customer or group of customers would have a material adverseeÅect on our business.

In addition to producing and selling cars and trucks, we also provide our customers with after-the-salevehicle services and products, such as maintenance and light repair, heavy repair, collision, vehicle accessoriesand extended repair service products. In North America, we market these services under the Quality CareSM

brand and market original equipment replacement parts under the MotorcraftSM brand.

The worldwide automotive industry, Ford included, is aÅected signiÑcantly by a number of factors overwhich we have little control, including general economic conditions. In the United States, the automotiveindustry is a highly-competitive, cyclical business that has a wide variety of product oÅerings. The number ofcars and trucks sold to retail and Öeet buyers (commonly referred to as ""industry demand'') can varysubstantially from year to year. In any year, industry demand depends largely on general economic conditions,the cost of purchasing and operating cars and trucks, and the availability and cost of credit and fuel. Industrydemand also reÖects the fact that cars and trucks are durable items that people generally can wait to replace.

Our unit sales vary with the level of total industry demand and our share of that industry demand. Ourshare is inÖuenced by how our products compare with those oÅered by other manufacturers based on manyfactors, including price, quality, styling, reliability, safety, and functionality. Our share also is aÅected by ourtiming of new model introductions and manufacturing capacity limitations. Our ability to satisfy changingconsumer preferences with respect to type or size of vehicle and its design and performance characteristics canimpact our sales and earnings signiÑcantly.

99.1-3

The proÑtability of vehicle sales is aÅected by many factors, including the following:

‚ unit sales volume

‚ the mix of vehicles and options sold

‚ the margin of proÑt on each vehicle sold

‚ the level of ""incentives'' (price discounts) and other marketing costs

‚ the costs for customer warranty claims and additional service actions

‚ the costs for safety, emission and fuel economy technology and equipment

‚ the ability to manage costs

‚ the ability to recover cost increases through higher prices

Further, because Ford and other manufacturers have a high proportion of costs that are Ñxed (includingrelatively Ñxed labor costs), relatively small changes in unit sales volumes can dramatically aÅect overallproÑtability. Therefore, should industry demand soften because of slowing or negative economic growth in themajor markets in which we operate, or should our share of total industry sales decline, our proÑtability will beadversely aÅected.

Most of the factors that aÅect the United States automotive industry and its sales volumes andproÑtability are equally relevant outside the United States.

Competitive Position. The worldwide automotive industry consists of many producers, with no singledominant producer. Certain manufacturers, however, account for the major percentage of total sales withinparticular countries, especially their countries of origin. Detailed information regarding our competitiveposition in the principal markets where we compete can be found below as part of the overall discussion of theautomotive industry in those markets.

Governmental Regulation. The worldwide automotive industry also is aÅected signiÑcantly by asubstantial amount of costly governmental regulation. In the United States and Europe, for example,governmental regulation has arisen primarily out of concern for the environment, for greater vehicle safety,and for improved fuel economy. Many governments also regulate local content and/or impose importrequirements as a means of creating jobs, protecting domestic producers, or inÖuencing their balance ofpayments. A detailed discussion of the material government regulation in the United States and Europeimpacting our business is set forth below under the heading ""Governmental Standards''.

Seasonality. There generally is no material seasonal impact on our business. To the extent that we doexperience some Öuctuation in the business of a seasonal nature, it has generally occurred in the third quarterand primarily is the result of the annual two to three week summer shut down of our manufacturing facilitiesduring that quarter. As a result of these production shut downs, operating results for the third quarter typicallyare less favorable than those of the other quarters.

Raw Materials. We purchase a wide variety of raw materials for use in the production of our vehiclesfrom numerous suppliers around the world. These raw materials include non-ferrous metals (e.g., aluminum),precious metals (e.g., palladium, platinum and rhodium), ferrous alloys (e.g., steel), energy (e.g., natural gas)and resins (e.g., polypropylene). We believe that we have adequate supplies or sources of availability of theraw materials necessary to meet our needs. However, there are risks and uncertainties with respect to thesupply of certain of these raw materials that could impact their availability in suÇcient quantities to meet ourneeds. These risks and uncertainties include industry manufacturing capacity restraints in the United Statessteel industry as a result of the Ñling for bankruptcy protection by a number of domestic steel manufacturers.In addition, because the grade of steel used in our products is not generic, but rather is often uniquely speciÑedfor each part, there is a limited number of suppliers, or even a single supplier, for each type of steel purchased.In the event of an interruption of supply of a given type of speciÑed steel, replacement steel would not bereadily available on the market as it would take some amount of time for a substitute supplier to tailor theirmanufacturing processes to produce steel that meets our speciÑcations. A prolonged disruption of the supply of

99.1-4

steel or any other raw materials used for the production of our vehicles could have a substantial adverse eÅecton us.

Backlog Orders. We generally produce and ship our products on average within approximately 20 daysafter an order is deemed to become Ñrm. Therefore, no signiÑcant amount of backlog orders accumulatesduring any period.

Intellectual Property. We own, or hold licenses to use, numerous patents, copyrights and trademarks ona global basis. Our policy is to protect our competitive position by, among other methods, Ñling U.S. andinternational patent applications to protect technology and improvements that we consider important to thedevelopment of our business. As such, we have generated a large number of patents related to the operation ofour business and expect this portfolio to continue to grow as we actively pursue additional technologicalinnovation. We currently have over 10,000 active patents and pending patent applications globally, with anaverage age for patents in our active patent portfolio being 71/2 years. In addition to this intellectual property,we also rely on our proprietary knowledge and ongoing technological innovation to develop and maintain ourcompetitive position. While we believe these patents, patent applications and know-how, in the aggregate, tobe important to the conduct of our business, and we obtain licenses to use certain intellectual property ownedby others, none is individually considered material to our business. Similarly, we own numerous trademarksand service marks that contribute to the identity and recognition of our company and its products and servicesglobally. Certain of these marks are integral to the conduct of our business, the loss of which could have amaterial adverse eÅect on our business.

Following is a discussion of the automotive industry in the principal markets where we compete:

United States

Sales Data. The following table shows U.S. industry sales of cars and trucks for the years indicated:

U. S. Industry Sales(millions of units)

Years Ended December 31,

2002 2001 2000 1999 1998

Cars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.1 8.4 8.8 8.7 8.2

Trucks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9.0 9.1 9.0 8.7 7.8

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17.1 17.5 17.8 17.4 16.0

We classify cars by small, medium, large and premium segments and trucks by compact pickup, bus/van(including minivans), full-size pickup, sport utility vehicles and medium/heavy segments. The large andpremium car segments and the bus/van, full-size pickup and sport utility vehicle segments include theindustry's most proÑtable vehicle lines. The term ""bus'' as used in this discussion refers to vans designed tocarry passengers. The following tables show the proportion of United States car and truck unit sales by

99.1-5

segment for the industry (including both domestic and foreign-based manufacturers) and Ford for the yearsindicated:

U. S. Industry Vehicle Sales by Segment

Years Ended December 31,

2002 2001 2000 1999 1998

Cars

Small ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16.0% 16.7% 16.7% 16.1% 16.9%

Medium ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21.4 21.6 22.9 23.8 23.6

Large ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.2 2.7 2.9 3.2 3.7

Premium ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.7 7.2 7.2 6.8 6.8

Total U.S. Industry Car SalesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 47.3 48.2 49.7 49.9 51.0

Trucks

Compact Pickup ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.6% 5.2% 5.9% 6.2% 6.7%

Bus/VanÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.6 8.8 10.0 10.1 10.1

Full-Size Pickup ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12.7 13.2 12.4 12.7 12.4

Sport Utility VehiclesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25.2 23.0 19.8 18.5 17.5

Medium/HeavyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.6 1.6 2.2 2.6 2.3

Total U.S. Industry Truck Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52.7 51.8 50.3 50.1 49.0

Total U.S. Industry Vehicle Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.0% 100.0% 100.0% 100.0% 100.0%

Ford Vehicle Sales by Segment in U.S.

Years Ended December 31,

2002 2001 2000 1999 1998

Cars

Small ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12.5% 14.0% 14.5% 13.5% 13.1%

Medium ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11.9 11.5 13.0 15.5 16.7

Large ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.4 5.2 5.1 5.7 5.7

Premium ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.8 7.0 7.5 6.2 4.2

Total Ford U.S. Car Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36.6 37.7 40.1 40.9 39.7

Trucks

Compact Pickup ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.2% 6.9% 7.9% 8.4% 8.4%

Bus/VanÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9.1 9.1 10.5 11.0 11.1

Full-Size Pickup ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22.5 22.9 20.9 20.9 21.3

Sport Utility VehiclesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25.4 23.2 20.4 18.5 19.1

Medium/HeavyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.2 0.2 0.2 0.3 0.4

Total Ford U.S. Truck Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 63.4 62.3 59.9 59.1 60.3

Total Ford U.S. Vehicle SalesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.0% 100.0% 100.0% 100.0% 100.0%

As the tables above indicate, there has been a general shift from cars to trucks for both industry sales andFord sales. This shift has been occurring gradually over a number of years. Ford's sales of trucks as apercentage of its total vehicle sales has also increased since 1999 because of higher sales of sport utilityvehicles and full-size pickups. Ford's sales of the medium car segment as a percentage of its total sales hasdeteriorated more than the general decline of the industry sales in that segment because of the discontinuanceof certain product oÅerings in the segment (e.g., Ford Contour and Mercury Mystique). Ford's sales of thepremium car segment as a percentage of total Ford U.S. car sales has increased since 1998 because of the

99.1-6

addition of Volvo vehicles as a result of our purchase of Volvo Car Corporation on March 31, 1999 andexpansion of our Jaguar car product oÅerings.

Market Share Data. Our principal competitors in the United States include General Motors Corpora-tion, DaimlerChrysler Corporation, Toyota Corporation, Honda Motor Corporation and Nissan MotorCorporation, Ltd. The following tables show changes in car and truck United States market shares of the sixleading vehicle manufacturers for the years indicated:

U.S. Car Market Shares*

Years Ended December 31,

2002 2001 2000 1999 1998

Ford** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16.4% 17.7% 19.1% 19.9% 20.4%

General Motors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25.5 27.0 28.6 29.3 29.8

DaimlerChrysler*** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.6 8.5 9.1 10.3 10.7

Toyota ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12.2 11.3 11.0 10.2 10.6

HondaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.3 10.7 10.0 9.8 10.6

Nissan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.1 4.9 4.8 4.6 5.0

All Other**** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20.9 19.9 17.4 15.9 12.9

Total U.S. Car Retail DeliveriesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.0% 100.0% 100.0% 100.0% 100.0%

U.S. Truck Market Shares*

Years Ended December 31,

2002 2001 2000 1999 1998

Ford** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25.5% 27.4% 28.2% 28.6% 30.5%

General Motors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30.7 28.9 27.0 27.8 27.5

DaimlerChrysler*** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19.0 19.5 21.5 22.2 23.2

Toyota ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.5 8.7 7.2 6.7 6.3

HondaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.5 3.4 3.1 2.6 1.9

Nissan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.8 3.2 3.7 3.2 2.7

All Other***** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9.0 8.9 9.3 8.9 7.9

Total U.S. Truck Retail Deliveries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.0% 100.0% 100.0% 100.0% 100.0%

U.S. Combined Car and Truck Market Shares*

Years Ended December 31,

2002 2001 2000 1999 1998

Ford** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21.1% 22.8% 23.7% 24.3% 25.3%

General Motors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28.3 28.0 27.8 28.5 28.7

DaimlerChrysler*** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14.1 14.2 15.3 16.3 16.8

Toyota ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.3 10.0 9.1 8.5 8.5

HondaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.3 6.9 6.6 6.2 6.3

Nissan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.4 4.1 4.3 3.9 3.9

All Other**** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14.5 14.0 13.2 12.3 10.5

Total U.S. Car and Truck Retail Deliveries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.0% 100.0% 100.0% 100.0% 100.0%

* All U.S. retail sales data are based on publicly available information from the media and tradepublications.

** Ford purchased Volvo Car on March 31, 1999 and Land Rover on June 30, 2000. The Ñgures shownhere include Volvo Car and Land Rover on a pro forma basis for the periods prior to their acquisitionby Ford. In 1998, Volvo Car represented 0.6 percentage points of total market share. During the period

99.1-7

1998 through 1999, Land Rover represented no more than 0.2 percentage points of total market shareduring any one year.

*** Chrysler and Daimler-Benz merged in late 1998. The Ñgures shown here combine Chrysler andDaimler-Benz (excluding Freightliner and Sterling Heavy Trucks) on a pro forma basis for the periodprior to their merger.

**** ""All Other'' includes primarily companies based in various European countries, Korea and otherJapanese manufacturers. The increase in combined market share from 2001 to 2002 shown for ""AllOthers'' reÖects primarily increases in market share for BMW and the Korean manufacturers (e.g.,Hyundai and Kia).

***** ""All Other'' in the U.S. Truck Market Shares table includes primarily companies based in variousEuropean countries, Korea and other Japanese manufacturers and heavy truck manufacturers.

The decline in overall market share for Ford since 1998 is primarily the result of increased competitionand, in particular, an increased number of new competitive truck product oÅerings.

Marketing Incentives and Fleet Sales. Automotive manufacturers that sell vehicles in the United Statestypically give purchasers price discounts or other marketing incentives. These incentives are the result ofcompetition from new product oÅerings by manufacturers and the desire to maintain production levels andmarket shares. Manufacturers provide these incentives to both retail and Öeet customers (Öeet customersinclude daily rental companies, commercial Öeet customers, leasing companies and governments). Marketingincentives generally are higher during periods of economic downturns, when excess capacity in the industrytends to increase. We estimate that there exists presently about three to four million units of excess capacity inNorth America.

Our marketing costs for the Ford, Lincoln and Mercury brands in the United States as a percent of grosssales revenue for those brands were as follows for the three years indicated: 15.8% (2002), 14.7% (2001), and11.1% (2000). These ""marketing costs'' include primarily (i) marketing incentives on vehicles, such as retailrebates and costs for special Ñnancing and lease programs, (ii) reserves for costs and/or losses associated withour required repurchase of certain vehicles sold to daily rental companies, and (iii) costs for advertising andsales promotions for vehicles. The increase in marketing costs over the last several years is a result of increasedcompetition in the United States market.

Fleet sales generally are less proÑtable than retail sales, and sales to daily rental companies generally areless proÑtable than sales to other Öeet purchasers. The mix between sales to daily rental companies and otherÖeet customers has been about evenly split in recent years. The table below shows our Öeet sales in the UnitedStates, and the amount of those sales as a percentage of our total United States car and truck sales, for the lastÑve years.

Ford Fleet Sales

Years Ended December 31,

2002 2001 2000 1999 1998

Units sold ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 816,000 885,000 977,000 940,000 878,000

Percent of Ford's total U.S. carand truck sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23% 22% 23% 23% 22%

Warranty Coverage and Additional Service Actions. We presently provide warranty coverage for defectsin factory-supplied materials and workmanship on all vehicles in the United States. The warranty coverage forFord/Mercury vehicles generally extends for 36 months or 36,000 miles (whichever occurs Ñrst) and coverscomponents of the vehicle, including tires beginning January 1, 2001 for 2001 and later model years. Prior toJanuary 1, 2001, tires were warranted only by the tire manufacturers. The United States warranty coverage forluxury vehicles (Lincoln, Jaguar, Volvo and Land Rover) extends for 48 months or 50,000 miles (whicheveroccurs Ñrst) but, except for 2001 or later model year Lincoln vehicles, does not include tires, which arewarranted by the tire manufacturers. In general, diÅerent warranty coverage is provided on medium trucks andon vehicles sold outside the United States. Warranty coverage for safety restraint systems (safety belts, airbags and related components) extends for 60 months or 50,000 miles (whichever occurs Ñrst). Also, corrosion

99.1-8

damage resulting in perforation (holes) in body sheet metal panels is covered on 1995 and newer models for60 months (unlimited mileage). In addition, the Federal Clean Air Act requires warranty coverage for 8 yearsor 80,000 miles (whichever occurs Ñrst) for emissions equipment (e.g., catalytic converter and powertraincontrol module) on most light duty vehicles sold in the United States. As a result of these warranties, costs forwarranty repairs can be substantial. Estimated warranty costs for each vehicle sold by us are accrued at thetime of sale. Such accruals, however, are subject to adjustment from time to time depending on actualexperience.

In addition to the costs associated with the contractual warranty coverage provided on our vehicles, wealso incur costs as a result of additional service actions not covered by our warranties, including product recallsand customer satisfaction actions. Estimated additional service action costs for each vehicle sold by us are alsoaccrued at the time of sale and are subject to the same adjustments described above.

For a discussion of our accounting estimates with respect to costs for warranty and additional serviceactions, see Item 7. ""Management's Discussion and Analysis of Financial Condition and Results ofOperations Ì Critical Accounting Estimates''.

Europe

Market Share Information. Outside of the United States, Europe is our largest market for the sale ofcars and trucks. The automotive industry in Europe is intensely competitive. Our principal competitors inEurope include General Motors Corporation, DaimlerChrysler Corporation, Volkswagen A.G., PSA, RenaultGroup, Fiat SPA and Toyota Corporation. Over the past year, we estimate that 167 new or freshened vehicles,including derivatives of existing vehicles, were introduced in the European market by various manufacturers.For the past 10 years, the top six manufacturers have collectively held between 73% and 77% of the total carmarket. This competitive environment is expected to intensify further as Japanese manufacturers increasetheir production capacity, and all of the manufacturers of premium brands (e.g., BMW, Mercedes Benz andAudi) continue to broaden their product oÅerings. We estimate that in 2002 the European automotiveindustry had excess capacity of approximately four million units (based on a comparison of Europeandomestic demand and capacity).

In 2002, vehicle manufacturers sold approximately 17.2 million cars and trucks in Europe, down 3.4%from 2001 levels. Our combined car and truck market share in Europe in 2002 was 10.9%, up 2/10 of onepercentage point from 2001.

Britain and Germany are our most important markets within Europe, although the Southern Europeancountries are becoming increasingly signiÑcant. Any adverse change in the British or German market has asigniÑcant eÅect on our total European automotive proÑts. For 2002 compared with 2001, total industry saleswere up 4% in Britain and down 3% in Germany.

For purposes of the Ñgures shown in this section, we consider Europe to consist of the following 19markets: Britain, Germany, France, Italy, Spain, Austria, Belgium, Ireland, Netherlands, Portugal, Switzer-land, Finland, Sweden, Denmark, Norway, Czech Republic, Greece, Hungary and Poland.

Marketing Incentives. The automotive industry in Europe continues to be intensely competitive. InEurope in 2002, increased competition resulted in substantial retail and Öeet incentive spending on the part ofFord and most manufacturers, particularly in our key European market of Britain. Similar to the UnitedStates, marketing costs in Europe include primarily (i) marketing incentives on vehicles, such as rebates andcosts for special Ñnancing and lease programs, (ii) reserves for costs and/or losses associated with our requiredrepurchase of certain vehicles sold to daily rental companies, and (iii) costs for advertising and salespromotions for vehicles.

Motor Vehicle Distribution in Europe. On October 1, 2002, the Commission of the European Unionadopted a new regulation that changes the way motor vehicles are sold and repaired throughout the EuropeanCommunity. Under the new regulation, Ford could continue to maintain its ""exclusive'' distributionarrangements that allow it to provide dealers with exclusive sales territories, however, the new regulationeliminates the formerly allowable restrictions on resale. This means that if we continue with the exclusive

99.1-9

distribution arrangements, our dealers could sell vehicles to any reseller (e.g., supermarket chains, internetagencies and other resellers not authorized by us), who in turn could sell to end customers both within andoutside of the dealer's exclusive sales territory. Alternatively, the new regulation allows manufacturers toestablish a ""selective'' distribution regime that would allow the manufacturer to determine the number but,beginning in 2005, not the location of its dealers. In addition, under the selective distribution regime, we wouldbe able to restrict the dealer's ability to sell our vehicles to unauthorized resellers. Under either system, thenew rules make it easier for a dealer to display and sell multiple brands in one store without the need tomaintain separate facilities.

Ford, as well as the majority of the other automotive manufacturers, has elected to establish a selectivedistribution system. Therefore, beginning in 2005, under new dealer agreements to be entered with each of ourdealers in the European Union, our dealers will be free to set up additional sales or delivery outlets within theEuropean Union and to sell actively to all customers within the European Union.

Within this new regulation, the Commission also has adopted sweeping changes to the repair industry.Dealers can no longer be required by the manufacturer to perform repair work themselves. Instead, dealers cansubcontract the work to independent repair shops that meet reasonable criteria set by the manufacturer. Theseauthorized repair facilities can perform warranty and recall work, in addition to other repair and maintenancework. While a manufacturer can continue to require the use of its parts in warranty and recall work, the repairfacility can use parts made by others that are of comparable quality for all other repair work.

We are currently negotiating our new Dealer, Authorized Repairer and Spare Part contracts on a countryby country level. The new regulation will apply to existing dealers and any new dealers when the newagreements are signed, which is expected to occur during the Ñrst half of 2003.

It is diÇcult to quantify at this time the full impact of these changes on our European operations. TheCommission, however, has stated that it expects the new rules to lead to increased competition and anarrowing of diÅerences in car prices from country to country.

Warranty Coverage. Beginning in January 2002, warranty coverage provided by volume manufacturers(including Ford) in most of our European markets increased from one year with unlimited mileage to twoyears with unlimited mileage. This increase in warranty coverage was prompted by new consumer laws ineleven of the 19 European markets that granted private buyers a two-year period in which to pursue defects ingoods (including vehicles and substantial components). Prior to January 2002, Ford provided warrantycoverage on Jaguar and Volvo brand vehicles that extended for 36 months or 60,000° miles and will continueto provide such warranty coverage. In Britain, Ford provides a warranty package that includes a 36 monthwarranty composed of a 12 month/unlimited mileage base warranty and free of charge OEW (ExtendedService Plan) covering up to a further 24 months and 60,000 miles. Commercial vehicles (e.g., Ford Transitand Ford Transit Connect) carry a 24 month/unlimited mileage warranty except in Britain where Fordcurrently provides a 36 month or 100,000 miles base warranty. In addition to the base warranties discussedabove, Ford warrants the bodywork of all of its brands against rust perforation for periods between 6 years and12 years.

Other Markets

Canada and Mexico. Canada and Mexico also are important markets for us. In Canada, industry salesof new cars and trucks in 2002 were approximately 1,730,000 units, up 8.4% from 2001 levels. In 2002,industry sales of new cars and trucks in Mexico were approximately 1,005,000 units, up approximately 6.1%from 2001 levels Our combined car and truck market share in these markets in 2002 was 15.8% in Canada and16.5% in Mexico.

South America. Brazil and Argentina are our principal markets in South America. The economicenvironment in those countries has been volatile in recent years, particularly in 2002, leading to largevariations in industry sales. Results have also been inÖuenced by sharp devaluation of the Argentine Peso andBrazilian Real, continued weak economic conditions, political uncertainty and government actions to reduceinÖation and public deÑcits. Industry sales in 2002 were approximately 1.5 million units in Brazil, down about

99.1-10

6.4% from 2001, and approximately 96,000 units in Argentina, down 52.2% from 2001. Our combined car andtruck market share in these markets in 2002 was 10.3% in Brazil (up 2.1 percentage points from last year) and16.5% in Argentina (up 2.0 percentage points from a year ago).

Ford has undertaken restructuring actions in recent years to improve its competitiveness in SouthAmerica. In addition, we built a new assembly plant in Brazil, which will manufacture a new family of vehiclesfor the South American markets. The new plant started building the 5-door Fiesta in May of 2002 and beganproducing an all-new sport utility vehicle early in the Ñrst quarter of 2003.

Asia PaciÑc. In the Asia PaciÑc region, Australia, Taiwan, Thailand and Japan are our principalmarkets. Industry volumes in 2002 in this region were as follows: approximately 824,000 units in Australia (up6.6% from 2001), approximately 399,000 units in Taiwan (up 15% from 2001), approximately 415,000 units inThailand (up 39.7% from 2001) and approximately 5.8 million units in Japan (down 2% from 2001). In 2002,our combined car and truck market share in Australia was 14.3%. In Taiwan, we had a combined car and truckmarket share in 2002 of 16.4%. In Thailand, our combined car and truck market share was 5.7% in 2002. Ourcombined car and truck market share in Japan has been less than 1% in recent years. We own a 33.4% interestin Mazda Motor Corporation (""Mazda'') and account for Mazda on an equity basis. Mazda's market share inJapan has been in the 5% range in recent years. Our principal competition in the Asia PaciÑc region has beenthe Japanese manufacturers. We anticipate that the continuing relaxation of import restrictions (includingduty reductions) will intensify competition in the region.

We opened an assembly plant in India in 1999, launching an all-new small car (the Ikon) designedspeciÑcally for that market. In addition, India sells components to Mexico and South Africa. We expect Indiato become one of our most important markets in Asia in the future.

We also are in the process of increasing our presence in China. During 2002, a new purchasing oÇce wasestablished in China to take advantage of sourcing opportunities for global markets from that country. TheChangan Ford assembly plant located in Chongqing became operational and production of the Fiesta in Chinastarted mid-January 2003. Changan Ford is our 50/50 joint venture operation with Changan Automobile.

Africa. We distribute Ford, Jaguar, Land Rover, Mazda, and Volvo vehicles in South Africa. In 2002,industry volume in South Africa was approximately 350,000 units, down 4.6% from 2001 levels. Our combinedcar and truck market share in 2002 was 13.2% for the Ñve brands we distribute.

FINANCIAL SERVICES SECTOR

Ford Motor Credit Company Ì Not Included

The Hertz Corporation

The Hertz Corporation (""Hertz'') and its aÇliates, associates and independent licensees represent whatHertz believes is the largest worldwide general use car rental brand based upon revenues. Hertz also operatesone of the largest industrial and construction equipment rental businesses in North America based uponrevenues. Hertz and its aÇliates, associates and independent licensees, do the following:

‚ rent cars and light trucks

‚ rent industrial and construction equipment

‚ sell their used cars and equipment

‚ provide third-party claim management services

These businesses are operated from approximately 7,000 locations throughout the United States and inover 150 foreign countries and jurisdictions. Hertz is an indirect, wholly-owned subsidiary of Ford.

99.1-11

Below are some Ñnancial highlights for Hertz (in millions):

Years EndedDecember 31,

2002 2001

Revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $4,978 $4,925

Pre-Tax Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 200 3

Income before cumulative eÅect of change in accounting principle ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 127 23

Net Income/(Loss)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (167) 23

GOVERNMENTAL STANDARDS

A number of governmental standards and regulations relating to safety, corporate average fuel economy(""CAFE''), emissions control, noise control, damageability, and theft prevention are applicable to new motorvehicles, engines, and equipment manufactured for sale in the United States, Europe and elsewhere. Inaddition, manufacturing and assembly facilities in the United States, Europe and elsewhere are subject tostringent standards regulating air emissions, water discharges, and the handling and disposal of hazardoussubstances. Such facilities in the United States and Europe also are subject to comprehensive national,regional, and/or local permit programs with respect to such matters.

Mobile Source Emissions Control Ì U.S. Requirements. The Federal Clean Air Act imposes stringentlimits on the amount of regulated pollutants that lawfully may be emitted by new motor vehicles and enginesproduced for sale in the United States. Currently, most light duty vehicles sold in the United States mustcomply with these standards for 10 years or 100,000 miles, whichever Ñrst occurs. The U.S. EnvironmentalProtection Agency (""EPA'') has promulgated post-2004 model year standards that are more stringent thanthe default standards contained in the Clean Air Act. These new regulations will require most light duty trucksto meet the same emissions standards as passenger cars by the 2007 model year. The stringency of the newstandards presents compliance challenges and is likely to hinder eÅorts to employ light-duty diesel technology,which could negatively impact our ability to meet CAFE standards. The EPA also has promulgated post-2004emission standards for ""heavy-duty'' trucks (8,500-14,000 lbs. gross vehicle weight). These standards arelikely to pose technical challenges and may aÅect the competitive position of full-line vehicle manufacturerssuch as Ford.

Pursuant to the Clean Air Act, California has received a waiver from the EPA to establish its own uniqueemissions control standards. New vehicles and engines sold in California must be certiÑed by the CaliforniaAir Resources Board (""CARB''). CARB has adopted stringent new vehicle emissions standards that will bephased in beginning in the 2004 model year. These new standards treat most light duty trucks the same aspassenger cars and require both types of vehicles to meet new stringent emissions requirements. As with theEPA's post-2004 standards, CARB's vehicle standards present a diÇcult engineering challenge, and willessentially rule out the use of light-duty diesel technology.

Since 1990, the California program has included requirements for manufacturers to produce and deliverfor sale zero-emission vehicles, which produce no emissions of regulated pollutants (""ZEV''). Currentlyavailable ZEVs are typically battery-powered vehicles with narrow consumer appeal due to their limited range,reduced functionality, and high cost. The ZEV mandate initially required that a speciÑed percentage of eachmanufacturer's vehicles produced for sale in California, beginning at 2% in 1998 and increasing to 10% in2003, must be ZEVs. In 1996, CARB eliminated the ZEV mandate for the 1998-2002 model years, butretained the 10% mandate in a modiÑed form beginning with the 2003 model year. Around the same time,vehicle manufacturers voluntarily entered into agreements with CARB to conduct ZEV demonstrationprograms. In 2001, CARB approved a series of complex modiÑcations to the ZEV mandate that requiredmanufacturers to produce increasing numbers of ZEVs and partial zero-emission vehicles (""PZEVs'')between 2003 and 2018. PZEVs are vehicles certiÑed to California's super-ultra-low emission vehicle(""SULEV'') tailpipe standards, with zero evaporative emissions.

99.1-12

In 2002, a federal court granted a preliminary injunction against enforcement of the ZEV mandatebecause it found that certain provisions are preempted by the federal CAFE law. That ruling is on appeal. Inthe meantime, in March 2003, California regulators proposed sweeping changes to the ZEV mandate thatwould shift the focus of the regulation away from battery-electric vehicles to advanced-technology vehicles(e.g., hybrid electric vehicles or compressed natural gas vehicles) with extremely low Ì but not zero Ìtailpipe emissions. In essence, the proposal would drop the current ""pure ZEV'' requirements in favor ofincreased requirements to produce advanced-technology vehicles, plus a requirement to produce a smallnumber of zero-emission fuel cell vehicles by 2008. The proposal would also establish an ""Independent ExpertReview Panel'' to periodically assess the state of ZEV technology. On one hand, the changes appear to reÖecta welcome recognition that battery-electric vehicles simply do not have the potential to achieve widespreadcustomer acceptance. On the other hand, the proposal calls for very large numbers of advanced-technologyvehicles in future years; there are questions about the feasibility of these requirements, as well as California'sauthority to adopt them. We expect that this proposal will face signiÑcant opposition from certain groups thatcontinue to support near-term requirements for battery-electric vehicles.

The Clean Air Act permits other states that do not meet national ambient air quality standards to adoptCalifornia's motor vehicle emission standards no later than two years before the aÅected model year.New York, Massachusetts, Vermont, and Maine adopted the California standards eÅective with the2001 model year or before. New York and Massachusetts have adopted the California ZEV mandate alongwith alternative ZEV compliance programs. Other states are considering the adoption of California vehiclestandards, with or without the ZEV mandate. There are problems with transferring California standards tonortheast states, including the following: 1) the driving range of ZEVs is greatly diminished in cold weather,thereby limiting their market appeal; and 2) the northeast states have refused to adopt the Californiareformulated gasoline regulations, which may impair the ability of vehicles to meet California's in-usestandards.

Ford has accumulated ZEV credits through sales of TH!NK brand electric vehicles, and it has plans toaccumulate more credits by selling future PZEV models. In the longer term, however, it is doubtful whetherthe market will support the number of battery electric vehicles called for by the modiÑed ZEV mandate. Fuelcell technology may in the future enable production of ZEVs with widespread consumer appeal, but it does notappear that production vehicles with fuel cell technology will be commercially feasible for years to come.Compliance with the ZEV mandate may eventually require costly actions that would have a substantialadverse eÅect on Ford's sales volume and proÑts. For example, Ford could be required to curtail the sale ofnon-electric vehicles and/or oÅer to sell electric vehicles well below cost. Other states may seek to adoptCARB's ZEV mandate pursuant to the Clean Air Act, thereby increasing the costs to Ford.

Under the Clean Air Act, the EPA and CARB can require manufacturers to recall and repair non-conforming vehicles. The EPA, through its testing of production vehicles, also can halt the shipment of non-conforming vehicles. Ford may be required to recall, or may voluntarily recall, vehicles for such purposes inthe future. The costs of related repairs or inspections associated with such recalls could be substantial.

European Requirements. European Union (""EU'') directives and related legislation limit the amountof regulated pollutants that may be emitted by new motor vehicles and engines sold in the EU. In 1998, theEU adopted a new directive on emissions from passenger cars and light commercial trucks. More stringentemissions standards applied to new car certiÑcations beginning January 1, 2000 and to new car registrationsbeginning January 1, 2001 (""Stage III Standards''). A second level of even more stringent emission standardswill apply to new car certiÑcations beginning January 1, 2005 and to new car registrations beginning January 1,2006 (""Stage IV Standards''). The comparable light commercial truck Stage III Standards and Stage IVStandards would come into eÅect one year later than the passenger car requirements. The directive includes aframework that permits EU member states to introduce Ñscal incentives to promote early compliance with theStage III and Stage IV Standards. The directive also introduces on-board diagnostic requirements, morestringent evaporative emission requirements, and in-service compliance testing and recall provisions foremissions-related defects that occur in the Ñrst Ñve years or 80,000 kilometers of vehicle life (extended to100,000 kilometers in 2005). The Stage IV Standards for diesel engines are not yet technically feasible andmay impact our ability to produce and oÅer a broad range of products with the characteristics and

99.1-13

functionality that customers demand. A related EU directive was adopted at the same time which establishesstandards for cleaner fuels beginning in 2000 and even cleaner fuels in 2005. The EU is setting up a program toassess the need for further changes to vehicle emission and fuel standards after 2005.

Certain European countries are conducting in-use emissions testing to ascertain compliance of motorvehicles with applicable emissions standards. These actions could lead to recalls of vehicles; the future costs ofrelated inspection or repairs could be substantial.

Stationary Source Emissions Control Ì U.S. Requirements. In the United States, the Federal CleanAir Act also requires the EPA to identify ""hazardous air pollutants'' from various industries and promulgaterules restricting their emission. In 2002, the EPA issued proposed rules for a variety of industrial categories,several of which would further regulate emissions from our U.S. operations, including engine testing,automobile surface coating and iron casting. These technology-based standards could require certain of ourfacilities to signiÑcantly reduce their air emissions. If the Ñnal rules are unchanged from the proposals, the costto us, in the aggregate, to comply with these standards could be substantial.

Motor Vehicle Safety Ì U.S. Requirements. The National TraÇc and Motor Vehicle Safety Act of1966 (the ""Safety Act'') regulates motor vehicles and motor vehicle equipment in the United States intwo primary ways. First, the Safety Act prohibits the sale in the United States of any new vehicle orequipment that does not conform to applicable motor vehicle safety standards established by the NationalHighway TraÇc Safety Administration (the ""Safety Administration''). Meeting or exceeding many safetystandards is costly because the standards tend to conÖict with the need to reduce vehicle weight in order tomeet emissions and fuel economy standards. Second, the Safety Act requires that defects related to motorvehicle safety be remedied through safety recall campaigns. A manufacturer also is obligated to recall vehiclesif it determines that they do not comply with a safety standard. Should Ford or the Safety Administrationdetermine that either a safety defect or a noncompliance exists with respect to certain of Ford's vehicles, thecosts of such recall campaigns could be substantial. There were pending before the Safety Administrationapproximately 40 investigations relating to alleged safety defects or potential compliance issues in Fordvehicles as of February 11, 2003.

The Transportation Recall Enhancement, Accountability, and Documentation Act (the ""TREAD Act'')was signed into law in November 2000. The TREAD Act mandates that the Safety Administration establishseveral new regulations including reporting requirements for motor vehicle manufacturers on foreign recallsand certain information received by the manufacturer that may assist the agency in the identiÑcation of safetydefects.

Foreign Requirements. Canada, the EU, individual member countries within the EU, and othercountries in Europe, South America and the Asia PaciÑc markets also have safety standards applicable tomotor vehicles and are likely to adopt additional or more stringent standards in the future. In addition, theEuropean Automobile Manufacturers Association (of which Ford is a member) (""ACEA'') made a voluntarycommitment in June 2001 to introduce a range of safety measures to improve pedestrian protection with theÑrst phase starting in 2005 and a second phase starting in 2010. Similar commitments were subsequently madeby the Japanese and Korean automobile manufacturers associations. As a result, over 99% of cars and smallvans sold in Europe are covered by industry safety commitments. After consultation with the EuropeanCouncil of Ministers and the European Parliament, the European Commission released a proposal for adirective in February 2003, which includes only the principal requirements and objectives of the industrycommitments (i.e., the application dates, the types of tests to be conducted and the limit values to beachieved). The detailed provisions for various tests prescribed by the directive will be subject to a subsequentCommission decision related to the industry commitments, which is scheduled for publication in late 2003.

Motor Vehicle Fuel Economy Ì U.S. Requirements. Under federal law, vehicles must meet minimumCAFE standards set by the Safety Administration. A manufacturer is subject to potentially substantial civilpenalties if it fails to meet the CAFE standard in any model year, after taking into account all available creditsfor the preceding three model years and expected credits for the three succeeding model years.

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The law established a passenger car CAFE standard of 27.5 mpg for 1985 and later model years, whichthe Safety Administration believes it has the authority to amend to a level it determines to be the maximumfeasible level. The current CAFE standard applicable to light trucks is 20.7 mpg. In late 2002, the SafetyAdministration issued a Notice of Proposed Rulemaking that would increase the CAFE standard for lighttrucks to 21.0 mpg for model year 2005; 21.6 mpg for model year 2006; and 22.2 mpg for model year 2007.Ford and the Alliance of Automobile Manufacturers have submitted extensive comments on the proposedrule, which we expect will be Ñnalized later in 2003. We expect that light truck standards will continue toincrease beyond model year 2007, and it is also likely that the Safety Administration will soon issue proposedincreases in passenger car standards as well. There is renewed interest in CAFE in Congress, and there is somepotential for new legislation that avoids the regulatory process and establishes new standards by statute.

Pressure to increase CAFE standards stems in part from concerns over greenhouse gas emissions, whichmay aÅect the global climate. With respect to greenhouse gas emissions, the Bush administration released aclimate change policy initiative in February 2002. The Bush administration plan stresses voluntary measuresand a cap-and-trade program to stem the growth of greenhouse gas emissions. The Bush administration alsohas launched the Freedom Car initiative, which supports research for fuel cell-powered vehicles. Other nationscontinue to press for United States ratiÑcation of the so-called ""Kyoto Protocol,'' which would require theUnited States to reduce greenhouse gas emissions by 7% below its 1990 levels. The Kyoto Protocol does notcurrently have the support of either the Bush administration or Congress. Separately, a petition has been Ñledwith the EPA requesting that it regulate carbon dioxide (CO2, a greenhouse gas) emissions from motorvehicles under the Clean Air Act. The petitioners have Ñled suit in an eÅort to compel a formal response fromthe EPA. Several state Attorneys General have also signaled their intention to sue the EPA to compelregulation of CO2 emissions.

In 2002, California enacted legislation authorizing CARB to regulate greenhouse gas emissions from newmotor vehicles beginning in the 2009 model year. Other states are considering similar legislation. CO2 is theprimary greenhouse gas emitted from motor vehicles, and the amount of CO2 emissions is proportional to theamount of fuel used. It is possible that CARB may attempt to implement the law by setting Öeet averagestandards for vehicle CO2 emissions, although we believe this would be prohibited by the federal fuel economylaw.

In general, a continued increase in demand for larger vehicles, coupled with a decline in demand for smalland middle-size vehicles, could jeopardize our long-term ability to comply with CAFE standards. In addition,if signiÑcant increases in CAFE standards for upcoming model years are imposed beyond those presentlyproposed, or if the EPA or other agencies regulate CO2 emissions from motor vehicles, we might Ñnd itnecessary to take various costly actions that could have substantial adverse eÅects on our sales volume andproÑts. For example, we might have to curtail production of larger, family-size and luxury cars and full-sizelight trucks, restrict oÅerings of engines and popular options, and increase market support programs for ourmost fuel-eÇcient cars and light trucks.

Foreign Requirements. The EU also is a party to the Kyoto Protocol and has agreed to reducegreenhouse gas emissions by 8% below their 1990 levels during the 2008-2012 period. In December 1997, theEuropean Council of Environment Ministers (the ""Environment Council'') reaÇrmed its goal to reduceaverage CO2 emissions from new cars to 120 grams per kilometer by 2010 (at the latest) and invited Europeanmotor vehicle manufacturers to negotiate further with the European Commission on a satisfactory voluntaryenvironmental agreement to help achieve this goal. In October 1998, the EU agreed to support anenvironmental agreement with the European Automotive Manufacturers Association (of which Ford is amember) on CO2 emission reductions from new passenger cars (the ""Agreement''). The Agreementestablishes an emission target of 140 grams of CO2 per kilometer for the average of new cars sold in the EU bythe Association's members in 2008. In addition, the Agreement establishes an estimated target range of165-170 grams of CO2 per kilometer for the average of new cars sold in 2003. Also in 2003, the Associationwill review the potential for additional CO2 reductions, with a view to moving further toward the EU'sobjective. The Agreement assumes (among other things) that no negative measures will be implementedagainst diesel-fueled cars and the full availability of improved fuels with low sulfur content in 2005. Average

99.1-15

CO2 emissions of 140 grams per kilometer for new passenger cars corresponds to a 25% reduction in averageCO2 emissions compared to 1995.

The Environment Council requested the European Commission to review in 2003 the EU's progresstoward reaching the 120 gram target by 2010, and to implement annual monitoring of the averageCO2 emissions from new passenger cars and progress toward achievement of the objectives for 2003.

In 1995, members of the German Automobile Manufacturers Association (including Ford Werke AG)made a voluntary pledge to increase by 2005 the average fuel economy of new cars sold in Germany by 25%from 1990 levels, to make regular reports on fuel consumption, and to increase industry research anddevelopment eÅorts toward this end. The German Automobile Manufacturers Association has reported thatthe industry is on track to meet the pledge.

Other European countries are considering other initiatives for reducing CO2 emissions from motorvehicles. Taken together, such proposals could have substantial adverse eÅects on our sales volumes andproÑts in Europe.

End-of-Life Vehicle Directive Ì The European Parliament has published a directive imposing anobligation on motor vehicle manufacturers to take back end-of-life vehicles with zero or negative valueregistered after July 1, 2002, and to take back all other end-of-life vehicles with zero or negative value as ofJanuary 1, 2007, with no cost to the last owner. The directive also imposes requirements on the proportion ofthe vehicle that may be disposed of in landÑlls and the proportion that must be reused or recycled beginning in2006, and bans the use of certain substances in vehicles beginning with vehicles registered after July 2003.Member states may apply these provisions prior to the dates mentioned above.

Presently, there are numerous uncertainties surrounding the form and implementation of the legislation indiÅerent member states, especially regarding manufacturers' responsibilities and the resultant expenses thatmay be incurred. As of December 31, 2002, the following Ñve member states have adopted legislation toimplement the directive: The Netherlands, Germany, Belgium, Austria and Spain. In addition, Norway hasadopted legislation similar to the directive. Based on the legislation that has been enacted to date, we haveaccrued $70 million at December 31, 2002 for compliance costs we expect to incur in respect of our existingvehicle populations in those countries. Depending on the legislation implemented in the ten member statesthat have not yet enacted legislation and other circ*mstances, we may be required to take additional accrualsfor the expected costs to comply with these regulations. Although all of the member states were required toenact legislation to implement the directive by April 21, 2002, implementation of the directive has beendelayed in some countries and is now expected to be substantially Ñnalized during 2003. The directive shouldnot, however, result in signiÑcant cash expenditures before 2007.

Pollution Control Costs Ì During the period 2003 through 2007, we expect to spend approximately$377 million on our North American and European facilities to comply with air and water pollution andhazardous waste control standards, which now are in eÅect or are scheduled to come into eÅect. Of this total,we estimate spending approximately $68 million in 2003 and $102 million in 2004.

EMPLOYMENT DATA

The average number of people we employed by geographic area was as follows for the years indicated:

2002 2001

United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 161,868 165,787

Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 136,717 139,355

Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51,736 53,533

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 350,321 358,675

Most of our employees work in our Automotive sector. In 2002, the average number of people weemployed decreased approximately two percent. The decrease reÖects a reduction in employment in our

99.1-16

Automotive sector in North America and Europe and the partial-year eÅect of the sale of our Kwik-Fitsubsidiary. The numbers above include approximately 19,800 hourly employees of Ford who are assigned toVisteon Corporation, and, pursuant to our collective bargaining agreement with the United AutomobileWorkers (the ""UAW''), remain Ford employees. The number of Ford employees assigned to Visteon hasdeclined from approximately 24,000 at the time of our spin-oÅ of Visteon as a result of retirements and, insome cases, the return of employees to Ford. Visteon reimburses us for all costs to us associated with theseemployees.

For further information regarding employment statistics of Ford, see Item 6. ""Selected Financial Data''later in this Report. For information concerning employee retirement beneÑts, see Note 20 of our Notes toFinancial Statements at the end of this Report.

Substantially all of the hourly employees in our Automotive operations in the United States arerepresented by unions and covered by collective bargaining agreements. Approximately 99% of theseunionized hourly employees in our Automotive segment are represented by the UAW. Approximately 3% ofour salaried employees are represented by unions. Most hourly employees and many non-management salariedemployees of our subsidiaries outside the United States also are represented by unions.

We have entered into a collective bargaining agreement with the UAW that is scheduled to expire onSeptember 14, 2003. Negotiation of a new collective bargaining agreement with the UAW could result in ourincurring costs diÅerent than currently anticipated. We also have recently entered into a new collectivebargaining agreement with the Canadian Automobile Workers (""CAW'') that is scheduled to expire onSeptember 20, 2005. Among other things, our agreements with the UAW and CAW provide for guaranteedwage and beneÑt levels throughout their terms and provide for signiÑcant employment security. As a practicalmatter, these agreements restrict our ability to eliminate product lines, close plants and divest businesses.These agreements can also limit our ability to change local work rules and practices. Our Revitalization Planassumes full compliance with our obligations under existing collective bargaining agreements.

Consistent with the Revitalization Plan, for example, our new agreement with the CAW provides for theclosure of our Ontario Truck Plant in 2004. In addition to the closure of the Ontario Truck Plant in July 2004,the new CAW agreement includes a requirement to make a $600 million (Canadian Dollar) investment in ourOakville Assembly Plant for the new Ford Freestar and Mercury Monterey minivans, and a commitment toprovide 900 jobs at the Oakville site during the term of this agreement.

We are or will be negotiating new collective bargaining agreements with labor unions in Mexico,Australia, Taiwan, Thailand where current agreements will expire in 2003. We are or will be negotiating a newcollective bargaining agreement to cover the employees of our Land Rover subsidiary, whose currentagreement also will expire in 2003.

In recent years we have not had signiÑcant work stoppages at our facilities, but they have occurred insome of our suppliers' facilities. A work stoppage could occur as a result of disputes under our collectivebargaining agreements with labor unions or in connection with negotiations of new collective bargainingagreements, which, if protracted, could substantially adversely aÅect our business and results of operation.Work stoppages at supplier facilities for labor or other reasons could have similar consequences if alternatesources of components are not readily available.

In addition to our collective bargaining agreement with the UAW, we entered into a separate agreementwith the UAW in connection with the sale of our Dearborn steel-making operations to Rouge Industries, Inc.,then known as Marico Acquisition Corp., in 1989. As part of the sale, employees of our former steel-makingoperations became employees of Rouge Steel Company, a wholly-owned subsidiary of Rouge Industries, Inc.(""Rouge''). Pursuant to the UAW agreement, we agreed that Rouge hourly employees who, at the time of thesale, were represented by the UAW and met certain seniority requirements would be allowed to return to Fordto work in one of our Rouge area plants if they were laid oÅ by Rouge in the future as a result of a layoÅ ofunknown duration, a permanent discontinuance of operations by Rouge or a sale of the assets of Rouge. Theright to return remains in eÅect with respect to each eligible employee for a period equal to the employee'sFord seniority as of the date of the sale by Ford. Approximately 800 former Ford employees currently

99.1-17

employed by Rouge are covered by this agreement. In part to avoid the occurrence of one or more of thetriggering events described above, we have extended subordinated credit to Rouge totaling $90 million throughJune 30, 2004. In its Annual Report on Form 10-K for the year ended December 31, 2002, Rouge stated thatit has suÅered recurring losses from operations and negative cash Öows that raise substantial doubt about itsability to continue as a going concern.

ENGINEERING, RESEARCH AND DEVELOPMENT

We conduct engineering, research and development primarily to improve the performance (including fueleÇciency), safety and customer satisfaction of our products, and to develop new products. We also have staÅsof scientists who engage in basic research. We maintain extensive engineering, research and design centers forthese purposes, including large centers in Dearborn, Michigan; Dunton, Gaydon and Whitley, England;Gothenburg, Sweden; and Merkenich, Germany. Most of our engineering research and development relates toour Automotive operating segment.

During the last three years, we took charges to our consolidated income for engineering, research anddevelopment we sponsored in the following amounts: $7.7 billion (2002), $7.3 billion (2001), and $6.8 billion(2000). Any customer-sponsored research and development activities that we conduct are not material.

ITEM 3. LEGAL PROCEEDINGS

Various legal actions, governmental investigations and proceedings and claims are pending or may beinstituted or asserted in the future against us and our subsidiaries, including, but not limited to, those arisingout of the following: alleged defects in our products; governmental regulations covering safety, emissions, andfuel economy; Ñnancial services; employment-related matters; dealer, supplier, and other contractual relation-ships; intellectual property rights; product warranties; environmental matters; and shareholder matters. Someof the pending legal actions are, or purport to be, class actions. Some of the foregoing matters involve or mayinvolve compensatory, punitive or antitrust or other multiplied damage claims in very large amounts, ordemands for recall campaigns, environmental remediation programs, sanctions or other relief that, if granted,would require very large expenditures. See Item 1. ""Business-Governmental Standards''. We regularlyevaluate the expected outcome of product liability litigation and other litigation matters. We have accruedexpenses for probable losses on product liability matters, in the aggregate, based on an analysis of historicallitigation payouts and trends. Expenses also have been accrued for other litigation where losses are deemedprobable. These accruals have been reÖected in our Ñnancial statements. Following is a discussion of oursigniÑcant pending legal proceedings:

Firestone Matters

Recall and National Highway TraÇc Safety Administration Matters. On August 9, 2000, Bridgestone/Firestone, Inc. (""Firestone'') announced a recall of all Firestone ATX and ATX II tires (P235/75R15)produced in North America since 1991 and Wilderness AT tires of that same size manufactured at Firestone'sDecatur, Illinois plant. Firestone estimated that about 6.5 million of the aÅected tires were still in service onthe date the recall was announced. The recall was announced following an analysis by Ford and Firestone thatidentiÑed a statistically signiÑcant incidence of tread separation occurring in the aÅected tires. Most of theaÅected tires were installed as original equipment on Ford Explorer sport utility vehicles. This original recallwas substantially completed by the end of the Ñrst quarter of 2001. On May 22, 2001, we announced that wewould replace all remaining Firestone Wilderness AT tires (about 13 million tires) on our vehicles. Thisprecautionary action was based on an analysis of data on the actual road performance of these tires,comparisons with the performance of comparable tires by other tire makers, a review of information developedby and received from the Safety Administration, and laboratory and vehicle testing. This program has alsobeen completed.

The Safety Administration investigated the tread separation matter both to make a root cause assessmentand to determine whether Firestone's recall should be expanded to include other Firestone tires. We activelycooperated with the Safety Administration in their investigation. On February 12, 2002, the Safety

99.1-18

Administration issued a report denying an earlier request for an investigation into the handling and stability ofthe Ford Explorer after a tread separation. In its report, the Safety Administration speciÑcally analyzed andrejected each of allegations made in the request. The Safety Administration based its denial on both atechnical analysis of the steering and handling of the Ford Explorer as well as a review of crash data thatindicated ""no signiÑcant diÅerence in the likelihood of a crash following a tread separation between Explorervehicles and other compact SUVs.''

Firestone Tire Related Litigation. In the United States, the above-described defect in certain Firestonetires, most of which were installed as original equipment on Ford Explorers, has led to a signiÑcant number ofpersonal injury and class action lawsuits against Ford and Firestone. These cases are described below.

Firestone Personal Injury Actions. PlaintiÅs in the personal injury cases typically allege that theirinjuries were caused by defects in the tire that caused it to lose its tread and/or by defects in the Ford Explorerthat caused the vehicle to roll over. We are a defendant in these actions and, as with all litigation we face, areinvestigating the circ*mstances surrounding the accidents and preparing to defend our product in the event weare unable to reach reasonable resolution. In addition to the signiÑcant number of personal injury cases againstus related to accidents in the United States allegedly caused by tread separations involving Firestone tires onour vehicles, we are also a party to numerous cases Ñled by residents of foreign countries involving accidentsoutside of the United States allegedly caused by the same tire issues. A number of these cases have been Ñledin courts in the United States and are pending in the federal court in Indianapolis, and in state courts in Texasand Tennessee.

Firestone Class Actions. Over 100 Firestone-related class actions have been Ñled against us, but mosthave been consolidated into a single case now pending in federal court in Indianapolis. PlaintiÅs in these caseshave never been injured in an accident involving Firestone tires, but they seek to recover, on behalf of allpurchasers of Ford Explorers with Firestone tires, the alleged diminution in vehicle value caused by the use ofthose tires or by the alleged instability of Explorers. PlaintiÅs also seek punitive damages.

In the case pending in Indianapolis, the United States Court of Appeals for the Seventh Circuit has ruledthat the case cannot be maintained as a nationwide or statewide class action. PlaintiÅs' petition for a writ ofcertiorari in the United States Supreme Court was denied. PlaintiÅs are likely to begin focusing on one ormore of the 15 cases that have not yet been transferred to Indianapolis. These cases were Ñled in state courtsin Illinois (2 cases), Pennsylvania, South Carolina (2 cases), Wisconsin, Arkansas (2 cases), California (2cases), Louisiana, Ohio, Texas, Connecticut, and Florida. Some of these cases have been removed to federalcourt and are likely to be transferred to the court in Indianapolis, where they will be subject to the SeventhCircuit's order denying class certiÑcation. Some of these cases, however, will remain in state court where thetrial courts will be free to reconsider the issue of class certiÑcation.

In one of the cases Ñled in Illinois, and in one of the cases Ñled in South Carolina, the trial courts havealready certiÑed statewide classes. In those cases, however, plaintiÅs are not relying on any alleged defects inthe Ford Explorer; rather, they allege only that Firestone ATX and Wilderness AT tires installed on FordExplorers and Mercury Mountaineers are defective. Since we have already agreed to replace all of these tires,we are seeking to have these cases dismissed as moot. We will also be seeking appellate review of these rulings.

Firestone Securities Class Actions. Seven class actions were consolidated in federal court in Detroitalleging securities fraud and violations of Rule 10b-5 on behalf of all persons who purchased Ford stock duringthe period from March 1998 through August 2000. The plaintiÅs allege that, during that period of time, thedefendants made misrepresentations about the safety of Ford products and the Ford Explorer in particular,and failed to disclose material facts about problems with Firestone tires and the safety of Ford Explorersequipped with Firestone tires. The plaintiÅs claim that, as a result of these misrepresentations or omissions,they purchased Ford stock at inÖated prices and were damaged when the price of the stock fell uponannouncement of the recall and subsequent revelations. On December 10, 2001 the federal district courtgranted our motion to dismiss and dismissed the consolidated action with prejudice. The court deniedplaintiÅs motion for leave to Ñle an amended complaint and plaintiÅs Ñled an appeal to the Sixth CircuitCourt of Appeals. All briefs on appeal have been Ñled and we are awaiting oral argument.

99.1-19

Venezuelan Matters. In Venezuela, the investigation being conducted by the Attorney General's OÇceas to whether criminal charges should be Ñled against Firestone and Ford employees as a result of tire treadseparation accidents that occurred in that country remains open. The Venezuelan consumer protection agency(INDECU) is assisting in this investigation. INDECU has submitted an extensive report alleging there are nodefects in the Firestone tires rather that the tire tread separation was the result of the inÖation pressurespeciÑed by Ford. The report also alleges a series of defects in the Ford Explorer including defects in thesteering knuckle and spindle, shock absorbers, roof design, front axle fastener, the general electronic moduleand powertrain control module. These allegations are contrary to the Safety Administration's Ñndings andFord's analysis of U.S. and Venezuelan accidents involving the Ford Explorer. In a separate investigationbeing conducted by the Venezuelan National Assembly concerning the cause of the accidents, a preliminaryreport was Ñled on December 5, 2001 by the Technical Commission appointed to conduct the investigation.The report did not contain any conclusions regarding the cause of the accidents; it only detailed the workperformed by the committee up to that date. Since the release of the INDECU report, the National Assemblyhas demonstrated renewed interest in its own investigation. We have submitted to the Attorney General awritten rebuttal of the INDECU report and, in late September, members of Ford Venezuela's seniormanagement appeared before the National Assembly to refute INDECU's Ñndings. Due to the politicalsituation in Venezuela, there has been very little activity concerning this matter at either the NationalAssembly or at the Attorney General's OÇce since December 2002.

Other Product Liability Matters

Asbestos Matters. Asbestos was used in brakes, clutches and other auto components dating from theearly 1900s. Along with other vehicle manufacturers, we have been the target of asbestos litigation and, as aresult, we are a defendant in various actions for injuries claimed to have resulted from alleged contact withcertain Ford parts and other products containing asbestos. PlaintiÅs in these personal injury cases allegevarious health problems as a result of asbestos exposure either from (i) component parts found in oldervehicles (ii) insulation or other asbestos products in our facilities or (iii) asbestos aboard our former maritimeÖeet. The majority of these cases have been Ñled in the state courts in essentially every state in the country.

Most of the asbestos litigation we face involves mechanics or other individuals who have worked on thebrakes of our vehicles over the years. Also, in most of asbestos litigation we are not the sole defendant. Webelieve we are being more aggressively targeted in asbestos suits because many previously targeted companieshave Ñled for bankruptcy. We are prepared to defend these asbestos related cases and, with respect to thecases alleging exposure from our component parts, believe that the scientiÑc evidence conÑrms our long-standing position that mechanics and others are not at an increased risk of asbestos related disease as a resultof exposure to asbestos used in our vehicles.

The extent of our Ñnancial exposure to asbestos litigation remains very diÇcult to estimate. The majorityof our asbestos cases do not specify a dollar amount for damages, and in many of the other cases the dollaramount speciÑed is the jurisdictional minimum. The vast majority of these cases involve multiple defendants,with the number in some cases exceeding 100. At the same time, although our annual payout and relateddefense costs in asbestos cases have not, to date, been substantial, they are increasing and may increase morerapidly in the future. The total number of claims pending against us as of February 28, 2003 is approximately25,000, compared with approximately 23,000 claims as of December 31, 2002 and 18,000 claims as ofDecember 31, 2001. This, together with the trends in civil litigation toward larger jury verdicts and punitivedamages awards, will result in increased costs in 2003 and could result in our costs for asbestos-related claimsbecoming substantial in the future.

Romo v. Ford. During December, 1994, an action was Ñled in Superior Court in Stanislaus County,California, alleging that manufacturing and design defects in a 1978 Bronco and failure to warn caused thedeaths of three members of the plaintiÅ's family. The trial in July 1999 resulted in a jury verdict ordering us topay $290 million in punitive damages and $5 million in compensatory damages, on which interest continues toaccrue. Following the trial, the trial judge set aside the punitive damages award based on a Ñnding ofmisconduct during jury deliberations. On June 28, 2002, the California Court of Appeals reinstated theoriginal jury verdict. In reinstating the verdict, the three-judge appeals panel acknowledged that there was

99.1-20

juror misconduct during the early stages of deliberations, but stated that there was no proof that we had beenprejudiced by the misconduct or that the jury had ultimately failed to decide the case on the legal instructionsgiven by the trial judge. The appeals court also rejected our contention that the punitive damages were notwarranted by the evidence and were, in any event, excessive. An appeal of the appellate court's decision to theCalifornia Supreme Court was denied. On January 21, 2003, we Ñled a petition for certiorari in theUnited States Supreme Court.

Environmental Matters

General. We have received notices under various federal and state environmental laws that we (alongwith others) may be a potentially responsible party for the costs associated with remediating numeroushazardous substance storage, recycling or disposal sites in many states and, in some instances, for naturalresource damages. We also may have been a generator of hazardous substances at a number of other sites. Theamount of any such costs or damages for which we may be held responsible could be substantial. Thecontingent losses that we expect to incur in connection with many of these sites have been accrued and thoselosses are reÖected in our Ñnancial statements in accordance with generally accepted accounting principles.However, for many sites, the remediation costs and other damages for which we ultimately may be responsibleare not reasonably estimable because of uncertainties with respect to factors such as our connection to the siteor to materials there, the involvement of other potentially responsible parties, the application of laws and otherstandards or regulations, site conditions, and the nature and scope of investigations, studies, and remediation tobe undertaken (including the technologies to be required and the extent, duration, and success of remedia-tion). As a result, we are unable to determine or reasonably estimate the amount of costs or other damages forwhich we are potentially responsible in connection with these sites, although that total could be substantial.

Cleveland Casting Plant. Following an inspection by the Cleveland Local Air Agency (which has beendelegated enforcement authority by Ohio EPA), our Cleveland Casting Plant received a notice of violation inJuly 2002. The NOV alleges that the Plant exceeded a number of its permit limitations, modiÑed its emissionsources without Ñrst obtaining a permit to install, and did not operate certain process equipment according topermit requirements. If Ford is determined to have violated its permit requirements or Ohio EPA regulations,Ford could be required to pay Ñnes or take other actions, the aggregate cost of which could exceed $100,000.

Class Actions

Paint Class Actions. There are two purported class actions pending against us in Texas and Illinoisalleging claims for fraud, breach of warranty, and violations of consumer protection statutes. The Texas casepurports to assert claims on behalf of Texas residents who have experienced paint peeling in certain 1984through 1992 model year Ford vehicles. The Illinois case purports to assert claims on behalf of residents of allstates except Louisiana and Texas who have experienced paint peeling on most 1988 through 1997 model yearFord vehicles. PlaintiÅs in both cases contend that their paint is defective and susceptible to peeling becausewe did not use spray primer between the high-build electrocoat (""HBEC'') and the color coat. The lack ofspray primer allegedly causes the adhesion of the color coat to the HBEC to deteriorate after extendedexposure to ultraviolet radiation from sunlight. PlaintiÅs in both cases seek unspeciÑed compensatory damages(in an amount to cover the cost of repainting their vehicles and to compensate for alleged diminution invalue), punitive damages, attorneys' fees and interest.

In the Texas case, Sheldon, the trial court certiÑed a class of Texas owners who experienced paint peelingbecause of the alleged defect. That order was reversed by the Texas Supreme Court, but the trial court granteda renewed motion for class certiÑcation and certiÑed two classes consisting of original owners of class vehicleswho experienced peeling paint and all original owners who paid us or a Ford dealer to repaint their vehicles.Our appeal from this order to the Texas Court of Appeals is pending. In the Illinois case, Phillips, the trialcourt denied our motion to dismiss and plaintiÅ's motion for class certiÑcation is pending.

Ford/Citibank Visa Class Action. Following the June 1997 announcement of the termination of theFord/Citibank credit card rebate program, Ñve purported nationwide class actions and two purportedstatewide class action were Ñled against us; Citibank is also a defendant in some of these actions. The actions

99.1-21

allege damages in an amount up to $3,500 for each cardholder who obtained a Ford/Citibank credit card inreliance on the rebate program and who is precluded from accumulating discounts toward the purchase orlease of new Ford vehicles after December 1997 as a result of the termination of the rebate program. PlaintiÅscontend that defendants deceptively breached their contract by unilaterally terminating the program, thatdefendants have been unjustly enriched as a result of the interest charges and fees collected from cardholders,and further, that defendants conspired to deprive plaintiÅs of the beneÑts of their credit card agreement.PlaintiÅs seek compensatory damages, or alternatively, reinstatement of the rebate program, and punitivedamages, costs, expenses and attorneys' fees. The Ñve purported nationwide class actions were Ñled in statecourts in Alabama, Illinois, New York, Oregon and Washington, and the purported statewide class actionswere Ñled in a California state courts. The Alabama court has conditionally certiÑed a class consisting ofAlabama residents. Ford removed all of the cases, except the most recently Ñled California state court caseÑled in December 2002, to federal court which consolidated and transferred the cases to federal court inWashington for pretrial proceedings. In October 1999, the federal court dismissed the consolidated proceed-ings for lack of jurisdiction and sent each action back to the state court in which it originated. We appealedthis ruling to the United States Court of Appeals for the Ninth Circuit, which aÇrmed the trial court. TheUnited States Supreme Court granted our petition for a writ of certiorari but dismissed the writ after oralargument. Five of the cases will be remanded to state courts in Alabama, California, Illinois, New York andWashington. The case in Oregon has been dismissed.

Lease Residual Class Action Ì Not Included

Retail Lessee Insurance Coverage Class Action. On May 24, 1999, Michigan Mutual InsuranceCompany was served with a purported class action complaint in federal court in Florida alleging that the FordCommercial, General Liability and Business Automobile Insurance Policy, and the Personal Auto Supple-ment to that policy, provides uninsured/underinsured motorist coverage and medical payments coverage toretail lessees of Ford vehicles (e.g., to Red Carpet lessees). We are required to defend and indemnifyMichigan Mutual. We believe the complaint rests on an untenable interpretation of the Michigan Mutualpolicy, which was intended to cover company cars and lease evaluation vehicles. Unfortunately, however, theFlorida Court of Appeals in a prior action brought by a single individual, has accepted plaintiÅs' interpretationof the policy. The Florida court's opinion should not be controlling in federal court, however, and we have Ñleda motion for summary judgment based on the policy language and the intention of the parties. PlaintiÅsresponded to our motion, cross-moved for summary judgment in their favor, moved to amend their complaint,and moved for class certiÑcation. The federal district court denied our motion to dismiss and our request tocertify the question for immediate appeal, but also denied plaintiÅs' motion to certify a class. We expect theplaintiÅs will renew their motion for class certiÑcation.

Throttle Body Assemblies Class Action. A purported nationwide class action is pending in federal courtin Ohio on behalf of all persons who own or lease 1999 Mercury Villagers. The complaint alleges that thevehicle has a defective throttle body assembly that causes the gas pedal to intermittently lock or stick in theclosed position. The complaint alleges breach of warranty, negligence, and violation of consumer protectionstatutes. PlaintiÅs seek an order requiring us to recall the vehicles. They also seek unspeciÑed compensatorydamages, treble damages, attorneys fees, and costs. The trial court has denied plaintiÅs' motion to certify anationwide class, but plaintiÅs' motion to certify a statewide class is pending.

Windstar Transmission Class Actions. Two purported class actions are pending, alleging that wemarketed, advertised, sold, and leased 1995 Windstars in a deceptive manner by misrepresenting their qualityand safety and actively concealing defects in the transmissions. One case is pending in California state courtand is limited to owners and lessees of that state. Another case is pending in Illinois state court and purports torepresent owners and lessees from all states. PlaintiÅs contend that transmissions in the Windstar haveprematurely suÅered from shifting problems and acceleration failures, requiring early replacement atsubstantial expense to owners. The cases assert several statutory and common law theories, and seek severaltypes of relief, including unspeciÑed compensatory damages, punitive damages, and injunctive relief. PlaintiÅs'have Ñled a motion for class certiÑcation in the California case.

99.1-22

Seat Back Class Actions. Four purported statewide class actions were Ñled in state courts in Maryland,New Hampshire, New Jersey and New York against Ford, General Motors Corporation and DaimlerChryslerAG alleging that seat backs with single recliner mechanisms are defective. PlaintiÅs in each of these suitsalleged that seats installed in class vehicles (deÑned as almost all passenger cars made after 1991) aredefective because the seat backs are unstable and susceptible to rearward collapse in the event of a rear-endcollision. The purported class in each state consists of all persons who own a class vehicle and speciÑcallyexcludes all persons who have suÅered personal injury as a result of the rearward collapse of a seat. PlaintiÅsallege causes of action for negligence, strict liability, implied warranty, fraud, and civil conspiracy. PlaintiÅsalso allege violations of the consumer protection statutes in the various states. PlaintiÅs seek ""compensatorydamages measured by the cost of correcting the defect, not to exceed $5,000 for each class vehicle.'' Ford'smotions to dismiss were granted in Maryland, New Hampshire, and New York, and Ford's motion forsummary judgment was granted in New Jersey. The New Hampshire Supreme Court aÇrmed the trial court'sruling. The Maryland Court of Appeals (Maryland's highest court) has agreed to review the dismissal of theMaryland case. PlaintiÅs' appeals are pending in New York and New Jersey.

Fair Lending Class Action Ì Not Included

F-150 Radiator Class Actions. Two purported class actions are pending alleging that the Companydefrauded purchasers of approximately 400,000 1999-2001 F-150 trucks by falsely representing that certainoption packages included ""upgraded'' radiators. In one case, in state court in Texas, the trial court has certiÑeda nationwide class of all purchasers of 2000 and 2001 F-150 trucks with heavy duty or trailer packages. We areappealing that ruling to the Texas Court of Appeals. Another case recently was Ñled in state court in SouthCarolina and purports to represent a statewide class. We removed the case to federal court and Ñled a motionto stay proceedings pending the outcome of the appeal in Texas. Another case, previously pending in statecourt in New York, has been dismissed and plaintiÅs have appealed. Prior to the Ñling of these suits, weimplemented a program that gives aÅected customers a choice of $100 cash, a $500 coupon, or installation ofan upgraded radiator. However, plaintiÅs' are alleging that the program should cover additional vehicles andthat they should be reimbursed for loss of use of the vehicle while the radiators are being replaced, and thatthey are entitled to attorney fees.

Platinum Group Metals. A purported nationwide class action has been Ñled against us in federal courtin New York alleging securities fraud and violations of Rule 10b-5 on behalf of all persons who purchasedFord stock between December 1, 1999 and January 12, 2002 (the ""class period''). The plaintiÅ alleges thatduring the class period we entered into a series of contracts for the purchase of platinum group metals(""PGM'') at historically high prices and failed to properly hedge these purchases, thereby exposing us tolosses when the price of PGM fell. The plaintiÅs allege that we made statements in our public disclosuresabout our commodity purchase practices and hedging programs that misled investors as to our exposure to lossfrom PGM purchases. As a result, plaintiÅs allege that they purchased Ford stock at inÖated prices and weredamaged when we ""wrote-down'' the value of our PGM by $1 billion on a pre-tax basis. Our motion to dismissfor failure to plead fraud or fraudulent intent with suÇcient particularity under the Private SecuritiesLitigation Reform Act is pending. PlaintiÅs have sought numerous extensions and have not yet Ñled a responseto this motion.

Side Release Seat Belt Buckles. On February 14, 2002, we were served with a purported class actionalleging that the side release buckles installed in 1969 through 1998 Ford vehicles are defective because they""could unlatch from inertial forces.'' The suit was Ñled in state court in Illinois against General MotorsCorporation as well as against Ford, allegedly on behalf of all Illinois owners of vehicles with the defectivebuckles. The complaint seeks compensatory and punitive damages, including a payment to each class memberof the cost of installing diÅerent buckles. We Ñled a motion to dismiss on the basis that the plaintiÅs havesuÅered no injury. That motion was denied on May 21, 2002. We plan to appeal that ruling.

Focus Fuel Delivery Module Class Action. On April 17, 2002, a purported nationwide class action wasÑled against us in state court in New Jersey on behalf of all persons who own or lease 2000-2002 Ford Focusvehicles. The complaint alleges that the fuel delivery module in these vehicles is defective and causes a loss ofpower on acceleration and stalling. The complaint alleges consumer fraud, breach of warranty and unjust

99.1-23

enrichment. PlaintiÅs seek rescission of their contracts, compensatory damages, punitive damages, aninjunction, and attorney fees.

Crown Victoria Police Interceptor Class Actions. A total of nineteen purported class actions have beenÑled on behalf of government entities that own Ford Crown Victoria Police Interceptors, alleging that thevehicles are susceptible to fuel leaks and Ñres when struck from the rear at high speed. Sixteen of the actionshave been consolidated into a Multi District Litigation (""MDL'') proceeding in the U.S. District Court,Northern District of Ohio. The three remaining actions are pending in Illinois and Louisiana (two cases). Wehave removed these actions to federal court, and we are requesting that they be consolidated into the MDLproceeding. Of the nineteen purported class actions, two purport to represent a nationwide class; the othercases purport to represent statewide classes. The complaints seek a recall of the aÅected vehicles, aninjunction, compensatory and punitive damages and other relief. Five additional purported class actionsrelating to non-police Ford Crown Victoria vehicles, with similar allegations and demands for relief, have beenÑled in Arkansas, Illinois and Ohio. The Arkansas and New Jersey cases purport to represent a nationwideclass; the others purport to represent owners in the relevant state.

Apartheid Class Actions. We and scores of other United States and European corporations have beennamed as defendants in purported class action litigation Ñled in federal court in New York on behalf of SouthAfrican citizens who suÅered alleged ""crimes against humanity'' and other forms of violence and oppressionunder the apartheid regime. The legal theories asserted in this litigation are similar to the legal theoriesadvanced in the previously-reported WWII forced and slave labor lawsuits, which resulted in the formation ofa humanitarian fund pursuant to a multi-national accord. The current lawsuit alleges that we and otherautomobile manufacturers (including General Motors Corporation and DaimlerChrysler AG) helped perpetu-ate the apartheid regime by selling vehicles to the South African military and police. This matter is in theearly stage of litigation and we are preparing our response.

Hydroboost Truck Brake Class Action. A purported class action was Ñled on August 2, 2002 in statecourt in Oklahoma on behalf of all purchasers of 1999 through 2002 model year F-250, F-350, F-450, andF-550 Ford Super Duty Trucks and 2002 Excursions with hydroboost hydraulic braking systems. Thecomplaint alleges that these trucks are unsafe because they suÅer diminished power assist to the brakes orsteering when the driver is simultaneously braking and steering. The complaint alleges breach of warranty andfraud, and seeks the cost of retroÑtting the trucks to eliminate the alleged danger, compensation fordiminished resale value, and other relief. We removed the case to federal court, but it was remanded to statecourt.

Focus Brake Wear Class Action. A purported class action was Ñled in state court in California onJuly 23, 2002 on behalf of all persons who own or lease 2000 and 2001 model year Ford Focus vehicles. Thecomplaint alleges that the front brake pads and rotors wear out prematurely, resulting in repair bills anddamage to other components of the vehicles. The complaint alleges breach of warranty, misrepresentation andunfair competition. PlaintiÅs seek an injunction, restitution of amounts paid for the vehicles, and other relief.We removed the case to federal court, however, the court has remanded the case to state court.

Kingsford Class Action. On October 8, 2002, a purported class action was Ñled against us and KingsfordProducts Company in state court in Dickinson County, Michigan. The purported class consists of approxi-mately 900 property owners in the Kingsford, Michigan area. The lawsuit seeks damages for diminution inproperty values and emotional distress as a result of environmental issues in the area allegedly related to ourformer automobile parts, chemical distillation and charcoal production plant in Kingsford, Michigan. We andKingsford Products have been cooperating with the State of Michigan Department of Environmental Qualityto investigate and address environmental issues in the area.

Fifteen-Passenger Van Class Action. On December 9, 2002, we received a summons and complaint Ñledin state court in Harris County, Texas, alleging that we breached express warranties and committed unfair anddeceptive trade practices by selling Ñfteen-passenger vans that ""cannot safely transport more than ninepersons.'' This allegation is based upon warnings and recommendations issued by the federal government withrespect to Ñfteen-passenger vans and the relatively higher rate of rollovers experienced by this class of vehiclesin comparison to passenger cars, especially when they are fully loaded and driven at high speed. The complaint

99.1-24

alleges a national class of persons who purchased Ñfteen-passenger vans within the last four years and asubclass of purchasers who currently reside in Texas and currently own Ñfteen-passenger vans manufacturedbetween 1990 and the present. The complaint seeks actual and multiple damages for the alleged ""diÅerencebetween the value of a van which can safely carry 15 passengers and one which can safely transport no morethan 9.'' In the alternative, the complaint seeks ""to have the Defendants modify/repair their existing "15passenger vans' and to provide training to all drivers of such vans so that such vans can be used as warranted.''The complaint also seeks exemplary damages, attorney's fees, costs and interest. On January 15, 2003, wereceived a summons and complaint in a second case, also in state court in Texas, containing similarallegations. We have removed these cases to federal court and intend to Ñle a motion to dismiss.

Other Matters

Rouge Powerhouse Insurance Litigation. Factory Mutual Insurance Company, an insurer of RougeSteel Company, Ñled an action against us in March 2000. The action seeks damages for claims paid out forproperty damage and business interruption losses experienced by Rouge Steel Company as a result of the 1999Rouge Powerhouse explosion. Total claims in the action exceed $340 million. The insurer alleges that thePowerhouse explosion was caused by our negligence, gross negligence and/or willful and wanton misconduct.This action was moved to arbitration, and closing arguments in the arbitration occurred in November 2002.We are awaiting a decision from the arbitration panel. (Additional claims by other insurers and suppliers ofRouge Steel that totaled over $45 million were dismissed prior to the arbitration hearing.) In addition,seventeen Ford employees and two Rouge Steel employees also have Ñled lawsuits seeking recovery for allegedpsychological injuries caused as a result of the explosion. These actions are pending in state court in Michigan.

Scrap Materials Litigation. In August 2002, Technology Recycling Corporation, doing business asEclipse Technology, Ñled a lawsuit in Wayne County Circuit Court against us and a subsidiary alleging breachof contract and tortious interference with contract based upon our recent termination of our Master ServiceAgreements and other sales agreements with Eclipse. Eclipse contends that it has a Ñve-year contractrequiring us to provide Eclipse all scrap and blemished materials from all of our facilities in North America.We have denied that we have any such contractual obligation with Eclipse.

Antitrust Class Action. During February and early March 2003, eleven antitrust class actions were Ñledin federal courts in California, Illinois, Massachusetts, Florida, and New York (seven cases) and six antitrustclass actions were Ñled in state courts in California (four cases), Arizona, and New York against us, FordMotor Company of Canada, and several other motor vehicle manufacturers and their U.S. and CanadianaÇliates (""defendants''). PlaintiÅs in these cases purport to represent a nationwide class consisting of allpersons who purchased a new car manufactured by one of defendants after January 1, 2001. PlaintiÅs allegethat defendants violated the law by entering into agreements in restraint of trade to ""prevent new cars sold inCanada from being imported into the United States.'' PlaintiÅs allege that by so doing, the new carmanufacturers maintained prices in the United States at an artiÑcially high level, causing plaintiÅs andmembers of the class to pay more for new cars than they would have in the absence of the alleged wrongdoing.PlaintiÅs seek treble damages in these actions.

99.1-25

ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth selected Ñnancial data and other data concerning Ford for each of the lastÑve years (dollar amounts in millions, except per share amounts). The data (except for employment data)have been reclassiÑed for discontinued and held-for-sale operations, which are described in Note 3 of theNotes to our Financial Statements.

Summary of Operations

2002 2001 2000 1999 1998

Automotive sector

Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $134,425 $130,827 $140,777 $135,029 $118,017

Operating income/(loss)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (531) (7,395) 5,288 7,186 5,376

Income/(loss) before income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,156) (8,862) 5,323 7,292 5,842

Net income/(loss) from continuing operations ÏÏÏÏÏÏÏÏÏÏÏ (987) (6,155) 3,664 4,996 4,049

Financial Services sector

RevenuesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 28,161 $ 29,927 $ 28,314 $ 25,162 $ 25,011

Income/(loss) before income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,109 1,440 2,976 2,565 18,415

Net income/(loss) from continuing operations(a)(b) ÏÏÏÏÏ 1,271 806 1,792 1,508 17,333

Total Company

Income/(loss) before income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 953 $ (7,422) $ 8,299 $ 9,857 $ 24,257

Provision/(credit) for income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 302 (2,097) 2,720 3,243 2,723

Minority interests in net income of subsidiaries ÏÏÏÏÏÏÏÏÏÏÏ 367 24 123 110 152

Income/(loss) from continuing operations(a) ÏÏÏÏÏÏÏÏÏÏÏÏ 284 (5,349) 5,456 6,504 21,382

Income/(loss) from discontinued/held-for-sale operationsÏÏ (63) (104) 263 733 689

Loss on disposal of discontinued/held-for-sale operationsÏÏÏ (199) Ì (2,252) Ì Ì

Cumulative eÅects of change in accounting principle ÏÏÏÏÏÏ (1,002) Ì Ì Ì Ì

Net income/(loss)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (980) $ (5,453) $ 3,467 $ 7,237 $ 22,071

Total Company Data Per Share of Common and Class BStock(b)

Basic:

Income/(loss) from continuing operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.15 $ (2.96) $ 3.69 $ 5.38 $ 17.60

Income/(loss) from discontinued/held-for sale operationsÏÏ (0.04) (0.06) 0.18 0.61 0.57

Loss on disposal of discontinued/held-for-sale operationsÏÏÏ (0.11) Ì (1.53) Ì Ì

Cumulative eÅects of change in accounting principle ÏÏÏÏÏÏ (0.55) Ì Ì Ì Ì

Net income/(loss)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.55) (3.02) 2.34 5.99 18.17

Diluted:

Income/(loss) from continuing operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.15 $ (2.96) $ 3.62 $ 5.26 $ 17.20

Income/(loss) from discontinued/held-for sale operationsÏÏ (0.03) (0.06) 0.17 0.60 0.56

Loss on disposal of discontinued/held-for-sale operationsÏÏÏ (0.11) Ì (1.49) Ì Ì

Cumulative eÅects of change in accounting principle ÏÏÏÏÏÏ (0.55) Ì Ì Ì Ì

Net income/(loss)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.54) (3.02) 2.30 5.86 17.76

Cash dividends(c) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.40 $ 1.05 $ 1.80 $ 1.88 $ 1.72

Common stock price range (NYSE Composite)

High ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18.23 31.42 31.46 37.30 33.76

Low ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.90 14.70 21.69 25.42 15.64

Average number of shares of Common and Class B stockoutstanding (in millions) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,819 1,820 1,483 1,210 1,211

(a) 1998 includes a non-cash gain of $15,955 million that resulted from Ford's spin-oÅ of The Associates.

(b) Share data have been adjusted to reÖect stock dividends and stock splits. Common stock price range (NYSEComposite) has been adjusted to reÖect the Visteon spin-oÅ, a recapitalization known as our Value EnhancementPlan, and The Associates spin-oÅ.

99.1-26

Summary of Operations Ì Continued

2002 2001 2000 1999 1998

Total Company Balance Sheet Data atYear-End

ASSETS

Automotive sectorÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $107,790 $ 88,319 $ 94,312 $ 99,201 $ 83,911

Financial Services sector ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 187,432 188,224 189,078 171,048 148,801

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $295,222 $276,543 $283,390 $270,249 $232,712

Long-term debt

Automotive ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 13,607 $ 13,467 $ 11,769 $ 10,398 $ 8,589

Financial Services ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 106,529 107,031 86,877 67,178 55,092

Stockholders' equityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,590 7,786 18,610 27,604 23,434

Total Company Facility and Tooling Data

Capital expenditures for facilities (excludingspecial tools) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4,174 $ 4,615 $ 5,315 $ 4,332 $ 4,369

DepreciationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,676 15,453 12,561 11,846 10,890

Expenditures for special tools ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,104 2,337 3,033 3,327 3,388

Amortization of special tools ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,461 3,265 2,451 2,459 2,880

Total Company Employee Data Ì Worldwide

Payroll ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 18,319 $ 17,810 $ 18,227 $ 18,512 $ 16,757

Total labor costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,871 23,937 25,940 26,953 25,606

Average number of employeesÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 350,321 358,675 352,380 375,214 342,545

Total Company Employee Data Ì U.S.Operations

Payroll ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 11,301 $ 11,084 $ 11,288 $ 11,473 $ 10,548

Average number of employeesÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 161,868 165,787 165,081 173,120 171,269

Average hourly labor costs(f)

Earnings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 29.34 $ 27.38 $ 26.73 $ 25.58 $ 24.30

BeneÑtsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23.31 20.35 21.71 21.79 21.42

Total hourly labor costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 52.65 $ 47.73 $ 48.44 $ 47.37 $ 45.72

(f) Per hour worked (in dollars). Excludes data for subsidiary companies.

99.1-27

Summary of Operations Ì Continued

Summary of Vehicle Unit Sales(a)2002 2001 2000 1999 1998(in thousands)

North America

United States

Cars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,454 1,427 1,775 1,725 1,563

Trucks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,493 2,458 2,711 2,660 2,425

Total United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,947 3,885 4,486 4,385 3,988

Canada ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 280 245 300 288 279

Mexico ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 175 162 147 114 103

Total North America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,402 4,292 4,933 4,787 4,370

Europe

Britain ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 592 637 476 518 498

Germany ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 327 383 320 353 444

Italy ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 245 249 222 209 205

Spain ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 169 178 180 180 155

France ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 150 163 158 172 171

Other countries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 520 551 526 528 377

Total Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,003 2,161 1,882 1,960 1,850

Other international

Brazil ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 148 125 134 117 178

AustraliaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 117 115 125 125 133

Taiwan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 65 53 63 56 77

Argentina ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25 29 49 60 97

Japan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32 36 26 32 25

Other countries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 181 197 212 83 93

Total other internationalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 568 555 609 473 603

Total worldwide vehicle

Unit Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,973 7,008 7,424 7,220 6,823

(a) Vehicle unit sales generally are reported worldwide on a ""where sold'' basis and include sales of all FordMotor Company-badged units, as well as units manufactured by Ford and sold to other manufacturers.

99.1-28

The presentation below, consistent with our prior periodic reports, provides a geographic split of ourAutomotive operations, reÖecting the results of our various automotive aÇliates grouped by legal domicile.

The results of our continuing operations exclude the results of discontinued and held-for-sale operations,which are described in Note 3 of the Notes to our Financial Statements.

Fourth Quarter 2002 Results of Operations

Our worldwide losses were $130 million in the fourth quarter of 2002, or $0.07 per diluted share ofCommon and Class B Stock. In the fourth quarter of 2001, losses were $5,068 million, including charges of$4,106 million primarily related to our Revitalization Plan, or $2.81 per diluted share. Worldwide sales andrevenues were $41.6 billion in the fourth quarter of 2002, up $869 million, reÖecting primarily improvement innet pricing and mix. Unit sales of cars and trucks were 1,791,000, down 21,000 units, due to reduced U.S. andEuropean industry volume, and reduced U.S. market share, partially oÅset by a fourth quarter 2002 increase inU.S. dealer inventories (23,000 units) and the non-recurrence of a reduction in U.S. dealer inventories in thefourth quarter of 2001 (101,000 units).

Results of our operations by business sector for the fourth quarter of 2002 and 2001 are shown below (inmillions):

Fourth Quarter Net Income/(Loss)

2002Over/(Under)

2002 2001 2001

Automotive sectorÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(342) $(4,667) $4,325

Financial Services sector ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 331 (364) 695

Income/(loss) from continuing operations ÏÏÏÏÏÏÏÏÏ (11) (5,031) 5,020

Income/(loss) from discontinued and held-for-saleoperations * ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (15) (37) 22

Loss on disposal of discontinued and held-for-saleoperations * ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (104) Ì (104)

Total Company net income/(loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(130) $(5,068) $4,938

* See Note 3 of the Notes to our Financial Statements for a discussion of these discontinued and held-for-saleoperations.

Automotive Sector

Worldwide losses for our Automotive sector were $342 million in the fourth quarter of 2002 on sales of$34.7 billion. Losses in the fourth quarter of 2001 were $4,667 million on sales of $33.6 billion.

99.1-29

Details of our geographic Automotive sector operations for the fourth quarter of 2002 and 2001 are shownbelow (in millions):

Fourth Quarter Income/(Loss) fromContinuing Operations

2002Over/(Under)

2002 2001 2001

North American Automotive ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (49) $(4,024) $3,975

Automotive Outside North America

Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (363) 59 (422)

South America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (11) (598) 587

Rest of World ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 81 (104) 185

Total Automotive Outside North America ÏÏÏÏÏÏÏÏÏÏÏ (293) (643) 350

Total Automotive sector ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(342) $(4,667) $4,325

The improved fourth quarter results in our North American automotive operations reÖected primarily thenon-recurrence of the 2001 asset impairments and other one-time charges that were primarily related to ourRevitalization Plan, as well as improvements in cost performance (primarily lower costs related to warrantycoverages and additional service actions), net revenue and vehicle mix. These were oÅset partially by lowerunit sales volume in 2002 due primarily to lower U.S. industry demand (down 400,000 units to 17.1 millionunits on a seasonally adjusted annual basis) and lower market share (down 1.6 percentage points to 21.2%) forFord, Lincoln and Mercury brand vehicles, compared with 2001 levels.

The decrease in fourth quarter results in Europe reÖected charges related to restructuring actionsinvolving our Ford-brand Europe and Premier Automotive Group operations, as well as a less favorablevehicle mix and lower production for dealer inventories. These were partially oÅset by a higher Europeanmarket share (up 0.6 percentage points to 10.6%) for all vehicle brands.

The fourth quarter restructuring charges in Europe discussed above totaled $117 million for Ford-brandoperations and $106 million for Premier Automotive Group operations, with each primarily reÖectingemployee separation costs. In the case of Ford-brand operations, the employee separation costs were incurredprimarily in preparation for the planned transfer of production of the Transit vehicle from our Genk, Belgiumfacility to a facility owned by an unconsolidated joint venture in Turkey Ì Ford Otosan Ì in which we have a41% equity interest.

Our Automotive sector losses in South America were $11 million from operations in the fourth quarter of2002, compared with a loss of $598 million for the same period one year ago. The improvement reÖectedprimarily the non-recurrence of the 2001 asset impairments and other restructuring charges that were largelyrelated to our Revitalization Plan and the reversal of accruals related to trade tariÅs as a result of thesettlement between Brazil and Argentina of MERCOSUR trade balance rules. The results also reÖectedimproved operating fundamentals, partially oÅset by lower industry volumes. The earnings improvement of$185 million in Rest of World reÖected primarily the non-recurrence of a Mazda pension-related charge in thefourth quarter of 2001.

99.1-30

Financial Services Sector

Details of our Financial Services sector earnings from continuing operations are shown below (inmillions):

Fourth QuarterIncome/(Loss) from Continuing

Operations

2002Over/(Under)

2002 2001 2001

Ford CreditÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $372 $(301) $673

HertzÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16 (58) 74

Minority interests and other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (57) (5) (52)

Total Financial Services sectorÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $331 $(364) $695

Ford Credit Ì Not Included

Full-Year 2002 Results of Operations

Our worldwide sales and revenues were $162.6 billion in 2002, up $1.8 billion from 2001. The increase isexplained by higher Automotive revenues, reÖecting higher unit sales volume and improved vehicle mix inNorth America, partially oÅset by lower Ñnancial services revenues resulting from increased sales ofreceivables. We sold 6,973,000 cars and trucks in 2002, down 35,000 units from 2001.

Results of our operations by business sector for 2002, 2001, and 2000 are shown below (in millions):

Automotive Sector Financial Services Sector Total

2002 2001 2000 2002 2001 2000 2002 2001 2000

Income/(loss) from continuingoperations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (987) $(6,155) $ 3,664 $1,271 $806 $1,792 $ 284 $(5,349) $ 5,456

Income/(loss) from discontinuedand held-for-sale operations ÏÏÏÏ (93) (112) 269 30 8 (6) (63) (104) 263

Loss on disposal of discontinuedand held-for-sale operations ÏÏÏÏ (168) Ì (2,252) (31) Ì Ì (199) Ì (2,252)

Cumulative eÅect of change inaccounting principle* ÏÏÏÏÏÏÏÏÏÏ (708) Ì Ì (294) Ì Ì (1,002) Ì Ì

Total Company net income/(loss) ÏÏ $(1,956) $(6,267) $ 1,681 $ 976 $814 $1,786 $ (980) $(5,453) $ 3,467

* See Note 7 of the Notes to our Financial Statements for a discussion of impairment of goodwill pursuant tothe adoption of SFAS No. 142, to which this relates.

99.1-31

The following unusual items were included in our 2002, 2001, and 2000 income from continuingoperations (in millions):

Automotive Sector

Rest Total FinancialNorth South of Auto Services

America Europe America World Sector Sector

2002

Derivative instruments (SFAS No. 133)ongoing eÅectsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (57) $ (57) $(141)

Interest income on U.S. federal taxrefund ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 142 142

Loss on sale of Kwik-Fit and otherbusinessesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (15) $ (510) (525)

European end-of-life accrual ÏÏÏÏÏÏÏÏÏÏÏ (46) (46)

Europe and PAG restructuring ÏÏÏÏÏÏÏÏÏ (223) (223)

Total 2002 unusual itemsÏÏÏÏÏÏÏÏÏÏÏÏ $ 70 $ (779) $ Ì $ Ì $ (709) $(141)

2001

Derivative instruments (SFAS No. 133)transition adjustment and ongoing eÅects ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (95) $ (95) $(157)

Mazda restructuring actions in the secondquarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(114) (114)

Write-down of E-commerce andAutomotive-related ventures in thethird quarterÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (199) (199)

Revitalization Plan and other fourthquarter charges* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,149) $(552) (201) (3,902) (204)

Total 2001 unusual itemsÏÏÏÏÏÏÏÏÏÏÏÏ $(3,443) $ Ì $(552) $(315) $(4,310) $(361)

2000

Asset impairment and restructuring costsfor Ford-brand operations in Europe inthe second quarterÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(1,019) $(1,019)

Inventory-related proÑt reduction forLand Rover in the third quarter ÏÏÏÏÏÏ $ (13) (76) $ (17) (106)

Write-down of assets associated with theNemak joint venture in the fourth quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (133) (133)

Total 2000 unusual itemsÏÏÏÏÏÏÏÏÏÏÏÏ $ (146) $(1,095) $ Ì $ (17) $(1,258) $ Ì

* Included pre-tax charges for Ñxed-asset impairments in our North American and South AmericanAutomotive operations ($3.1 billion and $700 million, respectively), precious metals impairment ($1.0 bil-lion), employee separation charges ($600 million) and other charges ($300 million).

99.1-32

We established and communicated the Ñnancial milestones for 2002. Our results against these mile-stones, excluding the unusual items described above, are listed below.

2002 Milestone Achieved

Restructuring Priorities

Communicate/implement plansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Report on progress Yes

Quality (U.S.)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Improve J.D. Power Initial Quality Survey Yes

Capacity utilization (North America) ÏÏÏÏÏÏÏÏÏÏÏ Improve by 10% Yes

Non-product-related cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Reduce by $2 billion Yes

Divest non-core operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1 billion cash realization Yes*

Financial Results

Corporate

Pre-tax earningsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Positive Yes

Capital spending ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $7 billion Yes

Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Improve results No

South AmericaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Improve results No

* In 2002, we received about $930 million in cash proceeds and entered into commitments from third partiesto receive the balance in 2003.

Automotive Sector Results of Operations

Details of our Automotive sector geographic earnings from continuing operations for 2002, 2001, and2000 are shown below (in millions):

Income/(Loss)from ContinuingOperations

2002 2001 2000

North American AutomotiveÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(278) $(5,488) $4,909

Automotive Outside North America

Ì EuropeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (725) 268 (1,115)

Ì South America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (295) (776) (236)

Ì Rest of WorldÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 311 (159) 106

Total Automotive Outside North America ÏÏÏÏÏÏÏÏÏÏÏ (709) (667) (1,245)

Total Automotive sectorÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(987) $(6,155) $3,664

2002 Compared with 2001

Worldwide losses from continuing operations for our Automotive sector were $987 million in 2002 onsales of $134.4 billion, compared with losses of $6,155 million in 2001 on sales of $130.8 billion.

Our automotive sector losses from continuing operations in North America were $278 million in 2002 onsales of $94.1 billion, compared with losses of $5,488 million in 2001 on sales of $90.8 billion. Theimprovement in earnings reÖected primarily the non-recurrence of the 2001 asset impairments and other one-time charges largely related to our Revitalization Plan, as well as the non-recurrence of costs related to our2001 Firestone tire replacement action (about $2 billion). Additionally, proÑts improved due to achievementof our 2002 milestone to reduce non-product costs by $2 billion and the replenishment of dealer inventories inthe U.S., which were unusually low at year-end 2001. These improvements were partially oÅset by increasedproduct-related costs and lower market share. Net pricing (per vehicle, at constant mix) was about the sameas 2001 levels, with pricing improvements being oÅset by higher variable marketing costs.

In 2002, approximately 17.1 million new cars and trucks were sold in the United States, down from17.5 million units in 2001. Our share of those unit sales was 21.1% in 2002, down 1.7 percentage points from a

99.1-33

year ago. The decline in market share reÖected a number of factors, including an increase in the number ofnew competitive product oÅerings and our discontinuation of four vehicle lines (Mercury Cougar, MercuryVillager, Lincoln Continental and most models of the Ford Escort). Marketing costs for our Ford, Lincoln andMercury brands increased to 15.8% of sales of those brands, up from 14.7% a year ago, reÖecting continuingcompetitive pressures in the United States.

Our automotive sector losses in Europe were $725 million from continuing operations in 2002, comparedwith earnings of $268 million a year ago. The decrease reÖected primarily the loss related to our sale of Kwik-Fit, charges related to restructuring actions involving our Ford-brand Europe and Premier Automotive Groupoperations (discussed above), as well as a less favorable vehicle mix primarily at Jaguar and lower productionto reduce dealer inventories.

In 2002, approximately 17.2 million new cars and trucks were sold in our nineteen primary Europeanmarkets, down from 17.8 million units in 2001. Our share of those unit sales was 10.9% in 2002, up0.3 percentage points from a year ago, due primarily to share improvement for Ford-brand vehicles (up0.1 percentage points to 8.7%), Jaguar brand vehicles (up 0.1 percentage points to 0.3%) and Volvo brandvehicles (up 0.1 percentage points to 1.4%).

Our Automotive sector losses from continuing operations in South America were $295 million in 2002,compared with losses of $776 million in 2001. The improvement reÖected primarily the non-recurrence of the2001 asset impairments and other one-time charges largely related to our Revitalization Plan. The results alsoreÖected the adverse eÅects of currency devaluation, partially oÅset by continuing improvement in operatingfundamentals.

In 2002, approximately 1.5 million new cars and trucks were sold in Brazil, compared with 1.6 million in2001. Our share of those unit sales was 10.3% in 2002, up 2.1 percentage points from a year ago. The increasein market share reÖected market acceptance of our new Ford Fiesta model and strong sales performance.

Automotive sector earnings from continuing operations outside North America, Europe, and SouthAmerica (""Rest of World'') were $311 million in 2002, compared with losses of $159 million in 2001. Theimprovement reÖected primarily the non-recurrence of the 2001 pension and restructuring related charges atMazda, as well as net revenue and volume improvements throughout our Asia PaciÑc operations and operatingimprovements at Mazda.

New car and truck sales in Australia, our largest market in Rest of World, were approximately824,000 units in 2002, up about 51,000 units from a year ago. In 2002, our combined car and truck marketshare in Australia was 14.3%, down 0.8 percentage points from 2001, reÖecting primarily strong competitivepressures in the small car segment and the truck segment.

2001 Compared with 2000

Worldwide losses from continuing operations for our Automotive sector were $6,155 million in 2001 onsales of $130.8 billion, compared with earnings of $3,664 million in 2000 on sales of $140.8 billion. Adjustedfor constant volume and mix and excluding unusual items and costs related to our Firestone tire replacementaction, our total costs in the Automotive sector increased $1.0 billion compared with 2000.

Our Automotive sector losses from continuing operations in North America were $5,488 million in 2001on sales of $90.8 billion, compared with earnings of $4,909 million in 2000 on sales of $103.8 billion. Theearnings deterioration reÖected primarily lower vehicle unit sales volumes, the charges associated with theRevitalization Plan and the other charges outlined above, signiÑcantly increased marketing costs, costsassociated with the Firestone tire replacement action and increased costs associated with warranty andadditional service actions.

In 2001, approximately 17.5 million new cars and trucks were sold in the United States, down from17.8 million units in 2000. Our share of those unit sales was 22.8% in 2001, down 0.9 percentage points from ayear ago, due primarily to increased competition resulting from new model entrants into the truck and sportutility vehicle segments, as well as the continued weakness of the Japanese yen, which creates favorable

99.1-34

pricing opportunities for our Japanese competitors. Marketing costs for our Ford, Lincoln and Mercury brandsincreased to 14.7% of sales of those brands, up from 11.1% a year ago, reÖecting increased competitive pricingin the form of subsidized Ñnancing and leasing programs (such as 0.0% Ñnancing during the fourth quarter),cash rebates and other incentive programs.

Our Automotive sector earnings in Europe were $268 million from continuing operations in 2001,compared with losses of $1,115 million a year ago. The increase reÖected the non-recurrence of the 2000charge related to asset impairments and restructuring, as well as increased vehicle unit sales and the eÅect ondepreciation from last year's asset impairment and restructuring actions.

In 2001, approximately 17.8 million new cars and trucks were sold in our nineteen primary Europeanmarkets, down from 17.9 million units in 2000. Our share of those unit sales was 10.7% in 2001, up0.7 percentage points from a year ago, reÖecting increased sales of new Ford-brand Mondeo and Transitmodels and our acquisition of Land Rover.

Our Automotive sector losses in South America were $776 million from continuing operations in 2001,compared with a loss of $236 million in 2000. The decrease is more than explained by asset impairmentcharges and the devaluation of the Argentine peso.

In 2001, approximately 1.6 million new cars and trucks were sold in Brazil, compared with 1.5 million in2000. Our share of those unit sales was 8.2% in 2001, down 1.4 percentage points compared with 2000. Thedecline in market share reÖected new and existing manufacturers who are aggressively competing for marketshare.

Automotive sector losses from continuing operations outside North America, Europe, and SouthAmerica (""Rest of World'') were $159 million in 2001, compared with earnings of $106 million in 2000. Theearnings deterioration reÖected Ford's share of a non-cash charge relating to Mazda's pension expenses andother restructuring actions at Mazda.

New car and truck sales in Australia, our largest market in Rest of World, were approximately773,000 units in 2001, down about 14,000 units from a year ago. In 2001, our combined car and truck marketshare in Australia was 15.1%, down 0.6 percentage points from 2000, reÖecting primarily share deterioration inthe full-size car segment due to continued aggressive competition.

Financial Services Sector Results of Operations

Our Financial Services sector consists primarily of two segments, Ford Credit and Hertz. Details of ourFinancial Services sector earnings from continuing operations for 2002, 2001, and 2000 are shown below(in millions):

Income/(Loss)fromContinuing Operations

2002 2001 2000

Ford Credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,235 $831 $1,542

Hertz ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 127 23 358

Minority interests and otherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (91) (48) (108)

Total Financial Services sector ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,271 $806 $1,792

2002 Compared with 2001

Ford Credit Ì Not Included

Earnings at Hertz in 2002, before the cumulative eÅect of a change in accounting principle, were$127 million. The Hertz results shown here include amortization of intangibles at Ford FSG, Inc., Hertz'parent company, which is not applicable to Hertz' Ñnancial statements. Results for Hertz in 2002 included a$294 million non-cash charge related to impairment of goodwill in Hertz' industrial and constructionequipment rental business in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. In 2001,

99.1-35

Hertz had earnings of $23 million. The increase in earnings, before the change in accounting principle, wasprincipally due to an improved car rental pricing environment and lower costs.

Included in the $91 million loss for ""minority interests and other'' within the Financial Services sector for2002 is an after-tax charge related to our equity interest in a partnership that holds diversiÑed Ñnancing assets.These are assets that we retained in connection with our sale of the assets of USL Capital Corporation in 1996.The charge, totaling $95 million after-tax, is speciÑcally related to aircraft leases to United Airlines (twelveaircraft) and US Airways (Ñve aircraft) which are in bankruptcy, and telecommunications equipment leasesto a WorldCom subsidiary. In all, the partnership has leased 69 aircraft to 11 lessees, primarily to U.S.-basedairlines; our share of the partnership's remaining investment in aircraft leases is about $350 million.

2001 Compared with 2000

Ford Credit's consolidated income from continuing operations in 2001 was $831 million, down $711 mil-lion or 46% from 2000. Excluding Ford Credit's share of the charges associated with the Revitalization Plan,net income was about $1 billion, down $507 million compared with 2000, due primarily to a higher provisionfor credit losses and the net unfavorable impact of SFAS No. 133 from hedging activity, oÅset partially byfavorable earnings eÅects related to securitization transactions, higher Ñnancing volumes of Ñnance receivablesand operating leases and improved Ñnancing margins.

Earnings at Hertz in 2001 were $23 million. In 2000, Hertz had earnings of $358 million. The decreasein earnings was primarily due to lower car rental volume in the United States, reÖecting the adverse impact onbusiness travel and downward pricing pressure due to the slowdown in the United States economy and theadverse impact of the terrorist attacks.

Liquidity and Capital Resources

Automotive Sector

For the Automotive sector, liquidity and capital resources include gross cash balances, cash generatedfrom operations, our ability to raise funds in capital markets and committed credit lines.

Gross Cash Ì Automotive gross cash includes cash and marketable securities and assets contained in aVoluntary Employee BeneÑciary Association (""VEBA'') trust, which are Ñnancial assets available to fundcertain future employee beneÑt obligations in the near term, as summarized below (in billions):

December 31,

2002 2001 2000

Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 5.2 $ 4.1 $ 3.4

Marketable securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17.4 10.9 13.1

VEBA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.7 2.7 3.7

Gross cashÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $25.3 $17.7 $20.2

99.1-36

In managing our business, we classify changes in gross cash in three categories: operating (includingcapital expenditures and capital transactions with the Financial Services sector), acquisitions and divestitures,and Ñnancing. Changes for the last three years are summarized below (in billions):

December 31,

2002 2001 2000

Gross cash at end of period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $25.3 $17.7 $20.2

Gross cash at beginning of period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17.7 20.2 25.4

Total change in gross cash ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 7.6 $(2.5) $(5.2)

Operating related cash Öows

Automotive net income/(loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(2.0) $(6.3) $ 1.7

Non-cash, one-time charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.7 4.3 3.5

Depreciation and special tools amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.9 5.0 5.1

Changes in receivables, inventory and trade payables ÏÏÏÏÏÏÏÏ (1.8) 4.4 (0.5)

Other Ì primarily expense and payment timing diÅerencesÏÏÏ 3.8 (0.1) 3.7

Capital transactions with Financial Services sector * ÏÏÏÏÏÏÏÏ 0.4 0.4 0.7

Capital expendituresÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6.8) (6.3) (7.4)

Total operating related cash Öows before tax refunds ÏÏÏÏÏÏ 0.2 1.4 6.8

Tax refundsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.6 Ì Ì

Total operating related cash Öows ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.8 1.4 6.8

Divestitures and asset sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.9 0.4 Ì

Acquisitions and capital contributions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.3) (2.7) (2.7)

Financing related cash Öows

Convertible trust preferred securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.9 Ì Ì

Value Enhancement Plan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (5.6)

Dividends to shareholders ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.7) (1.9) (2.8)

Net issuance/(purchase) of stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.1 (1.4) (1.2)

Changes in total Automotive Sector debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.1) 1.7 0.3

Total Ñnancing related cash Öows ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.2 (1.6) (9.3)

Total change in gross cash ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 7.6 $(2.5) $(5.2)

* Includes the net of capital contributions, dividends, loans and loan repayments.

In 2002, we had non-cash one-time charges of $1.7 billion, reÖecting primarily impairment of goodwilland other intangible assets under SFAS 142, Goodwill and Other Intangible Assets (which eliminatesamortization of goodwill and certain other intangible assets, but requires annual testing for impairment), losseson the sales of Kwik-Fit and other businesses, and restructuring charges in our Ford- brand EuropeanAutomotive operations and Premier Automotive Group operations.

Timing diÅerences between the recognition of certain expenses or revenue reductions and theircorresponding cash payments are recognized in operating related cash Öows. In 2002, these diÅerences andother miscellaneous items improved our operating related cash Öows by $3.8 billion, denoted as ""Other'' in thetable above. These timing diÅerences arise primarily from accrual of health care, marketing, warranty andadditional service action costs before the corresponding cash payments are required to be made.

In 2002, we spent $6.8 billion for Automotive sector capital goods, such as machinery, equipment, toolingand facilities. This was up $500 million from 2001, reÖecting primarily increased spending on new productsconsistent with our product-led revitalization. Capital expenditures were 5.0% of sales in 2002, up 0.2 percent-age points from a year ago.

99.1-37

During 2002, we received $4.9 billion of net proceeds from the issuance of our 6.5% CumulativeConvertible Trust Preferred Securities and about $2.6 billion of income tax refunds. These two factors aloneexplain substantially all of the $7.6 billion increase in our gross cash balances during 2002.

Capital transactions with the Financial Services sector improved cash Öow by $400 million, reÖectingprimarily dividends from Ford Credit, net of a $700 million cash contribution from Ford indirectly to FordCredit in January 2002.

Shown in the table below is a reconciliation between operating related cash Öow above and Ñnancialstatement cash Öows from operating activities before securities trading (in billions):

Full Year

2002 2001

Operating related cash Öows ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2.8 $ 1.4

Items Ford includes in operating related cash Öow

Capital transactions with Financial Services sectorÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.4) (0.4)

Capital expenditures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.8 6.3

Net transactions between Automotive and Financial Services sectors*ÏÏÏÏ 0.1 (0.6)

Other, primarily exclusion of cash in-Öows from VEBA draw-down ÏÏÏ 0.2 0.8

Total reconciling items ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.7 6.1

Cash Öows from operating activities before securities trading ÏÏÏÏÏÏÏ $ 9.5 $ 7.5

* Primarily payables and receivables between the sectors in the normal course of business, as shown in oursector statement of cash Öows.

Debt and Net Cash Ì At December 31, 2002, our Automotive sector had total debt of $14.2 billion, up$400 million from a year ago. The weighted average maturity of our long-term debt, substantially all of whichis Ñxed-rate debt, is approximately 27 years with about $1.1 billion maturing by December 31, 2007. Theweighted average maturity of total debt (long-term and short-term) is approximately 26 years. At Decem-ber 31, 2002, our Automotive sector had net cash (deÑned as gross cash less total debt) of $11.1 billion,compared with $3.9 billion and $8.1 billion at the end of 2001 and 2000, respectively.

Credit Facilities Ì At December 31, 2002, the Automotive sector had $7.8 billion of contractuallycommitted credit agreements with various banks; eighty-eight percent of the total facilities are committedthrough June 30, 2007. Ford has the ability to transfer on a non-guaranteed basis $7.2 billion of these creditlines to Ford Credit or FCE Bank, plc, Ford Credit's European operation (""FCE''). All of our global creditfacilities are free of material adverse change clauses and restrictive Ñnancial covenants (for example, debt-to-equity limitations, minimum net worth requirements and credit rating triggers that would limit out ability toborrow). Approximately $100 million of these facilities were in use at December 31, 2002.

Other Securities Ì Ford Motor Company Capital Trust I and Ford Motor Company Capital Trust IItogether have outstanding an aggregate $5.7 billion of trust preferred securities as described in Note 14 of theNotes to our Financial Statements. These securities are not included in the total debt amounts discussedabove. In addition, during the fourth quarter of 2002, we redeemed our Series B Cumulative Preferred Stockfor an aggregate redemption price of $177 million.

Financial Services Sector

Ford Credit Ì Not Included

Hertz

Hertz requires funding for the acquisition of revenue earning equipment, which consists of vehicles andindustrial and construction equipment. Hertz purchases this equipment in accordance with the terms ofa*greements negotiated with automobile and equipment manufacturers. The Ñnancing requirements of Hertzare seasonal and are mainly explained by the seasonality of the travel industry. Hertz' Öeet size, and its related

99.1-38

Ñnancing requirements, generally peak in the months of June and July, and decline during the months ofDecember and January. Hertz accesses the global capital markets to meet its funding needs.

Hertz maintains unsecured domestic and foreign commercial paper programs and a secured domesticcommercial paper program to cover short-term funding needs, and also draws from bank lines, as a normalbusiness practice, to fund international needs. Hertz also is active in the domestic medium-term and long-termdebt markets.

During 2002, Hertz launched an asset-backed securitization program for its domestic car rental Öeet toreduce its borrowing costs and enhance its Ñnancing resources. As of December 31, 2002, $514 million wasoutstanding under this program.

At December 31, 2002, Hertz had committed credit facilities totaling $3.0 billion. Of this amount,$1.4 billion represented global and other committed credit facilities ($0.9 billion of which are availablethrough June 30, 2007 and $0.5 billion of which have various maturities of up to four years); $500 millionconsisted of a revolving credit line provided by Ford, which currently expires in June 2004; $215 millionconsisted of asset backed Letters of Credit, and $928 million consisted of 364-day asset backed commercialpaper facilities.

Total Company

Stockholders' Equity Ì Our stockholders' equity was $5.6 billion at December 31, 2002, down $2.2 bil-lion compared with December 31, 2001. As described below, changes in the funded status of our pension fundsadversely impacted stockholders' equity by $5.3 billion, which was partially oÅset by favorable foreigncurrency translation adjustments of $2.9 billion. Our stockholders' equity also was reduced in 2002 by netlosses of $980 million and dividend payments of $743 million.

Post Retirement Obligations Ì We sponsor deÑned beneÑt pension plans whose pension fund assetsconsist principally of investments in equities and in government and other Ñxed income securities. For ourmajor U.S. pension funds, the target asset allocation is 70% equities and 30% Ñxed income securities. OnDecember 31, 2002, the market value of our U.S. pension fund assets was less than the projected beneÑtobligations (calculated using a discount rate of 6.75%, which is reduced from 7.25% used at year-end 2001) by$7.3 billion for our U.S. plans. For non-U.S. plans, the shortfall as of December 31, 2002, was $8.3 billion, fora total worldwide shortfall of $15.6 billion. Our stockholders' equity was reduced by $5.3 billion atDecember 31, 2002 because of increased pension under funding. Pension funding obligations and strategies arehighly dependent on investment returns, discount rates, actuarial assumptions, and beneÑt levels (which canbe contractually speciÑed, such as those under the Ford-UAW Retirement Plan that is subject to negotiationin 2003). If these assumptions were to remain unchanged, we project that we would not have a legalrequirement to fund our major U.S. pension plans before 2007. However, we review our pension assumptionsregularly and we do from time to time make contributions beyond those legally required. For example, inJanuary 2003 we contributed $500 million in cash to the U.S. pension funds and, depending on adetermination that it will be deductible for U.S. income tax purposes, expect to contribute an additional$500 million by June 2003. Further, after giving eÅect to these contributions, based on current interest ratesand on our return assumptions and assuming no additional contributions, we do not expect to be required topay any variable-rate premiums to the Pension BeneÑt Guaranty Corporation before 2005.

We sponsor post retirement health care plans, primarily in the U.S. We partially fund these obligationsthrough a VEBA trust, which is invested in short-term Ñxed income investments.

Debt Ratings Ì Our short- and long-term debt are rated by three nationally-recognized statistical ratingorganizations: Fitch, Inc. (""Fitch''); Moody's Investors Service, Inc. (""Moody's''); and Standard & Poor'sRating Services, a division of McGraw-Hill Companies, Inc. (""S&P''). In addition to these three ratingagencies, we also are rated in several local markets by locally recognized rating agencies. Debt ratings reÖectan assessment by the rating agencies of the credit risk associated with particular securities we issue, and arebased on information provided by us or other sources. Lower ratings generally result in higher borrowing costsand reduced access to capital markets. Long- and short-term debt ratings of BBB- and F3 or higher by Fitch,

99.1-39

Baa3 and P-3 or higher by Moody's and BBB- and A3 or higher by S&P are considered ""investment grade.''However, debt ratings are not recommendations to buy, sell, or hold securities and are subject to revision orwithdrawal at any time by the assigning rating agency. Each rating agency may have diÅerent criteria inevaluating the risk associated to a company, and therefore ratings should be evaluated independently for eachrating agency.

Fitch Ratings. On January 11, 2002, Fitch lowered the long-term debt ratings of Ford, Ford Credit andHertz from A- to BBB°, conÑrmed Ford Credit's and Hertz' short-term debt rating at F2, and conÑrmed therating outlook for all three companies as negative. On October 31, 2002, Fitch aÇrmed the long-term debtratings of Ford, Ford Credit and Hertz at BBB°, short-term debt ratings at F2 and its rating outlook asnegative.

Moody's Ratings. On January 16, 2002, Moody's lowered Ford's long-term debt rating from A3 toBaa1, lowered Ford Credit's long- and short-term debt ratings from A2 to A3 and from Prime-1 to Prime-2,respectively, and conÑrmed the rating outlook of both companies as negative. Moody's also lowered Hertz'long-term debt rating from Baa1 to Baa2, conÑrmed its short-term debt rating at Prime-2 and conÑrmed itsrating outlook as negative. On December 10, 2002, Moody's conÑrmed Hertz' long-term debt rating at Baa2,short-term debt rating at Prime-2 and its rating outlook is negative. On March 7, 2003, Moody's aÇrmed thelong-term debt rating of Ford at Baa1 and long- and short-term debt ratings of Ford Credit at A3 and Prime-2,respectively, and conÑrmed the rating outlook of both companies as negative.

S&P Ratings. On January 11, 2002, S&P changed the rating outlook for Ford, Ford Credit and Hertz tonegative. On October 16, 2002, S&P placed Ford, Ford Credit and Hertz's long-term debt ratings onCreditWatch with negative implications. The short-term debt rating of Ford Credit was reaÇrmed at A2. OnOctober 25, 2002, S&P lowered the long-term debt ratings of Ford and Ford Credit from BBB° to BBB. ItaÇrmed the short-term debt ratings of Ford Credit at A2. S&P stated that its rating outlook on us wasnegative and that is was concerned that the beneÑts of our Revitalization Plan could eventually be oÅset bydecreasing industry demand in North America, industry wide price competition and Ford's market shareweakness. S&P also indicated that its ratings on Ford could be lowered further if it comes to doubt Ford'sability to sustain earnings improvement, including the achievement of at least breakeven per-tax earnings inour Automotive operations in 2003. On October 30, 2002, S&P aÇrmed Hertz' long-term debt rating at BBBand its short-term debt rating at A2. On March 7, 2003, S&P aÇrmed the long-term debt ratings of Ford andFord Credit at BBB and the short-term debt rating of Ford Credit at A2. The outlook for all companies isnegative.

OÅ-Balance Sheet Arrangements

We have entered into various arrangements not reÖected on our balance sheet that have or are reasonablylikely to have a current or future eÅect on our Ñnancial condition, revenues or expenses, results of operations,liquidity, capital expenditures or capital resources. These include guarantees, sales of receivables by FordCredit, and variable interest entities, each of which is discussed below.

Guarantees (See also Note 24 of the Notes to our Financial Statements)

Occasionally, we guarantee debt and lease obligations of joint venture entities and other third parties withwhich we do business to support their growth. As of December 31, 2002, our maximum potential exposureunder these guarantees was $486 million.

In the ordinary course of business, we also execute contracts involving indemniÑcations standard in theindustry and indemniÑcations speciÑc to a transaction. These indemniÑcations include claims for any of thefollowing: environmental, tax, and shareholder matters; intellectual property rights; governmental regulationsand employment-related matters; Ñnancial matters; and dealer, supplier, and other commercial contractualrelationships. Performance under these indemnities would generally be triggered by a breach of terms of thecontract or by a third party claim.

99.1-40

Sales of Receivables by Ford Credit Ì Not Included

Variable Interest Entities (See also Item 2. ""Properties'' and Note 13 of the Notes to our FinancialStatements)

Automotive

Our Automotive sector has invested in several joint ventures that are reported as equity investments. Inmany cases, we have contracted with these joint ventures to manufacture and/or assemble vehicles orcomponents. We have invested and contracted with these entities to obtain low cost, high quality parts andvehicles, world-class niche product development capabilities and the ability to leverage the technical expertiseof our joint venture partners. These investments may involve a transfer of assets in exchange for an equityinterest. In some cases, we have agreed to guarantee the debt of the entity; in others we have unconditionalsupply arrangements that are used by the entity to secure Ñnancing. In many cases, labor used by the jointventures are Ford employees, the cost of which we are reimbursed; however, failing reimbursem*nt we areultimately responsible for the costs of these employees. The terms of these supply arrangements are a result ofarms-length negotiation. For a discussion of the impact of FIN 46 on our accounting for these joint ventures,see Note 13 of the Notes to our Financial Statements.

Financial Services

It is reasonably possible that FCAR, in its existing structure, may be consolidated in our Ñnancial resultsin compliance with FIN 46. Our equity investment and retained beneÑcial interest related to FCAR isapproximately $1.7 billion, which is reÖected on our consolidated balance sheet. At December 31, 2002,FCAR had gross assets of $12.2 billion and gross liabilities of $11.8 billion. We continue to assess structuresthat would maintain FCAR as an unconsolidated entity under FIN 46. We are continuing to analyze theimpact on our Ñnancial statements of FIN 46 and its impact on FCAR. In addition, Ford Credit also sellsreceivables to bank-sponsored asset-backed commercial paper issuers that are SPEs of the sponsor bank. FIN46 might also require the sponsor banks to consolidate the assets and liabilities of the SPEs into their Ñnancialresults. If this occurs, the sponsor banks may increase the program fees for Ford Credit's use of these SPEs orfail to renew their commitment to purchase additional receivables from Ford Credit. At December 31, 2002,about $6 billion of retail installment sale contracts Ford Credit originated were held by these SPEs. Webelieve we would not be required to consolidate any portion of these SPEs in our Ñnancial results. We arecontinuing to evaluate the impact of FIN 46 on the bank sponsors of these SPEs and on the continuedavailability and costs of this program. We believe bank sponsors will not terminate their SPEs or reduce theirpurchase of receivables.

Aggregate Contractual Obligations

We are party to many contractual obligations involving commitments to make payments to third parties.Most of these are debt obligations incurred by our Financial Services sector. In addition, as part of our normalbusiness practices, we enter into contracts with suppliers for purchases of certain raw materials, componentsand services. These arrangements may contain Ñxed or minimum quantity purchase requirements. We enterinto such arrangements to facilitate adequate supply of these materials and services. Many of these obligationsare recorded; others are disclosed in various notes to the Ñnancial statements. Some obligations are executorycontracts and therefore are not recognized as liabilities until the occurrence of a future event.

99.1-41

In order to provide information about our short- and long-term liquidity needs, a disclosure of selectedobligations is displayed below (in millions):

Payments Due by Period

Less Morethan 1 - 3 3 - 5 than

Total 1 year years years 5 years

Debt obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $162,222 $42,086 $56,655 $23,858 $39,623

Capital lease obligations ÏÏÏÏÏÏÏÏ 284 45 48 37 154

Operating lease obligations ÏÏÏÏÏÏ 3,294 856 1,125 603 710

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $165,800 $42,987 $57,828 $24,498 $40,487

Critical Accounting Estimates

We consider an accounting estimate to be critical if: 1) the accounting estimate requires us to makeassumptions about matters that were highly uncertain at the time the accounting estimate was made, and2) changes in the estimate that are reasonably likely to occur from period to period, or use of diÅerentestimates that we reasonably could have used in the current period, would have a material impact on ourÑnancial condition or results of operations.

Management has discussed the development and selection of these critical accounting estimates with theAudit Committee of our Board of Directors and the Audit Committee has reviewed the foregoing disclosure.In addition, there are other items within our Ñnancial statements that require estimation, but are not deemedcritical as deÑned above. Changes in estimates used in these and other items could have a material impact onour Ñnancial statements.

Warranty and Additional Service Actions

See Notes 1 and 24 of the Notes to our Financial Statements for more information regarding costs andassumptions for warranties and additional service actions.

Nature of Estimates Required: The estimated warranty and additional service action costs for eachvehicle sold by us are accrued at the time the vehicle is sold to a dealer. Included in the accruals are the costsfor both basic warranty and additional service action on vehicles we sell. Estimates are principally based onassumptions regarding the lifetime warranty costs of each vehicle line and each model year of that vehicle line,where little or no claims experience may exist. In addition, the number and magnitude of additional serviceactions expected to be approved, and policies related to additional service actions, are taken into consideration.Due to the uncertainty and potential volatility of these estimated factors, changes in our assumptions couldmaterially aÅect net income.

Assumptions and Approach Used: Our estimate of warranty and additional service action obligations isreevaluated on a quarterly basis. Experience has shown that initial data for any given model year can bevolatile; therefore, our process relies upon long-term historical averages until suÇcient data are available. Asactual experience becomes available, it is used to modify the historical averages to ensure that the forecast iswithin the range of likely outcomes. Resulting balances are then compared with present spending rates toensure that the accruals are adequate to meet expected future obligations.

Pension

See Note 20 of the Notes to our Financial Statements for more information regarding costs andassumptions for employee retirement beneÑts.

Nature of Estimates Required: The measurement of our pension obligations, costs and liabilities isdependent on a variety of assumptions used by our actuaries. These assumptions include estimates of thepresent value of projected future pension payments to all plan participants, taking into consideration thelikelihood of potential future events such as salary increases and demographic experience. These assumptions

99.1-42

may have an eÅect on the amount and timing of future contributions. The plan trustee conducts anindependent valuation of the fair value of pension plan assets.

Assumptions and Approach Used: The assumptions used in developing the required estimates includethe following key factors:

‚ Discount rates ‚ InÖation

‚ Salary growth ‚ Expected return on plan assets

‚ Retirement rates ‚ Mortality rates

We base the discount rate assumption on investment yields available at year-end on corporate long-termbonds rated AA. Our inÖation assumption is based on an evaluation of external market indicators. The salarygrowth assumptions reÖect our long-term actual experience, the near-term outlook and assumed inÖation. Theexpected return on plan assets reÖects asset allocations, investment strategy and the views of investmentmanagers and other large pension plan sponsors. Retirement and mortality rates are based primarily on actualplan experience. The eÅects of actual results diÅering from our assumptions are accumulated and amortizedover future periods and, therefore, generally aÅect our recognized expense in such future periods.

Sensitivity Analysis: The eÅect of the indicated decrease in the selected assumptions is shown below,assuming no changes in beneÑt levels and no amortization of gains or losses for our major plans in 2003 (inmillions):

EÅect on U. S. Plans:

December 31, 2002

Percentage Decline HigherPoint in Funded Reduction 2003

Assumption Change Status in Equity Expense

Discount rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ¿0.5 pts $1,800 $1,100 $ 10

Expected return on assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ¿0.5 pts Ì Ì 175

Other Post Retirement BeneÑts (Retiree Health Care and Life Insurance)

See Note 20 of the Notes to our Financial Statements for more information regarding costs andassumptions for other post retirement beneÑts.

Nature of Estimates Required: The measurement of our obligations, costs and liabilities associated withother post retirement beneÑts (e.g., retiree health care) requires that we make use of estimates of the presentvalue of the projected future payments to all participants, taking into consideration the likelihood of potentialfuture events such as health care cost increases, salary increases and demographic experience, which may havean eÅect on the amount and timing of future payments.

Assumptions and Approach Used: The assumptions used in developing the required estimates includethe following key factors:

‚ Health care cost trends ‚ InÖation

‚ Discount rates ‚ Expected return on plan assets

‚ Salary growth ‚ Mortality rates

‚ Retirement rates

Our health care cost trend assumptions are developed based on historical cost data, the near-termoutlook, and an assessment of likely long-term trends. We base the discount rate assumption on investmentyields available at year-end on corporate long-term bonds rated AA. Our inÖation assumption is based on anevaluation of external market indicators. The salary growth assumptions reÖect our long-term actualexperience, the near-term outlook and assumed inÖation. The expected return on plan assets reÖects historyand asset allocation. Retirement and mortality rates are based primarily on actual plan experience. The eÅectsof actual results diÅering from our assumptions are accumulated and amortized over future periods and,therefore, generally aÅect our recognized expense in such future periods.

99.1-43

Sensitivity Analysis: The eÅect of the indicated increase/decrease in the selected assumptions is shownbelow (assuming no changes in beneÑt levels); the 2003 expense eÅect includes the impact on service cost andinterest cost as well as amortization of gains or losses (in millions):

EÅect on U. S. and Canadian Plans:

December 31, 2002Percentage Obligation 2003 Expense

Assumption Point Change Higher/(Lower) Higher/(Lower)

Discount rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ °/¿0.5 pts $(1,700)/$1,700 $(130)/$130

Health care cost trend ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ °/¿1.0 pts 3,900/(3,300) 560/(460)

Allowance for Credit Losses Ì Not Included

Accumulated Depreciation on Operating Leases Ì Not Included

New Accounting Standards

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation ÌTransition and Disclosure Ì an amendment of FASB Statement No. 123. This Statement amends SFASNo. 123, ""Accounting for Stock-Based Compensation'', to provide alternative methods of transition for avoluntary change to the fair value based method of accounting for stock-based employee compensation. Inaddition, this Statement amends the disclosure requirements of Statement 123 to require prominentdisclosures in both annual and interim Ñnancial statements about the method of accounting for stock-basedemployee compensation and the eÅect of the method used on reported results. EÅective January 1, 2003, weadopted the fair value recognition provisions of SFAS No. 123 prospectively to all unvested employee awardsas of January 1, 2003, and all new awards granted to employees after January 1, 2003 using the modiÑedprospective method of adoption under the provisions of SFAS No. 148.

The FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities inJune 2002. This Statement requires obligations associated with disposing of operations to be recognized andmeasured at fair value when certain liabilities are incurred. The current accounting guidance allows forrecognition of liabilities on the commitment date of a disposal or exit plan. We adopted this Statement onJanuary 1, 2003 and plant closures related to our Revitalization Plan will follow SFAS No. 146 accountingguidelines. We do not expect adoption of this Statement to have a material impact on our consolidatedÑnancial position or results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This Statement superseded SFAS No. 121, Accounting for the Impairment of Long-LivedAssets and for Long-Lived Assets to Be Disposed Of and addresses Ñnancial accounting and reporting forimpairment of long-lived assets to be held and used, and long-lived assets and components of an entity to bedisposed of. We adopted this Statement on January 1, 2002.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations, whichrequires entities to establish liabilities for legal obligations associated with the retirement of tangible long-livedassets. We adopted the Statement on January 1, 2003 and do not expect a material impact on our consolidatedÑnancial position or results of operations.

In November 2002, the FASB issued Interpretation No. 45 (FIN 45), Guarantor's Accounting andDisclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45clariÑes the requirements of SFAS No. 5, Accounting for Contingencies, relating to a guarantor's accountingfor, and disclosure of, the issuance of certain types of guarantees. For certain guarantees issued afterDecember 31, 2002, FIN 45 requires a guarantor to recognize, upon issuance of a guarantee, a liability for thefair value of the obligations it assumes under the guarantee. Guarantees issued prior to January 1, 2003, arenot subject to liability recognition, but are subject to expanded disclosure requirements. We do not believe thatthe adoption of this Interpretation will have a material impact on our consolidated Ñnancial position orstatement of operations. For further discussion, see Note 24 of the Notes to our Financial Statements.

99.1-44

In January 2003, FASB issued FIN 46, an interpretation of Accounting Research Bulletin No. 51. UnderFIN 46, which requires us to consolidate variable interest entities for which we are deemed to be the primarybeneÑciary and disclose information about variable interest entities in which we have a signiÑcant variableinterest. FIN 46 became eÅective immediately for variable interest entities formed after January 31, 2003 andwill become eÅective in the third quarter of 2003 for any variable interest entities formed prior to February 1,2003. We are adopting FIN 46 as it becomes eÅective, which could materially impact our Ñnancialstatements. For further discussion of FIN 46, see ""OÅ-Balance Sheet Arrangements Ì Variable InterestEntities'' above and Note 13 of the Notes to our Financial Statements.

Outlook

2003 Financial Milestones

We have set and communicated certain Ñnancial milestones for 2003. The Ñnancial milestones for 2003are as follows:

Planning Assumptions

Industry Volume

U.S. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16.5 million units

Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17.0 million units

Net Pricing

U.S. ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Zero

Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1%

Physicals Milestone

Quality ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Improve in all regions

Market ShareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Improve in all regions

Automotive:

Cost Performance (at constant volumeand mix)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Improve by at least $500 million

Capital Spending ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $8 billion

Financial Results

Automotive

Income Before Taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Breakeven

Operating Cash Flow* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Breakeven

Ford Credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Improve cash contribution to ParentMaintain managed leverage in low end of13-14 to 1 range**

* Consistent with operating cash Öow calculation under ""Liquidity and Capital Resources Ì AutomotiveSector'' above.

** Consistent with deÑnition of leverage under ""Liquidity and Capital Resources Ì Financial ServicesSector'' above.

Based on the planning assumptions set forth above and achievement of the foregoing milestones, weexpect 2003 fully diluted earnings to be about 70 cents per share for the full-year and 20 cents per share for theÑrst quarter. For the full-year, we expect the Automotive sector to break even and the Financial Servicessector to provide improved cash contributions to the parent company.

Revitalization Plan Update

In January 2002, we announced our Revitalization Plan, which is expected to improve our pre-tax incometo $7 billion by mid-decade. Excluding unusual items, our pre-tax earnings in 2002 were well in excess of the

99.1-45

breakeven target we set when we announced the Revitalization Plan last year. We also made improvements toour cost structure consistent with the Revitalization Plan. With the progress made on costs in 2002, coupledwith the acceleration of cost reductions planned for this year, we expect proÑts to be ahead of the original planthis year as well. This expectation is reÖected in our full year earnings target of 70 cents per share.

Pension and Health Care Expenses

We sponsor deÑned beneÑt pension plans throughout the world and post retirement health care plans,primarily in the United States. We also provide health care coverage for our active employees, primarily in theUnited States. Pursuant to our collective bargaining agreement with the UAW, under which most of our U.S.hourly employees are covered, we are contractually committed to provide speciÑed levels of pension andhealth care beneÑts to both employees and retirees covered by the contract. These obligations give rise tosigniÑcant expenses that are highly dependent on assumptions discussed in Note 20 of the Notes to ourFinancial Statements and under ""Critical Accounting Estimates'' above.

Based on present assumptions and beneÑt agreements, we expect our 2003 U.S. pre-tax pension expenseto be about $270 million, which is about $460 million higher than it was in 2002.

In 2002, our health care costs for United States employees was $2.8 billion, with about $1.9 billionattributable to retirees and $900 million attributable to active employees. Our health care costs in the UnitedStates have been rising at about 16% a year over the last two years. The cost of prescription drugs, which roseabout 15% in 2002 compared with 2001, is the fastest growing segment of our health care costs and nowaccounts for approximately 30% of our total United States health care costs. Although we have takenmeasures to have salaried employees and retirees bear a higher portion of the costs of their health carebeneÑts, we expect these trends to continue over the next several years.

Risk Factors

Statements included or incorporated by reference herein may constitute ""forward looking statements''within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve anumber of risks, uncertainties, and other factors that could cause actual results to diÅer materially from thosestated, including, without limitation:

‚ greater price competition in the U.S. and Europe resulting from currency Öuctuations, industryovercapacity or other factors;

‚ a signiÑcant decline in industry sales, particularly in the U.S. or Europe, resulting from slowingeconomic growth, geo-political events or other factors;

‚ lower-than-anticipated market acceptance of new or existing products;

‚ work stoppages at key Ford or supplier facilities or other interruptions of supplies;

‚ the discovery of defects in vehicles resulting in delays in new model launches, recall campaigns orincreased warranty costs;

‚ increased safety, emissions, fuel economy or other regulation resulting in higher costs and/or salesrestrictions;

‚ unusual or signiÑcant litigation or governmental investigations arising out of alleged defects in ourproducts or otherwise;

‚ worse-than-assumed economic and demographic experience for our post retirement beneÑt plans (e.g.,investment returns, interest rates, health care cost trends, beneÑt improvements);

‚ currency or commodity price Öuctuations;

‚ a market shift from truck sales in the U.S.;

‚ economic diÇculties in South America or Asia;

99.1-46

‚ reduced availability of or higher prices for fuel;

‚ labor or other constraints on our ability to restructure our business;

‚ a change in our requirements under long-term supply arrangements under which we are obligated topurchase minimum quantities or pay minimum amounts;

‚ a further credit rating downgrade;

‚ inability to access debt or securitization markets around the world at competitive rates or in suÇcientamounts;

‚ higher-than-expected credit losses;

‚ lower-than-anticipated residual values for leased vehicles;

‚ increased price competition in the rental car industry and/or a general decline in business or leisuretravel due to terrorist attacks, act of war or measures taken by governments in response thereto thatnegatively aÅect the travel industry; and

‚ our inability to implement the Revitalization Plan.

99.1-47

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Overview

We are exposed to a variety of market and other risks, including the eÅects of changes in foreign currencyexchange rates, commodity prices, interest rates, as well as risks to availability of funding sources, hazardevents, and speciÑc asset risks.

These risks aÅect our Automotive and Financial Services sectors diÅerently. We monitor and managethese exposures as an integral part of our overall risk management program, which includes regular reports to acentral management committee, the Global Risk Management Committee (""GRMC''). The GRMC isresponsible for developing our overall risk management objectives and reviewing performance against theseobjectives. The GRMC is chaired by our Chief Financial OÇcer, and its members include our Treasurer, ourController, and the Chief Financial OÇcer of Ford Credit.

Our Automotive and Financial Services sectors are exposed to liquidity risk, or the possibility of having tocurtail their businesses or being unable to meet present and future Ñnancial obligations as they come duebecause funding sources may be reduced or become unavailable. We, and particularly Ford Credit, whichcomprises substantially all of our Financial Services sector, maintain plans for sources of funding to ensureliquidity through a variety of economic or business cycles. As discussed in greater detail in Item 7, our fundingsources include commercial paper, term debt, sale of receivables through securitization transactions,committed lines of credit from major banks, and other sources.

We are exposed to a variety of insurable risks, such as loss or damage to property, liability claims, andemployee injury. We protect against these risks through a combination of self-insurance and the purchase ofcommercial insurance designed to protect against events that could generate signiÑcant losses.

Direct responsibility for the execution of our market risk management strategies resides with ourTreasurer's OÇce and is governed by written polices and procedures. Separation of duties is maintainedbetween the development and authorization of derivative trades, the transaction of derivatives, and thesettlement of cash Öows. Regular audits are conducted to ensure that appropriate controls are in place and thatthey remain eÅective. In addition, our market risk exposures and our use of derivatives to manage theseexposures are reviewed by the GRMC and the Audit Committee of our Board of Directors. For additionalinformation on our derivatives, see Note 17 of our Notes to Financial Statements.

The market and counterparty risks of our Automotive sector and Ford Credit are discussed and quantiÑedbelow. The quantitative disclosures presented are independent of any adjustments related to SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities.

Automotive Market and Counterparty Risk

Our Automotive sector frequently has expenditures and receipts denominated in foreign currencies,including the following: purchases and sales of Ñnished vehicles and production parts, debt and other payables,subsidiary dividends, and investments in foreign operations. These expenditures and receipts create exposuresto changes in exchange rates. We also are exposed to changes in prices of commodities used in ourAutomotive sector and changes in interest rates.

Foreign currency risk and commodity risk are measured and quantiÑed using a model to calculate thechanges in the value of currency and commodity derivative instruments along with the underlying exposurebeing hedged. Beginning with this report, we have changed our risk disclosure methodology to an earnings atrisk (""EaR'') model from a value at risk (""VaR''). VaR is a valuation of the existing hedge portfolio andprojects the potential change in the portfolio's liquidation value. EaR provides the potential impact to pre-taxearnings related to foreign currency and commodity price exposure and is a more meaningful metric to anongoing business than VaR. The model to calculate EaR combines current market data with historical data onvolatilities and correlations of the underlying currencies and commodity prices. EaR includes hedgingderivatives as well as the underlying exposures over a twelve month period.

99.1-48

Foreign Currency Risk

Foreign currency risk is the possibility that our Ñnancial results could be better or worse than plannedbecause of changes in foreign currency exchange rates. We use derivative instruments to hedge assets,liabilities, investments in foreign operations, and Ñrm commitments denominated in foreign currencies. In ourhedging actions, we use primarily instruments commonly used by corporations to reduce foreign exchange risk(e.g., forward contracts and options).

Our EaR is based on transaction exposure, which is the foreign currency exposure that results from crossborder cash Öows from speciÑc transactions, and our related hedging activity. At December 31, 2002, the EaRfrom foreign currency exchange movements over the next twelve months is less than $390 million, within a95% conÑdence level, which is approximately $60 million higher than the EaR projection for 2002 calculatedas of December 31, 2001. The increased exposure results primarily from less diversiÑcation beneÑt due tohigher correlation among major currency pairings.

Commodity Price Risk

Commodity price risk is the possibility of higher or lower costs due to changes in the prices ofcommodities, such as non-ferrous (e.g., aluminum) and precious metals (e.g., palladium, platinum andrhodium), ferrous alloys (e.g., steel), energy (e.g., natural gas and electricity), and plastics/resins (e.g.,polypropylene), which we use in the production of motor vehicles. We use derivative instruments to hedge theprice risk associated with the purchase of those commodities that we can economically hedge. In our hedgingactions, we primarily use instruments commonly used by corporations to reduce commodity price risk (e.g.,Ñnancially settled forward contracts, swaps, and options).

Based on our Ñnancial hedging activities with derivatives and the associated underlying exposures (e.g.,precious metals, aluminum, copper, natural gas, and unleaded gas), at December 31, 2002, the EaR fromcommodity price movements over the next twelve months is less than $59 million, within a 95% conÑdencelevel, which is approximately $25 million lower than the EaR projection for 2002 calculated as ofDecember 31, 2001. The decreased exposure results primarily from declining consumption exposures and alower cost basis.

In addition to these price-hedging activities, our procurement activities ensure that we have adequatesupplies of raw materials used in our business. These procurement activities utilize forward purchasecontracts, long-term supply contracts, and stockpiles. Any price-hedging inherent in our procurementactivities is approved by the GRMC.

Interest Rate Risk

Interest rate risk relates to the gain or loss we could incur to our investment portfolio in the event of achange in interest rates. We have $25.3 billion in cash (including assets contained in a VEBA trust), which weinvest in securities of various types and maturities. Many of these securities are interest sensitive. Thesesecurities are generally classiÑed as Trading or Available for Sale. The Trading portfolio gains and losses(unrealized and realized) are reported in the income statement. The Available for Sale portfolio realized gainsor losses are reported in the income statement, and unrealized gains and losses are reported in theConsolidated Statement of Stockholders' Equity in other comprehensive income. The investment strategy isbased on clearly deÑned risk and liquidity guidelines to maintain liquidity, minimize risk, and earn areasonable return on the short-term investment.

At any time, a rise in interest rates could have a material adverse impact on the fair value of our Tradingand our Available for Sale portfolios. As of December 31, 2002, the value of our Trading portfolio was$18.5 billion (including assets contained in a VEBA trust), the value of our Available for Sale portfolio was$1.6 billion, and the value of our cash and cash equivalents was $5.2 billion.

Assuming a hypothetical, instantaneous increase in interest rates of one percentage point, the value of ourAvailable for Sale and Trading portfolios would be reduced by $185 million and $27 million, respectively.While this is our best estimate of the impact of the speciÑed interest rate scenario, actual results could diÅer

99.1-49

from those projected. The sensitivity analysis presented assumes interest rate changes are instantaneous,parallel shifts in the yield curve. In reality, interest rate changes are rarely instantaneous or parallel.

Counterparty Risk

Counterparty risk relates to the loss we could incur if an obligor or counterparty defaulted on aninvestment or a derivative contract. Exposures primarily relate to investments in Ñxed-income instruments andderivative contracts used for managing interest rate, currency and commodity risk. We, together with FordCredit, establish exposure limits for each counterparty to minimize risk and provide counterparty diversiÑca-tion. Our exposures are monitored on a regular basis and are included in monthly reporting to the GRMC.

Our approach to managing counterparty risk is forward-looking and proactive, allowing us to take riskmitigation actions. We establish exposure limits for both mark-to-market and future potential exposure, basedon our overall risk tolerance and ratings-based historical default probabilities. The exposure limits are lowerfor lower-rated counterparties and for longer-dated exposures. We use a Monte Carlo simulation technique toassess our potential exposure by tenor, deÑned at a 95% conÑdence level.

Substantially all of our counterparty and obligor exposures are with counterparties and obligors that arerated single-A or better.

Ford Credit Market Risks Ì Not Included

99.1-50

Exhibit 99.2

Statement Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Public CompanyAccounting Reform and Investor Protection Act of 2002

I, Bibiana Boerio, the Chief Financial OÇcer of Ford Motor Credit Company (the ""Ford Credit''), herebycertify that:

1. Ford Credit's annual report on Form 10-K for the year ended December 31, 2002 (the ""Report''), towhich this statement is Ñled as an exhibit, fully complies with the requirements of Section 13(a) or15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the Ñnancial conditionand results of operations of Ford Credit.

By /s/ BIBIANA BOERIO

Bibiana BoerioExecutive Vice President,

Chief Financial OÇcer and Treasurer

Dated: March 12, 2003

99.2-1

Exhibit 99.3

Statement Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Public CompanyAccounting Reform and Investor Protection Act of 2002

I, Gregory C. Smith, the Chairman of the Board, Chief Executive OÇcer and President of Ford Motor CreditCompany (the ""Ford Credit''), hereby certify that:

2. The information contained in the Report fairly presents, in all material respects, the Ñnancial conditionand results of operations of Ford Credit.

By /s/ GREGORY C. SMITH

Gregory C. Smith,Chairman of the Board,

Chief Executive OÇcer and President

Dated: March 12, 2003

99.3-1

Ford Motor Credit Company - [PDF Document] (2024)

FAQs

Is Ford Credit the same as Ford Motor Credit? ›

Ford Motor Credit Company is Ford's financial services subsidiary. It is a leading provider of automotive financial products and services globally to Ford and Lincoln dealers and their customers.

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What credit reporting agency does Ford Motor Credit use? ›

The Ford Credit Card mainly uses Experian for approval.

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What credit score is needed for Ford Motor Credit? ›

Even if you have fair credit, Ford financing may be possible. It might approve you with a score as low as 620 to 650, albeit at a higher interest rate. You can prequalify with Ford Motor Credit online. Although prequalification doesn't guarantee approval, it will let you know where you stand.

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How do I get my Ford Motor Credit payoff statement? ›

Sign in to Account Manager and view your payoff by clicking on the "View Payoff Amount" link near the "Payment progress" bar on the landing page. This will generate a letter that includes your payoff amount, good-until date and payoff mailing address.

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Who provides Ford Credit? ›

Ford Credit is a trading Style of FCE Bank plc. Registered in England: No 772784. Registered Office: FCE Bank plc, Arterial Road, Laindon, Essex, SS15 6EE.

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Which bank does Ford use? ›

Beneficiary Name: FCE Bank plc. ('Ford Money' is a trading style of FCE Bank plc)

Can Ford Motor Credit garnish wages? ›

If FMCC already has a judgment debt against you, that judgment can lead to wage garnishment, bank levy, and/or judgment liens on your property. Judgments in California are good for 10 years and can be renewed for ten more, and then ten more!

How long does it take to get approved for Ford Credit? ›

Credit Application

The process usually takes around 10-15 minutes and you can expect to receive a response right away. You'll be asked to provide the following basic personal information: Social Security Number. Date of Birth.

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Does Ford Credit have a hardship program? ›

Get started here. At Ford Credit, we know these are uncertain times. That's why if you experience financial hardship following the loss of employment after financing an eligible vehicle through Ford Credit, you can return it within one year of date of purchase.

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Can I pay off my Ford Credit loan early? ›

Can You Pay Off Ford Credit Loan Early? Ford Motor Credit offers simple interest auto loans for all cars, trucks, and SUVs. So, you don't have to worry about a prepayment penalty if you want to pay off your car loan early.