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Ford Motor Credit Company

ANNUAL REPORTON FORM 10-K

for the year endedDecember 31, 2001

Filed pursuant to Section 13of the Securities Exchange Act of 1934

TABLE OF CONTENTS

Item Page

PART I 1 Our Business ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1Overview ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1Retail Financing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2Wholesale Financing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4Other Financing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4Servicing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5Insurance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5Segment Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5

Our Employee Relations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5Our Governmental RegulationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5Our Transactions with Ford and AÇliatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6

2 Our PropertiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 63 Our Legal ProceedingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6

PART II 5 Market for Our Common Equity and Related Stockholder Matters ÏÏÏÏÏÏÏÏ 86 Selected Financial DataÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 97 Management's Discussion and Analysis of Financial Condition and Results

of OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10Overview ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10Critical Accounting Policies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10Results of OperationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13Financial Condition ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16Credit RatingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21Funding and Liquidity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22Sales of Receivables and SecuritizationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26Capital Adequacy ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32Other Changes in Accounting StandardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 33Cautionary Statement Regarding Forward Looking Statements ÏÏÏÏÏÏÏÏÏ 33

7A Quantitative and Qualitative Disclosures About Market Risk ÏÏÏÏÏÏÏÏÏÏÏÏÏ 348 Financial Statements and Supplementary Data ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37

PART III 10-13 Not required ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ NA

PART IV 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K ÏÏÏÏÏÏÏ 38Signatures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41Report of Independent AccountantsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ FC-1Ford Motor Credit Company and Subsidiaries Financial StatementsConsolidated Statement of Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ FC-2Consolidated Balance Sheet ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ FC-3Consolidated Statement of Stockholder's Equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ FC-4Consolidated Statement of Cash Flows ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ FC-5Notes to Financial Statements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ FC-6

Exhibit Index ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ E-1Exhibit 10AÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ E-2Exhibit 12 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ E-4Exhibit 23 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ E-5Exhibit 24 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ E-6Exhibit 99 Ì Items 1, 3, 6, 7 and 7A of Ford Motor Company's

Annual Report on Form 10-K ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ E-9

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, 2001

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

6≥% Notes due November 5, 2008 New York Stock Exchange7≥% 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 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to Ñle such reports), and (2) has been subject to such Ñling requirements forthe past 90 days.

Yes $ No

As of March 28, 2002, the registrant had outstanding 250,000 shares of Common Stock. No voting stockof the registrant 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 ofFord Motor Company's Annual Report on Form 10-K for the year ended December 31, 2001.

The registrant meets the condition set forth in General Instruction I(1)(a) and (b) of Form 10-K andis therefore 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 a wholly-owned subsidiary of Ford Motor Company (Ford). Our principal executive oÇces arelocated at One American Road, Dearborn, Michigan 48126 and our telephone number is (313) 322-3000.

Services. We oÅer a wide variety of automotive Ñnancial services to and through automotive dealersthroughout the world. Under the Ford Credit brand name, we provide Ñnancial services to and through dealersof Ford, Lincoln and Mercury brand vehicles and their aÇliated dealers. Our PRIMUS division oÅersÑnancial services to and through dealers of Jaguar, Land Rover, Aston Martin and Mazda brand vehicles andnon-Ford dealers. Our Volvo finance subsidiaries provide Ñnancing to and through Volvo dealers. Our Fairlaneand Triad subsidiaries oÅer non-prime Ñnancing through dealers, mainly for used vehicles. We also oÅerÑnancial services to vehicle leasing companies and Öeet purchasers.

Our primary Ñnancial services fall into three categories:

‚ Retail Ñnancing Ì purchasing retail installment sale contracts and retail leases from dealers.

‚ 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 acquisition of real estate.

We also service the Ñnance receivables we originate and purchase, make loans to Ford aÇliates, Ñnancereceivables of Ford and its subsidiaries and provide insurance services related to our Ñnancing programs. Weearn our revenue primarily from retail installment sale contracts and leases and interest supplement and othersupport payments we receive from Ford on special-rate retail Ñnancing programs. See Item 7 for quantitativeinformation concerning the amount of revenue generated by the diÅerent types of services we provide.

Geographic Scope of Operations. We conduct our Ñnancing operations directly or through oursubsidiaries and aÇliates. We do business in all 50 states of the United States through about 175 dealerautomotive Ñnancing branches and seven regional service centers. Our United States operations accounted for79% and 78% of our total revenues in 2001 and 2000, respectively. Outside the United States, our largestoperation is FCE Bank plc (Ford Credit Europe), which accounted for 11% of our total revenue in both 2001and 2000. Ford Credit Europe does business in the United Kingdom, Germany, most other Europeancountries, and Saudi Arabia. We also operate in Canada, Mexico, Brazil, Australia, a number of Asia-PaciÑccountries, Argentina and Chile. In addition, we manage Ford's vehicle Ñnancing operations in other countrieswhere we do not have independent operations. We conduct our operations outside of the United States in amanner similar to our United States operations, with appropriate adjustments for local law and othercircumstances.

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

ITEM 1. OUR BUSINESS (Continued)

No single company is a dominant force in the industry. We compete mainly on the basis of service andÑnancing rates. A key foundation of our service is providing broad and consistent purchasing policies for retailinstallment sale and lease contracts and consistent support for dealer Ñnancing requirements across economiccycles. These policies have built strong relationships with Ford's dealer network that enhance our competitive-ness. Our ability to provide competitive Ñnancing rates depends on accessing the capital markets eÇcientlyand eÅectively and originating, purchasing and servicing our receivables eÇciently. We routinely monitor thecapital markets and develop funding alternatives to maximize our competitive position. The integration of ourÑnancing services with Ford's vehicle production and marketing plans gives us a competitive advantage inproviding Ñnancing to Ford dealers and their customers. In addition, our size allows us to take advantage ofeconomies of scale in both origination and servicing of receivables.

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 automobile 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.

Dependence on Ford Motor Company. The Ñnancing of Ford vehicles is the largest portion 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 could have anadverse eÅect on our business. On the other hand, an increase in Ford's vehicle production or a signiÑcantmarketing program sponsored by Ford could positively impact our business. A description of Ford's business isincluded as an exhibit to this Report and incorporated by this reference. Additional information about Ford'sbusiness, operations, production, sales and risks can be found in Ford's Annual Report on Form 10-K for theyear ended December 31, 2001, Ñled separately with the Securities and Exchange Commission.

Retail Financing

Overview

We provide Ñnancial 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 2001, we Ñnanced about4.5 million vehicles through installment sales and Ñnance leases, and we Ñnanced about 1.1 million vehiclesthrough operating leases. We report the receivables from customers under installment sale contracts andcertain leases with Öeet customers as Ñnance receivables. We report our retail leases as operating leases withthe capitalized cost of the vehicles recorded as depreciable assets and reported in our Ñnancial statements asnet investment in operating leases. At December 31, 2001, our worldwide retail Ñnance receivables totaled$85.5 billion and our worldwide total net investment in operating leases was $39.3 billion.

The amount (or volume) of our retail Ñnance receivables and operating leases depends on several factors:

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

‚ The extent to which we purchase retail installment sale contracts and lease contracts for these vehicles,also known as Ñnancing share,

‚ The cost of vehicles Ñnanced, and

‚ Our sales of receivables in securitizations.

In the past, Ford periodically has sponsored special low-rate Ñnancing programs available only through us.Similar programs may be oÅered in the future. Under these programs, Ford makes interest supplement orother support payments to us. These programs can increase our Ñnancing volume and share of Ford vehicles.We earned $4.0 billion and $3.4 billion in interest supplements and other support payments from Ford in 2001and 2000, respectively.

2


Installment Sale Contracts

We purchase from dealers retail installment sale contracts that meet our credit standards. Most of thesecontracts relate to the purchase of new vehicles, but some are for used vehicles. The amount we pay for aninstallment sale contract is based on a negotiated vehicle purchase price agreed to between the dealer and theretail customer, less any vehicle trade-in or down payment applied to the purchase price. The net purchaseprice owed by the customer is paid over a speciÑed number of months with interest at a Ñxed rate negotiatedbetween the dealer and the retail customer. The dealer may retain a portion of the Ñnance charge. Installmentsale contract terms generally range from 12 to 72 months with an average original term of 54 months in theUnited States in 2001. In the United States, the average repayment obligation for new Ford, Lincoln, andMercury brand vehicles under installment sale contracts was $24,915 in 2001, compared to $21,205 in 2000and $19,547 in 1999. The corresponding average monthly payment was $505 in 2001, $495 in 2000, and $454in 1999.

We hold a security interest in the vehicles purchased through installment sale contracts. The priority ofour security interest is protected against claims from other creditors, usually through lien notation on vehicletitles or other forms of security interest perfection. If our collection eÅorts fail to bring a delinquent customer'spayments current, we generally can repossess their vehicle, after satisfying local legal requirements and sell itat auction. The customer remains liable for any deÑciency between net auction proceeds and their defaultedcontract obligations. We require retail customers to carry Ñre, theft and collision insurance on Ñnancedvehicles.

Retail Lease Plans

We oÅer leasing plans to retail customers through our dealers. Our most successful retail leasing plan iscalled Red Carpet Lease, which is oÅered in the United States and Canada through dealers of Ford, Lincolnand Mercury brand vehicles. We oÅer similar lease plans through dealers of other Ford vehicles, Mazdadealers and private label plans for a limited number of non-Ford dealers. Under these plans, dealers originatethe leases and oÅer them to us for purchase. We purchase leases that meet our credit standards. Upon ourpurchase of a lease, we take ownership of the lease and title to the leased vehicle from the dealer. At the end ofthe lease, the customer has the option to purchase the vehicle for the lease-end value as speciÑed in the leasecontract or return the vehicle to the dealer. Afterwards, the dealer may buy the vehicle from us for thespeciÑed lease-end value or return it to us. Once we purchase a lease from a dealer, that dealer generally hasno further obligation to us in connection with the lease and no responsibility if the value of a leased vehicle atthe end of the lease is less than the speciÑed lease-end value.

The amount we pay to a dealer for a retail lease, also called the acquisition cost, is based on thenegotiated price for the vehicle less vehicle trade-in or down payment from the customer. The customer makesmonthly lease payments, in an amount equal to the acquisition cost less the estimated residual value of thevehicle at the lease term end amortized over the lease term, plus lease charges. Retail lease terms range from12 to 48 months with an average original lease term of 32 months in the United States in 2001. In the UnitedStates, the average monthly payment of retail lease contracts for new Ford, Lincoln, and Mercury brandvehicles we purchased was $420 in 2001, $394 in 2000, and $380 in 1999.

If our collection eÅorts fail to bring delinquent lease customer's payments current, we repossess thevehicle and sell it at auction. We require lease customers to carry Ñre, theft, liability and collision insurance onleased vehicles.

Other Retail Financing

We also oÅer vehicle Ñnancing programs to leasing companies, daily rental companies, governmententities and Öeet customers. These Ñnancings include both lease plans and installment purchase plans and aregenerally for terms of 12 to 84 months. The Ñnancing obligations are collateralized by perfected liens onÑnanced vehicles in almost all instances and, where appropriate, an assignment of rentals under any related

3


leases. At the end of the Ñnance term, a lease customer may be required to pay us any shortfall between thefair market value and the speciÑed end of term value of the vehicle. If the fair market value of the vehicle atthe end of the Ñnance term exceeds the speciÑed end of term value, we may pay the lease customer the excessamount. These Ñnancings are included in retail installment Ñnance receivables and net investment in operatingleases and in the United States totaled about $6 billion as of December 31, 2001.

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 wholesale price for new vehicles and up to 100% of theauction price for used vehicles. Dealers pay a Öoating interest rate on wholesale receivables based on the primerate. Each wholesale receivable is paid oÅ by the dealer as vehicles are sold or leased. In the United States in2001, the average wholesale receivable was outstanding for 80 days, including vehicle delivery time. In 2001,we Ñnanced about 5 million vehicles worldwide through wholesale Ñnancing, and at December 31, 2001, wehad a total of $15.6 billion in wholesale Ñnancing outstanding, after taking into account sales of wholesalereceivables in securitizations during 2001. Our wholesale Ñnancing program includes Ñnancing of large multi-brand national dealer groups that are some of our largest wholesale customers, based on the amount Ñnanced.

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. We areinsured for vehicle damage and theft of vehicles held in dealer inventory.

Since 1999, we have provided more than 84% of the wholesale Ñnancing on new Ford, Lincoln andMercury brand vehicles acquired by dealers in the United States and 97% of the wholesale Ñnancing on newFord brand vehicles acquired by European dealers.

The amount of our wholesale receivables depends on several factors:

‚ The number of total vehicle sales by Ford to dealers,

‚ The level of dealer inventories,

‚ Our Ñnancing share of Ford's sales to dealers,

‚ The costs of the vehicles Ñnanced, and

‚ Our sales of wholesale receivables in securitizations.

Other Financing

We make loans to vehicle dealers for facilities improvements, working capital and to enable them topurchase dealership real estate. For dealers in the United States and Canada, these loans totaled about$4.3 billion at December 31, 2001 and were included in other Ñnance receivables. These loans are typicallysecured by liens on real estate, other dealership assets and sometimes personal guarantees of the individualowners of the dealership.

We also purchase receivables generated by certain divisions and aÇliates of Ford, primarily in connectionwith the delivery of vehicle inventories from United States Ford manufacturing plants to dealers and the saleof parts and accessories by Ford to dealers. At December 31, 2001, these purchased receivables totaled about$4.7 billion, of which about $3 billion was included in wholesale Ñnance receivables and $1.7 billion wasincluded in other Ñnance receivables.

4


Servicing

After we purchase retail installment sale contracts and leases from dealers and other customers, wemanage the receivables during their contract term. This management process is called servicing. We serviceboth our owned and sold receivables. Our servicing duties include collecting monthly payments fromcustomers, providing reports to customers, contacting delinquent customers for payment, releasing liens onpaid-oÅ Ñnance contracts, repossessing vehicles and selling repossessed and returned vehicles. We operate ourretail servicing from 15 regional service centers in North America and Europe that use state-of-the-artservicing and collection tools.

Insurance

We conduct insurance operations primarily through The American Road Insurance Company and itssubsidiaries in the United States and Canada. We oÅer extended service plan contracts, mainly through Forddealers for new and used vehicles, physical damage insurance covering vehicles and equipment Ñnanced by usat wholesale, and the reinsurance of credit life and credit disability insurance for retail purchasers of vehiclesand equipment. We also oÅer various Ford branded insurance products throughout the world underwritten bynon-aÇliated insurance companies from which we receive fee income. Our insurance business generated lessthan 1% of our total revenues in 2001.

Segment Information

Financial information regarding our operating segments and operations by geographic area is shown inNote 16 of our Notes to Financial Statements.

OUR EMPLOYEE RELATIONS

At December 31, 2001, we had about 22,000 employees. Most of our employees are salaried, and mostare not represented by a union. We consider employee relations to be satisfactory.

OUR GOVERNMENTAL REGULATIONS

As a Ñnance company, we are highly regulated by the governmental authorities in the locations where weoperate. In some countries outside the United States, certain of our subsidiaries, including Ford CreditEurope, are regulated banking institutions and are required, among other things, to maintain minimum capitalreserves. In many locations, governmental authorities require us to obtain licenses to conduct our Ñnancingbusiness. We must renew these licenses periodically.

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. Lawmakersand judges in recent years have continued to show concern for the protection of consumers in Ñnancingtransactions. This has led us to make adjustments to some of our business processes and, in some instances, toadopt new business practices. Our ongoing compliance eÅorts have not had a material adverse eÅect on ouroperations.

Interest rates on consumer Ñnancing generally are limited by law. In periods of high interest rates, theserate limitations can have an adverse eÅect on our operations if we are unable to pass on increased costs to ourcustomers.

5


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. A copy of this agreement is Ñled as an exhibit to thisReport. In addition, we have an agreement to maintain a minimum control interest in Ford Credit Europe andto maintain Ford Credit Europe's net worth above a minimum level. No payments were made under theseagreements during the period from 1998 through 2001.

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 Securities and Exchange Commission on that date. Theprincipal terms of this agreement include 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 circumstances.

‚ 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 12 of ourNotes 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, our PRIMUS corporate oÇces in Nashville,Tennessee. Ford Credit Europe leases its corporate oÇces in Brentwood, England. Most of our dealerautomotive 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, 2001, our total obligation underleases of real property was about $163 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, one of our lease customers. Ms. Shorecounterclaimed for purported violations of the Truth-in-Leasing Act (alleging that certain lease charges wereexcessive) and the Truth-in-Lending Act (alleging that the lease lacked clarity). Ms. Shore purported torepresent a class of all similarly situated lessees. Ms. Higginbotham objected to the proposed settlement of theShore case, intervened as a named defendant, Ñled separate counterclaims against us, and joined Ford as an

6

ITEM 3. OUR LEGAL PROCEEDINGS (Continued)

additional counterclaim defendant. Ms. Higginbotham asserts claims against us for violations of the ConsumerLeasing Act, declaratory judgment concerning the enforceability of early termination provisions in our leases,and 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 leased vehicles, which resultsin lower monthly lease payments but higher termination fees for lessees who exercise their right of earlytermination. Ms. Higginbotham claims that the early termination fees were not adequately disclosed on thelease form and that the fees are excessive and illegal because of the allegedly inÖated residual values. She alsoalleges that Ford dictated the residual values to us and thereby participated in an unlawful conspiracy. Thiscase was stayed pending the approval or rejection of the settlement in Shore. We have reached individualsettlements with the Shore plaintiÅs.

The Illinois court in Higginbotham found that the lease-end residual value of Ms. Higginbotham'svehicle was 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 Ms. Higginbotham's motion for classcertiÑcation and have renewed our motion for summary judgment based on information obtained in discovery.

Late Charges Class Actions. A purported state-wide class action was Ñled in Maryland (Simpkins v. FordCredit) in which the plaintiÅs are contending that our late charges on lease accounts violate state law. TheplaintiÅs allege that we violated the Maryland Consumer Leasing Act, Maryland Constitution and MarylandConsumer Code by charging late fees in consumer lease transactions in excess of 6%. The plaintiÅs assert thatthe maximum late fee allowed under Maryland law is the judgment rate of interest, which is 6% per annum.PlaintiÅs are seeking restitution, punitive damages and injunctive relief. We have removed the case to federalcourt and the plaintiÅs have Ñled a motion to remand the case to state court. The case was remanded to statecourt. We have Ñled a motion to dismiss.

Fair Lending Class Action. We have been served with three purported class actions alleging that ourpricing practices are discriminatory. One (Jones v. Ford Credit) was Ñled in federal court in New York,another (Rodriquez v. Ford Credit) was Ñled in federal court in Illinois and the last (Lucena v. PRIMUS) wasÑled in federal court in Pennsylvania. The Jones case alleges that our pricing practices discriminate againstAfrican Americans. SpeciÑcally, plaintiÅs allege that although our initial credit risk scoring analysis appliesobjective criteria to calculate the risk-related ""Buy Rate,'' we then authorize dealers to impose a subjectivecomponent in their credit pricing system ""the Mark-up Policy'' to impose additional non-risk charges. TheplaintiÅs allege that this allegedly subjective mark-up discriminates against African Americans. Our motion todismiss was denied and the parties are preparing for trial. Rodriquez and Lucena involve similar allegationswith respect to Hispanic Americans. In Rodriquez, the court denied our motion to dismiss, and we expect theplaintiÅs to Ñle a motion for class certiÑcation. In Lucena, the plaintiÅs Ñled a motion to voluntarily dismissthe case without prejudice which was granted. We expect the plaintiÅs will re-Ñle the case. We believe thatour pricing practices are fair and are not discriminatory.

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, 2001 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, 2001, Ñled with the Securities and ExchangeCommission and included as an exhibit to our Report and incorporated by this reference.

7

PART II

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

At December 31, 2001 all shares of our common stock were owned by Ford FSG, Inc., a wholly-ownedsubsidiary of Ford. We have not issued or sold any equity securities during 2001. There is no market for ourstock. During the Ñrst nine months of 2001, we paid cash dividends of $400 million, no dividend was paid inthe fourth quarter of 2001. During 2000, we paid cash dividends of $119.7 million. We also paid dividends in1999, 1998 and 1997. We may pay additional dividends from time to time depending on the amount of ourreceivables, capital requirements and proÑtability.

In January 2002, we received a capital contribution of $700 million from Ford.

8

ITEM 6. SELECTED FINANCIAL DATA

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

2001 2000 1999 1998 1997

Selected Income StatementFinancing revenue (in millions)

Operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $11,979 $10,987 $ 9,791 $ 9,610 $ 8,853Retail installment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,493 7,943 6,754 6,058 5,103Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,186 2,713 1,919 1,823 1,754Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 477 525 421 399 392

Total Ñnance revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,135 22,168 18,885 17,890 16,102Depreciation on operating leasesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8,861) (7,846) (7,564) (7,327) (6,188)Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8,951) (8,970) (7,193) (6,910) (6,268)

Net Ñnancing margin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,323 5,352 4,128 3,653 3,646Insurance premiums earnedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 231 226 236 293 298Investment and other income related to securitizations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,433 557 433 610 402Other income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 651 655 805 509 543

Total Ñnancing margin and revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,638 6,790 5,602 5,065 4,889Operating expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,570) (2,415) (2,125) (1,777) (1,478)Provision for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,355) (1,671) (1,166) (1,180) (1,338)Other insurance expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (206) (209) (207) (296) (267)

Total expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6,131) (4,295) (3,498) (3,253) (3,083)

Income before income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,507 2,495 2,104 1,812 1,806Provision for income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (667) (926) (791) (680) (727)Minority interests in net income of subsidiaries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1) (33) (52) (48) (48)

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 839 $ 1,536 $ 1,261 $ 1,084 $ 1,031

Net income (excluding SFAS No. 133) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 996 $ 1,536 $ 1,261 $ 1,084 $ 1,031Cash dividends ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 400 120 2,317 500 596Return on equityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.0% 13.1% 11.5% 10.6% 10.8%Earnings-to-Ñxed charges ratio ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.17 1.28 1.29 1.26 1.29

Selected Balance SheetFinance receivables (in billions)

Retail installment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 85.5 $ 81.1 $ 76.4 $ 67.9 $ 55.7Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15.6 33.8 26.2 22.5 21.5Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.9 9.1 7.2 6.8 5.3

Total Ñnance receivables, net of unearned income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 112.0 124.0 109.8 97.2 82.5Deduct: Allowance for credit lossesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2.3) (1.3) (1.1) (1.3) (1.2)

Finance receivables, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 109.7 122.7 108.7 95.9 81.3Operating leases, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 39.3 38.5 32.9 34.6 34.8

Total net Ñnance receivables and operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 149.0 161.2 141.6 130.5 116.1All other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24.1 13.1 15.0 6.7 5.9

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 173.1 $ 174.3 $ 156.6 $ 137.2 $ 122.0

Memo:Total managed receivables*ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 207.8 $ 189.7 $ 161.2 $ 144.0 $ 126.8

CapitalizationShort-term debt (in billions)

Commercial paper ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 15.7 $ 42.3 $ 43.1 $ 46.2 $ 40.9All other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.0 7.8 6.8 7.5 5.3

Total short-term debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22.7 50.1 49.9 53.7 46.2Long-term debt

Notes payable within one year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21.3 12.9 19.9 9.7 9.6Notes payable after one yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 102.3 83.3 63.3 51.6 44.9

Total long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 123.6 96.2 83.2 61.3 54.5

Total debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 146.3 146.3 133.1 115.0 100.7Stockholder's equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12.0 12.2 10.9 10.6 9.6

Total capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 158.3 $ 158.5 $ 144.0 $ 125.6 $ 110.3

Debt-to-equity ratio (to 1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12.2 12.0 12.2 10.8 10.5Short-term debt and notes payable within one year as percent of

total capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27.8% 39.7% 48.4% 50.5% 50.6%

* Managed receivables includes receivables sold in securitizations. All other data shown are after the impact of sales of receivables insecuritizations.

9

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

Overview

The principal factors that inÖuence our earnings are the amount of Ñnance receivables and net investmentin operating leases and Ñnancing margins. The performance of these receivables and leases over time, mainlythrough credit losses and variations in the residual value of leased vehicles, 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 provide wholesaleÑnancing,

‚ The cost of vehicles Ñnanced,

‚ The level of dealer inventories,

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

‚ Our sales of Ñnance receivables in securitizations.

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. Securitization provides us a stable source of funding atlower cost than our traditional funding sources.

We analyze our business performance on an owned basis and on a managed basis. The owned basis onlyincludes the receivables owned by us and reported on our balance sheet. The managed basis includes ownedreceivables and receivables that we sold to investors through securitizations but that we continue to service.

We manage our operations through two segments, Ford Credit North America and Ford CreditInternational. Ford Credit North America includes operations in the United States and Canada. Ford CreditInternational includes operations in all other countries.

Critical Accounting Policies

Our consolidated Ñnancial statements are prepared in conformity with United States generally acceptedaccounting principles. The preparation of these Ñnancial statements requires the use of estimates, judgments,and assumptions that aÅect the reported amounts of assets and liabilities at the date of the Ñnancial statementsand the reported amounts of revenues and expenses during the periods presented. If actual circumstances arediÅerent than these estimates, judgments or assumptions, our Ñnancial statements could be materiallyaÅected.

We believe our most critical accounting policies are related to the following areas:

‚ Allowance for credit losses,

‚ Sale of receivables,

‚ Derivative Ñnancial instruments, and

‚ Depreciation expense on operating leases.

10

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

Allowance for Credit Losses

The allowance for credit losses reÖects our estimate of the losses inherent in our portfolio of Ñnancereceivables and operating leases. Our estimates are based on factors that require signiÑcant managementjudgment. We classify these factors into two main categories:

Frequency. Frequency is the number of Ñnance receivables and operating leases that we expect to defaultover a period of time. Frequency depends on our assessment of current and future economic conditions andchanges in the credit risk quality of our portfolio.

Loss Severity. Loss severity is the diÅerence between the outstanding amount a customer owes us whenwe charge-oÅ their Ñnance contract and the amount we receive, net of expenses, from selling the repossessedvehicle, including any recoveries from the customer. Our estimate of loss severity depends on our projection ofthe following factors:

‚ The amount we paid to purchase the retail installment sale or lease contracts compared with the valueof the vehicle,

‚ The remaining number of payments when the customer stopped paying, and

‚ Prices in the used-car market.

We rely on internally developed statistical models to assist us in assessing whether our allowance for creditlosses is adequate given the factors that aÅect severity and frequency.

We monitor credit loss performance monthly, and we assess the adequacy of our allowance for creditlosses quarterly. When we determine an account is uncollectible, we reduce our Ñnance receivables and leaseinvestments, and we charge-oÅ the loss through our allowance for credit losses. We increase our allowance forcredit losses by amounts we recover on Ñnance receivables and operating leases we previously charged-oÅ asan uncollectible account.

Sale of Receivables

We use securitization as a source of funding for our operations. In a securitization, we sell Ñnancereceivables to a special purpose entity (SPE) in exchange for the proceeds from the sale of securities backedby the receivables that the SPE issues to investors. We are required to recognize a gain or loss on the sale ofreceivables in the period the sale occurs. We also record our retained interests in securitizations as assets onour balance sheet at fair value. These retained interests include interest-only strips, also referred to as excessspread, which represent our right to receive collections on sold receivables in excess of amounts needed to payprincipal and interest payments to investors and servicing fees. Retained interests may also include senior andsubordinated securities and restricted cash held for the beneÑt of securitization trusts.

The most signiÑcant factors aÅecting the gain or loss on the sale of receivables that require us to makeestimates and judgments are:

‚ Expected credit losses over the term of the 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 and interest supplementpayments from Ford.

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 our

11


historical experience and other factors. These estimates are made separately for each securitizationtransaction.

In addition, we are required to make adjustments to the fair value of our retained interests on a quarterlybasis. These fair value adjustments are reÖected, net of tax, as a separate component of other comprehensiveincome included in stockholder's equity. The fair value analysis for our interest-only strips largely depends onupdating our estimate of lifetime credit losses and prepayment speeds. We adjust the fair value of oursecurities based on quoted market prices of securities with similar characteristics. If we determine, based onthis updated information, these retained interests are permanently impaired, we would record fair valueadjustments in earnings and not stockholder's equity. The recorded amount of our restricted cash retainedinterest normally does not have to be adjusted.

Derivative Financial Instruments

We use interest rate swaps, foreign currency swaps and foreign currency forward contracts in the normalcourse of our business as an integral part of our overall risk management program to manage our interest rateand foreign currency exposures. We do not use any derivatives for speculative purposes. EÅective January 1,2001, in accordance with Statement of Financial Accounting Standards No. 133, Accounting for DerivativeInstruments and Hedging Activities (SFAS No. 133), as amended, all derivatives are recognized on ourbalance sheet as assets or liabilities at fair value. The requirements of this standard are complex and continueto evolve, and often require a signiÑcant amount of interpretation. In establishing the fair value of derivatives,we estimate fair value based on quoted market values, if available. When market values are not readilyavailable, we must estimate fair value based on valuation techniques and approaches we deem appropriateunder the circumstances.

In addition to estimating and recording derivative instruments at fair value, the requirements of SFASNo. 133 also call for us to regularly analyze the changes in fair value of derivatives compared to the changes infair value of the underlying hedged items. This analysis process is called eÅectiveness testing. To the extentthat these changes in fair value between derivatives and underlying hedged items are not oÅsetting, thestandard requires us to recognize this diÅerence, called hedge ineÅectiveness, in earnings. The use ofalternative assumptions may impact the results of our eÅectiveness testing and the amount of ineÅectivenessthat is recorded in earnings.

Depreciation Expense on Operating Leases

We have a signiÑcant number of vehicles in our operating lease portfolio. Our operating lease customerspay us Ñxed monthly rental payments that we cannot subsequently alter. At lease termination, our operatinglease customers have the option of either purchasing the vehicle for the lease-end value speciÑed in their leasecontract or returning the vehicle to us. We sell at auction all vehicles returned to us. The net proceeds from avehicle auction are called residual value.

We record depreciation expense on our operating leases on a straight-line basis over the term of the leasein amounts necessary to reduce the vehicle to its estimated residual value at the end of the lease. At the timeof contract origination, we base depreciation expense on our initial assessment of lease-end residual value. Wemonitor residual value performance by vehicle model each month. We review the adequacy of ouraccumulated depreciation reserve on a quarterly basis. The most signiÑcant factors we examine to assesswhether adjustments are required include termination volumes, return rates and expected used-car values atthe end of the lease term. Termination volumes are the number of vehicles coming oÅ lease, and return ratesare the percentage of these vehicles returned to us. If we determine that modiÑcations are necessary, werecord adjustments to depreciation expense over the remaining life of the aÅected vehicles in our portfolio.Accumulated depreciation is reÖected on our balance sheet and is included in our net investment in operatingleases. The use of diÅerent assumptions may materially aÅect our estimated fair value amounts.

12


Results of Operations

New Accounting Standard. Our 2001 Ñnancial results include the eÅects of SFAS No. 133, as amended,that we adopted on January 1, 2001, requiring us to recognize all derivative instruments on our balance sheetat fair value. Further information on SFAS No. 133 and its impact on our results is contained in Notes 1 and14 of our Notes to Financial Statements.

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 in2001 for the cost of strategic partnering actions in Brazil, including losses related to the disposition ofbusinesses and the write-down of certain assets ($126 million), government initiatives in Argentina related tocurrency devaluation and consumer debt ($65 million) and voluntary employee separation costs in NorthAmerica ($13 million). In addition, we announced we will renew our focus on supporting vehicle Ñnancing ofFord's brands.

Fourth Quarter 2001 Compared with Fourth Quarter 2000

Net Income. We incurred a consolidated net loss of $297 million in the fourth quarter of 2001, down$707 million compared with earnings of $410 million a year ago. These results included unusual chargesrelating to the Revitalization Plan. Excluding these unusual charges and the eÅects of SFAS No. 133, our netincome in the fourth quarter of 2001 was $6 million, down $404 million from a year ago.

Fourth QuarterOperating Net Income/(Loss)

2001Over/(Under)

2001 2000 2000

(in millions)

Net income/(loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(297) $410 $(707)Exclude:

Unusual charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (204) Ì (204)SFAS No. 133 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (99) Ì (99)

Total unusual charges and SFAS No. 133 ÏÏÏÏ (303) Ì (303)

Operating net income/(loss)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 6 $410 $(404)

Business Segments. Results of our operations by business segment for the fourth quarter of 2001 and2000 are shown below:

Fourth QuarterNet Income/(Loss)

2001Over/(Under)

2001 2000 2000

(in millions)

Ford Credit North America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (53) $421 $(474)Ford Credit InternationalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 63 (12) 75Unusual charges and SFAS No. 133 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (303) Ì (303)Eliminations/reclassiÑcations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4) 1 (5)

Total net income/(loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(297) $410 $(707)

Ford Credit North America incurred a $53 million loss in the fourth quarter of 2001, down $474 millioncompared with earnings of $421 million a year ago. This decline reÖected primarily a higher provision forcredit losses, oÅset partially by an increase in Ñnancing volumes, improved Ñnancing margins and favorable

13


earnings related to securitization transactions. Ford Credit International net income for the fourth quarter of2001 was $63 million, up $75 million from a loss of $12 million a year ago. This increase reÖected primarilyhigher Ñnancing volume resulting from the introduction of special low-rate Ñnancing programs in the UnitedKingdom, the addition of Land Rover brand vehicles to the portfolio of vehicles we Ñnance, improvedÑnancing margins and the non-recurrence of increased loss provisions for South American activities.

Credit Losses. Our after-tax provision for credit losses in the fourth quarter of 2001 was $912 millioncompared with $360 million a year ago. We increased the provision because of higher actual credit losses.Credit losses, net of recoveries, expressed as a percentage of average net Ñnance receivables and netinvestment in operating leases is referred to as the loss-to-receivables ratio. The loss-to-receivables ratio forour owned portfolio increased to 2.02% in the fourth quarter of 2001 compared with 1.02% a year ago. In 2001,higher net credit losses resulted largely from increases in our volume of receivables, a conversion to regionalservice centers in the United States and Canada and an overall decline in the economy in the United States,with a signiÑcant increase in personal bankruptcy Ñlings. During the last quarter of 2001, we also experiencedan increase in account delinquencies and vehicle repossessions reÖecting signiÑcantly weakening economicconditions in the United States following the events of September 11, 2001. The change in the make-up of ourportfolio of owned receivables, in part because of the securitization of wholesale receivables, also adverselyimpacted our loss-to-receivables ratio. Excluding the impact of the securitization of wholesale receivables, theloss-to-receivables ratio for our owned portfolio for the fourth quarter of 2001 would have been 1.82%.

Full Year 2001 Compared with Full Year 2000

Net Income. Our consolidated net income in 2001 was $839 million, down $697 million from 2000. Theseresults included unusual charges relating to the Revitalization Plan, which totaled $204 million, and the fullyear impact of SFAS No. 133, which totaled $157 million. Together, these charges reduced net income by$361 million in 2001.

Full YearOperating Net Income/(Loss)

2001Over/(Under)

2001 2000 2000

(in millions)

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 839 $1,536 $(697)Exclude:

Unusual charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (204) Ì (204)SFAS No. 133ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (157) Ì (157)

Total unusual charges and SFAS No. 133ÏÏÏÏÏÏÏ (361) Ì (361)

Operating net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,200 $1,536 $(336)

Business Segments. Results of our operations by business segment for the full year 2001 and 2000 areshown below:

Full YearNet Income/(Loss)

2001Over/(Under)

2001 2000 2000

(in millions)

Ford Credit North America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 958 $1,369 $(411)Ford Credit International ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 254 206 48Unusual charges and SFAS No. 133ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (361) Ì (361)Eliminations/reclassiÑcations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (12) (39) 27

Total net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 839 $1,536 $(697)

14


Ford Credit North America full year 2001 net income was $958 million, down $411 million comparedwith 2000. This decline reÖected primarily a higher provision for credit losses, oÅset partially by favorableearnings eÅects related to securitization transactions, higher Ñnancing volumes of Ñnance receivables andoperating leases and improved Ñnancing margins. Ford Credit International net income for the full year of2001 was $254 million, $48 million higher than in 2000. This increase resulted primarily from higher retailÑnancing volumes and improved Ñnancing margins in Europe.

Credit Losses. Our after-tax provision for credit losses for the full year of 2001 was $2.1 billion compared with$1.1 billion a year earlier. Credit losses as a percentage of average owned net finance receivables and netinvestment in operating leases increased to 1.35% in 2001 compared with 0.84% in 2000. This increase in loss-to-receivables ratio for our owned portfolio was caused in part by an overall decline in the economy, the continuedconversion of collection activities from local branch offices to regional service centers in the United States andCanada and growth in the volume of our receivables. The change in the make-up of our portfolio of ownedreceivables, in part because of the securitization of wholesale receivables, also adversely impacted our loss-to-receivables ratio. Excluding the impact of the securitization of wholesale receivables, the loss-to-receivables ratiofor our owned portfolio for 2001 would have been 1.28%. In response to higher actual credit losses, we increasedour allowance for credit losses.

Full Year 2000 Compared with Full Year 1999

Net Income. Our consolidated net income in 2000 was $1,536 million, up $275 million or 22% from 1999.Compared with 1999, the increase in full-year earnings reÖected primarily improved Ñnancing margins and ahigher level of receivables, oÅset partially by higher credit losses and operating costs.

Improved Ñnancing margins reÖected primarily lower depreciation expense oÅset partially by an increasein borrowing costs due to the replacement of short-term debt with long-term funding to improve our liquidity.Lower depreciation costs resulted from fewer leased vehicles returned to us at lease termination.

Total net Ñnance receivables and net investment in operating leases at December 31, 2000 was$161 billion, up $19 billion or 13% from a year earlier. The increase in total net Ñnance receivables and netinvestment in operating leases resulted primarily from Ford-sponsored special Ñnancing and leasing programsavailable exclusively through us, a higher volume of wholesale receivables, and inclusion of Volvo Ñnancingreceivables. The percentage increase in installment sale receivables was less than the percentage increase innet investment in operating leases or wholesale receivables, because our sales of installment sale receivables insecuritizations more than doubled from 1999 levels.

Higher operating costs reÖected primarily the servicing of a higher amount of receivables, inclusion ofoperating expenses of recently acquired subsidiaries, and costs associated with the restructuring of operationsin the United States and Canada.

In the fourth quarter of 2000, our consolidated net income was $410 million, up $101 million or 33% from1999 earnings of $309 million. Compared with 1999, the increase in earnings reÖected primarily improvedÑnancing margins and a higher amount of receivables, oÅset partially by higher credit losses associated withthe restructuring of operations in the United States and Canada.

Credit Losses. Our loss-to-receivables ratio increased to 0.84% in 2000 compared with 0.74% in 1999.This increase was due primarily to the launch of collection activities at the regional service centers in theUnited States and Canada, as the centers transitioned new staÅ and launched new collection tools. Increasedlosses also reÖected growth in sub-prime Ñnancing at our subsidiaries.

15


Financial Condition

Financing Share and Volume

Shown below is our Ñnancing share of all new Ford, Lincoln and Mercury brand vehicles sold by dealersin the United States and Ford brand vehicles sold by dealers in Europe. Also shown below is our wholesaleÑnancing of Ford, Lincoln and Mercury brand vehicles acquired by dealers in the United States and of Fordbrand vehicles acquired by European dealers:

Fourth Quarter Full Year

2001 2000 2001 2000 1999 1998 1997

United StatesFinancing share Ì Ford, Lincoln and Mercury

Retail installment and leaseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 69% 48% 54% 51% 47% 42% 38%WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 84% 80% 84% 84% 84% 83% 80%

EuropeFinancing share Ì Ford

Retail installment and leaseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43% 34% 37% 32% 33% 33% 29%WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 98% 98% 97% 97% 96% 95% 95%

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

Fourth Quarter Full Year

2001 2000 2001 2000 1999 1998 1997

(in thousands)

Installment sales and Ñnance lease ÏÏÏÏÏÏ 1,299 893 4,495 3,777 3,428 3,030 2,389Operating lease ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 178 204 1,050 1,228 1,065 1,138 1,206

Total Ñnancing volumeÏÏÏÏÏÏÏÏÏÏÏÏ 1,477 1,097 5,545 5,005 4,493 4,168 3,595

United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,054 743 3,819 3,525 3,139 2,794 2,549Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 247 177 988 795 829 800 727Other international ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 176 177 738 685 525 574 319

Total Ñnancing volumeÏÏÏÏÏÏÏÏÏÏÏÏ 1,477 1,097 5,545 5,005 4,493 4,168 3,595

Worldwide, our installment sale and Ñnance lease contract volumes were about 4.5 million, up 718,000compared with 2000, resulting primarily from increased Ford-sponsored special low-rate marketing programs.Operating lease contract volumes were 1.1 million, down 178,000 compared with 2000. This decrease resultedprimarily from changes in Ford's marketing programs in the United States that made retail installment saleÑnancing more attractive compared with leasing.

United States. Our Ñnancing share of all new Ford, Lincoln and Mercury brand cars and light trucks soldby dealers in the United States was 54% in 2001 compared with 51% in 2000. Total contract volumes in theUnited States were 3.8 million in 2001, an increase of about 300,000 contracts compared with 2000, reÖectingthe increased use of special low-rate Ñnancing programs by Ford in the fourth quarter of 2001. These specialÑnancing programs resulted in an increase in Ñnancing share for retail installment sales and leases from 48% to69% for the fourth quarter of 2000 and 2001, respectively.

Europe. Our financing share of all new Ford brand vehicles sold by dealers in Europe was 37% in 2001compared with 32% in 2000, resulting primarily from Ford's use of special low-rate Ñnancing programs in theUnited Kingdom. Contract volumes in Europe increased to 988,000 in 2001, compared with 795,000 contractsin 2000. This increase in contract volumes is attributable to the special Ñnancing programs in the UnitedKingdom and the addition of Land Rover brand vehicles to the portfolio of vehicles we Ñnance.

16


Finance Receivables and Operating Leases

Our Ñnancial condition is signiÑcantly impacted by the performance of our owned and managed Ñnancereceivables. Our managed Ñnance receivables includes receivables that we own and receivables that we havesold in securitizations but continue to service. Our owned and managed Ñnance receivables, net of allowancefor credit losses, and net investment in operating leases are shown below:

2001 December 31,

December 31, September 30, 2000 1999 1998 1997

(in billions)

Outstanding Receivables Ì OwnedFinance receivables

Retail installment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 83.4 $ 82.4 $ 79.9 $ 75.4 $ 66.7 $ 54.6WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15.4 15.5 33.7 26.1 22.4 21.4Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.9 11.7 9.1 7.2 6.8 5.3

Total Ñnance receivables, netÏÏÏ $109.7 $109.6 $122.7 $108.7 $ 95.9 $ 81.3Net investment in operating leases ÏÏ 39.3 40.4 38.5 32.9 34.6 34.8

Total ownedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $149.0 $150.0 $161.2 $141.6 $130.5 $116.1

Memo: Allowance for credit lossesincluded aboveÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2.8 $ 2.0 $ 1.6 $ 1.5 $ 1.5 $ 1.5

Outstanding Receivables Ì ManagedFinance receivables

Retail installment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $124.7 $117.2 $105.9 $ 89.9 $ 74.5 $ 58.9WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32.8 33.5 36.1 31.1 28.1 27.1Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.9 11.7 9.1 7.2 6.8 5.3

Total Ñnance receivables, netÏÏÏ $168.4 $162.4 $151.1 $128.2 $109.4 $ 91.3Net investment, operating leasesÏÏÏÏ 39.4 40.4 38.6 33.0 34.6 35.5

Total managedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $207.8 $202.8 $189.7 $161.2 $144.0 $126.8

Memo: Allowance for credit lossesincluded aboveÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 3.3 $ 2.5 $ 2.1 $ 1.7 $ 1.7 $ 1.6

On an owned basis, Ñnance receivables and net investment in operating leases, net of allowances for creditlosses, at December 31, 2001 were $149 billion, $1 billion lower than September 30, 2001 and down$12.2 billion or 8% from a year ago. The decrease in owned receivables from a year ago resulted primarily fromhigher sales of retail and wholesale receivables in securitizations.

Total managed receivables at December 31, 2001 were $207.8 billion, up $5 billion or 2% fromSeptember 30, 2001 and up $18.1 billion or 10% from a year ago. This increase in managed receivables from ayear ago resulted primarily from a higher volume of retail receivables. As a result of the Revitalization Planand our renewed focus on supporting vehicle Ñnancing of Ford's brands, our receivables growth rate comparedwith prior years may slow down and the amount of our total owned and managed receivables may decline.

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. We actively manage the credit risk of our consumerand non-consumer portfolios to balance our level of risk and return.

17


Consumer Credit

We divide retail installment sale and lease contracts into segments by credit risk quality, contractual termand whether the vehicle Ñnanced is new or used. We use this segment data to assist with setting the terms forour purchase of the contract to ensure risk factors are appropriately considered. We also use this segment datain servicing to match servicing procedures with the risk associated with each contract. In addition, in theUnited States and Canada, starting in 2000 we began restructuring our operations to establish regional servicecenters that centralize retail customer service activities in fewer locations. We believe this centralization willpermit us to realize increased eÅectiveness and economies of scale in our servicing operations.

Our credit investigations prior to purchasing a retail installment sale contract or lease contract includes areview of the applicant's credit report supplied from a national credit bureau and an internal review andveriÑcation process. Our retail credit loss management strategy is based on our experience with millions ofcontracts over many years and diÅerent economic cycles, and our assessment of expected trends. We usestatistically-based credit risk models to determine the creditworthiness of applicants. We review and revalidatethe accuracy of these models quarterly against actual performance and revise them as necessary.

We use internally developed behavioral models to assist in determining the best collection strategies. Wegroup contracts by risk category for collection. Our collection procedures are designed to collect on delinquentaccounts and to keep accounts current. We generally view repossession of the installment sale or leased vehicleas a Ñnal step only after collection eÅorts have failed. We sell repossessed vehicles at auction and apply theproceeds to the amount owed on the receivable. Ford's Vehicle Remarketing Department, in conjunction withour regional service centers and our National Recovery Center, manage the sale of repossessed vehicles,seeking the highest price for the vehicle, net of transportation and auction costs. We continue to attemptcollection of any remaining balance after repossession until the account is paid in full or we determine that theaccount is uncollectible.

Non-Consumer Credit

Our non-consumer loans include wholesale and other loans to dealers, as well as automotive Ñnancing forcommercial entities, such as Öeet purchasers, leasing companies and daily rental companies. In evaluating ournon-consumer loans, we consider the borrower's Ñnancial condition, collateral, debt servicing capacity, andnumerous other Ñnancial and qualitative factors. We generally review our exposure under credit arrangementsat least annually. We monitor potential credit deterioration, and we require dealers to submit monthly Ñnancialstatements. We assign an evaluation rating to each dealer and we perform physical audits of vehicle inventoryperiodically, with more frequent audits for higher risk dealers. In addition, we monitor dealer inventoryÑnancing payoÅs daily to detect adverse deviations from typical repayment patterns, in which case we takeappropriate actions.

18


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 for our worldwide owned and managed portfolios, for the various categories ofÑnancing during the years indicated:

2001 2000 1999 1998 1997

(in millions)

OwnedNet Credit Losses

Retail installment and leaseÏÏ $2,055 $1,283 $ 995 $1,031 $1,004WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32 14 3 9 (1)Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24 Ì 2 (1) 4

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,111 $1,297 $1,000 $1,039 $1,007

Loss-to-receivablesRetail installment and leaseÏÏ 1.71% 1.09% 0.95% 1.08% 1.15%WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.13 0.05 0.01 0.04 Ì

Total including other ÏÏÏÏÏ 1.35 0.84 0.74 0.85 0.89

ManagedNet Credit Losses

Retail installment and leaseÏÏ $2,272 $1,410 $1,164 $1,166 $1,108WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34 15 3 11 1Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24 Ì 2 (1) 4

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,330 $1,425 $1,169 $1,176 $1,113

Loss-to-receivablesRetail installment and leaseÏÏ 1.45% 1.00% 0.97% 1.07% 1.11%WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.10 0.05 0.01 0.04 0.01

Total including other ÏÏÏÏÏ 1.20 0.81 0.78 0.86 0.88

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 andleases. Other credit losses reÖect primarily account charge-oÅs for dealer capital loans.

In 2001, higher net credit losses resulted largely from increases in our volume of receivables, a conversionto regional service centers in the United States and Canada, and an overall decline in the economy in theUnited States, with a signiÑcant increase in personal bankruptcy Ñlings. During the last quarter of 2001, wealso experienced an increase in account delinquencies and vehicle repossessions reÖecting signiÑcantlyweakening economic conditions in the United States following the events of September 11, 2001.

In addition, because credit losses on wholesale receivables are substantially lower than those for retailinstallment sale and lease contracts, the sale of a large portion of our wholesale receivables in securitizationsresulted in a larger increase in the loss-to-receivables ratio for our owned portfolio.

For the Ñrst half of 2002, on a managed basis, we expect our credit losses and loss-to-receivables ratio tolikely be higher than comparable periods in 2001 because of the continued weakened economic conditions inthe United States.

19


In response to higher credit losses, we implemented the following actions in 2001:

‚ ReÑned our pricing and Ñnancing policies to reduce our exposure to higher risk contracts,

‚ Increased service center staÇng levels, improved training of new collectors, and enhanced segmenta-tion strategies, and

‚ Initiated further improvements in bankruptcy predictors and portfolio monitoring processes.


We maintain an allowance for credit losses at a level that is adequate to provide for estimated creditlosses inherent in our portfolio of receivables and leases. Our estimates are based on historical experience andother factors that require signiÑcant management judgment and interpretation. We classify these factors intotwo main categories:

Frequency. Frequency is the number of Ñnance receivables and operating leases that we expect to defaultover a period of time. Frequency depends on our assessment of current and future economic conditions andchanges in the credit risk quality of our portfolio.

Loss Severity. Loss severity is the diÅerence between the outstanding amount a customer owes us whenwe charge-oÅ an account and the amount we receive, net of expenses, from selling the repossessed vehicle,including any recoveries from the customer. Our estimate of loss severity depends on our projection of thefollowing factors:

‚ The amount we paid to purchase the retail installment sale or lease contract compared with the valueof the vehicle,

‚ The remaining number of payments when the customer stopped paying, and

‚ Prices in the used-car market.

We regularly evaluate our allowance for credit losses and make adjustments as necessary. We chargeactual credit losses against our allowance for credit losses as they occur. Adjustments to our allowance forcredit losses are made through the provision for credit losses as reported in our income statement.

Our allowance for credit losses, and our allowance for credit losses as a percentage of net receivables, forboth our owned and managed portfolios are shown below:

December 31,

2001 2000 1999 1998 1997

(in billions)

OwnedAllowance for credit lossesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2.8 $1.6 $1.5 $1.5 $1.5

As a percentage of net receivables ÏÏÏÏ 1.86% 1.02% 1.04% 1.19% 1.27%

ManagedAllowance for credit lossesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3.3 $2.1 $1.7 $1.7 $1.6

As a percentage of net receivables ÏÏÏÏ 1.60% 1.10% 1.04% 1.17% 1.29%

In 2001, we increased our allowance for credit losses for our owned portfolio by $1.2 billion comparedwith 2000 year-end levels. We took this action to reÖect the impact of signiÑcantly weakening economicconditions in the United States on our portfolio of Ñnance receivables.

20


Residual Value Risk

Residual value risk is the possibility that the actual proceeds we realize upon the sale of returned vehiclesat lease termination, which is referred to as the residual value of these vehicles, will be lower than ourprojection of these values.

Our lease contracts generally are written with speciÑed vehicle lease-end values to the customer. In somecases, the lease-end value approximates the guideline residual values that appear in the publicationAutomotive Leasing Guide. For Ñnancial reporting purposes, we estimate expected residual values at lease-endbased on internally developed projections. Any diÅerence between the customer contract lease-end value andour expected residual value at lease-end is adjusted through depreciation expense in a reserve that is includedin accumulated depreciation on our balance sheet. We base our projections of the expected residual values atlease-end on a proprietary econometric model that uses historical experience and forward-looking information,including Ford's new product plans, marketing programs and vehicle quality data. We monitor residual valueperformance monthly by each vehicle model and review our reserve adequacy quarterly. We adjust ourreserves to reÖect revised estimates of residual values at the end of the lease term through adjustments todepreciation expense on a straight-line basis over the remaining term of the lease.

At lease termination, we attempt to maximize residual proceeds by selling vehicles in geographic marketsthat we believe will result in the highest resale value, net of transportation and auction costs, based onhistorical data and models. We sometimes oÅer lease extensions or early terminations to take advantage ofseasonal resale patterns.

Residual Value Experience

Our worldwide net investment in operating leases at December 31, 2001 was $39.3 billion, up$798 million or 2% from a year ago and down $1 billion from September 30, 2001. The North Americanportfolio accounts for $35.5 billion, or 90% of total operating leases. For the period 1999 to 2001, for our NorthAmerican portfolio, we experienced a decrease in the number of vehicles coming oÅ lease (terminationvolumes), from 864,000 units in 1999 to 633,000 units in 2001, along with a reduction in the percentage ofthese vehicles that were returned to us (return rates) from 70% in 1999 to 62% in 2001. These reductionsreÖect the impact of the growth in 36-month leases and the adoption of more conservative residual values atlease-end. For 2002, termination volumes will likely increase because of higher contract volumes for leasesoriginated in 1999 and 2000. However, future return rates will depend on a variety of factors including usedvehicle values and new vehicle Ñnancing incentives, and we cannot be certain that return rates will continue todecrease as they did from 1999 to 2001.

Credit Ratings

Overview

Our short and long-term debt funding sources are rated by three major rating agencies:

‚ 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 local 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 or other sources that the rating agency considers reliable. Credit ratings are notrecommendations to buy, sell or hold securities and are subject to revision or withdrawal at any time by theassigning rating agency. Each rating agency may have diÅerent criteria for evaluating company risk, andtherefore ratings should be evaluated independently for each rating agency. Lower ratings generally result inhigher borrowing costs and reduced access to capital markets. More information about the rating categoriesused by the major rating agencies can be obtained from Fitch, Moody's and S&P.

21


Fitch Ratings. On September 26, 2001, Fitch lowered its credit ratings of the long-term debt of Ford andFord Credit from A° to A¿ and lowered its credit ratings of our short-term debt from F1 to F2 with anegative outlook. On January 11, 2002, Fitch lowered its credit ratings of the long-term debt of Ford and FordCredit from A¿ to BBB°, conÑrmed its credit ratings of our short-term debt at F2, and conÑrmed the ratingoutlook of both companies as negative.

Moody's Ratings. On October 18, 2001, Moody's lowered its credit ratings of Ford's long-term debt fromA2 to A3, aÇrmed its credit ratings of our long- and short-term debt at A2 and Prime-1, respectively, andchanged the rating outlook for both companies from stable to negative. On January 16, 2002, Moody's loweredits credit ratings of Ford's long-term debt from A3 to Baa1, lowered its credit ratings of our long- and short-term debt from A2 to A3 and from Prime-1 to Prime-2, respectively, and conÑrmed the rating outlook of bothcompanies as negative.

S&P Ratings. On October 15, 2001, S&P lowered its credit ratings of Ford's and our long-term debt fromA to BBB°, lowered our short-term debt credit rating from A-1 to A-2, and changed the rating outlook forboth companies from negative to stable. On January 11, 2002, S&P changed the rating outlook for bothcompanies to negative.

The following chart summarizes our credit ratings and the outlook assigned by the rating agencies as ofFebruary 28, 2002:

Short-term Long-termdebt debt Outlook

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

As a result of the rating agencies lowering their ratings of our short-term debt, we are required to remitmost collections on sold receivables in securitizations on a daily basis instead of once a month. As a result, ourfunding needs, since the third quarter of 2001, increased by about $1.7 billion, or 0.9% of our total debt plussecuritized funding.

Funding and Liquidity

Funding Sources

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

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 a maturity of 12 months or less to beshort-term debt. We achieve short-term debt funding primarily through the sale of commercial paper mostlyto qualiÑed institutional investors. We have commercial paper programs in the United States, Europe, Canadaand other international markets. We also obtain short-term funding by the sale of short-term notes to retailcustomers through the Ford Money Market Account (FMMA). Ford Credit Europe issues certiÑcates ofdeposit primarily to a broad range of institutional investors in various markets to obtain short-term funding.Bank borrowings by several of our international aÇliates in the ordinary course of business are an additionalsource of short-term funding.

We achieve long-term debt funding through the issuance of a variety of debt securities underwritten inthe United States and international capital markets. Long-term debt is debt with a maturity of more than 12months. We use several well-established long-term funding programs, including GlobLSTM where we oÅerdebt in large amounts with a variety of maturities of Ñve years and longer, and medium-term notes where wesell notes through sales agents in smaller amounts in several currencies. We reach both retail and institutionalinvestors in our long-term funding programs.

22


We also sell receivables in securitization transactions to obtain funding. Securitization can be structuredto provide both short-term and long-term funding. Securitization investors are mainly institutional investors.

Funding Strategy

Maintaining liquidity through access to diversiÑed sources of funds 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 repayment of our debt obligationsas they become due. In December 1988, we began selling a portion of our receivables in securitizationtransactions to fund our operations, and we have been a regular participant in the securitization market sincethen. Securitization represents an additional source of funding that has been less susceptible to changingmarket conditions.

Beginning in 2000, we modiÑed our funding strategy to reduce our reliance on short-term funding. Weincreased our use of securitization because of its lower relative cost and issued a larger amount of unsecuredlong-term debt to improve our liquidity. We will continue to use securitization as long as it provides addedfunding and remains cost eÇcient. We also developed additional funding sources and capacity to maintain adiversiÑed funding portfolio, such as wholesale receivables securitization and asset-backed commercial paperprograms.

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 operations and maintain our liquidity, although our access to thecommercial paper market has declined. In 2002, our funding strategy will continue to focus on improvingliquidity and sustaining diverse and competitive funding sources. We believe that our funding strategy willallow us to maintain liquidity through diÇcult economic conditions. Any further lowering of our credit ratingswould increase our borrowing costs and potentially constrain certain funding sources from the capital markets.This in turn would likely cause us to rely more heavily on funding through securitization. However, our abilityto securitize may be aÅected by the following factors:

‚ Amount and credit quality of receivables available to sell,

‚ Performance of receivables in our previous securitizations,

‚ General demand for the type of receivables we oÅer,

‚ 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 signiÑcantly increases or securitizedfunding were no longer available to us, our liquidity would be adversely impacted.

In the normal course of our funding transactions, we may generate more proceeds than are necessary forour immediate funding needs. These excess amounts are maintained as cash and other highly liquidinvestments. We use a portion of the invested amounts as an over-borrowing portfolio, to provide liquidityprimarily for our commercial paper program and to give us Öexibility to maintain a market presence with ourinvestor base. We increased our over-borrowing levels in the last quarter of 2001 as a result of increasedconstraints in accessing short-term capital markets. We monitor our over-borrowing levels daily and adjustthem as necessary to support our short-term liquidity needs.

Cost of Funding Sources

The cost of both debt and securitized funding is based on a margin or spread over a benchmark interestrate. Spreads are typically measured in basis points. Our unsecured commercial paper and FMMA fundingcosts are based on spreads over the London Interbank OÅered Rate (LIBOR), a commonly used benchmark

23


interest rate. Our unsecured long-term debt and securitized funding costs are based on spreads over UnitedStates Treasury Notes (U.S. Treasury) of similar maturities, LIBOR or other benchmark rates.

In addition to enhancing our liquidity, one of the main reasons why we increased our use of securitizationas a funding source is that spreads on securitized funding have been more stable than unsecured term-debtfunding spreads in recent years. As shown in the table below, spreads on securitized funding have Öuctuatedbetween 48 and 99 basis points above comparable U.S. Treasury rates, while our unsecured long-term debtfunding spreads have Öuctuated between 50 and 264 basis points above comparable U.S. Treasury rates.

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

2001 December 31,

Dec. 31 Sept. 30 June 30 Mar. 31 2000 1999 1998 1997

(basis points)

Unsecured debt fundingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 264 217 131 160 157 86 79 50Securitized funding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 99 87 91 85 93 70 84 48

Unsecured over/(under) securitized ÏÏÏÏÏÏ 165 130 40 75 64 16 (5) 2

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

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

2001 2000 1999 1998 1997

(in billions)

DebtCommercial paperÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 15.7 $ 42.3 $ 43.1 $ 46.2 $ 40.9Ford Money Market Account ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.0 3.7 2.8 2.6 1.7Other short-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.0 4.1 4.0 4.9 3.6

Short-term debtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22.7 50.1 49.9 53.7 46.2Long-term debt (including notes payable within one year)ÏÏ 123.6 96.2 83.2 61.3 54.5

Total debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $146.3 $146.3 $133.1 $115.0 $100.7

Securitized fundingServicing portfolioÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 58.7 $ 28.4 $ 19.5 $ 13.5 $ 10.0Retained interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (12.5) (3.7) (3.5) (1.3) (1.0)

Total securitized funding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46.2 24.7 16.0 12.2 9.0

Total debt plus securitized fundingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $192.5 $171.0 $149.1 $127.2 $109.7

Back-up credit facilities:Ford Credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 9.5 $ 20.4 $ 19.3 $ 21.2 $ 20.8Ford Credit EuropeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.5 4.6 4.6 4.7 4.6Bank lines shared with Ford ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.0 8.1 8.3 8.3 8.0FCAR lines ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12.5 1.4 1.4 1.5 1.6

Total back-up facilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34.5 34.5 33.6 35.7 35.0Drawn amounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1.0) (1.1) (0.9) (2.2) (1.5)

Total available back-up facilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 33.5 $ 33.4 $ 32.7 $ 33.5 $ 33.5

Memo:Available funding through bank-sponsored asset-backed

commercial paper issuers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 6.8 Ì Ì Ì ÌRatios:

Commercial paper coverageÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H100% 73% 69% 64% 74%

24


2001 2000 1999 1998 1997

(in billions)

Short-term debt and notes payable within one year tototal debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30 43 52 55 55

Short-term debt and notes payable within one year tototal capitalizationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28 40 48 50 51

At December 31, 2001, our commercial paper balance was $15.7 billion ($13.8 billion net of over-borrowing), down $26.6 billion from a year ago. Total long-term debt at December 31, 2001 was$123.6 billion, compared with $96.2 billion a year ago. The increase in our long-term debt reÖects our fundingstrategy to reduce short-term debt and improve our liquidity.

At December 31, 2001, our total debt was $146.3 billion, about the same as a year ago, while debt plussecuritized funding totaled $192.5 billion, up $21.5 billion compared with a year ago reÖecting our increaseduse of securitization as a funding source.

At December 31, 2001, the ratio of our short-term debt and notes payable within one year to totalcapitalization was 28% compared with 40% and 48% at December 31, 2000 and December 31, 1999,respectively. This reduction reÖects our strategy to improve liquidity.

During 2001, we issued $40 billion of long-term debt with maturities of two to ten years. These issuancesincluded $19 billion of debt in two GlobLSTM oÅerings, $17 billion in foreign currency transactions (mainlydenominated in euros), and $4 billion in medium-term notes and other oÅerings, primarily in internationalmarkets. In addition, we sold $52.5 billion of receivables in securitization transactions.

Our commercial paper balance at February 28, 2002 was about $11 billion ($6 billion net of over-borrowing). In 2002, we plan to maintain our commercial paper balances at levels around $5 billion to$7 billion, net of over-borrowing. We plan to raise $15 billion to $20 billion through long-term debt issuancesand $15 billion to $20 billion through securitization (excluding securitization related to asset-backedcommercial paper programs). Our total funding requirements, estimated to be $30 billion to $35 billion oflong-term transactions for the year, will be down from 2001. By February 28, 2002, we had completed aboutone-third of our planned funding transactions for 2002.

Back-up Credit Facilities and Committed Funding Sources

For additional liquidity, at December 31, 2001, we had $34.5 billion of back-up facilities, of which $33.5billion remains available to us, about the same as a year ago. We maintain committed credit facilities withlarge banking institutions that totaled $14 billion at December 31, 2001 (Ford Credit $9.5 billion, Ford CreditEurope $4.5 billion). The majority of these facilities are available through June 30, 2006 and $1 billion was inuse at December 31, 2001 (primarily by aÇliates outside of the United States and Europe). In addition, wemay at Ford's option, use $8 billion of Ford's committed credit facilities, including $598 million available forFord Credit Europe, which also are available through June 30, 2006. At December 31, 2001, of the $34.5billion of total back-up facilities, $12.5 billion serves as a liquidity facility for our FCAR Owner Trust asset-backed commercial paper program, and $15.7 billion supports our commercial paper program.

In addition, we have entered into agreements with several bank-sponsored commercial paper issuersunder which such issuers are contractually committed to purchase from us, at our option, up to $12.4 billion ofreceivables. The agreements have varying maturity dates between June 27, 2002 and December 12, 2002. Asof December 31, 2001, approximately $5.6 billion of these commitments had been utilized.

These credit facilities and committed purchase facilities do not contain restrictive Ñnancial covenants (forexample, debt-to-equity limitations or minimum net worth requirements) or material adverse change clausesthat could preclude borrowing under the credit facilities or selling receivables under committed purchasefacilities. None of these facilities may be terminated based on a change in our credit rating.

25


Debt-to-Equity Ratio

We use the debt-to-equity ratio to evaluate and adjust our capital structure. We calculate debt-to-equityratios in two ways: for our debt as well as on a combined basis with securitized funding. Based on the types ofassets we hold and market conditions, we have targeted our debt-to-equity ratio for debt and securitizedfunding to be about 14.0 to 1.

To maintain our debt-to-equity ratio for debt and securitized funding at our target, we eliminated plannedfourth quarter 2001 and Ñrst quarter 2002 dividends to Ford. Also, on January 11, 2002, Ford made a capitalcontribution of $700 million to us. Including this capital contribution, our debt-to-equity ratio for debt andsecuritized funding would have been 14.1 to 1 at December 31, 2001. At February 28, 2002 our debt-to-equityratio for debt and securitized funding was 13.6 to 1. The following chart shows the way we calculate our debt-to-equity ratios:

Year-end 2001 Year-end 2000

Debt and Debt andSecuritized Securitized

Debt Funding Debt Funding

(in billions)

Total debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $146.3 $146.3 $146.3 $146.3Gross sold receivables outstanding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 58.7 Ì 28.4Retained interest in sold receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (12.5) Ì (3.7)SFAS No. 133 adjustment, over-borrowing and cash ÏÏÏÏÏÏÏÏ (5.0) (5.0) (1.1) (1.1)

Adjusted debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $141.3 $187.5 $145.2 $169.9

Total stockholder's equity (including minority interest) ÏÏÏÏÏÏÏÏ $ 12.0 $ 12.0 $ 12.2 $ 12.2SFAS No. 133 adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.6 0.6 Ì Ì

Adjusted stockholder's equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 12.6 $ 12.6 $ 12.2 $ 12.2

Debt-to-equity ratios including adjustments(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11.2 14.8 11.9 13.9

Memo:Debt-to-equity ratios including January 11, 2002 capital

contribution from Ford ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.7 14.1 Ì Ì

(1) Debt-to-equity ratio for debt excluding adjustments for SFAS No. 133, over-borrowing and cash was 12.2to 1 in 2001.

Sales of Receivables and Securitization

Overview

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. Securitization is used by many Ñnance companies and banks to fundtheir operations. The United States securitization market is well-developed and highly liquid with more than$1.3 trillion of asset-backed securities outstanding at December 31, 2001.

We actively participate in the asset-backed securitization market and have been a frequent participantsince December 1988. We were the largest securitizer of prime automobile Ñnancing receivables in 2001.

We securitize three types of assets:

‚ Retail installment sale contracts,

‚ Wholesale receivables, and

‚ Operating leases.

26


Use of Special Purpose Entities

We securitize our receivables because it allows us to access the highly liquid and eÇcient market forsecuritization of Ñnancial assets thereby providing us with a cost-eÅective source of funding. Our use of SPEsin our securitizations is consistent with conventional practices in the securitization industry. The sale to theSPE achieves isolation of the sold receivables for the beneÑt of securitization investors and, assumingaccounting rules are met, the sold receivables are removed from our balance sheet. We sponsor some of theSPEs used in our securitizations. Most of our SPEs are classiÑed as qualifying special purpose entities(QSPEs) consistent with the requirements of Statement of Financial Accounting Standards No. 140 (SFASNo. 140), Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,because of the nature of the assets held by these entities and the limited nature of their activities. Basically, aQSPE's activities must be limited to passive investment in Ñnancial assets and issuing beneÑcial interests inthose assets. We also sponsor one securitization SPE that does not qualify as a QSPE under SFAS No. 140because its permitted activities are not suÇciently limited (see FCAR Owner Trust below). However, becausethe FCAR Owner Trust SPE maintains substantive third-party equity, this entity is not required to beconsolidated in our Ñnancial statements. Finally, third-party banking institutions sponsor other SPEs that weuse in our securitizations (see Bank-Sponsored Asset-Backed Commercial Paper Issuers below). None of ouroÇcers, directors or employees holds any equity interests in our QSPEs or SPEs or receives any direct orindirect compensation from the QSPEs or SPEs. These QSPEs and SPEs do not own our stock or stock of anyof our aÇliates.

Typical Securitization Structure

In our typical securitization, we sell a pool of our Ñnance receivables to a wholly-owned bankruptcyremote special purpose subsidiary that establishes a separate QSPE trust and transfers the receivables to thetrust in exchange for the proceeds from securities issued by the trust. Following the transfer of the soldreceivables to the QSPE, they are no longer our assets and they no longer appear on our balance sheet. Thesecurities issued by the trust, usually notes or certiÑcates of various maturities and interest rates, are securedby future collections on the sold receivables. These securities, commonly referred to as asset-backed securities,are structured into senior and subordinated classes. The senior classes have priority over the subordinatedclasses 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(Qualified SpecialPurpose Entity)

Special PurposeSubsidiary

Investors

Various forms of credit enhancements also are provided to reduce the risk of loss for senior classes ofsecurities. These credit enhancements include the following:

‚ Over-collateralization Ì the principal balance of receivables exceeds the principal amount of asset-backed securities issued. As a result of over-collateralization, we have the right to receive collections onthe sold receivables in excess of amounts needed to pay interest and principal to investors and servicingfees. This is referred to as excess spread and is recorded as an interest-only strip on our balance sheet.

27


‚ Cash reserve funds or restricted cash Ì a portion of proceeds from the sale of asset-backed securitiesthat are held in segregated reserve funds and may be used to pay principal and interest to investors ifcollections on the sold receivables are insuÇcient, and

‚ Subordinated securities Ì these securities generally do not receive payments of principal until moresenior securities are paid.

The asset-backed securities generally are rated by at least two independent rating agencies and sold inregistered public oÅerings or in private transactions exempt from registration under United States securitieslaws. The holders of asset-backed securities have no recourse to us or our assets and have no ability to requireus to repurchase their securities. We do not guarantee any securities issued by the QSPE.

We use both amortizing and revolving structures in our securitizations. In most amortizing structures, theQSPE issues securities that receive monthly payments of principal and interest and therefore amortize downas principal collections on the sold receivables are received. In revolving structures, the QSPE issues securitiesthat receive only monthly interest payments for a set period of time, called the revolving period, beforereceiving repayments of principal. During the revolving period, principal collections on the sold receivables areused to purchase additional receivables for the QSPE. At the end of the revolving period, investors mayreceive principal payments in a number of monthly payments or in a single lump sum payment.

We retain interests in sold receivables. The retained interests may include senior and subordinatedsecurities issued by the QSPE, restricted cash held for the beneÑt of the QSPE and an interest-only strip.Most retained interests are subordinated and serve as credit enhancements for the more senior securitiesissued by the QSPE to help ensure that adequate funds will be available to pay investors that hold seniorsecurities. Our ability to realize on our retained interests depends on actual credit losses and prepaymentspeeds on the sold receivables.

The QSPE has limited purposes and may only be used to purchase the receivables, issue asset-backedsecurities and make payments on the securities. The trust has a limited duration and generally terminateswhen investors holding the asset-backed securities have been paid all amounts owed to them.

The QSPE engages us as servicer to collect and service the sold receivables for a servicing fee of generally1% of the principal amount of receivables. Our servicing duties include collecting payments on receivables andpaying them to the QSPE within two business days of receipt. If the credit ratings on our short-term debt werein the highest short-term rating category assigned by the rating agencies, we would be entitled to hold allcollected amounts until the QSPE needs the funds for monthly distributions of principal and interest toinvestors. We also prepare monthly investor reports on the performance of the sold receivables, includingcollections, delinquencies and credit losses. While servicing the receivables for the QSPE we use our normalservicing policies and procedures and maintain our normal relationship with our Ñnancing customers.

We may also enter into derivative transactions to facilitate our securitizations.

Securitization Programs

We sell receivables as part of Ñve securitization programs:

Retail Securitization. We sell pools of retail installment sale contracts to QSPEs that issue securities,most of which are sold to investors in underwritten registered public oÅerings or private transactions. Thesetransaction structures are similar to the typical securitization structure described above.

Wholesale Securitization. We sell wholesale Ñnance receivables from speciÑed dealer accounts to QSPEsthat issue notes that are sold to investors in registered underwritten public oÅerings or private transactions. Wecontinue to own the dealer accounts, but we are required to sell all receivables generated under these dealeraccounts as the dealers acquire vehicles that are Ñnanced by us. The QSPE issues notes that are secured by anundivided proportionate interest in the receivables and we retain the remaining undivided interest. Part of ourretained interest is subordinated to senior investors and serves as credit enhancement. The other part has the

28


same priority to the collections on sold receivables as the senior noteholders. Our retained interest Öuctuates asthe amount of receivables increases or decreases over time and as additional series of notes are issued by theQSPE and notes are paid oÅ but must be maintained at a minimum required level for credit enhancement.

FCAR Owner Trust. FCAR Owner Trust (FCAR) is a limited purpose trust established to purchasehighly-rated asset-backed securities issued by Ford Credit-sponsored securitization QSPEs. The asset-backedsecurities held by FCAR are secured predominantly by retail installment sale contracts, and to a lesser extentby wholesale receivables and lease receivables. FCAR raises the funds to purchase these asset-backedsecurities by issuing asset-backed commercial paper and equity certiÑcates. At December 31, 2001, FCARheld about $12.5 billion of asset-backed securities and had about $12.1 billion of asset-backed commercialpaper outstanding and $410 million of equity certiÑcates outstanding owned by investors not aÇliated with us.We act as administrator for FCAR and oversee its limited operations. About $12.5 billion of our bank creditfacilities are available to provide liquidity to FCAR's issuance of asset-backed commercial paper.

Motown Notes Program. The Motown NotesSM Program, launched in January 2002, is an asset-backedcommercial paper program we administer. The Motown Notes are issued by a QSPE that owns a pool ofwholesale receivables and are secured by an undivided proportionate interest in these receivables. The QSPEis also used for wholesale securitization as described above. The size of the Motown Notes Program iscurrently $4.5 billion. This program is supported by a bank liquidity facility equal to 5% of the principalamount of the Motown Notes.

Bank-Sponsored Asset-Backed Commercial Paper Issuers. We sell pools of retail installment salecontracts to committed bank-sponsored asset-backed commercial paper issuers that are SPEs of thesponsoring bank. These issuers purchase Ñnance receivables and other assets from numerous other sellers andissue commercial paper backed by these assets to investors. We retain interests in the sold receivablesincluding restricted cash held in reserve funds and interest-only strips.

The following table illustrates the retail installment sale contracts and wholesale receivables that supportour securitization programs, and securitization activity in 2001 and 2000:

Types of Receivables

Full Year 2001 Full Year 2000

Retail Wholesale Total Retail Wholesale Total

(in billions)

Retail securitizationÏÏÏÏÏÏÏÏÏÏÏÏÏ $17.2 $ Ì $17.2 $19.2 $ Ì $19.2Wholesale securitization ÏÏÏÏÏÏÏÏÏ Ì 5.3 5.3 Ì 0.3 0.3FCAR ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.6 3.5 12.1 Ì Ì ÌBank-sponsored commercial paper

issuers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.2 Ì 6.2 Ì Ì Ì

Net proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $32.0 $ 8.8 $40.8 $19.2 $0.3 $19.5Retained interest and otherÏÏÏÏÏÏÏ 1.5 10.2 11.7 2.1 Ì 2.1

Total receivables sold ÏÏÏÏÏÏÏ $33.5 $19.0 $52.5 $21.3 $0.3 $21.6Prior period sold receivables and

paydown activityÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.8 (1.6) 6.2 4.7 2.1 6.8

Total sold receivablesoutstanding at December 31, ÏÏÏÏÏÏÏÏÏÏÏÏ $41.3 $17.4 $58.7 $26.0 $2.4 $28.4

29


Growth in Securitization Activity

Our proceeds from the sale of retail and wholesale Ñnance receivables worldwide are shown below for theyears ended December 31:

Full Year

Receivable Type 2001 2000 1999 1998 1997

(in billions)

RetailÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $32.0 $19.2 $9.4 $7.9 $2.6Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.8 0.3 0.5 Ì 1.3

Net Proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $40.8 $19.5 $9.9 $7.9 $3.9

In addition, in January of 2002 we received $9.6 billion of securitization proceeds, including $5.7 billionfrom securitization of retail installment sale contracts.

Our Continuing Obligations

As Seller

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 no right to require us to repurchase the securities.We do not guarantee any asset-backed securities and have no obligation to provide liquidity or make monetarycontributions to our SPEs either due to the performance of the sold receivables or the overall credit rating ofour short-term or long-term debt. However, as the seller of the Ñnance receivables to the SPE, we areobligated to provide certain kinds of support to our securitizations. These support obligations are customary inthe securitization industry and consist of the following:

‚ IndemniÑcation. We are obligated to indemnify the SPE for breaches of representations and warran-ties we made at the time the receivables were originally sold to the SPE, and certain tax liabilities incurred bythe SPE, its trustees or the holders of the securities issued by the SPE.

‚ Receivable Repurchase Obligations. The rating agencies specify eligibility criteria for receivablespermitted to be included in securitizations. We make representations and warranties to the SPE that the soldreceivables meet certain eligibility criteria. If a breach of any of our representations and warranties as to theeligibility of a sold receivable is later discovered, the SPE may require us to repurchase the non-conformingreceivable. The repurchase price is the face value of the receivable plus accrued interest.

‚ 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, before receivingrepayment of principal. Because the principal amount of the issued securities remains constant during therevolving period while the principal balance of the underlying Ñnance receivables are declining as monthlypayments on the receivables are collected, we replenish or ""top-up'' the SPE with new receivables each monthduring the revolving period and receive additional proceeds. In our wholesale securitization, we are required tosell all receivables from certain dealer accounts to the SPE on a daily basis until the SPE terminates.

As Servicer

We have a continuing involvement in managing and servicing the sold receivables. As servicer of the soldreceivables, we are entitled to grant extensions and make adjustments to obligors if such extensions andadjustments are consistent with our servicing policies and procedures. If we make material changes to areceivable including changing the interest rate, amount or number of monthly payments or extend the Ñnalpayment date beyond certain established dates, we are required to repurchase the materially modiÑed

30


receivable from the SPE at face value plus accrued interest. These servicer repurchase requirements aretypical in asset-backed securitization transactions.

Securitization Income

Securitization revenue includes the gain or loss on sale of Ñnance receivables, as well as servicing feeincome, the interest income earned on retained securities and excess spread. In 2001, securitization revenuereported in investment and other income related to securitizations was $1,433 million, compared with$557 million in 2000, and $433 million in 1999.

The following table summarizes the pre-tax proÑt impact of securitizations reported in investment andother income related to securitizations for the years ended December 31:

2001 2000 1999

(in millions)

Gains on sale of receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 739 $ 14 $ 83SFAS No. 133 fair value basis adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (327) Ì Ì

Net gainÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 412 14 83Servicing fees collected ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 456 190 136Interest income from retained securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 379 152 173Excess spread and otherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 186 201 41

Total investment and other income related to securitizations ÏÏÏÏÏÏÏÏÏÏÏ $ 1,433 $ 557 $ 433

Memo:Total investment and other income related to securitizations (excluding

SFAS No. 133) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,760 $ 557 $ 433Receivables sold ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $52,533 $21,618 $12,910Servicing portfolio as of December 31ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $58,748 $28,366 $19,471

We recognize the gain or loss on sale of Ñnance receivables in the period in which they are sold, based onthe estimated fair value of the assets sold or retained. We retain certain interests in the sold receivables. Theseretained interests include senior and subordinated securities, interest-only strips and restricted cash held forthe beneÑt of QSPEs. These Ñnancial instruments are recorded at fair value with unrealized gains or lossesrecorded, net of tax, as a separate component of accumulated other comprehensive income in stockholder'sequity.

The increased use of securitization, coupled with the sharp fall in interest rates during 2001, led to higherreported gains on sold receivables compared with prior years. Net gains in 2001 of $412 million compare togains of $14 million and $83 million in 2000 and 1999, respectively.

In addition to the growth in gains during 2001, interest earned on retained assets and servicing fees alsoincreased due to the increased use of securitization.

The EÅect of Securitization Activity on Financial Reporting

To better understand the performance of our total business, we analyze our results on both an owned basisand a managed basis.

As required by generally accepted accounting principles, our published Ñnancial statements reÖect theperformance of our owned receivables. On an owned basis, we report securitization gains or losses ininvestment and other income related to securitizations on our income statement. We also prepare internalÑnancial reports that assume the sold receivables were not sold. This represents the managed basis.

31


For 2001, gains on sales of receivables (excluding SFAS No. 133 charges) were $739 million, comparedwith $14 million in 2000. As required by generally accepted accounting principles, these gains are recognizedin the period that the securitization takes place. The sale of receivables has the impact of reducing ourÑnancing margins in the year the receivables are sold as well as in future years. The net impact ofsecuritizations on our annual earnings will include income eÅects in addition to the reported gain or loss on thesale of receivables and will vary depending on the amount, type of receivable and timing of our securitizationsin the current year and the preceding two to three year period as well as the interest rate environment at thetime the Ñnance receivables were originated and securitized. The following tables shows the estimated after-tax net impact of securitizations (excluding SFAS No. 133 charges) for the years-ended December 31:

2001 2000 1999

(in millions)

Total investment and other income related to securitizations (excludingSFAS No. 133) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,760 $ 557 $ 433

Impact of current-year receivable sales on Ñnancing marginÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,059) (243) (218)Impact of prior-year receivable sales on Ñnancing marginÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (611) (521) (158)

Pre-tax impact of securitization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 90 (207) 57TaxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (33) 77 (21)

After-tax impact of securitizationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 57 $(130) $ 36

Memo:2001 compared with 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 187 Ì Ì2000 compared with 1999 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì $(166) Ì

The above tables do not reÖect the lower cost of secured funding compared with unsecured funding.

Because we do not expect another sharp decline in interest rates, and we are planning to sell a smalleramount of Ñnance receivables, we anticipate that the gains on sale of receivables will not continue at the levelwe saw in 2001. As a result of the large increase in the use of securitization in 2001 and lower gains on sale ofreceivables in 2002, we anticipate that the after-tax impact of securitization in 2002 will be unfavorable.

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 services commensurate with the level of risk.

Our capital management framework optimizes the use of our capital by sizing our equity in proportion to risk.We manage our capital structure and make adjustments as the level of portfolio risk changes.

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 extremecircumstances. 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 segments

32


and 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 commercialpaper capacity described in ""ÌFunding and Liquidity'', provide additional levels of liquidity. About 70% ofthese facilities have Ñve-year terms. These facilities do not contain restrictive Ñnancial covenants (forexample, debt-to-equity limitations or minimum net worth requirements) or material adverse change clausesthat could preclude borrowing under these facilities.

Contractual Obligations

Our contractual obligations are the liabilities reÖected in our balance sheet excluding net deferred taxliabilities. Net deferred tax liabilities reÖect timing diÅerences between the Ñnancial statement and taxtreatment of revenues and expenses. If we experience unexpected losses, the net deferred tax liability isreduced or eliminated without any actual tax payment.

Capital Adequacy Study Conclusions

At December 31, 2001, 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 mentionedabove. We adjust our capital as the level of risk and other sources of creditor risk protection change.

Other 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 indeÑnite-lived intangibleassets are no longer amortized, but are subject to an annual impairment test. As of December 31, 2001, our netgoodwill and intangible assets, having various amortization periods, was approximately $200 million. Adoptionof this standard is not expected to have a material eÅect on our Ñnancial statements.

The Financial Accounting Standards Board (FASB) plans to issue an interpretation of Statement ofFinancial Accounting Standards No. 94, Consolidation of All Majority-Owned Subsidiaries, that will addressissues related to identifying and accounting for special purpose entities (SPEs). The scope of the interpreta-tion is expected to exclude QSPEs as deÑned in SFAS No. 140. The interpretation will introduce a conceptthat the primary beneÑciary of the activities of a special purpose entity would be required to consolidate theSPE unless the SPE met certain substantive independent economic substance criteria. Until the interpretationis issued in Ñnal form, it is not possible to fully assess the impact the interpretation may have on ouraccounting for SPEs.

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

33


assumptions concerning future events. These statements involve a number of risks, uncertainties, and otherfactors that could cause actual results to diÅer materially from those expressed or implied by such statements,including:

Automotive Related:

‚ A signiÑcant decline in automotive industry sales and our Ñnancing of those sales, particularly in theUnited States or Europe, resulting from slowing economic growth or other factors;

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

‚ Increased safety, emissions or other regulations resulting in higher costs and/or sales restrictions;

‚ Work stoppages at key Ford or supplier facilities;

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

Ford Credit Related:

‚ Higher-than-expected credit losses resulting in increased credit loss reserves;

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

‚ Lower-than-anticipated residual values for leased vehicles;

General:

‚ Currency or interest rate Öuctuations;

‚ Availability of securitization as a source of funding;

‚ A credit rating downgrade, labor or other constraints on Ford's or our ability to restructure Ford's orour business;

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

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

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 each of the various types of risk in our business is critical toour Ñnancial condition and proÑtability. In January of 2002, we reorganized our Risk Management Group tomore closely link the management of various elements of risk we face. The principal types of risk to ourbusiness include:

‚ 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.

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

34

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

‚ Market risk Ì the possibility that changes in interest and currency rates will adversely impact ourincome.

‚ Counterparty risk Ì the possibility that a counterparty may default on an investment or a derivativecontract.

‚ 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 Item 7. A discussion of market, counterparty, andoperating risks follows.

Market Risk

Our overall risk management program recognizes the unpredictability of Ñnancial markets and seeks toreduce potential adverse eÅects on our operating results from changes in interest and currency rates. We usevarious Ñnancial instruments commonly referred to as derivatives or swaps. We most often use interest rateswaps and currency swaps, to manage market risks. We do not engage in any trading, market-making or otherspeculative activities in the derivative markets.

Our receivables consist primarily of Ñxed-rate retail installment sale and lease contracts, with an averagelife of about two years, and Öoating-rate wholesale receivables. Interest earned on fixed-rate receivables doesnot change regardless of shifts in market interest rates. Funding sources consist of short- and long-termunsecured debt and sales of receivables. In an eÅort to have funds available throughout business cycles, weoften borrow longer-term debt, with Ñve to ten year maturities. However, as a consequence of this type offunding strategy, we face interest rate risk because the average maturities of our receivables and debt arediÅerent, and we face currency risk because the currencies of our receivables and debt may be diÅerent. As aresult, changes in interest or currency rates impact the value of our receivables and our debt diÅerently. Weuse derivatives to match the characteristics of our receivables and funding sources commonly known ashedging. These derivatives include interest rate swaps and foreign currency instruments as follows:

‚ Debt swaps Ì an agreement to convert long-term Ñxed-rate debt to Öoating interest rate payments.

‚ Asset liability swaps Ì an agreement to convert Öoating interest rate payments to Ñxed interest ratepayments.

‚ 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

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

Using a combination of these derivatives helps us to manage our interest and currency rate risks, lock-inmargins and reduce proÑt volatility.

To the extent possible, we manage receivables and borrowings in the local country currency, minimizingexposure to exchange rate movements. When a diÅerent currency is used, we use foreign currency forwardagreements to hedge speciÑc debt instruments. Based on a sensitivity analysis, we have concluded that ourearnings in the ensuing twelve-month period would not be materially aÅected by the change in the value of ourreceivables, borrowings and hedging instruments resulting from an instantaneous 10% change in foreigncurrency rates relative to the U.S. dollar.

Our interest rate hedging strategy seeks to limit the eÅects of interest rate changes on our income byentering into interest rate swaps to lock-in interest rate margins. Until the fourth quarter of 2001, we followed

35


a monthly process to determine our need for interest rate swaps using a ""cash Öow at risk'' analysis. Ouranalysis divided our managed receivables and borrowings into time periods based on the maturities for Ñxed-rate receivables and borrowings or when the interest rate would reset for Öoating rate receivables andborrowings. We then measured the diÅerence between the amount of managed receivables and the amount ofour borrowings over the diÅerent time periods. For each time period, we would enter into interest rate swaps toreduce the eÅects of interest rate changes such that the diÅerence in the amount of managed receivables andborrowings would not exceed a speciÑc amount, expressed as a percentage, of the managed receivables in thattime period. This method of managing our interest rate exposure has been eÅective, but it requires us toextensively use interest rate swaps.

In the fourth quarter of 2001, we began to implement a revised hedging process that is less reliant oninterest rate swaps, and we are currently continuing to implement this new process. Instead of measuringinterest rate risk for a number of speciÑc time periods, our revised process measures the interest rate risk ofour managed receivables and borrowings on a portfolio basis. With the revised process, we determine thediÅerence between the weighted average maturities of our managed receivables and borrowings, and seek tominimize the diÅerence by entering into interest swaps with varying maturities.

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

2001 2000 1999 1998 1997

(in billions)

Debt and asset liability swaps ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $170.0 $139.5 $125.2 $ 97.3 $86.6Cross-currency swaps and foreign currency forwards ÏÏÏÏÏÏÏÏ 31.4 21.6 17.1 14.5 12.5

Total notional ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $201.4 $161.1 $142.3 $111.8 $99.1

The net eÅect of all derivative transactions are recorded as part of our funding costs. In 1999 and 2000,the net eÅect of derivatives on funding costs was favorable by $59 million and $171 million, respectively, andunfavorable by $321 million in 2001. In 1999 and 2000, market interest rates increased, and in 2001 theydeclined sharply. We are a net receiver of Öoating interest payments and a net payer of Ñxed interest ratepayments. When market interest rates increase, our net interest expense is reduced by the higher payments wereceive on Öoating interest rate derivatives. Conversely, when interest rates decline our net interest expensesincrease as we receive lower payments from our Öoating interest rate derivatives. The following table showsour Ñnancial statement funding costs and the net eÅect of derivatives used to hedge our interest rate riskexposure.

2001 2000 1999 1998 1997

(in millions)

Funding costBase cost (total debt and securitized funding) ÏÏÏÏÏÏÏÏÏÏ $8,630 $9,141 $7,252 $6,891 $6,317Derivatives net interest expense/(income) ÏÏÏÏÏÏÏÏÏÏÏÏÏ 321 (171) (59) 19 (49)

Total funding costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $8,951 $8,970 $7,193 $6,910 $6,268

We assess our exposure to interest rate changes by performing a sensitivity analysis, which measures thepotential loss in net earnings resulting from a hypothetical increase in interest rates of 100 basis points (or 1%)across all maturities. Under this model, it is estimated that, all else constant, such an increase would reduceour net earnings by approximately $50 million over the next twelve months.

The model assumes interest rate changes are instantaneous parallel shifts in the yield curve. In reality,changes are rarely instantaneous or parallel. Although certain assets and liabilities may have similar maturitiesor periods to repricing, they may not react correspondingly to changes in market interest rates. Also, the

36


interest rates on certain types of assets and liabilities may Öuctuate with changes in market interest rates, whileinterest rates on other types of assets may lag behind changes in market rates. We make prepaymentassumptions as part of our overall analysis. However, in the event of a change in interest rates, actual loanprepayments may deviate signiÑcantly from assumptions used in the model.

Counterparty Risk

Counterparty risk relates to the loss we could incur if a counterparty defaults on an investment or aderivative contract. Our exposures relate primarily to investments in Ñxed-income products and derivativetransactions for the purpose of managing interest rate and currency risk. We, on a combined basis with Ford,establish exposure limits for each counterparty to minimize risk and provide counterparty diversiÑcation. Ourexposures are monitored on a regular basis.

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.We use a Monte Carlo simulation technique to assess our potential exposure by tenor, deÑned at 95%conÑdence level.

The majority of our counterparty exposures are with counterparties that are rated single-A or better. Ourguideline for counterparty minimum credit ratings is BBB. In addition, we may limit our exposure tocounterparties on contracts with longer maturities. Exceptions to these guidelines require prior approval by oursenior management.

Operating Risk

We operate in many locations and rely on the abilities of our employees and systems to process a largenumber of transactions. Improper operation of systems or improper employee actions could result in Ñnancialloss, regulatory action and damage to our reputation. To address this risk, we maintain internal controlprocesses which identify transaction authorization requirements, safeguard assets from misuse or theft, andprotect the reliability of Ñnancial and other data. We also maintain system controls to maintain the accuracy ofinformation about our operations. These controls are designed to manage operating risk throughout ouroperation.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by Item 8 is set forth at pages FC-1 through FC-28 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).

37

PART IV

ITEM 14. 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, 2001, 2000 and 1999.

Consolidated Balance Sheet, December 31, 2001 and 2000.

Consolidated Statement of Stockholder's Equity, 2001, 2000 and 1999.

Consolidated Statement of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999.

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-30 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

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 onbetween Ford Motor Credit Form 8-K dated April 29, 1986 andCompany and Manufacturers incorporated herein by reference.Hanover Trust Company File No. 1-6368.supplementing the Indenturedesignated as Exhibit 4-A.

38

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K(Continued)


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 on1986 between Ford Motor Credit Form 8-K dated August 28, 1986 andCompany and Manufacturers incorporated herein by reference.Hanover Trust Company File 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.

Exhibit 4-A-6 Form of Sixth Supplemental Filed as Exhibit 4.1 to Ford MotorIndenture dated as of June 1, 1998 Credit Company Current Report onbetween Ford Motor Credit Form 8-K dated June 15, 1998 andCompany and The Chase incorporated herein by reference. FileManhattan Bank supplementing the No. 1-6368.Indenture 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 Indenturedesignated as Exhibit 4-A.

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 onCompany and Continental Bank, Form 8-K dated December 10, 1990 andNational Association relating to incorporated herein by reference. FileDebt Securities. No. 1-6368.

39

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K(Continued)


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 with this Report.ProÑt Maintenance Agreementdated as of January 1, 2002 betweenFord Motor Credit Company andFord Motor Company.

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 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 Sections of Items 1, 3, 6, 7 and 7A Filed with this Report.of Ford Motor Company's AnnualReport on Form 10-K for 2001.

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 Commission upon request.

(b) Reports on Form 8-K

Ford Credit Ñled the following Reports on Form 8-K during the quarter ended December 31, 2001, whichdid not contain Ñnancial statements:

Date of Report Item

October 2, 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other EventsOctober 10, 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other EventsOctober 17, 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other EventsOctober 18, 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other EventsOctober 24, 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other EventsOctober 30, 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other EventsNovember 1, 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other EventsDecember 3, 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other EventsDecember 5, 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Item 5 Ì Other Events

40

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant hascaused this report to be signed on its behalf by the undersigned duly authorized oÇcers and directors.

Ford Motor Credit Company

By /s/ GREGORY C. SMITH*

(Gregory C. Smith,President and Chief Operating OÇcer)

Date: March 28, 2002

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, President and Chief Operating March 28, 2002OÇcer(Gregory C. Smith)

BIBIANA BOERIO* Director, Executive Vice President, Chief March 28, 2002Financial OÇcer and Treasurer(Bibiana Boerio)(principal Ñnancial oÇcer andprincipal accounting oÇcer)

TERRY D. CHENAULT* Director March 28, 2002

(Terry D. Chenault)

DAVID C. FLANIGAN* Director March 28, 2002

(David C. Flanigan)

I. MARTIN INGLIS* Director March 28, 2002

(I. Martin Inglis)

MALCOLM S. MACDONALD* Director March 28, 2002

(Malcolm S. Macdonald)

*By /s/ SUSAN J. THOMAS

(Susan J. Thomas,Attorney-in-Fact)

41

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, of stockholder's equity and of cash Öows present fairly, in all material respects, the Ñnancial positionof Ford Motor Credit Company and its subsidiaries at December 31, 2001 and 2000, and the results of theiroperations and their cash Öows for each of the three years in the period ended December 31, 2001 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 1, the Company adopted Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging Activities, as amended, eÅective January 1, 2001.

/s/ PRICEWATERHOUSECOOPERS LLP

DETROIT, MICHIGAN

FEBRUARY 15, 2002

FC-1

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME(in millions)

For the Years Ended December 31

2001 2000 1999

Financing revenueOperating leasesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $11,978.5 $10,986.7 $ 9,790.9Retail ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,492.4 7,942.7 6,753.8Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,186.4 2,713.1 1,919.6OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 477.3 525.3 421.1

Total Ñnancing revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,134.6 22,167.8 18,885.4Depreciation on operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8,860.9) (7,845.7) (7,564.5)Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8,951.2) (8,970.1) (7,193.4)

Net Ñnancing margin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,322.5 5,352.0 4,127.5Other revenue

Investment and other income related to securitizations (Note 6)ÏÏÏ 1,432.9 557.3 432.8Insurance premiums earned ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 231.4 225.6 236.6Other income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 651.6 655.0 804.9

Total Ñnancing margin and revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,638.4 6,789.9 5,601.8Expenses

Operating expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,570.0 2,415.4 2,124.5Provision for credit losses (Note 5) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,355.3 1,670.8 1,166.4Other insurance expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 205.6 208.7 207.1

Total expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,130.9 4,294.9 3,498.0

Income before income taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,507.5 2,495.0 2,103.8Provision for income taxes (Note 10)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 667.6 925.6 790.6

Income before minority interests ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 839.9 1,569.4 1,313.2Minority interests in net income of subsidiariesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.4 32.9 52.1

Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 838.5 $ 1,536.5 $ 1,261.1

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

FC-2


CONSOLIDATED BALANCE SHEET(in millions)

December 31

2001 2000

ASSETS

Cash and cash equivalentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,945.3 $ 1,123.4Investments in securities (Note 2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 525.9 547.4Finance receivables, net (Note 3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 109,701.4 122,658.8Net investment in operating leases (Note 4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 39,334.9 38,536.6Retained interest in securitized assets (Note 6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,548.4 3,686.6Notes and accounts receivable from aÇliated companies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,529.0 2,489.1Other assets (Note 7) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,511.5 5,215.9

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $173,096.4 $174,257.8

LIABILITIES AND STOCKHOLDER'S EQUITYLiabilities

Accounts payableTrade, customer deposits, and dealer reservesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,653.9 $ 4,758.1AÇliated companiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,005.6 1,036.9

Total accounts payableÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,659.5 5,795.0Debt (Note 8) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 146,343.7 146,294.7Deferred income taxes (Note 10) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,591.5 4,495.4Other liabilities and deferred incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,500.1 5,468.8

Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 161,094.8 162,053.9Minority interests in net assets of subsidiaries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17.8 17.3Stockholder's Equity

Capital stock, par value $100 a share, 250,000 shares authorized, issued andoutstanding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25.0 25.0

Paid-in surplus (contributions by stockholder)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,457.7 4,273.0Accumulated other comprehensive loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,209.7) (383.7)Retained earnings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,710.8 8,272.3

Total stockholder's equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,983.8 12,186.6

Total liabilities and stockholder's equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $173,096.4 $174,257.8


FC-3


CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY(in millions)

Accumulated OtherComprehensive Income/(Loss)

UnrealizedGain/(Loss)

Note on RetainedReceivable Interest in

Paid from Securitized ForeignCapital in AÇliated Retained Assets and Currency DerivativeStock Surplus Company Earnings Other Translation Instruments Total

Balance at January 1, 1999ÏÏÏÏÏÏÏÏÏÏÏÏ $25.0 $4,343.4 $(1,517.0) $ 7,911.4 $ 42.0 $(160.1) Ì $10,644.7Comprehensive income

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 1,261.1 Ì Ì Ì 1,261.1Retained interest in securitized assets

(net of tax of $33.4) ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 55.4 Ì Ì 55.4Foreign currency translation ÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì (209.4) Ì (209.4)Unrealized loss (net of tax of $1.9)ÏÏÏ Ì Ì Ì Ì (3.2) Ì Ì (3.2)Less: Reclassification adjustment for

gains realized in net income (net oftax of $13.7) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì (22.7) Ì Ì (22.7)

Total comprehensive income, netof tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 1,261.1 29.5 (209.4) Ì 1,081.2

Settlement of Note ReceivableÏÏÏÏÏÏÏÏÏ Ì Ì 1,517.0 Ì Ì Ì Ì 1,517.0Paid-in surplus ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (1.8) Ì Ì Ì Ì Ì (1.8)Cash dividends ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì (2,317.0) Ì Ì Ì (2,317.0)

Year ended December 31, 1999 ÏÏÏÏÏÏÏÏ $25.0 $4,341.6 $ 0.0 $ 6,855.5 $ 71.5 $(369.5) $ 0.0 $10,924.1Comprehensive income

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 1,536.5 Ì Ì Ì 1,536.5Retained interest in securitized assets

(net of tax of $66.8) ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 113.3 Ì Ì 113.3Foreign currency translation ÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì (208.4) Ì (208.4)Unrealized gain (net of tax of $7.0) ÏÏ Ì Ì Ì Ì 19.6 Ì Ì 19.6Less: ReclassiÑcation adjustment for

gains realized in net income (net oftax of $6.0) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì (10.2) Ì Ì (10.2)

Total comprehensive income, netof tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 1,536.5 122.7 (208.4) Ì 1,450.8

Paid-in surplus ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (68.6) Ì Ì Ì Ì Ì (68.6)Cash dividends ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì (119.7) Ì Ì Ì (119.7)

Year ended December 31, 2000 ÏÏÏÏÏÏÏÏ $25.0 $4,273.0 $ 0.0 $ 8,272.3 $ 194.2 $(577.9) $ 0.0 $12,186.6Comprehensive income

Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 838.5 Ì Ì Ì 838.5Transition adjustment (net of tax

of $126.5) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (214.5) (214.5)Net loss on derivative instruments (net

of tax of $224.3)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì Ì (380.3) (380.3)Less: Reclassification adjustment for

(losses) realize in net income (net oftax of $68.2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì Ì 115.7 115.7

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

Foreign currency translation ÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì (165.1) Ì (165.1)Unrealized gain (net of tax

of $11.2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 19.0 Ì Ì 19.0Less: Reclassification adjustment for

gains realized in net income (net oftax of $14.1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì (23.9) Ì Ì (23.9)

Total comprehensive income, netof tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 838.5 (181.8) (165.1) (479.1) 12.5

Paid-in surplus ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 184.7 Ì Ì Ì Ì Ì 184.7Cash dividends ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì (400.0) Ì Ì Ì (400.0)

Year ended December 31, 2001 ÏÏÏÏÏÏÏÏ $25.0 $4,457.7 $ 0.0 $ 8,710.8 $ 12.4 $(743.0) $(479.1) $11,983.8


FC-4


CONSOLIDATED STATEMENT OF CASH FLOWS(in millions)


2001 2000 1999

Cash Öows from operating activitiesNet incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 838.5 $ 1,536.5 $ 1,261.1Adjustments to reconcile net income to net cash provided by

operating activities:Provision for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,355.3 1,670.8 1,166.4Depreciation and amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,933.6 8,333.2 7,995.1Gain on sales of Ñnance receivables (Note 6)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (411.9) (13.8) (82.6)Increase in deferred income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 272.8 765.6 432.2(Increase)/decrease in other assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (357.4) 226.4 (1,343.7)(Decrease)/increase in other liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,456.2) 2,051.6 127.0All other operating activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 105.3 458.0 110.5

Net cash provided by operating activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,280.0 15,028.3 9,666.0

Cash Öows from investing activitiesPurchase of Ñnance receivables (other than wholesale) ÏÏÏÏÏÏÏÏ (71,076.9) (62,216.2) (54,525.8)Collection of Ñnance receivables (other than wholesale) ÏÏÏÏÏÏÏ 29,972.2 34,529.4 33,575.6Purchase of operating lease vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (27,238.5) (26,945.0) (23,334.9)Liquidation of operating lease vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,807.8 15,285.9 16,668.2Net change in wholesale receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,024.0 (7,136.9) (4,026.2)Proceeds from sales of receivables (Note 6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40,830.5 19,544.4 9,928.9Decrease/(increase) in note receivable with aÇliate ÏÏÏÏÏÏÏÏÏÏ 599.8 3,619.2 (4,757.6)Proceeds from settlement of intercompany note receivable ÏÏÏÏÏ Ì Ì 1,517.0Purchase of investment securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (726.1) (559.2) (894.4)Proceeds from sale/maturity of investment securities ÏÏÏÏÏÏÏÏÏÏ 747.5 550.6 1,095.8Acquisition of minority interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (659.4) ÌAll other investing activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (230.0) (484.9) (217.8)

Net cash used in investing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8,289.7) (24,472.1) (24,971.2)

Cash Öows from Ñnancing activitiesProceeds from issuance of long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41,047.0 33,837.7 34,128.4Principal payments on long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (15,847.7) (21,947.6) (12,266.0)Change in short-term debt, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (26,139.1) (775.2) (3,974.5)Cash dividends paid ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (400.0) (269.7) (2,167.0)All other Ñnancing activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 306.2 (382.6) 7.4

Net cash (used in)/provided by Ñnancing activities ÏÏÏÏÏ (1,033.6) 10,462.6 15,728.3EÅect of exchange rate changes on cash and cash equivalents ÏÏÏÏ (134.8) (837.6) (261.7)

Net change in cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,821.9 181.2 161.4Cash and cash equivalents, beginning of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,123.4 942.2 780.8

Cash and cash equivalents, end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,945.3 $ 1,123.4 $ 942.2

Supplementary cash Öow informationInterest paid ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8,146.4 $ 8,533.0 $ 6,681.6Taxes paid ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 177.2 178.5 215.1


FC-5


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. Due to 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'').

Revenue Recognition

Revenue from Ñnance receivables is recognized using the interest method. Certain origination costs onreceivables are deferred and amortized, using the interest method, over the term of the related receivable as areduction in Ñnancing revenue. Rental revenue on operating leases is recognized on a straight-line basis overthe term of the lease. Initial direct costs related to leases are deferred and amortized over the term of the lease.The accrual of interest on receivables is discontinued at the time a receivable is determined to be impaired.Subsequent payments are applied as a reduction of principal until such time the receivable becomescontractually 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 Creditand its Ñnance subsidiaries, are recognized in 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. Ceded insurance agreements do not relieveTARIC of its primary obligation to its policyholders.

Sale of Receivables and Operating Leases

Ford Credit periodically sells Ñnance receivables in securitization transactions to fund its operations.These transactions involve Ford Credit surrendering control over these assets by selling Ñnance receivables to

FC-6


NOTES TO FINANCIAL STATEMENTS Ì Continued

NOTE 1. ACCOUNTING POLICIES Ì Continued

oÅ-balance sheet securitization entities. Securitization entities are a common, required element of securitiza-tion transactions to meet certain legal and transaction requirements, that assure that the sold assets have beenisolated from Ford Credit and its creditors. The securitization entities issue interest-bearing securitiescollateralized by future collections on the sold receivables.

Estimated gains or losses from the sale of Ñnance receivables are recognized in the period in which thesale occurs. In determining the gain or loss on each qualifying sale of Ñnance receivables, the investment in thesold receivable pool is allocated between the portion sold and the portion retained based on their relative fairvalues at the date of sale. Ford Credit retains certain interests in the sold receivables. These retained interestsinclude senior and subordinated securities, interest only strips and restricted cash held for the beneÑt ofsecuritization entities. These Ñnancial instruments are recorded at fair value with unrealized gains or lossesrecorded, net of tax, as a separate component of accumulated other comprehensive income in stockholder'sequity. In securitization transactions, Ford Credit retains the servicing rights and receives a servicing fee,which is recognized as collected over the remaining term of the related sold Ñnance receivables.

Ford Credit also periodically sells vehicles subject to operating leases to special purpose entities undersale-leaseback arrangements. Estimated gains or losses are deferred and amortized over the period of theleaseback arrangement.

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, accordingly the lease termrepresents the economic useful life of the vehicle. The Company evaluates its depreciation policy for leasedvehicles on a regular basis taking into consideration various assumptions, which include estimated used carprices at lease termination and the estimated number of vehicles that will be returned to the Company.Adjustments to reÖect revised estimates of residual values at the end of the lease term are included indepreciation expense on a straight-line basis over the remaining term of the lease.


The allowance for credit losses reÖects management's estimate of losses inherent in the portfolio,considering concentrations of credit risk, evaluation of individual credits, net losses charged to the allowance,changes in the quality of the credit portfolio, levels of non-accrual loans and leases, and current economicconditions. Finance receivables and lease investments are charged to the allowance for credit losses when anaccount is deemed to be uncollectible, taking into consideration the Ñnancial condition of the borrower orlessee, the value of the collateral, recourse to guarantors and other factors. Recoveries on Ñnance receivablesand lease investments previously charged oÅ as uncollectible are credited to the allowance for credit losses.The allowance for credit losses related to non-consumer loans that are identiÑed as impaired is measuredbased on the present value of expected future cash Öows discounted at the loan's eÅective interest rate or thefair value of the collateral for collateral dependent loans.

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.

FC-7




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 are used to manage foreign exchange exposure. The diÅerential paid orreceived on swap agreements is recognized on an accrual basis as an adjustment to interest expense.

Ford Credit adopted Statement of Financial Accounting Standard (SFAS No. 133), Accounting forDerivative Instruments and Hedging Activities, as amended, on January 1, 2001. All derivatives are recognizedon the balance sheet at fair value. Ford Credit designates derivatives as a hedge of the fair value of arecognized 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.

Interest rate risk is managed by entering into interest rate swap agreements to change the interest ratecharacteristics of debt to match the interest rate characteristics of related assets. These interest ratederivatives are designated as either cash Öow or fair value hedges. Exchange rate risk is managed by use offoreign currency agreements, including forward contracts and swaps.

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 are 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 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 transactions, the accumulated basis adjustments relatedto the sold assets are reversed and included in earnings in the same period in which the assets were sold.

Counterparty Credit Risk

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




Concentrations

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, adverse publicity, or any other event, could have substantial adverse eÅect onFord 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.

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 with the eÅects of these translation adjustments being 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



NOTE 2. INVESTMENTS IN SECURITIES

Investments in securities consist of debt, municipal, corporate, mortgage-backed and other securities.Available-for-sale securities are recorded at fair value with unrealized gains and losses excluded from incomeand reported, net of tax, as a separate component of accumulated other comprehensive income in stock-holder's equity. Held-to-maturity securities are recorded at amortized cost. Equity securities that do not havereadily determinable fair values are recorded at cost. The basis of cost used in determining realized gains andlosses is speciÑc 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, 2001:

Gross GrossAmortized Unrealized Unrealized Fair

Cost Gains Losses Value

(in millions)

Available-for-sale securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $487.9 $37.9 $(6.4) $519.4Held-to-maturity securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.5 0.0 0.0 6.5

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

Balance at December 31, 2000:

Gross GrossAmortized Unrealized Unrealized Fair

Cost Gains Losses Value

(in millions)

Available-for-sale securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $502.1 $44.5 $(5.4) $541.2Held-to-maturity securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.2 0.2 0.0 6.4

Total investments in securitiesÏÏÏÏÏÏÏÏÏÏ $508.3 $44.7 $(5.4) $547.6

The amortized cost and fair value of investments in available-for-sale securities and held-to-maturitysecurities at December 31, 2001, by contractual maturity, were as follows:

Available-for-Sale Held-to-Maturity

Amortized Fair Amortized FairCost Value Cost Value

(in millions)

Due in one year or less ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4.3 $ 4.4 $0.1 $0.1Due after one year through Ñve years ÏÏÏÏÏÏÏÏÏÏÏ 87.4 89.6 1.3 1.3Due after Ñve years through ten years ÏÏÏÏÏÏÏÏÏÏÏ 82.1 83.7 3.1 3.1Due after ten yearsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 78.3 80.6 2.0 2.0Mortgage-backed securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28.8 52.2 0.0 0.0Equity securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 207.0 208.9 0.0 0.0

TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $487.9 $519.4 $6.5 $6.5

Proceeds from sales of available-for-sale securities were $739 million and $551 million in 2001 and 2000,respectively. Gross realized gains and losses were $14.5 million and $3.8 million, respectively in 2001,$9.5 million and $6.7 million, respectively in 2000, and $32.8 million and $14.2 million, respectively in 1999.

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NOTE 3. FINANCE RECEIVABLES

Net Ñnance receivables at December 31 were as follows:

2001 2000

(in millions)

Retail ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 85,478.3 $ 81,035.9Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,610.3 33,803.7OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,889.5 9,129.9

Total Ñnance receivables, net of unearned income ÏÏÏÏÏ 111,978.1 123,969.5Less: Allowance for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,276.7) (1,310.7)

Finance receivables, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $109,701.4 $122,658.8

Net Ñnance receivables subject to fair value* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $102,224.6 $115,883.3Fair value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 102,378.1 117,194.8

* Excludes certain leases that are not Ñnancial instruments of $7,476.8 and $6,775.5 million atDecember 31, 2001 and 2000 respectively

The fair value of most Ñnance receivables is estimated 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, 2001 Ñnance receivables include $848 million owed by three customers with the largestreceivables balances.

The contractual maturities of total Ñnance receivables outstanding at December 31, 2001, net of unearnedincome, were as follows (excludes $702.7 million related to SFAS No. 133 fair value adjustments included inRetail and Other):

DueDue in Year Ending December 31 After

2002 2003 2004 2004 Total

(in millions)

Retail ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $40,948.8 $24,860.5 $11,712.7 $ 7,535.0 $ 85,057.0WholesaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,534.5 18.1 33.0 24.7 15,610.3Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,883.2 514.0 329.6 3,881.3 10,608.1

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏ $62,366.5 $25,392.6 $12,075.3 $11,441.0 $111,275.4

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.

The aggregate receivables balances related to accounts past due 60 days or more at December 31 were asfollows:

2001 2000

(in millions)

Retail ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,337.0 $1,203.8Wholesale ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 270.7 233.7OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 86.0 19.5

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,693.7 $1,457.0

FC-11



NOTE 3. FINANCE RECEIVABLES Ì Continued

Included in retail receivables are investments in direct Ñnancing leases (generally leases over 48 months)related to the leasing of motor vehicles.

2001 2000

(in millions)

Net investment in direct Ñnancing leasesMinimum lease rentals to be received ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $4,794.8 $4,611.0Estimated residual values ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,288.8 3,081.3Less: Unearned incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (955.3) (923.0)Origination costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 54.3 58.0Less: Allowance for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (42.3) (116.3)

Net investment in direct Ñnancing leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $7,140.3 $6,711.0

Minimum direct Ñnancing lease rentals for each of the Ñve succeeding years are as follows (in millions):2002 Ì $1,848.5; 2003 Ì $1,373.1; 2004 Ì $1,003.0; 2005 Ì $459.4; 2006 Ì $87.5; thereafter Ì $23.3.

NOTE 4. NET INVESTMENT, OPERATING LEASES

Operating leases at December 31 were as follows:

2001 2000

(in millions)

Investment in operating leasesVehicles, at costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $50,921.4 $48,491.2Lease initial direct costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 138.8 132.6Less: Accumulated depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (11,237.0) (9,753.0)

Allowance for credit lossesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (488.3) (334.2)

Net investment in operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $39,334.9 $38,536.6

Future minimum rentals on operating leases are as follows (in millions): 2002 Ì $8,565.6; 2003 Ì$6,018.1; 2004 Ì $3,230.7; 2005 Ì $1,284.5; 2006 Ì $118.1.

FC-12



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:

2001 2000 1999

(in millions)

Balance, beginning of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,644.9 $1,475.6 $1,548.2Provision charged to operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,355.3 1,670.8 1,166.4Deductions

Losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,485.1 1,596.8 1,274.2Recoveries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (373.9) (299.6) (274.5)

Net losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,111.2 1,297.2 999.7Other changes, principally amounts related to Ñnance receivables sold

and translation adjustments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 124.0 204.3 239.3

Net deductionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,235.2 1,501.5 1,239.0

Balance, end of year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,765.0 $1,644.9 $1,475.6

NOTE 6. SALE OF RECEIVABLES

Servicing Portfolio

Ford Credit retains servicing rights for receivables sold in securitization transactions. The servicingportfolio is summarized in the following table:

Retail Wholesale Total

(in millions)

Servicing portfolio as of December 31, 1999ÏÏÏÏÏÏ $ 14,466.4 $ 5,005.0 $ 19,471.42000 activityReceivable sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,317.9 300.0 21,617.9Paydowns ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (9,776.5) (2,947.1) (12,723.6)

Servicing portfolio as of December 31, 2000ÏÏÏÏÏÏ $ 26,007.8 $ 2,357.9 $ 28,365.72001 activityReceivable sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 33,491.1 19,041.7 52,532.8Paydowns ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (18,187.0) (3,963.5) (22,150.5)

Servicing portfolio as of December 31, 2001ÏÏÏÏÏÏ $ 41,311.9 $17,436.1 $ 58,748.0

Retained Interest

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

2001 2000

(in millions)

Wholesale receivables sold to securitization entities ÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 7,586.0 $ 0.0Subordinated securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,039.1 1,067.5Senior securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,310.9 1,664.4Interest only stripsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,235.4 698.0Restricted cash held for the beneÑt of securitization entitiesÏÏÏÏÏÏ 377.0 256.7

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $12,548.4 $3,686.6

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NOTE 6. SALE OF RECEIVABLES Ì Continued

Most of the retained interest in sold wholesale receivables (about $6.5 billion) represents the company'sundivided interest in wholesale receivables that are available to support the issuance of additional securities bythe securitization entity. The balance represents credit enhancements. Interest only strips represent thepresent value of monthly collections on the sold Ñnance receivables in excess of amounts needed by the SPE(securitization trust) to pay interest and principal to investors and servicing fees that will be realized by FordCredit. Subordinated securities, restricted cash and interest only strips are credit enhancement assets.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 due to short-term maturities. The fair value of the senior notes and subordinated certiÑcates areestimated based on market prices. In determining the fair value of the interest only strips, the companydiscounts 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 impact of securitizations reported in investment and other income forthe years ended December 31:

2001 2000 1999

(in millions)

Gains on sale of receivablesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 738.5 $ 13.8 $ 82.6SFAS No. 133 basis adjustmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (326.6) 0.0 0.0

Net gain on sale of receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 411.9 13.8 82.6Servicing fees collected ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 456.3 190.2 135.6Interest income from retained securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 378.5 152.3 172.7Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 186.2 201.0 41.9

Total investment income related to securitizationÏÏÏÏ $1,432.9 $557.3 $432.8

Net pre-tax gains related to Ñnance receivable sales amounted to $738.5 million (excluding fair valuebasis adjustments of $326.6 million related to SFAS No. 133) in 2001, $13.8 million in 2000, and$82.6 million in 1999. For the year ended December 31, 2001, Ford Credit utilized certain point-of-saleassumptions, including a discount rate of 12%, a prepayment speed of 1.5% (which represents expectedpayments earlier than normal scheduled maturity dates) and credit losses of 1.14% to 1.66% over the life ofthe pool. The securitization structures utilized to sell Ñnance receivables include public term, Ford Credit'ssingle-seller asset backed commercial paper program, and bank sponsored, multi-seller commercial paperissuers (""conduits'').

FC-14



NOTE 6. SALE OF RECEIVABLES Ì Continued

Cash Flow

The following table summarizes the cash Öow movements between the securitization entities and FordCredit:

2001 2000 1999

Proceeds from new securitizations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $37,047.5 $18,918.3 $9,167.3Proceeds reinvested in revolving-period securitizationsÏÏÏ 2,789.7 626.1 761.6Proceeds from sale of retained notes and certiÑcates ÏÏ 993.3 0.0 0.0

Total proceeds from the sale of receivablesÏÏÏÏ $40,830.5 $19,544.4 $9,928.9

Principal and interest received on retained interest ÏÏÏ $ 1,173.6 $ 1,168.6 $1,328.5Servicing fees collected ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 456.3 190.2 135.6Repurchased receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (224.3) (108.7) (103.6)

Other Disclosures

The following table summarizes key economic assumptions at December 31, 2001 used in estimatingcash Öows from sold receivables and the 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

(in millions)

Cash Flow Discount Rate (annual rate) ÏÏÏÏÏÏ 12.0% - 14.0% $(22.9) $ (45.1)Estimated Net Credit Loss Rate (annual rate)ÏÏ 1.00% - 2.25% (52.7) (105.1)Prepayment Speed (annual rate) ÏÏÏÏÏÏÏÏÏÏÏÏ 1.50% - 1.75% (59.2) (118.3)

The eÅect of a variation in a particular assumption on the fair value of retained interest was calculatedwithout changing any other assumptions and changes in one factor may result in changes in another.

Outstanding delinquencies on Ford Credit's securitized portfolios were $823.5 million and $414.9 millionat December 31, 2001 and 2000, respectively. Credit losses, net of recoveries, were $222.0 million and$91.1 million at December 31, 2001 and 2000, respectively. Expected static pool losses were 1.40% atDecember 31, 2001. Static pool losses are calculated by summing the actual and projected future credit lossesand dividing them by the original balance of each pool of assets.

NOTE 7. OTHER ASSETS

Other assets at December 31 were as follows:

2001 2000

(in millions)

Deferred charges and other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,627.8 $1,461.0Prepaid reinsurance premiums ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,541.2 1,305.4Collateral held for resaleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 955.3 1,031.8Investment in used vehicles held for resale, at estimated fair value ÏÏÏ 892.4 1,062.5Property and equipment, net of accumulated depreciation of $217.3

in 2001 and $169.8 in 2000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 494.8 355.2

Total other assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $5,511.5 $5,215.9

FC-15



NOTE 8. DEBT

Debt at December 31 was as follows:

Weighted-Average(a)

Interest Rates Book Value

2001 2000 2001 2000

(in millions)

Short-Term DebtCommercial paper ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 15,664.0 $ 42,254.8Ford Money Market Account ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,051.4 3,740.5

Other short-term debt(b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,002.3 4,134.6

Total short-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.69% 7.19% 22,717.7 50,129.9

Long-Term DebtUnsecured senior indebtedness

Notes payable within one year(c) ÏÏÏÏÏÏ 21,274.9 12,856.6Notes payable after one year(d)ÏÏÏÏÏÏÏÏ 102,398.4 83,402.6Unamortized discount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (47.3) (94.4)

Total long-term debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.73% 6.49% 123,626.0 96,164.8

Total debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.55% 6.72% $146,343.7 $146,294.7

Estimated Fair Value of DebtNet short-term debt subject to fair value ÏÏ $ 22,717.7 $ 50,129.9Short-term debt fair value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22,717.7 50,129.9Net long-term debt subject to fair

value(e) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 121,509.2 96,164.8Long-term debt fair value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 127,663.1 98,352.2

Interest Rate Characteristics of Debt PayableAfter One Year(f)

Fixed interest rates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 77,364.7 $ 56,420.9Variable interest rates (generally based on

LIBOR or other short-term rates) ÏÏÏÏÏÏ 24,986.4 26,887.3

Total payable after one year ÏÏÏÏÏÏÏÏÏ $102,351.1 $ 83,308.2

(a) Includes the eÅect of interest rate swap agreements.

(b) Includes $288.0 million and $571.0 million with aÇliated companies at December 31, 2001 and 2000,respectively.

(c) Includes $477.3 million and $912.6 million with aÇliated companies at December 31, 2001 and 2000,respectively.

(d) Includes $963.2 million and $1,663.8 million with aÇliated companies at December 31, 2001 and 2000,respectively.

(e) Excludes adjustments related to SFAS No. 133 of $2,116.8 million at December 31, 2001.

(f) Excludes the eÅect of interest rate swap agreements.

The Ford Money Market Account consists of variable denominated Öoating rate demand notes issued andoÅered by Ford Credit. Interest is accrued daily at a rate at least 1/4 point higher than the average yield for alltaxable money funds as reported weekly in the Money Fund Report‚ and published in the Wall Street

FC-16



NOTE 8. DEBT Ì Continued

Journal. The nominal interest rate as of December 31, 2001 ranged from 3.00% to 3.40% 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 2001 and 2000 were 6.05% and 6.40%, respectively.

The average remaining maturities of commercial paper were 48 days at December 31, 2001 and 35 daysat December 31, 2000. Unsecured senior notes mature at various dates through 2078 (about $900 millionmatures between 2031 and 2078). Maturities are as follows (in millions): 2003 Ì $22,329.5; 2004 Ì$25,725.6; 2005 Ì $16,763.6; 2006 Ì $12,320.6; thereafter Ì $25,211.8. Certain of these obligations aredenominated in currencies other than the currency of the issuing country. Foreign currency swap and forwardagreements are used to hedge exposure to changes in exchange 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. SUPPORT FACILITIES

Support facilities represent additional sources of funds, if required. At December 31, 2001, Ford Credithad approximately $8.3 billion of contractually committed facilities. Ford Credit also has the ability to use$7.4 billion of Ford lines of credit at Ford's option. These lines have various maturity dates through June 30,2006 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 $12.5 billion of contractually committedliquidity facilities to support Ford Credit's asset backed commercial paper program.

In addition, Ford Credit has entered into agreements with several bank-sponsored, commercial paperissuers (""conduits'') under which such conduits are contractually committed to purchase from Ford Credit, atFord Credit's option, up to an aggregate of approximately $12.4 billion of receivables. The agreements havevarying maturity dates between June 27, 2002 and December 12, 2002. As of December 31, 2001,approximately $5.6 billion of these conduit commitments have been utilized.

At December 31, 2001, there were approximately $4.5 billion of contractually committed facilitiesavailable for FCE Bank plc's (""FCE Bank'') use. In addition, $598 million of Ford lines of credit may be usedby FCE Bank at Ford's option. The lines have various maturity dates through June 30, 2006 and may be used,at FCE Bank's option, by any of its direct or indirect majority-owned subsidiaries. Any such borrowings will beguaranteed by FCE Bank.

FC-17



NOTE 10. 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:

2001 2000 1999

(in millions)

Currently payableU.S. federal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ Ì $ Ì $ ÌForeign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 194.0 210.0 246.5State and local ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì

Total currently payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 194.0 210.0 246.5Deferred tax (beneÑt)/liability

U.S. federal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 415.6 670.5 464.8Foreign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38.7 (50.0) 14.2State and local ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19.3 95.1 65.1

Total deferredÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 473.6 715.6 544.1

Total provision ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $667.6 $925.6 $790.6

A reconciliation of the provision for income taxes as a percentage of income before income taxes,excluding equity in net income of aÇliated companies and minority interest in net income of a joint venture,with the United States statutory tax rate for the last three years is shown below:

2001 2000 1999

U.S. statutory tax rateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35.0% 35.0% 35.0%EÅect of (in percentage points):

Taxes attributable to foreign source incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.2 Ì 0.5State and local income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.2 2.1 1.8Investment income not subject to tax or subject to tax at reduced

ratesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.5) (0.2) (0.2)Rate adjustments on deferred taxesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 0.4 0.2OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.4 (0.2) 0.3

EÅective tax rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44.3% 37.1% 37.6%

In 2001, included in taxes attributable to foreign source income is the write-oÅ of deferred tax assetsrelated to strategic partnering actions in Brazil.

FC-18



NOTE 10. 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 as of December 31 were as follows:

2001 2000

(in millions)

Deferred Tax AssetsNet operating losses and foreign tax creditsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4,360.6 $ 3,963.2Provision for credit losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,517.9 1,067.2Alternative minimum tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 298.0 298.0Employee beneÑt plans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 173.7 148.7OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 310.5 382.4

Total deferred tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,660.7 5,859.5Deferred Tax Liabilities

Leasing transactions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,632.4 6,653.9Finance receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,388.1 2,592.9Sales of receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 669.4 471.0Purchased tax beneÑtsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 260.1 270.6OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 302.2 366.5

Total deferred tax liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,252.2 10,354.9

Net deferred tax liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4,591.5 $ 4,495.4

NOTE 11. 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 actuarially determined basis overperiods of employee 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 2001 by about$11 million and the accumulated post-retirement beneÑt obligation at December 31, 2001 by about $60million. A decrease of one percentage point would reduce service and interest cost by about $8 million anddecrease the December 31, 2001 post-retirement beneÑt obligation by about $48 million.

FC-19



NOTE 11. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS Ì Continued

Net post-retirement beneÑt expense included the following for the years ended December 31:

2001 2000 1999

(in millions)

Costs Recognized in IncomeService cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $18.9 $16.6 $14.4Interest cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32.8 27.4 20.5CurtailmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.7 41.6 13.1Amortization of prior service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7.0) (0.5) (0.4)Amortization of lossesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.7 0.9 0.5

Net post-retirement beneÑt expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $52.1 $86.0 $48.1

Discount rate for expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.5% 7.8% 6.5%Initial health care cost trend rateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9.4% 9.0% 7.1%Ultimate health care cost trend rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.0% 5.0% 5.0%Number of years to ultimate trend rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 8 9

The status of these plans were as follows for the years ended December 31:

2001 2000

(in millions)

Change in BeneÑt ObligationBeneÑt obligation at January 1 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 468.8 $ 348.2

Service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18.9 16.6Interest cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32.8 27.4Amendments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (94.0) (17.3)CurtailmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.7 41.6BeneÑts paidÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (13.7) (9.7)Foreign exchangeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì ÌActuarial loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.7) 62.0

BeneÑt obligation at December 31 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 416.8 $ 468.8

Funded Status of the PlanPlan assets less than projected beneÑtsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(416.8) $(468.8)Unamortized prior service costÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (109.0) (22.0)Unamortized net losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 95.9 99.0

Net amount recognizedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(429.9) $(391.8)

Amounts Recognized in the Balance Sheet consist of:Accrued liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(429.9) $(391.8)

Assumptions as of December 31Discount rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.3% 7.5%Initial health care cost trend rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.0% 9.4%Ultimate health care cost trend rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.0% 5.0%Number of years to ultimate trend rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 7

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NOTE 12. 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 2001, 2000, or 1999. 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.

Balance Sheet

The eÅect of transactions with aÇliated companies included in Ford Credit's balance sheet atDecember 31:

2001 2000

(in millions)

Receivables purchased from certain divisions and subsidiaries ofFordÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $4,681.8 $5,594.4

Investment in vehicles leased to employees of Ford and otheraÇliates(a)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,191.9 1,000.8

Outstanding loans to Ford and other aÇliates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 947.7 1,150.6Fair values of vehicles held for resale that were purchased from

Ford and its subsidiaries(b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 892.4 1,062.5

(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 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.

Additionally, Ford and other aÇliates provide guarantees for Ford Credit and its' subsidiaries of $246.7and $238.0 at December 31, 2001 and 2000 respectively, for certain Ñnance receivables.

FC-21



NOTE 12. TRANSACTIONS WITH AFFILIATED COMPANIES Ì Continued

Income Statement

The eÅect of transactions with aÇliated companies included in Ford Credit's income statement for theyears ended December 31:

2001 2000 1999

(in millions)

Interest supplements and other support costs paid byFord and other aÇliates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $4,007.4 $3,398.7 $3,186.2

Earned insurance premiums ceded to a Ford-ownedaÇliate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (580.6) (400.5) (236.8)

Loss and loss adjustment expenses recovered from aFord-owned aÇliate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 339.0 221.4 121.9

Interest income earned from tax sharing agreement withFord(a) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 140.0 100.0 55.8

Payments to Ford for advice and services(b) ÏÏÏÏÏÏÏÏÏÏ (135.9) (165.1) (166.9)Interest expense on debt with Ford and aÇliated

companies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (113.6) (180.5) (191.5)Interest income earned on loans to Ford ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48.9 85.6 162.1Employee retirement plan costs allocated to Ford Credit

from Ford(c)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.5) (53.1) (35.4)Interest income earned on note with Ford Holdings, Inc.

that was settled in the Fourth Quarter 1999 ÏÏÏÏÏÏÏÏÏ 0.0 0.0 63.5

(a) 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 income.

(b) 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. Payments to Ford and its subsidiaries for such advice and services arecharged to operating expenses.

(c) 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.

NOTE 13. COMMITMENTS AND CONTINGENCIES

Various legal actions, governmental proceedings and other claims are pending or may be instituted orasserted in the future against Ford Credit and its subsidiaries. Certain of the pending legal actions are, orpurport to be, class actions. Some of these matters involve or may involve compensatory, punitive, antitrust orother treble damage claims in very signiÑcant amounts or other relief which, if granted, would require verysigniÑcant 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, 2001 with respect to

FC-22



NOTE 13. COMMITMENTS AND CONTINGENCIES Ì Continued

these 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, 2001 the Company had the following minimum rental commitments under non-cancelable operating leases (in millions): 2002 Ì $108; 2003 Ì $78; 2004 Ì $27; 2005 Ì $20; 2006 Ì $14;thereafter Ì $23. These amounts include rental commitments for certain land, buildings, machinery andequipment.

NOTE 14. DERIVATIVE FINANCIAL INSTRUMENTS

Adjustments to income and to stockholders' equity at December 31, 2001, were:

2001

(in millions)

Loss before income taxes(a)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(250.9)Net loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (157.2)Stockholder's equity(b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (479.1)

(a) Recorded in investment and other income

(b) Recorded in accumulated other comprehensive income

Ford Credit expects to reclassify losses of $324 million from stockholders' equity to net income during thenext twelve months. Consistent with Ford Credit's comprehensive, non-speculative risk-management prac-tices, neither these nor future reclassiÑcations are anticipated to have a material eÅect on net income.

NOTE 15. 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 become 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 2001, 2000, and 1999 using the Black-Scholes option-pricing model, was as follows:

2001 2000 1999

Estimated fair value per share of options granted during theyear ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $8.88 $6.27 $17.53

Assumptions:Annualized dividend yieldÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.0% 4.9% 3.2%Common stock price volatility ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43.9% 38.8% 36.5%Risk-free rate of return ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.1% 6.3% 5.2%Expected option term (in years) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 5 5

Ford Credit measures compensation cost using the intrinsic value method. Accordingly, no compensationcost for stock options has been recognized. If compensation cost had been determined based on the estimated

FC-23



NOTE 15. STOCK OPTIONS Ì Continued

fair value of options granted since 1995, the pro forma eÅects on Ford Credit's net income would not havebeen material.

Information concerning stock options for Ford Credit's employees is as follows (shares in thousands):

2001 2000 1999

Weighted Weighted WeightedAverage Average AverageExercise Exercise Exercise

Shares Subject to Option Shares Price Shares Price Shares Price

Outstanding at beginning of periodÏÏÏÏÏÏÏÏÏÏÏ 7,287 $19.95 3,773 $34.56 3,200 $26.39New grants (based on fair value of common

stock at dates of grant) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,989 30.17 1,647 23.02 906 57.75Visteon Adjustment (a)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 140 Ì Ì ÌValue Enhancement Plan (b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 2,927 Ì Ì ÌTransferred into Ford Credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 54 26.25 359 15.43 177 29.64Exercised (c) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (638) 27.83 (262) 27.89 (438) 59.40Transferred out of Ford Credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (105) 26.41 (887) 17.72 (68) 33.22Terminated and expired ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (392) 25.95 (410) 30.09 (4) 43.87

Outstanding at end of period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,195 22.63 7,287 19.95 3,773 34.56Outstanding but not exercisable ÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,291) Ì (2,995) Ì (1,892) Ì

Exercisable at end of period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,904 $18.87 4,292 $16.00 1,881 $23.49

(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.

(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 $17.19 to $31.25 during 2001, $24.44 to $31.43 during 2000, $49.81 to$67.00 during 1999.

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

$7.09 89 0.8 $ 7.09 89 $ 7.0911.06 Ì 12.53 2,284 4.1 12.16 2,284 12.1616.62 Ì 23.58 2,711 7.1 22.63 1,776 22.5724.49 Ì 29.62 92 8.2 28.54 41 28.9530.19 Ì 33.14 3,019 8.3 30.86 714 31.97

TotalÏÏÏÏ 8,195 $22.63 4,904 $18.87

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NOTE 16. 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 U.S. and Canada. Ford CreditInternational includes all other countries. In the Third Quarter of 2000, the Company merged the PersonalFinancial Services segment into these segments.

Ford Credit Ford CreditNorth Ford Credit Eliminations/ Financial

America International ReclassiÑcation Statements

2001Revenue(a)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 24,524.3 $ 3,578.5 $ (2,652.3) $ 25,450.5Income(b)Income before income taxesÏÏÏÏÏ 1,527.2 390.2 (409.9) 1,507.5Provision for income taxes ÏÏÏÏÏÏ 569.0 136.6 (38.0) 667.6Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 958.2 253.6 (373.3) 838.5Other disclosures(a)Depreciation on operating

leasesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,966.2 496.8 397.9 8,860.9Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,968.3 1,752.7 (1,769.8) 8,951.2Finance receivables

(including net investmentoperating leases) ÏÏÏÏÏÏÏÏÏÏÏÏ 175,370.8 33,585.0 (59,919.5) 149,036.3

Total assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 183,278.3 34,277.0 (44,458.9) 173,096.4


America International ReclassiÑcations Statements

2000Revenue(a)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 21,361.1 $ 3,713.9 $ (1,469.3) $ 23,605.7Income(b)Income before income taxesÏÏÏÏÏ 2,182.6 317.4 (5.0) 2,495.0Provision for income taxes ÏÏÏÏÏÏ 813.0 111.1 1.5 925.6Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,369.6 206.3 (39.4) 1,536.5Other disclosures(a)Depreciation on operating




FC-25



NOTE 16. SEGMENT INFORMATION Ì Continued


America International ReclassiÑcations Statements

1999Revenue(a)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 17,484.6 $ 3,559.8 $ (684.7) $ 20,359.7Income(b)Income before income taxesÏÏÏÏÏ 1,518.0 605.0 (19.2) 2,103.8Provision for income taxes ÏÏÏÏÏÏ 542.5 253.4 (5.3) 790.6Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 975.5 351.6 (66.0) 1,261.1Other disclosures(a)Depreciation on operating




(a) Revenue and Other Disclosures Ì operating segments are presented on a managed asset basis (managedassets include owned and sold receivables) for these items; therefore eliminations/reclassiÑcationsincludes adjustments to reconcile to Ñnancial statement results.

(b) Income Ì in 2001, eliminations/reclassiÑcations largely reÖects impact of SFAS No. 133 and chargesrelated to strategic partnering actions in Brazil, government initiatives in Argentina related to currencydevaluation and consumer debt, and voluntary employee separation costs in North America. In 2000 and1999, eliminations/reclassiÑcations largely reÖects minority interest in income of consolidated subsidiar-ies; minority interest was acquired in the fourth quarter 2000.

FC-26



NOTE 16. SEGMENT INFORMATION Ì Continued

Total revenue, income before income taxes, net income, Ñnance receivables, and assets identiÑable withUnited States, Europe, and other foreign operations were as follows:

2001 2000 1999

(in millions)

RevenueUnited States operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 20,163.9 $ 18,421.3 $ 15,321.1European operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,662.8 2,554.7 2,432.9Other foreign operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,623.8 2,629.7 2,605.7

Total revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 25,450.5 $ 23,605.7 $ 20,359.7

Income before income taxesUnited States operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,113.1 $ 2,069.4 $ 1,524.0European operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 308.5 277.6 466.3Other foreign operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 85.9 148.0 113.5

Total income before income taxes ÏÏÏÏÏÏÏÏÏ $ 1,507.5 $ 2,495.0 $ 2,103.8

Net incomeUnited States operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 720.4 $ 1,278.6 $ 941.7European operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 163.0 186.9 272.5Other foreign operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (44.9) 71.0 46.9

Total net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 838.5 $ 1,536.5 $ 1,261.1

Finance receivables at December 31 (includingnet investment in operating leases)United States operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $107,908.5 $123,602.2 $106,087.3European operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,494.7 20,583.2 20,099.0Other foreign operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,633.1 17,010.0 15,405.7

Total Ñnance receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $149,036.3 $161,195.4 $141,592.0

Assets at December 31United States operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $130,078.4 $133,899.7 $118,541.8European operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25,076.6 22,268.0 21,435.2Other foreign operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,941.4 18,090.1 16,653.7

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $173,096.4 $174,257.8 $156,630.7

FC-27



NOTE 17. 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)

2001Total Ñnancing revenue ÏÏÏÏÏÏÏÏ $5,878.1 $5,926.7 $5,762.3 $5,567.5 $23,134.6Depreciation on operating leases ÏÏ 2,121.4 2,250.0 2,219.4 2,270.1 8,860.9Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,426.0 2,347.7 2,146.9 2,030.6 8,951.2Total Ñnancing margin and

revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,923.0 1,775.9 2,061.7 1,877.8 7,638.4Provision for credit lossesÏÏÏÏÏÏÏ 617.9 485.4 801.9 1,450.1 3,355.3Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 393.5 366.7 375.6 (297.3) 838.5

2000Total Ñnancing revenue ÏÏÏÏÏÏÏÏ $5,203.4 $5,404.1 $5,678.2 $5,882.1 $22,167.8Depreciation on operating leases ÏÏ 1,858.4 2,018.1 1,982.0 1,987.2 7,845.7Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,069.7 2,195.2 2,300.4 2,404.8 8,970.1Total Ñnancing margin and

revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,601.6 1,605.8 1,707.8 1,874.7 6,789.9Provision for credit lossesÏÏÏÏÏÏÏ 377.5 310.4 409.7 573.2 1,670.8Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 353.1 387.7 385.5 410.2 1,536.5

FC-28

EXHIBIT INDEX

Designation Description

Exhibit 3-A* Restated CertiÑcate of Incorporation of Ford Motor Credit Company.

Exhibit 3-B* By-Laws of Ford Motor Credit Company as amended through March 2,1988.

Exhibit 4-A* Form of Indenture dated as of February 1, 1985 between Ford Motor CreditCompany and Manufacturers Hanover Trust Company relating to DebtSecurities.

Exhibit 4-A-1* Form of First Supplemental Indenture dated as of April 1, 1986 betweenFord Motor Credit Company and Manufacturers Hanover Trust Companysupplementing the Indenture designated as Exhibit 4-A.

Exhibit 4-A-2* Form of Second Supplemental Indenture dated as of September 1, 1986between Ford Motor Credit Company and Manufacturers Hanover TrustCompany supplementing Indenture designated as Exhibit 4-A.

Exhibit 4-A-3* Form of Third Supplemental Indenture dated as of March 15, 1987between Ford Motor Credit Company and Manufacturers Hanover TrustCompany supplementing the Indenture designated as Exhibit 4-A.

Exhibit 4-A-4* Form of Fourth Supplemental Indenture dated as of April 15, 1988between Ford Motor Credit Company and Manufacturers Hanover TrustCompany supplementing the Indenture designated as Exhibit 4-A.

Exhibit 4-A-5* Form of Fifth Supplemental Indenture dated as of September 1, 1990between Ford Motor Credit Company and Manufacturers Hanover TrustCompany supplementing the Indenture designated as Exhibit 4-A.

Exhibit 4-A-6* Form of Sixth Supplemental Indenture dated as of June 1, 1998 betweenFord Motor Credit Company and The Chase Manhattan Banksupplementing the Indenture designated as Exhibit 4-A.

Exhibit 4-A-7* Form of Seventh Supplemental Indenture dated as of January 15, 2002between Ford Motor Credit Company and JPMorgan Chase Banksupplementing the Indenture designated as Exhibit 4-A.

Exhibit 4-B* Indenture dated as of November 1, 1987 between Ford Motor CreditCompany and Continental Bank, National Association relating to DebtSecurities.

Exhibit 4-C* Indenture dated as of August 1, 1994 between Ford Motor CreditCompany and First Fidelity Bank, National Association, relating to DebtSecurities.

Exhibit 10-A Copy of Amended and Restated Profit Maintenance Agreement dated as ofJanuary 1, 2002 between Ford Motor Credit Company and Ford MotorCompany.

Exhibit 10-B* Copy of Agreement dated as of February 1, 1980 between Ford MotorCompany and Ford Motor Credit Company.

Exhibit 10-C* Copy of Agreement dated as of October 18, 2001 between Ford MotorCredit Company and Ford Motor Company.

Exhibit 12 Calculation of Ratio of Earnings to Fixed Charges of Ford Credit.

Exhibit 23 Consent of Independent Accountants.

Exhibit 24 Powers of Attorney.

Exhibit 99 Sections of Items 1, 3, 6, 7 and 7A of Ford Motor Company's AnnualReport on Form 10-K for the year ended December 31, 2001.

* Previously Ñled.

E-1

Exhibit 10A

This AMENDED AND RESTATED PROFIT MAINTENANCE AGREEMENT is dated as ofJanuary 1, 2002 between Ford Motor Company, a Delaware corporation (""Ford''), and Ford Motor CreditCompany, a Delaware corporation (""Ford Credit'').

WITNESSETH:

WHEREAS, Ford and Ford Credit (i) entered into a proÑt maintenance agreement dated as ofDecember 12, 1974, as amended by amendments dated as of April 14, 1978, January 15, 1980, March 28,1989, March 15, 1990, July 1, 1993 and January 1, 1999; and (ii) desire to further amend and restate the sameto read as set forth below (such agreement as amended and restated hereby being hereinafter called the""Agreement'').

NOW, THEREFORE, in consideration of the foregoing and of the mutual agreements hereinafterprovided, the parties hereto hereby agree as follows:

1. As used herein, ""Invested Capital'' shall mean an amount equal to Ford Credit's total stockholder'sequity, less any equity in the net assets of unconsolidated subsidiaries, as shown on the balance sheet of FordCredit and its consolidated subsidiaries as of December 31 of the year preceding the calendar year for whichany computation is made hereunder.

2. (a) Upon the demand of Ford Credit, Ford shall make a payment to Ford Credit, as of the end of eachcalendar quarter during the term of this Agreement (beginning with the Ñrst quarter of 2002), equal to thegreater of (i) an amount suÇcient to cause the income before income taxes of Ford Credit and itsconsolidated subsidiaries for the calendar year in which such calendar quarter falls, as shown on a consolidatedstatement of income of Ford Credit and its consolidated subsidiaries for such calendar quarter, to be not lessthan 2% on an annualized basis of Invested Capital, or (ii) an amount suÇcient to cause the net income ofFord Credit and its consolidated subsidiaries for the calendar year in which such calendar quarter falls, asshown on such statement of income, to be not less than 1% on an annualized basis of Invested Capital. In theevent that the amounts computed under clauses (i) and (ii) above shall be equal, Ford shall make a paymentto Ford Credit equal to such amount. The determination of whether and the extent to which any payment isrequired to be made as of the end of a calendar quarter shall be based on the latest available earnings forecastof Ford Credit and its consolidated subsidiaries for such calendar quarter and any actual earnings in any priorcalendar quarters in the same calendar year.

(b) In the event that Ford shall have made a payment to Ford Credit under paragraph 2(a) with respectto any calendar quarter, and Ford Credit thereafter shall have for any subsequent calendar quarter during thesame calendar year, both (i) income before income taxes of Ford Credit and its consolidated subsidiaries in anamount in excess of 2% on an annualized basis of Invested Capital, and (ii) net income of Ford Credit and itsconsolidated subsidiaries in an amount in excess of 1% on an annualized basis of Invested Capital, Ford Creditshall, upon demand of Ford, repay to Ford an amount equal to the lesser of (A) an amount suÇcient to reduceincome before income taxes of Ford Credit and its consolidated subsidiaries to 2% on an annualized basis ofInvested Capital, or (B) an amount suÇcient to reduce net income of Ford Credit and its consolidatedsubsidiaries to 1% on an annualized basis of Invested Capital (but not to exceed the aggregate of anypayments made to Ford Credit under paragraph 2(a) during such year less any prior repayments made byFord Credit during such year under this paragraph 2(b)). In the event that the amounts computed underclauses (A) and (B) above shall be equal, Ford Credit shall make a repayment to Ford equal to such amount.

3. During the term of this Agreement, Ford Credit shall continue to make inventory and capital Ñnancinggenerally available to dealers of vehicles manufactured or sold by Ford and shall continue to make retail andlease Ñnancing generally available to such dealers' customers to no less an extent than Ford Credit historicallyhas made such services available.

4. All determinations hereunder shall be made in accordance with generally accepted accountingprinciples.

E-2

5. 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 hereto withrespect to the subject matter hereof.

6. This Agreement shall continue indeÑnitely until terminated by either party by such party giving theother written notice of termination. If such notice is given at least 10 days prior to the Ñrst day of the calendarquarter next succeeding the calendar quarter in which the notice is given, then this Agreement shall terminateon such date; otherwise it shall terminate on the Ñrst day of the second next succeeding calendar quarter.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of theday and year Ñrst above written.

FORD MOTOR COMPANY

By: /s/ ELIZABETH S. ACTON

Name: Elizabeth S. ActonTitle: Vice President and Treasurer

FORD MOTOR CREDIT COMPANY

By: /s/ BIBIANA BOERIO

Name: Bibiana BoerioTitle: Executive Vice President and

Chief Financial OÇcer

E-3

Exhibit 12

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIESCALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES

(in millions)


2001 2000 1999 1998 1997

EarningsIncome before income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,507.5 $ 2,495.0 $2,103.8 $1,812.2 $1,806.0Less equity in net income/(loss) of aÇliated

companies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.9 (22.0) (24.9) 2.3 1.0Fixed charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,989.6 9,001.6 7,219.3 6,936.8 6,294.4

Earnings before Ñxed charges ÏÏÏÏÏÏÏÏÏÏÏÏÏ $10,492.2 $11,518.6 $9,348.0 $8,746.7 $8,099.4

Fixed ChargesInterest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8,951.2 $ 8,970.1 $7,193.4 $6,910.4 $6,268.2Rents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38.4 31.5 25.9 26.4 26.2

Total Ñxed chargesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 8,989.6 $ 9,001.6 $7,219.3 $6,936.8 $6,294.4

Ratio of earnings to Ñxed charges ÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.17 1.28 1.29 1.26 1.29

Income before income taxes of Ford Credit includes the equity in net income of all unconsolidatedaÇliates and minority interests in net income of subsidiaries. Fixed charges consist of interest on borrowedfunds, amortization of debt discount, premium, and issuance expense, and one-third of all rental expense (theproportion deemed representative of the interest factor.)

E-4

Exhibit 23

CONSENT OF PRICEWATERHOUSECOOPERS LLP

Re: Ford Motor Credit Company Registration StatementNos. 333-91953, 333-92595, 333-45015, 333-50090 and 333-75234 on Form S-3

We hereby consent to the incorporation by reference in the above Ford Motor Credit CompanyRegistration Statements of our report dated February 15, 2002 on our audits of the consolidated Ñnancialstatements of Ford Motor Credit Company and Subsidiaries at December 31, 2001 and 2000 and for each ofthe three years in the period ended December 31, 2001, which appears in this Form 10-K.

/S/ PRICEWATERHOUSECOOPERS LLP

DETROIT, MICHIGAN

MARCH 28, 2002

E-5

Exhibit 24

FORD MOTOR CREDIT COMPANY

CERTIFICATE OF ASSISTANT SECRETARY

The undersigned, S. J. Thomas, Secretary of FORD MOTOR CREDIT COMPANY, a Delawarecorporation (the ""Company''), DOES HEREBY CERTIFY that the resolutions attached to this CertiÑcatewere duly adopted by the Board of Directors of the Company on March 19, 2002 by unanimous writtenconsent, and such resolutions have not been amended, modiÑed, rescinded or revoked and are in full force andeÅect on the date hereof.

WITNESS my hand and the seal of the Company this 28th day of March, 2002.

/s/ S.J. THOMAS

S.J. ThomasSecretary

®Corporate Seal©

E-6

RESOLUTIONS

RESOLVED, That preparation of an annual report of the Company on Form 10-K for the year 2001,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, B. Boerio, T. J. Kuehn, S. J. Thomas, S. P. Thomas, A. B. Frankeland E. E. Smith-Sulfaro, and each of them, severally, his or her true and lawful attorney or attorneys to sign inhis or her name, place and stead in any such capacity such Annual Report and any and all amendmentsthereto, and to Ñle the same with the Commission, each of said attorneys to have power to act with or withoutthe other, and to have full power and authority to do and perform in the name and on behalf of each of saidoÇcers and directors who shall have executed such power of attorney, every act whatsoever which suchattorneys, or any of them, may deem necessary, appropriate or desirable to be done in connection therewith asfully and to all intents and purposes as such oÇcers or directors might or could do in person.

E-7

POWER OF ATTORNEY WITH RESPECT TOANNUAL REPORT ON FORM 10-K

OF FORD MOTOR CREDIT COMPANY

KNOW ALL PERSONS BY THESE PRESENTS that each of the undersigned, an oÇcer and/ordirector of FORD MOTOR CREDIT COMPANY, does hereby constitute and appoint B. Boerio,T.J. Kuehn, S. J. Thomas, S. P. Thomas, E.E. Smith-Sulfaro and A. B. Frankel and each of them, severally,his or her true and lawful attorney and agent at any time and from time to time to do any and all acts andthings and execute, in his or her name (whether on behalf of FORD MOTOR CREDIT COMPANY, or asan oÇcer or director of FORD MOTOR CREDIT COMPANY, or by attesting the seal of FORD MOTORCREDIT COMPANY, or otherwise) any and all instruments which said attorney and agent may deemnecessary or advisable in order to enable FORD MOTOR CREDIT COMPANY to comply with theSecurities Exchange Act of 1934, as amended, and any requirements of the Securities and ExchangeCommission in respect thereof, in connection with the annual report of FORD MOTOR CREDITCOMPANY on Form 10-K for the year 2001 and any and all amendments thereto, as heretofore dulyauthorized by the Board of Directors of FORD MOTOR CREDIT COMPANY, including speciÑcally butwithout limitation thereto, power and authority to sign his or her name (whether on behalf of FORD MOTORCREDIT COMPANY, or as an oÇcer or director of FORD MOTOR CREDIT COMPANY, or by attestingthe seal of FORD MOTOR CREDIT COMPANY, or otherwise) to such annual report and to any suchamendments to be Ñled with the Securities and Exchange Commission, or any of the exhibits, Ñnancialstatements or schedules Ñled therewith, and to Ñle the same with the Securities and Exchange Commission;and the undersigned does hereby ratify and conÑrm all that said attorneys and agents, and each of them, shalldo or cause to be done by virtue hereof. Any one of said attorneys and agents shall have, and may exercise, allthe powers hereby conferred.

IN WITNESS WHEREOF, each of the undersigned has signed his or her name hereto as of the19th day of March, 2002.

MALCOLM S. MACDONALD BIBIANA BOERIO

(Malcolm S. Macdonald) (Bibiana Boerio)

DAVID C. FLANIGAN TERRY D. CHENAULT

(David C. Flanigan) (Terry D. Chenault)

I. MARTIN INGLIS GREGORY C. SMITH

(I. Martin Inglis) (Gregory C. Smith)

E-8

Exhibit 99

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, 2001. (EXCLUDES INFORMATION DIRECTLY CONCERNING FORDCREDIT THAT IS ALREADY DISCLOSED IN FORD CREDIT'S ANNUAL REPORT ONFORM 10-K. ALL REFERENCES TO WE, OUR AND US IN THIS EXHIBIT 99 REFER TO FORDMOTOR COMPANY.)

ITEM 1. BUSINESS

Ford Motor Company was incorporated in Delaware in 1919. We acquired the business of a Michigancompany, also known as Ford Motor Company, incorporated in 1903 to produce and sell automobiles designedand engineered by Henry Ford. We are the world's second-largest producer of cars and trucks combined. Weand our subsidiaries also engage in other businesses, including Ñnancing and renting vehicles and equipment.

Overview

Our business is divided into two business sectors: the Automotive sector and the Financial Servicessector. We manage these sectors as three primary operating segments as described below.

Business Sectors Operating Segments Description

Automotive: ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Automotive design, manufacture, sale, and serviceof cars and trucks

Financial Services: ÏÏÏÏÏÏÏÏÏÏÏÏ Ford Motor Credit Company vehicle-related Ñnancing, leasing, andinsurance

The Hertz Corporation renting and leasing of cars and trucksand renting industrial and constructionequipment, 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 36 through 38; (2) Item 7. ""Management's Discussion and Analysis of Financial Condition and Resultsof Operations'' on pages 39 through 57; and (3) Note 18 of the Notes to our Consolidated FinancialStatements located at the end of this Report (page FS-21). Financial information relating to certaingeographic areas is also included in the above-mentioned areas of this Report.

Revitalization Plan

Following an extensive review of our North and South American operations, on January 11, 2002, weannounced a revitalization plan (the ""Revitalization Plan'') that includes the following elements:

‚ New products: A product-led revitalization program that will result in the introduction of 20 new orfreshened products in the United States annually between now and mid-decade.

‚ Plant capacity: Reduction of North American plant manufacturing operating capacity by about onemillion vehicles by mid-decade to realign capacity with market conditions.

‚ Hourly workforce: About 12,000 hourly employees in North America are aÅected by actionscompleted in December 2001 or to be taken throughout 2002 and beyond. An additional 3,000 hourlyemployees were aÅected in 2001. Plans are being made to reassign as many plant employees aspossible.

‚ Salaried workforce: Our 2001 voluntary separation program for salaried employees and other relatedactions resulted in a 3,500-person workforce reduction in North America. This program will beextended to achieve an additional 1,500-person salaried workforce reduction to reach the goal of 5,000.If necessary to meet this goal, an involuntary separation program will be used.

E-9

‚ Global workforce: More than 35,000 employees will be aÅected by combined actions around the worldby mid-decade. These include: 21,500 in North America Ì 15,000 hourly, 5,000 salaried and1,500 agency employees Ì and 13,500 in the rest of the world.

‚ Material costs: A material cost-reduction program has been initiated with North American supplierswhich shares design savings, with Ford receiving 65 percent of implemented cost reductions andsuppliers receiving 35 percent in the Ñrst year. Designs will be developed that will help improve ourproducts and overall quality. This program, along with other material cost reduction eÅorts, is expectedto improve ongoing annual proÑts before taxes by $3 billion by mid-decade.

‚ Discontinued low-margin models: The Mercury Cougar, Mercury Villager, Lincoln Continental andFord Escort will be discontinued this year.

‚ 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 are pursuing the sale of non-core assets and businesses. Our plan includes $1 billionof cash realization from these actions in 2002.

Manufacturing plans over the next several years include: 1) closing Ñve plants: Edison Assembly, OntarioTruck Plant, St. Louis Assembly, Cleveland Aluminum Casting and Vulcan Forge; 2) no new products havebeen identiÑed for two plants: Ohio Assembly and Cuautitlan Assembly; 3) pursuing the sale of WoodhavenForging Plant; 4) major downsizing and shift reductions at eleven plants; and 5) line speed reductions andchanges to operating patterns at nine plants.

AUTOMOTIVE SECTOR

We sell cars and trucks throughout the world. In 2001, we sold approximately 7 million vehiclesthroughout the world. Our automotive vehicle brands include Ford, Mercury, Lincoln, Volvo, Jaguar, LandRover, Aston Martin and TH!NK. Substantially all of our cars, trucks and parts are marketed through retaildealers in North America, and through distributors and dealers outside of North America. At December 31,2001, the approximate number of dealers and distributors worldwide distributing our vehicle brands was asfollows: Ford, over 13,000; Mercury, 2,229; Lincoln, 1,610; Volvo, 2,500; Jaguar, 694; Land Rover, 2,300;Aston Martin, 81; TH!NK 69. Because many dealerships distribute more than one of our brands from thesame sales location, a single dealership may be counted under more than one brand in the previous sentence.

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 buyers (commonly referred to as ""industry demand'') can vary substantially fromyear to year. In any year, industry demand depends largely on general economic conditions, the cost ofpurchasing and operating cars and trucks, and the availability and cost of credit and fuel. Industry demand alsoreÖects the fact that cars and trucks are durable items that people generally can wait to replace.

The worldwide automotive industry consists of many producers, with no single dominant producer.Certain manufacturers, however, account for the major percentage of total sales within particular countries,especially their countries of origin. Most of the factors that aÅect the United States automotive industry andits sales volumes and proÑtability are equally relevant outside the United States.

The worldwide automotive industry also is aÅected signiÑcantly by a substantial amount of costlygovernmental regulation. In the United States and Europe, for example, governmental regulation has arisenprimarily out of concern for the environment, for greater vehicle safety, and for improved fuel economy. Manygovernments also regulate local content and/or impose import requirements as a means of creating jobs,protecting domestic producers, or inÖuencing their balance of payments.

E-10

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.

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 other customer satisfaction actions

‚ the costs for government-mandated 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. In recent years, industry sales of vehicles in the United States have been at record levels(17.5, 17.8 and 17.4 million units in 2001, 2000 and 1999 respectively). In 2002, however, we expect industrysales volumes in the United States to be about 16.5 million units and we expect to incur signiÑcant losses inour Automotive segment in 2002.

Following is a discussion of the automotive industry in the principal markets where we compete, as wellas a discussion of our Ford Customer Service Division:

United States

Sales Data. The following table shows U.S. industry sales of cars and trucks for the years indicated:

U. S. Industry SalesYears Ended December 31,

2001 2000 1999 1998 1997

(millions of units)

Cars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.4 8.8 8.7 8.2 8.3Trucks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9.1 9.0 8.7 7.8 7.2

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17.5 17.8 17.4 16.0 15.5

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We classify cars by small, middle, large and luxury segments and trucks by compact pickup, bus/van,full-size pickup, sport utility vehicles and medium/heavy segments. The large and luxury car segments andthe bus/van, full-size pickup and sport utility vehicle segments include the industry's most proÑtable vehiclelines. The term ""bus'' as used in this discussion refers to vans designed to carry passengers. The followingtables show the proportion of United States car and truck unit sales by segment for the industry (includingJapanese and other foreign-based manufacturers) and Ford for the years indicated:

U. S. Industry Vehicle Sales by Segment

Years Ended December 31,

2001 2000 1999 1998 1997

CarsSmall ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16.7% 16.7% 16.1% 16.9% 18.1%Middle ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21.6 22.9 23.8 23.6 24.7Large ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.7 2.9 3.2 3.7 4.3Luxury ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.2 7.2 6.8 6.8 6.3

Total U.S. Industry Car SalesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48.2 49.7 49.9 51.0 53.4

TrucksCompact Pickup ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.2% 5.9% 6.2% 6.7% 6.4%Bus/VanÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.8 10.0 10.1 10.1 10.4Full-Size Pickup ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13.2 12.4 12.7 12.4 12.0Sport Utility VehiclesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23.0 19.8 18.5 17.5 15.7Medium/HeavyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.6 2.2 2.6 2.3 2.1

Total U.S. Industry Truck Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51.8 50.3 50.1 49.0 46.6

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.


2001 2000 1999 1998 1997

CarsSmall ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13.9% 14.5% 13.5% 13.1% 12.7%Middle ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11.4 13.0 15.5 16.7 19.6Large ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.2 5.1 5.7 5.7 5.6Luxury ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.0 7.5 6.2 4.2 4.1

Total Ford U.S. Car Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37.7 40.1 40.9 39.7 42.0

TrucksCompact Pickup ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.9% 7.9% 8.4% 8.4% 7.7%Bus/VanÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9.1 10.5 11.0 11.1 12.6Full-Size Pickup ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22.9 20.9 20.9 21.3 19.3Sport Utility VehiclesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23.2 20.4 18.5 19.1 17.3Medium/Heavy*ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.2 0.2 0.3 0.4 1.1

Total Ford U.S. Truck Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 62.3 59.9 59.1 60.3 58.0

Total Ford U.S. Vehicle SalesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.0% 100.0% 100.0% 100.0% 100.0%

* In 1997 Ford sold its heavy truck businesses in North America and Australia/New Zealand to FreightlinerCorporation. Ford ceased production of heavy trucks in North America in December 1997. The transfer ofthe North American and Australian heavy truck businesses was completed in 1998.

As shown in the tables above, since 1997 there has been a shift from cars to trucks for both industry salesand Ford sales. Ford's sales of the middle car segment as a percentage of its total sales has deteriorated morethan the general decline of the industry sales in that segment because of the discontinuance of certain productoÅerings in the segment (e.g., Ford Thunderbird and Contour and Mercury Mystique) and, more recently,lower Öeet sales of the Ford Taurus model.

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Market Share Data. The following tables show changes in car and truck United States market shares ofthe six leading vehicle manufacturers for the years indicated:

U.S. Car Market Shares*


2001 2000 1999 1998 1997

Ford** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17.7% 19.1% 19.9% 20.4% 20.8%General Motors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27.0 28.6 29.3 29.8 32.2DaimlerChrysler*** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.5 9.1 10.3 10.7 10.2Toyota ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11.3 11.0 10.2 10.6 9.9HondaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.7 10.0 9.8 10.6 10.0Nissan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.9 4.8 4.6 5.0 5.7All Other**** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19.9 17.4 15.9 12.9 11.2

Total U.S. Car Retail DeliveriesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.0% 100.0% 100.0% 100.0% 100.0%

U.S. Truck Market Shares*


2001 2000 1999 1998 1997

Ford** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27.4% 28.3% 28.6% 30.5% 31.4%General Motors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28.9 27.0 27.8 27.5 28.8DaimlerChrysler*** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19.5 21.5 22.2 23.2 21.9Toyota ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.7 7.2 6.7 6.3 5.7HondaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.4 3.1 2.6 1.9 1.5Nissan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.2 3.7 3.2 2.7 3.6All Other***** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.9 9.2 8.9 7.9 7.1

Total U.S. Truck Retail Deliveries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.0% 100.0% 100.0% 100.0% 100.0%

U.S. Combined Car andTruck Market Shares*


2001 2000 1999 1998 1997

Ford** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22.8% 23.7% 24.3% 25.3% 25.8%General Motors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28.0 27.8 28.5 28.7 30.6DaimlerChrysler*** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14.2 15.3 16.3 16.8 15.6Toyota ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.0 9.1 8.5 8.5 7.9HondaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.9 6.6 6.2 6.3 6.0Nissan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.1 4.3 3.9 3.9 4.7All Other**** ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14.0 13.2 12.3 10.5 9.4

Total U.S. Car and Truck Retail Deliveries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 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. During the period from 1997 through 1998, Volvo Car represented no more than 1.2percentage points of total market share during any one year. During the period 1997 through 1999,Land Rover represented no more than 0.4 percentage points of total market share during 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 periodsprior to their merger.

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**** ""All Other'' includes primarily companies based in various European countries, Korea and otherJapanese manufacturers. The increase in combined market share shown for ""All Others'' reÖectsprimarily increases in market share for European manufactures (e.g., BMW) and the Koreanmanufacturers (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. The decrease in combined market sharefrom 2000 to 2001 shown for ""All Others'' in this table reÖects primarily decreases in market share forheavy truck manufacturers.

The decline in overall market share for Ford in 2001 and in Ford's truck market share since 1997 isprimarily the result of increased competition and, in particular, an increased number of new competitiveproduct oÅerings mainly from foreign manufacturers.

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 Ñve to six 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: 14.7% (2001), 11.1% (2000), and10.6% (1999). In the fourth quarter of 2001, our United States marketing costs as a percent of gross salesrevenue for those brands was 16.7%. These ""marketing costs'' include primarily (i) marketing incentives onvehicles, such as retail rebates and costs for special Ñnancing and lease programs, (ii) reserves for costs and/orlosses associated with our required repurchase of certain vehicles sold to daily rental companies, and (iii) costsfor advertising and sales promotions for vehicles. The increase in marketing costs over the last several years isa result of intense competition 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


2001 2000 1999 1998 1997

Units soldÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 885,000 977,000 940,000 878,000 923,000Percent of Ford's total U.S. car and truck sales ÏÏÏÏÏÏ 22% 23% 23% 22% 24%

Warranty Coverage. We presently provide warranty coverage for defects in factory-supplied materialsand workmanship on all vehicles (other than medium trucks) in the United States. This warranty coverage forFord/Mercury vehicles extends for 36 months or 36,000 miles (whichever occurs Ñrst) and covers compo-nents 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 for2002 and later model years TH!NK Neighbor vehicles extends for 36 months with unlimited miles. TheUnited States warranty coverage for luxury vehicles (Lincoln, Jaguar, Volvo, and Land Rover) extends for48 months or 50,000 miles (whichever occurs Ñrst) but, except for Lincoln beginning January 1, 2001, doesnot include tires, which are warranted by the tire manufacturers. In general, diÅerent warranty coverage isprovided on medium trucks and on vehicles sold outside the United States. Warranty coverage for safetyrestraint systems (safety belts, air bags and related components) extends for 60 months or 50,000 miles(whichever occurs Ñrst) and 60 months with unlimited miles for 2002 and later model years TH!NK

E-14

Neighbor vehicles. Also, corrosion damage resulting in perforation (holes) in body sheet metal panels iscovered on 1995 and newer models for 60 months (unlimited mileage). In addition, the Federal Clean Air Actrequires warranty coverage for 8 years or 80,000 miles (whichever occurs Ñrst) for emissions equipment(catalytic converter and powertrain control module) on most light duty vehicles sold in the United States. Asa result of these warranties and the concern for customer satisfaction, costs for warranty repairs, emissionsequipment repairs, and customer satisfaction actions (""warranty costs'') can be substantial. Estimatedwarranty costs for each vehicle sold by us are accrued at the time of sale. Such accruals, however, are subjectto adjustment from time to time depending on actual experience.

Europe

Market Share Information. Outside of the United States, Europe is our largest market for the sale of carsand trucks. The automotive industry in Europe is intensely competitive. Over the past year, we estimate that145 new or freshened vehicles, including derivatives of existing vehicles, were introduced in the Europeanmarket by various manufacturers. For the past 10 years, the top six manufacturers have collectively heldbetween 73% and 77% of the total car market, and have each achieved a car market share in about the 9% to19% range. (Manufacturers' shares, however, vary considerably by country.) This competitive environment isexpected to intensify further as Japanese manufacturers increase their production capacity, and all of themanufacturers of premium brands (e.g., BMW, Mercedes Benz and Audi) continue to broaden their productoÅerings. We estimate that in 2001 the European automotive industry had excess capacity of approximatelysix million units (based on a comparison of European domestic demand and capacity).

In 2001, vehicle manufacturers sold approximately 17.8 million cars and trucks in Europe, about thesame as 2000 levels. Our combined car and truck market share in Europe in 2001 was 10.7%, up 7/10 of onepercentage point from 2000.

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 2001 compared with 2000, total industry saleswere up 10% in Britain and down 2% in Germany.

For purposes of the Ñgures shown in this section, we have considered 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.

Motor Vehicle Distribution in Europe. On February 5, 2002, the European Commission proposed a newregulation that would change the way motor vehicles are sold and repaired throughout the EuropeanCommunity. While Ford could continue to maintain its ""exclusive'' distribution arrangements that allow it toprovide dealers with exclusive sales territories, the new rules would eliminate the presently allowablerestrictions on resale. This means that our dealers could sell vehicles to any reseller (e.g., supermarket chains,internet agencies and other resellers not authorized by us) who in turn could sell to end customers both withinand outside of the dealer's exclusive sales territory. Alternatively, manufacturers could establish a ""selective''distribution regime that would allow the manufacturer to determine the number but not the location of itsdealers. Dealers also would be free to set up additional sales or delivery outlets within the European Union andprovide active sales to all customers within the European Union, but not sell motor vehicles to resellers notauthorized by the manufacturer. Under both systems, the new rules would make it easier for a dealer todisplay and sell multiple brands in one store without the need to maintain separate facilities.

The Commission also has proposed sweeping changes to the repair industry. Dealers could no longer berequired by the manufacturer to perform repair work. Instead, dealers could subcontract the work toindependent repair shops that met reasonable criteria set by the manufacturer. These ""oÇcial'' repair facilitiescould perform warranty and recall work, in addition to other repair and maintenance work. While amanufacturer could continue to require the use of its parts in warranty and recall work, the repair facility coulduse parts made by others that were of comparable quality for all other repair work.

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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 car prices from country to country. The new rules, coupled with the introduction of the newsingle currency, are likely to put downward pressure on prices for both vehicles and vehicle parts. Our existingdealer agreements will be modiÑed by October 1, 2003 when the new rules are expected to apply.

Other Markets

Mexico and Canada. Mexico and Canada also are important markets for us. In 2001, industry sales ofnew cars and trucks in Mexico were approximately 948,000 units, up approximately 7% from 2000 levels. InCanada, industry sales of new cars and trucks in 2001 were approximately 1.59 million units, up 0.7% from2000 levels. Our combined car and truck market share in these markets in 2001 was 17.3% (Mexico) and16.6% (Canada).

South America. Brazil and Argentina are our principal markets in South America. The economicenvironment in those countries has been volatile in recent years, leading to large variations in industry sales.Results have also been inÖuenced by the devaluation of the Brazilian Real and Argentina Peso, continuedweak economic conditions and government actions to reduce inÖation and public deÑcits. Industry sales in2001 were 1.6 million units in Brazil, up about 10% from 2000, and approximately 201,000 units in Argentina,down 41% from 2000. Our combined car and truck market share in these markets in 2001 was 7.8% in Brazil(down 1.3% from last year) and 14.3% in Argentina (down 0.6% from a year ago).

Ford has undertaken restructuring actions in recent years to improve our competitiveness in SouthAmerica. In addition, we are building a new assembly plant in Brazil, which will manufacture a new family ofvehicles for the South American markets. The new plant will start building the 5-door Fiesta in the spring of2002 and begin producing an all-new sport utility vehicle next year.

Asia PaciÑc. In the Asia PaciÑc region, Australia, Taiwan, Thailand and Japan are our principal markets.Industry volumes in 2001 in this region were as follows: approximately 773,000 units in Australia (down 1.9%from 2000), approximately 347,400 units in Taiwan (down 17.4% from 2000), approximately 297,000 units inThailand (up 13.4% from 2000) and approximately 5.9 million units in Japan (down 1.0% from 2000). In2001, our combined car and truck market share in Australia was 15.1%. In Taiwan, we had a combined carand truck market share in 2001 of 14.9%. In Thailand, our combined car and truck market share was 6.5% in2001. Our combined car and truck market share in Japan has been less than 1% in recent years. We own a33.4% interest in Mazda Motor Corporation and account for Mazda on an equity basis. Mazda's market sharein Japan has been in the 5% range in recent years. Our principal competition in the Asia PaciÑc region hasbeen the Japanese manufacturers. We anticipate that the continuing relaxation of import restrictions(including duty reductions) will intensify competition in the region.

We opened a new assembly plant in India in 1999, launching an all-new small car (the Ikon) designedspeciÑcally for that market. In 2001, approximately 14,800 Ikons were produced for sale in India. In addition,India commenced sale of Ikon CKD (completely knocked down) kits to Mexico and South Africa, exporting28,150 CKD kits to these two countries in 2001. We expect India to become one of our most importantmarkets in Asia in the future.

Africa. In recent years, we have operated in the South African market as a 45% owner in the SouthAfrican Motor Corporation (Pty.) Limited (""SAMCOR''). In 2000, we increased our ownership interest inSAMCOR to 100% by purchasing the remaining 55% we did not previously own. Subsequent to this purchase,SAMCOR's name was changed to Ford Motor Company of Southern Africa (""FMCSA'').

FMCSA assembles and distributes Ford, Mazda, Volvo and, beginning in 2001, Land Rover vehicles inSouth Africa. In addition, FMCSA distributes Jaguar vehicles. In 2001, industry volume in South Africa wasapproximately 367,000 units, up 7.6% from 2000 levels. FMCSA's combined car and truck market share in2001 was 15.1% for the Ñve brands it distributes.

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Ford Customer Service Division

Ford Customer Service Division is a business unit within Ford that supports customers of Ford, Lincolnand Mercury brand vehicles through a network of franchised dealers. This is the principal source of vehicleservice and customer support for our vehicle owners within these brands, traditionally recognized by theQuality CareSM brand. Ford Customer Service Division's Ñrst, and most critical, role within the organization isto provide the service parts, tools, technology & support to facilitate the dealer network to achieve high levelsof customer service satisfaction and owner loyalty. Beyond the traditional Ford, Lincoln and MercuryDealerships, Ford Customer Service Division also works together with the other Ford trustmark brands tooptimize our dealer service business and share best practices.

Ford Customer Service Division was part of our former Automotive Consumer Services Group that alsoincluded the DiversiÑed Consumer Services Organization. That organization contains businesses that provideservices to vehicle owners for all automotive brands. As part of our Revitalization Plan, discussed below underItem 7. ""Management's Discussion and Analysis of Financial Condition and Results of Operations,'' we planto focus primarily on our dealer network for traditional vehicle service and customer support. In addition, wewill decrease our involvement in selected businesses in our DiversiÑed Consumer Services organization Ì wehave announced that we are evaluating the sale or partial disposition of Kwik-Fit, our European maintenanceand light repair business, Collision Team of America, a U.S. chain of collision repair centers and GreenLeafLLC, a chain of automotive recycling centers in the U.S. and Canada.

Through Ford Customer Service Division's e-Business initiatives, we are working to manage our businessin real time. By linking together our suppliers, dealers and customers, we are able to improve the speed,accuracy and eÇciency of the service business throughout the value chain. One of the greatest competitiveadvantages we can provide to our dealers is the ability to easily obtain information such as:

‚ Technical information from suppliers

‚ Parts distribution status

‚ Service problem diagnosis

‚ Customer experience results

FINANCIAL SERVICES SECTOR

Ford Motor Credit Company Ì Not Included

The Hertz Corporation

Hertz and its aÇliates, associates and independent licensees operate what Hertz believes is the largestworldwide car rental business based upon revenues. They also operate one of the largest industrial andconstruction equipment rental businesses in North America based upon revenues. Hertz and its aÇliates,associates and independent licensees, do the following:

‚ rent and lease cars and 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 140 foreign countries and jurisdictions.

E-17

Below are some Ñnancial highlights for Hertz (in millions):

Years EndedDecember 31,

2001 2000

Revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $4,925 $5,087Pre-Tax IncomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 581Net Income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23 358

Between April 1997 and March 2001, we owned approximately 82% of the economic interest of Hertz,with the remaining approximately 18% interest represented by shares of Hertz common stock that werepublicly traded. In March 2001, through a cash tender oÅer and a merger transaction, we acquired the publiclyheld shares and, as a result, Hertz has become an indirect, wholly-owned subsidiary of Ford.

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'') recently has promulgated post-2004 model year standards that are morestringent than the default standards contained in the Clean Air Act. These new regulations will require mostlight duty trucks to meet the same emissions standards as passenger cars by the 2007 model year. Thestringency of the new standards may impact our ability to produce and oÅer a broad range of products with thecharacteristics and functionality that customers demand. The new standards also are likely to limit severelythe use of diesel technology, which could negatively impact fuel economy performance. The EPA also haspromulgated post-2004 emission standards for ""heavy-duty'' trucks (8,500-14,000 lbs. gross vehicle weight).These standards are likely to pose technical challenges and may aÅect the competitive position of full-linevehicle manufacturers such 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's emissions requirements (the ""California program'') for modelyears 1994 through 2003 require manufacturers to meet a non-methane organic gases Öeet averagerequirement that is signiÑcantly more stringent than that prescribed by the Clean Air Act for thecorresponding periods of time. In late 1998, CARB adopted stringent new vehicle emissions standards thatmust be phased in beginning in the 2004 model year. These new standards treat most light duty trucks thesame as passenger cars and require both types of vehicles to meet new stringent emissions requirements. It isalso expected that these new standards will essentially eliminate the use of diesel technology. CARB's newstandards present a diÇcult engineering and technological challenge, and may impact our ability to produceand oÅer a broad range of products with the characteristics and functionality that customers demand.

Since 1990, the California program has included requirements for manufacturers to produce and deliverfor sale ""zero-emission vehicles'' (the ""ZEV mandate''). The ZEV mandate initially required that a speciÑedpercentage of each manufacturer's vehicles produced for sale in California, beginning at 2% in 1998 andincreasing to 10% in 2003, must be zero-emission vehicles (""ZEVs''), which produce no emissions ofregulated pollutants. In 1996, CARB eliminated the ZEV mandate for the 1998-2002 model years, but

E-18

retained 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 January 2001, CARB voted to approve a series of complex modiÑcations to the ZEV mandate. ThesemodiÑcations require large-volume manufacturers such as Ford to produce ""partial zero-emission vehicles''(""PZEVs'') and/or ZEVs beginning in the 2003 model year. PZEVs are vehicles certiÑed to California's""super-ultra-low emission vehicle'' (""SULEV'') tailpipe standards, with zero evaporative emissions. Using aseries of phase-in tables and credit adjustments, the number of ZEVs required under the modiÑed mandatewill increase substantially between 2003 and 2018. The California OÇce of Administrative Law refused toapprove these rules due to procedural defects, so the modiÑcations still have not been Ñnalized. We anticipatethat CARB will attempt to correct the defects and Ñnalize the rules in 2002.

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. NewYork, Massachusetts, Vermont, and Maine adopted the California standards eÅective with the 2001 modelyear or before. New York, Massachusetts, and Vermont have either previously adopted, or indicated anintention to adopt, the California ZEV mandate. Maryland and New Jersey have laws requiring the adoptionof California standards if certain triggers are met. 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. New York and Massachusetts are in the process of Ñnalizing rules that give manufacturers theoption of complying with the California ZEV mandate or with an alternative program that may makecompliance more feasible in those states; it is likely that Ford will choose the alternative program. It isanticipated that Vermont will adopt the latest version of the ZEV mandate once it becomes Ñnal in California.

Battery electric vehicles are the only zero-emission vehicles currently feasible for mass production.Despite intensive research activities, battery technology has not made the major strides that were projectedwhen the ZEV mandate was originally enacted in 1990. Battery-electric vehicles remain considerably morecostly than gasoline-powered vehicles, and they have a relatively short driving range before they must berecharged. These factors limit the consumer appeal of battery-powered vehicles. Ford plans to comply with theearly years of the modiÑed ZEV mandate through sales of its TH!NK brand of electric vehicles, along withone or more PZEV models. In the longer term, however, it is doubtful whether the market will support thenumber of battery electric vehicles called for by the modiÑed ZEV mandate. Fuel cell technology may in thefuture enable production of ZEVs with widespread consumer appeal, but commercially feasible fuel celltechnology appears to be a decade or more away. Compliance with the ZEV mandate may eventually requirecostly actions that would have a substantial adverse eÅect on Ford's sales volume and proÑts. For example, wecould be required to curtail the sale of non-electric vehicles and/or oÅer to sell electric vehicles well belowcost. Other states may seek to adopt CARB's ZEV mandate pursuant to the Clean Air Act, thereby increasingthe costs to Ford. Other automobile manufacturers, along with some dealers, have Ñled suit in state andfederal court seeking to eliminate the ZEV mandate on various procedural and substantive grounds.

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 can be substantial.

European Requirements. European Union (""EU'') directives and related legislation limit the amount ofregulated pollutants that may be emitted by new motor vehicles and engines sold in the EU. In 1998, the EUadopted 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 IV

E-19

Standards 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 andfunctionality 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.

Motor Vehicle Safety Ì U.S. Requirements. The National TraÇc and Motor Vehicle Safety Act of 1966(the ""Safety Act'') regulates motor vehicles and motor vehicle equipment in the United States in two primaryways. First, the Safety Act prohibits the sale in the United States of any new vehicle or equipment that doesnot conform to applicable motor vehicle safety standards established by the National Highway TraÇc SafetyAdministration (the ""Safety Administration''). Meeting or exceeding many safety standards is costly becausethe standards tend to conÖict with the need to reduce vehicle weight in order to meet emissions and fueleconomy standards. Second, the Safety Act requires that defects related to motor vehicle safety be remediedthrough safety recall campaigns. There were pending before the Safety Administration approximately 32investigations relating to alleged safety defects in Ford vehicles as of February 28, 2002. A manufacturer alsois obligated to recall vehicles if it determines that they do not comply with a safety standard. Should Ford orthe Safety Administration determine that either a safety defect or a noncompliance exists with respect tocertain of Ford's vehicles, the costs of such recall campaigns could be substantial.

The Transportation Recall Enhancement, Accountability, and Documentation Act (the ""TREAD Act'')was signed into law in November 2000. The TREAD Act establishes new reporting requirements for motorvehicles, motor vehicle equipment, and tires, including reporting to the Safety Administration information onforeign recalls and information received by the manufacturer that may assist the agency in the identiÑcation ofsafety defects. The obligation of vehicle manufacturers to provide, on a cost-free basis, a remedy for vehicleswith an identiÑed safety defect or non-compliance issue is extended from eight years to ten years by the newlegislation. The Safety Administration is also required to develop a new dynamic test on rollovers to be usedfor consumer information. Potential civil penalties are increased from $1,000 to $5,000 per day for certainstatutory violations, with a maximum penalty of $15,000,000 for a related series of violations. Similar penaltiesare included for violation of the reporting requirements. Criminal penalties are introduced for persons whomake false statements to the government or withhold information with the intent to mislead the governmentabout safety defects that have caused death or serious bodily injury. Currently, there is substantial rulemakingactivity related to several TREAD Act requirements and Ñnal rules are expected to be promulgatedthroughout 2002 creating signiÑcant additional regulatory burdens for vehicle manufacturers.

Foreign Requirements. Canada, the EU, individual member countries within the EU, and other countriesin Europe, South America and the Asia PaciÑc markets also have safety standards applicable to motorvehicles and are likely to adopt additional or more stringent standards in the future.

Motor Vehicle Fuel Economy Ì U.S. Requirements. Under federal law, vehicles must meet minimumCorporate Average Fuel Economy (""CAFE'') standards set by the Safety Administration. A manufacturer issubject to potentially substantial civil penalties if it fails to meet the CAFE standard in any model year, aftertaking into account all available credits for the preceding three model years and expected credits for the threesucceeding model years.

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 maximum

E-20

feasible level. The Safety Administration has established a 20.7 mpg CAFE standard applicable to lighttrucks.

Ford expects to be able to comply with the foregoing CAFE standards, in some cases using credits fromprior or succeeding model years. In general, a continued increase in demand for larger vehicles, coupled with adecline in demand for small and middle-size vehicles could jeopardize our long-term ability to maintaincompliance with CAFE standards.

The CAFE standards will likely increase in the near future. Both the House and Senate have passedseparate bills directing the Safety Administration to establish new fuel economy standards for upcomingmodel years. It is anticipated that a measure similar to these bills will be enacted into law during 2002. Even ifCongress does not pass such a law, it is likely that the Safety Administration will use its existing rulemakingauthority to promulgate increases in light truck fuel economy standards. The Safety Administration hasrecently requested public comment on the advisability and feasibility of increasing light truck standards in the2005-2010 time frame.

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. EPA has requested public comment on this petition but has not taken actionto date. Some states, including California, are also proposing to regulate CO2 emissions from motor vehicles.

If signiÑcant increases in CAFE standards for upcoming model years are imposed, or if EPA or otheragencies regulate CO2 emissions from motor vehicles, Ford might Ñnd it necessary to take various costlyactions that could have substantial adverse eÅects on its sales volume and proÑts. For example, Ford mighthave to curtail production of larger, family-size and luxury cars and full-size light trucks, restrict oÅerings ofengines and popular options, and increase market support programs for its most fuel-eÇcient cars and light

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 provides that certain Association members(including Ford) will introduce models emitting no more than 120 grams of CO2 per kilometer in 2000, andestablishes an estimated target range of 165-170 grams of CO2 per kilometer for the average of new cars soldin 2003. Also in 2003, the Association will review the potential for additional CO2 reductions, with a view tomoving further toward the EU's objective. The Agreement assumes (among other things) that no negativemeasures will be implemented against diesel-fueled cars and the full availability of improved fuels with lowsulfur content in 2005. Average CO2 emissions of 140 grams per kilometer for new passenger cars correspondsto a 25% reduction in average CO2 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 average CO2

emissions from new passenger cars and progress toward achievement of the objectives for 2000 and 2003.

E-21

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.

Japan has adopted automobile fuel consumption goals that manufacturers must attempt to achieve by the2000 model year. The consumption levels apply only to gasoline-powered vehicles, vary by vehicle weight, andrange from 5.8 km/l to 19.2 km/l.

End-of-Life Vehicle Proposal

The European Parliament has published a directive imposing an obligation on motor vehicle manufactur-ers to take back end-of-life vehicles with zero or negative value registered after July 1, 2002, and to take backall other end-of-life vehicles with zero or negative value as of January 1, 2007, with no cost to the last owner.The Directive also imposes requirements on the proportion of the vehicle that may be disposed of in landÑllsand the proportion that must be reused or recycled beginning in 2006, and bans the use of certain substances invehicles beginning with vehicles registered after July 2003. Member states may apply these provisions prior tothe 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. Depending on the individual member states' legislation and other circumstances, we may berequired to accrue the costs represented by these regulations in our 2002 Ñnancial statements. The directiveshould not, however, result in signiÑcant cash expenditures before 2007.

Pollution Control Costs

During the period 2002 through 2006, we expect to spend approximately $391 million on our NorthAmerican and European facilities to comply with air and water pollution and hazardous waste controlstandards, which now are in eÅect or are scheduled to come into eÅect. Of this total, we estimate spendingapproximately $73 million in 2002 and $93 million in 2003.

EMPLOYMENT DATA

The average number of people we employed by geographic area was as follows for the years indicated:

2001 2000

United States ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 165,512 164,853Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 135,283 132,528OtherÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53,636 52,736

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 354,431 350,117

In 2001, the average number of people we employed increased approximately one percent. The increasereÖects the full year eÅect of acquisitions and newly consolidated subsidiaries (Land Rover, Ford MotorCompany Southern Africa, Collision Team of America). The numbers above include approximately 20,500hourly employees of Ford who are assigned to Visteon Corporation, and, pursuant to our collective bargaining

E-22

agreement with the United Automobile Workers (the ""UAW''), remain Ford employees. Visteon reimbursesFord for all costs to Ford associated with these employees. Most of our employees work in our Automotiveoperations.

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 17 of our Notes toConsolidated Financial 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 2% 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 will expire on September 14,2003. We also have entered into a collective bargaining agreement with the Canadian Automobile Workers(""CAW'') that will expire on September 17, 2002. Among other things, our agreements with the UAW andCAW provide for guaranteed wage and beneÑt levels throughout their terms and provide for signiÑcantemployment security. As a practical matter, 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 andpractices. Our Revitalization Plan assumes full compliance with our obligations under existing collectivebargaining agreements. Negotiation of new collective bargaining agreements with the UAW and CAW couldresult in our incurring costs diÅerent than currently anticipated.

We are or will be negotiating new collective bargaining agreements with labor unions in Europe (as wellas Mexico and Asia PaciÑc) where current agreements will expire in 2002. A protracted work stoppage inEurope could substantially adversely aÅect Ford's proÑts.

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. Our Canadian facilities, which are covered by the CAWagreement expiring in September 2002, include facilities that are the primary source of engines for many ofour truck and sport utility models, which are among our most proÑtable models. Therefore, any protractedwork stoppage at our Canadian facilities in connection with the negotiation of a new collective bargainingagreement with the CAW will have a substantial adverse eÅect on our business.

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 1,000 former Ford employees currentlyemployed 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. In itsAnnual Report on Form 10-K for the year ended December 31, 2001, Rouge stated that it has suÅeredrecurring losses from operations and negative cash Öows that raise substantial doubt about its ability tocontinue as a going concern.

E-23

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 facilitiesfor these purposes, including large centers in Dearborn, Michigan; Dunton, England; and Merkenich,Germany. Most of our engineering research and development relates to our 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 (restated for prior years to exclude Visteon): $7.4 billion(2001), $6.8 billion (2000), and $6.0 billion (1999). Any customer-sponsored research and developmentactivities 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 Ì 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 2001.

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. As a result of our work with the SafetyAdministration with regard to its investigation of the Firestone tire recall and our own root cause analysis, weannounced on May 22, 2001 that we would replace all remaining 15, 16, and 17-inch Firestone Wilderness ATtires (about 13 million tires) on our vehicles. This precautionary action was based on our analysis of data onthe actual road performance of these tires, comparisons with the performance of comparable tires by other tiremakers, a review of information developed by and received from the Safety Administration, and extensivelaboratory and vehicle testing.

As a result of its investigations, the Safety Administration on October 4, 2001 issued its determinationthat 3.5 million Wilderness AT tires manufactured before May 1998, which tires were subject to ourreplacement program, are defective, and said that Firestone had agreed to recall those tires. About 2.5 millionof the defective tires are estimated to have been in service as of May 2001 (when Ford's replacement program

E-24

was announced), and consist of 15 and 16-inch Wilderness AT tires manufactured prior to May 1998 andsupplied to Ford as original equipment or sold as replacement equipment.

On February 12, 2002, the Safety Administration issued a report denying an earlier request for aninvestigation into the handling and stability of the Explorer after a tread separation. In its report, the SafetyAdministration speciÑcally analyzed and rejected each of allegations made in the request. The SafetyAdministration based its denial on both a technical analysis of the steering and handling of the Explorer aswell as a review of crash data that indicated ""no signiÑcant diÅerence in the likelihood of a crash following atread separation between Explorer vehicles 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 in detail below.

Firestone Personal Injury Actions. PlaintiÅs in the personal injury cases typically allege that their injurieswere caused by defects in the tire that caused it to lose its tread and/or by defects in the Explorer that causedthe vehicle to roll over. We are a defendant in these actions and, as with all litigation facing the Company, areinvestigating the circumstances surrounding the accidents and preparing to defend our product in the event weare unable to reach reasonable resolution.

Firestone Class Actions. Five purported class actions are pending in which plaintiÅs seek to representpersons who own (or at one time owned) Ford Explorers with Firestone tires: one in federal court inIndianapolis and four in state courts in Pennsylvania, Wisconsin, South Carolina and Illinois. (A total of about96 Firestone-related class actions were originally Ñled, but almost all of these have been consolidated into theone case now pending in federal court in Indianapolis.) These actions were brought on behalf of persons whohave never been injured in an accident involving Firestone tires. They seek to expand the scope of the recall toinclude other tires, the cost of replacing those tires, the alleged diminution in vehicle value caused by the useof those tires or by the alleged instability of Explorers, or the amount by which Ford was ""unjustly enriched''through inÖated wholesale prices. They also seek punitive damages.

In the federal case, our motion to dismiss that complaint was granted in part and denied in part. Thecourt ruled that, under the National Highway TraÇc Safety Act, the Safety Administration has the exclusiveauthority to order and supervise automotive recalls. Accordingly, the court dismissed those portions of theclass action complaints that sought recall of additional tires or court supervision of the recall and the tirereplacement program. The court also dismissed some of the claims for damages. However, the court refused todismiss the plaintiÅs' warranty and unjust enrichment claims.

On November 28, 2001, the federal court certiÑed a class consisting of ""®a©ll current residents of theUnited States who either (a) owned or leased a 1991 through 2001 model year Ford Explorer as of August 9,2000 . . . or (b) owned or leased a 1991 through 2001 model year Ford Explorer prior to August 9, 2000 . . . ''The court also certiÑed a class consisting of ""®a©ll current residents of the United States who owned or leasedat any time from 1990 to the present, vehicles that are or were equipped with Firestone ATX, ATX II,Firehawk ATX, ATX 23 Degree, Widetrack Radial Baja, and Wilderness tires; all tires that are the same asFirestone ATX, ATX II, Firehawk ATX, ATX 23 Degree, Widetrack Radial Baja, and Wilderness tires butsold by Firestone under other brand names; and all other tires manufactured by Firestone that are the same orare substantially similar to Firestone ATX, ATX II, Firehawk ATX, ATX 23 Degree, Widetrack Radial Bajaand Wilderness tires.'' The United States Court of Appeals for the Seventh Circuit has granted our petition toreview this ruling.

The state trial court in South Carolina has certiÑed a class of all owners of Wilderness AT or ATX tiresinstalled on Ford Explorers, but our motion to dismiss that case is still pending.

Firestone Shareholder Derivative Actions. Two shareholder derivative actions are pending against theBoard of Directors with the Company named as a nominal defendant. Both actions are in Michigan, one instate court and one in federal court. The actions allege that the Board members breached their Ñduciary dutiesto the Company and shareholders by failing to inform themselves adequately regarding Firestone tires, failingto insure that the Explorer design was safe, failing to report problems with Firestone tires and to stop using

E-25

Firestone tires as original equipment, failing to recall all aÅected tires on a global basis as soon as problemswere known, and mismanaging the recall once it was announced. The actions also allege breach of Ñduciaryduties by the Board with respect to the use of distributor-mounted thick Ñlm ignition (""TFI'') modules. TheplaintiÅs seek injunctive relief and damages, a return of all Director compensation during the period of thealleged breaches and attorneys fees. By agreement of the parties the state court action has been administra-tively stayed pending the outcome of the federal court action. In the federal court action, Ford has Ñled amotion to dismiss.

Firestone Securities Class Actions. One purported nationwide class action against the Company was Ñledin federal court in Detroit alleging securities fraud and violations of Rule 10b-5 on behalf of all persons whopurchased Ford stock during the period from March 1998 through August 2000. (Seven separate class actioncomplaints were Ñled initially, but all seven complaints have now been replaced by one master complaint.)The plaintiÅs allege that, during that period of time, the defendants made misrepresentations about the safetyof Ford products and the Explorer in particular, and failed to disclose material facts about problems withFirestone tires and the safety of Explorers equipped with Firestone tires. The plaintiÅs claim that, as a result ofthese misrepresentations or omissions, they purchased Ford stock at inÖated prices and were damaged whenthe price of the stock fell upon announcement of the recall and subsequent revelations. On December 10, 2001the federal district court granted Ford's motion to dismiss and dismissed the consolidated action withprejudice. PlaintiÅs have moved to amend the judgment to make the dismissal without prejudice and for leaveto Ñle an amended complaint.

Venezuelan Matters. In Venezuela, the Attorney General's OÇce continues to investigate whethercriminal charges should be Ñled against Firestone and Ford employees as a result of tire tread separationaccidents that occurred in that country. The Venezuelan consumer protection agency (INDECU) is assistingin this investigation. In a separate investigation being conducted by the Venezuelan National Assemblyconcerning the cause of the accidents, a preliminary report was Ñled on December 5, 2001 by the TechnicalCommission appointed to conduct the investigation. The report did not contain any conclusions regarding thecause of the accidents; it only detailed the work performed by the committee up to that date. It is not clearwhether the committee will submit a Ñnal report.

Other Product Liability Matters

Asbestos Matters. Along with other vehicle manufacturers, we have been the target of asbestos litigation.We are a defendant in various actions for injuries claimed to have resulted from alleged contact with certainFord parts and other products containing asbestos. Asbestos was used in brakes, clutches and other autocomponents from 1927-1997. We no longer use asbestos in our vehicles.

Most of the asbestos litigation we face involves mechanics that worked with brakes over the years,although we have some cases that relate to the presence of asbestos in our facilities. In most of these cases weare not the sole defendant. We believe we are becoming more aggressively targeted in these suits as a result ofthe bankruptcy Ñlings of companies that have been the previous targets of asbestos litigation. As with alllitigation facing the Company, we are prepared to defend these asbestos related cases. We believe that thescientiÑc evidence conÑrms our long-standing position that mechanics are not at an increased risk of asbestosrelated disease as a result of exposure to asbestos used in the Company's vehicles.

The majority of these cases do not specify a dollar amount for damages claimed and in many of thosecases that do specify a dollar amount, the speciÑc amount referred to is only the jurisdictional minimum. Inany event, the actual damages paid out to claimants pursuant to adverse judgments or settlements havehistorically been only a small fraction of the damages claimed. To date, our annual payout on these cases hasnot been material. However, trends toward larger jury verdicts and increased awards of punitive damagescreate the risk that the amounts actually paid to asbestos claimants may increase in the future.

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 numerous

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hazardous 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.

Waste Disposal. The EPA initiated a civil enforcement action against Ford as a result of FordVenezuela's 1997 shipment of industrial wastes from its Valencia Assembly Plant in Venezuela for disposal inTexas. Ford Venezuela shipped the industrial waste to the U.S. for disposal under the more stringent U.S.disposal requirements because of the unavailability of adequate disposal facilities in Venezuela and to ensureproper disposal of the waste. Although Ford believes that the subject waste is properly classiÑed as non-hazardous under U.S. environmental laws, the EPA contends that even if the wastes do not exhibit anyhazardous characteristics, they nevertheless may be the product of a process that is automatically deemedhazardous under applicable regulations. If Ford is determined to have violated EPA regulations regarding thedisposal of hazardous wastes, Ford could be required to pay Ñnes which could exceed $100,000.

Ohio Assembly Plant. In September 1999, the EPA Ñled an administrative complaint against Fordalleging violations of the Resource Conservation and Recovery Act (""RCRA'') at Ford's Ohio AssemblyPlant. The alleged violations are related to Ford's storage of hazardous waste and the absence of a leakmonitoring program for paint equipment. The count alleging failure to implement a leak monitoring programfor paint equipment remains subject to discussion between Ford and EPA. Subsequent to the Ohio Assemblyenforcement action, Ford has received notices of violation alleging the same noncompliance at other facilities.If Ford is determined to have violated EPA regulations, Ford could be required to pay Ñnes or take otheractions, the aggregate cost of which could exceed $100,000.

Sale of E-450s in California. CARB has opened an investigation with respect to approximately 375 1998and 1999 model year E-450 vehicles sold to California customers. CARB alleges that these vehicles were soldwithout the required California emissions certiÑcation. CARB alleges that the sales were due, in part, to anerror in Ford's ordering process for the E-450. If Ford is determined to have violated CARB regulations, Fordcould be required to pay Ñnes that could exceed $100,000. Discussions between CARB and Ford are ongoing.

Class Actions

Paint Class Actions. There are two purported class actions pending against Ford 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 becauseFord 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.

The Illinois case, Phillips, is still in the early stages of litigation and there have been no signiÑcantdevelopments in that case. In the Texas case, Sheldon, the trial court certiÑed a class of Texas owners whoexperienced paint peeling because of the alleged defect. On May 11, 2000, the Texas Supreme Court reversed

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the trial court, decertiÑed the class and remanded the case for further proceedings. On remand, the trial courtcertiÑed two classes consisting of original owners of class vehicles who experienced peeling paint and originalowners who paid Ford or a Ford dealer to repaint their vehicles. We have Ñled an appeal with the Texas Courtof Appeals.

TFI Module Class Actions. There are seven class actions pending in state courts in Alabama, California,Illinois, Maryland, Missouri, Tennessee and Washington, alleging defects in TFI modules in more than22 million vehicles manufactured by Ford between 1983 and 1995. With minor variations based upon state lawand diÅerences in the scope of the classes alleged, all of the cases involve the same legal claims and theories.The parties have reached an agreement to settle the lead case in California and Ñve of the other pending cases.The agreement provides that Ford will extend the warranties applicable to distributor-mounted TFI modulesto 100,000 miles, reimburse class members who previously paid to replace Motorcraft» distributor-mountedTFI modules, donate $5 million to an organization for research and education in the Ñelds of automotive safetyor environmental protection, and pay plaintiÅs' counsel reasonable fees and expenses. The court in theCalifornia case gave preliminary approval to the settlement. A Ñnal hearing on the settlement has beenscheduled for June 21, 2002. If the settlement is approved by the California court, the remaining Ñve casesexpressly subject to the settlement will be dismissed. A class certiÑcation motion is pending in the seventhcase (in Illinois), but if the nationwide settlement is approved by the California court we expect that case tobe dismissed as well.

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 one purportedstatewide class action were Ñled against Ford; Citibank is also a defendant in some of these actions. Theactions allege damages in an amount up to $3,500 for each cardholder who obtained a Ford/Citibank creditcard in reliance on the rebate program and who is precluded from accumulating discounts toward the purchaseor lease of new Ford vehicles after December 1997 as a result of the termination of the rebate program.PlaintiÅs contend that defendants deceptively breached their contract by unilaterally terminating the program,that defendants have been unjustly enriched as a result of the interest charges and fees collected fromcardholders, and further, that defendants conspired to deprive plaintiÅs of the beneÑts of their credit cardagreement. PlaintiÅs seek compensatory damages, or alternatively, reinstatement of the rebate program, andpunitive damages, costs, expenses and attorneys' fees. The Ñve purported nationwide class actions were Ñled instate courts in Alabama, Illinois, New York, Oregon and Washington, and the purported statewide class actionwas Ñled in a California state court. The Alabama court has conditionally certiÑed a class consisting ofAlabama residents. Ford removed all of the cases to federal court, which consolidated and transferred thecases to federal court in Washington for pretrial proceedings. In October 1999, the federal court dismissed theconsolidated proceedings for lack of jurisdiction and sent each action back to the state court in which itoriginated. We appealed this ruling to the United States Court of Appeals for the Ninth Circuit, whichaÇrmed the trial court. The United States Supreme Court has granted Ford's petition for a writ of certiorariand will review the decision of the Ninth Circuit. We do not expect a decision from the Court until at least thefourth quarter.

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). The Company is required to defend and indemnifyMichigan Mutual. The complaint rests on an untenable interpretation of the Michigan Mutual policy, whichwas intended to cover company cars and lease evaluation vehicles. Unfortunately, however, the Florida Courtof Appeals in a prior action brought by a single individual, has accepted plaintiÅs' interpretation of the policy.The Florida court's opinion should not be controlling in federal court, however, and Ford has Ñled a motion forsummary judgment based on the policy language and the intention of the parties. PlaintiÅs responded toFord's motion, cross-moved for summary judgment in their favor, moved to amend their complaint, and

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moved for class certiÑcation. A hearing on Ford's motion was held on October 2, 2000, and we expect adecision sometime in 2002.

Throttle Body Assemblies Class Action. A purported nationwide class action is pending in federal court inOhio on behalf of all persons who own or lease 1999 Mercury Villagers. The complaint alleges that the vehiclehas a defective throttle body assembly that causes the gas pedal to intermittently lock or stick in the closedposition. The complaint alleges breach of warranty, negligence, and violation of consumer protection statutes.PlaintiÅs seek an order requiring Ford to recall the vehicles. They also seek unspeciÑed compensatorydamages, treble damages, attorneys fees, and costs. PlaintiÅs' motion to certify a class is pending.

Windstar Transmission Class Actions. Two purported class actions are pending, alleging that Fordmarketed, 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. (A third case, which alleged a defect in thetransmissions of 3.8 liter engines in 1990-95 Taurus/Sables and 1990-94 Lincoln Continentals in addition to1995 Windstars has been dismissed. PlaintiÅs have appealed the dismissal to the United States Court ofAppeals for the Third Circuit.)

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, but plaintiÅs' appeals are pending in New York, Maryland, and New Jersey.

Late Charges Class Actions Ì not included.

Fair Lending Class Actions Ì not included.

F-150 Radiator Class Actions. Two purported class actions are pending alleging that the Companydefrauded purchasers of 1999-2001 F-150 trucks by falsely representing that certain option packages included""upgraded'' radiators. Approximately 400,000 trucks that were intended to have larger radiators were builtwith standard radiators. The Ñrst case, Ñled in state court in New York, purports to represent a nationwideclass, and seeks an order requiring installation of larger radiators and other damages. The trial court grantedour motion to dismiss, and plaintiÅs have appealed. In the second case, Ñled in state court in Texas, the trialcourt has certiÑed a class of all purchasers of 2000 and 2001 F-150 trucks with heavy duty or trailer packagesin Texas, and seeks unspeciÑed damages. We are appealing that ruling to the Texas Court of Appeals.PlaintiÅs' motion to modify the certiÑcation ruling to expand it to a nationwide class is pending in the trialcourt.

Platinum Group Metals A purported nationwide class action has been Ñled against the Company infederal court in New York alleging securities fraud and violations of Rule 10b-5 on behalf of all persons whopurchased Ford stock between December 1, 1999 and January 12, 2002 (the ""class period''). The plaintiÅalleges that during the class period the Company entered into a series of contracts for the purchase of platinum

E-29

group metals (""PGM'') at historically high prices and failed to properly hedge these purchases, therebyexposing the Company to losses when the price of PGM fell. The plaintiÅs allege that the Company madestatements in its securities disclosures about its commodity purchase practices and hedging programs thatmisled investors as to Ford's exposure to loss from PGM purchases. As a result, plaintiÅs allege that theypurchased Ford stock at inÖated prices and were damaged when Ford ""wrote-down'' the value of its PGM by$1 billion on a pre-tax basis.

Side Release Seat Belt Buckles. On February 14, 2002, Ford was 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.

Other Matters

Rouge Powerhouse Insurance Litigation. There are several pending lawsuits arising out of the Febru-ary 1, 1999 Rouge Powerhouse explosion. In June 2000, Ford Ñled a coverage action against ten propertyinsurance carriers seeking property damage and business interruption losses attributable to the Powerhouseexplosion. Factory Mutual, one of these insurers, Ñled a counterclaim in the lawsuit for claims paid to RougeSteel Company (""Rouge Steel''). Factory Mutual's counterclaim alleges that Rouge Steel's damagesoccurred as a result of Ford's negligence, gross negligence or willful and wanton misconduct in operating thePowerhouse and totals approximately $340 million. This counterclaim, and a similar claim for approximately$25 million by other insurers of Rouge Steel, has been ordered to arbitration. Additionally, claims related tobusiness interruption losses incurred by several suppliers to Rouge Steel, totaling approximately $20 million,also have been added to the arbitration. In addition, seventeen Ford employees and two Rouge Steelemployees also have Ñled lawsuits seeking recovery in excess of $100 million in the aggregate for allegedpsychological injuries caused as a result of the explosion.

Visteon Dispute. As reported in the media, Ford and Visteon Corporation, our former automotivecomponents subsidiary that was spun-oÅ on June 28, 2000, have been attempting to resolve certain disputesthat arose out of the spin-oÅ related to the pricing of components sold by Visteon to Ford. The primarydisputes related to (i) the amount of Ford's contractual entitlement to productivity price reductions for theyear 2001, and (ii) Ford's ability to adjust downward the price of business sourced to Visteon in Europe at thetime of the spin-oÅ over the years 2001-2005. We have negotiated a resolution of the Ñrst matter in respect ofNorth America, and Visteon is pursuing arbitration of the second matter.

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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). 1997-1999 data (except employee data)have been restated to reÖect Visteon as a discontinued operation.

Summary of Operations

2001 2000 1999 1998 1997

Automotive SectorSales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $131,528 $141,230 $135,073 $118,017 $121,976Operating income/(loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,568) 5,232 7,169 5,376 6,060Income/(loss) before income taxes ÏÏÏÏÏÏÏÏÏÏÏÏ (9,036) 5,267 7,275 5,842 6,267Net income/(loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6,267) 3,624 4,986 4,049 4,203

Financial Services SectorRevenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 30,884 $ 28,828 $ 25,630 $ 25,524 $ 30,796Income before income taxes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,452 2,967 2,579 18,438 3,857Net income(a)(b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 814 1,786 1,516 17,319 2,206

Total CompanyIncome/(loss) before income taxes ÏÏÏÏÏÏÏÏÏÏÏÏ $ (7,584) $ 8,234 $ 9,854 $ 24,280 $ 10,124Provision/(credit) for income taxes ÏÏÏÏÏÏÏÏÏÏÏÏ (2,151) 2,705 3,248 2,760 3,436Minority interests in net income of subsidiaries ÏÏÏ 20 119 104 152 279

Income/(loss) from continuingoperations(a)(b) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,453) 5,410 6,502 21,368 6,409

Income from discontinued operationÏÏÏÏÏÏÏÏÏÏÏÏ Ì 309 735 703 511Loss on spin-oÅ of discontinued operation ÏÏÏÏÏÏÏ Ì (2,252) Ì Ì Ì

Net income/(loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (5,453) $ 3,467 $ 7,237 $ 22,071 $ 6,920

Total Company Data Per Share of Common andClass B Stock(c)

Basic:Income/(loss) from continuing operationsÏÏÏÏÏÏÏ $ (3.02) $ 3.66 $ 5.38 $ 17.59 $ 5.32Income/(loss) before cumulative eÅects of

changes in accounting principles ÏÏÏÏÏÏÏÏÏÏÏÏÏ (3.02) 2.34 5.99 18.17 5.75Net income/(loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3.02) 2.34 5.99 18.17 5.75

Diluted:Income/(loss) from continuing operationsÏÏÏÏÏÏÏ $ (3.02) $ 3.59 $ 5.26 $ 17.19 $ 5.20Income/(loss) before cumulative eÅects of

changes in accounting principles ÏÏÏÏÏÏÏÏÏÏÏÏÏ (3.02) 2.30 5.86 17.76 5.62Net income/(loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3.02) 2.30 5.86 17.76 5.62Cash dividends(d)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1.05 $ 1.80 $ 1.88 $ 1.72 $ 1.645Common stock price range (NYSE Composite)

High ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31.42 31.46 37.30 33.76 18.34LowÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14.70 21.69 25.42 15.64 10.95

Average number of shares of Common andClass B stock outstanding (in millions) ÏÏÏÏÏÏÏ 1,820 1,483 1,210 1,211 1,195

(a) 1998 includes a non-cash gain of $15,955 million that resulted from Ford's spin-oÅ of The Associates.

(b) 1997 includes a gain of $269 million on the sale of Hertz Common Stock.

(c) Share data have been adjusted to reÖect stock dividends and stock splits. Common stock price range(NYSE Composite) has been adjusted to reÖect the Visteon spin-oÅ, a recapitalization known as ourValue Enhancement Plan, and The Associates Spin-oÅ.

(d) Adjusted for the Value Enhancement Plan eÅected in August 2000, cash dividends were $1.16 per sharein 2000.

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Summary of Operations Ì Continued

2001 2000 1999 1998 1997

Total Company Balance Sheet Dataat Year-End

ASSETSAutomotive sectorÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 88,319 $ 94,312 $ 99,201 $ 83,911 $ 80,339Financial Services sector ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 188,224 189,078 171,048 148,801 194,018

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $276,543 $283,390 $270,249 $232,712 $274,357

Long-Term DebtAutomotive ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 13,492 $ 11,769 $ 10,398 $ 8,589 $ 6,964Financial Services ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 107,266 87,118 67,517 55,468 73,198

Stockholders' equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,786 18,610 27,604 23,434 30,787

Total Company Facility and Tooling DataCapital expenditures for facilities (excluding

special tools) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4,671 $ 5,315 $ 4,332 $ 4,369 $ 4,906DepreciationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,864 12,915 11,846 10,890 9,865Expenditures for special tools ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,337 3,033 3,327 3,388 2,894Amortization of special tools ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,265 2,451 2,459 2,880 3,126

Total Company Employee Data Ì WorldwidePayroll ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 17,433 $ 18,081 $ 18,390 $ 16,757 $ 17,187Total labor costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,553 25,783 26,881 25,606 25,546Average number of employeesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 354,431 350,117 374,093 342,545 363,892

Total Company Employee Data Ì U.S.Operations

Payroll ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 10,832 $ 11,274 $ 11,418 $ 10,548 $ 10,840Average number of employeesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 165,512 164,853 173,045 171,269 189,787

Average Hourly Labor Costs(f)Earnings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 27.38 $ 26.73 $ 25.58 $ 24.30 $ 22.95BeneÑtsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20.35 21.71 21.79 21.42 20.60

Total hourly labor costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 47.73 $ 48.44 $ 47.37 $ 45.72 $ 43.55

(f) Per hour worked (in dollars). Excludes data for subsidiary companies.

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Summary of Vehicle Unit Sales(a)

2001 2000 1999 1998 1997

(in thousands)

North AmericaUnited States

Cars ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,427 1,775 1,725 1,563 1,614Trucks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,458 2,711 2,660 2,425 2,402

Total United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,885 4,486 4,385 3,988 4,016

Canada ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 245 300 288 279 319Mexico ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 162 147 114 103 97

Total North America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,292 4,933 4,787 4,370 4,432

EuropeBritain ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 637 476 518 498 466Germany ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 383 320 353 444 460Italy ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 249 222 209 205 248Spain ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 178 180 180 155 155France ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 163 158 172 171 153Other countries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 551 526 528 377 318

Total Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,161 1,882 1,960 1,850 1,800

Other InternationalBrazil ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 125 134 117 178 214AustraliaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 115 125 125 133 132Taiwan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53 63 56 77 79Argentina ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29 49 60 97 147Japan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18 26 32 25 40Other countries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 198 212 83 93 103

Total other internationalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 538 609 473 603 715

Total Worldwide VehicleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

Unit Sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,991 7,424 7,220 6,823 6,947

(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.

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

Fourth Quarter 2001 Results of Operations

Our worldwide losses, including charges of $4,106 million primarily related to our Revitalization Plan,were $5,068 million in the fourth quarter of 2001, or $2.81 per diluted share of Common and Class B Stock. Inthe fourth quarter of 2000, earnings were $1,077 million (including charges for unusual items of $133 million),or $0.57 per diluted share. Worldwide sales and revenues were $41.2 billion in the fourth quarter of 2001,down $1.4 billion, reÖecting primarily lower vehicle sales in North America, partially oÅset by higher vehiclesales in Europe. Unit sales of cars and trucks were 1,808,000 units, down 32,000 units, reÖecting primarilylower market share in the United States, partially oÅset by higher market share in Europe.

Results of our operations by business sector for the fourth quarter of 2001 and 2000 are shown below (inmillions):

Fourth Quarter Net Income/(Loss)

2001Over/(Under)

2001 2000 2000

Automotive sector ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(4,708) $ 629 $(5,337)Financial Services sector ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (360) 448 (808)

Total Company net income/(loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(5,068) $1,077 $(6,145)

Following an extensive review of Ford's North and South American operations, on January 11, 2002, weannounced the operating and Ñnancial goals of our Revitalization Plan, which we expect to achieve by mid-decade. The pre-tax impact of the Revitalization Plan and other fourth quarter charges include (in billions):

Fixed-asset impairmentsNorth America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3.1South AmericaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.7

Total Ñxed-asset impairments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.8

Precious metals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.0Personnel (primarily North America salaried) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.6All other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.3

Total pre-tax charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $5.7

Memo: After-tax eÅect of charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $4.1

These substantially non-cash charges included $3.9 billion and $204 million for the Automotive sectorand the Financial Services sector, respectively. The Automotive-related charge included asset impairmentcharges, write-down of precious metals and forward contracts related thereto, employee separation costs(primarily for employees who voluntarily accepted separation oÅers in 2001) and other charges, such as anaccounting charge for Mazda pension expense and the impact of the devaluation of the Argentine peso. SeeNote 16 of the Notes to our Consolidated Financial Statements for more information regarding these charges.

We expect that the eÅects of our Revitalization Plan will improve our pre-tax operating results to$7 billion annually, an improvement of $9 billion, by mid-decade. This expectation is based on assumptions forthe U.S. market for 2003 and beyond with respect to industry sales (16 million units annually), Ford-brandmarket share (19%) and net pricing (negative).

Automotive Sector

Worldwide losses for our Automotive sector were $4,708 million in the fourth quarter of 2001 on sales of$33.8 billion. Earnings in the fourth quarter of 2000 were $629 million on sales of $35.1 billion.

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Details of our Automotive sector earnings for the fourth quarter of 2001 and 2000 are shown below (inmillions):


2001Over/(Under)

2001 2000 2000

North American Automotive ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(4,068) $607 $(4,675)

Automotive Outside North AmericaEurope ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 61 33 28South America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (598) (31) (567)Rest of World ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (103) 20 (123)

Total Automotive Outside North America ÏÏÏÏÏÏÏÏÏÏÏ (640) 22 (662)

Total Automotive sector ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(4,708) $629 $(5,337)

The decrease in our fourth quarter Automotive sector earnings in North America reÖected primarily theasset impairments and other charges outlined above, lower vehicle unit sales volumes, signiÑcantly increasedmarketing costs for Ford, Lincoln and Mercury brands (16.7% of sales compared with 10.7% a year ago), andan increase in warranty and other costs associated with customer satisfaction initiatives.

The improved fourth quarter results in Europe reÖected an increase in vehicle unit sales and the beneÑtsof last year's restructuring actions. The decline in South America reÖected primarily asset impairments relatedto the Revitalization Plan and other charges, lower operating results due to a weaker currency in Brazil, thedevaluation of the Argentine peso and lower industry volumes in Brazil and Argentina.

Financial Services Sector

Details of our Financial Services sector earnings are shown below (in millions):


2001Over/(Under)

2001 2000 2000

Ford CreditÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(297) $410 $(707)HertzÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (58) 56 (114)Minority interests and other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5) (18) 13

Total Financial Services sectorÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(360) $448 $(808)

Ford Credit Ì not included

Losses at Hertz in the fourth quarter of 2001 were $58 million, compared with earnings of $56 million ayear ago. The proÑt decline was primarily due to the lower car rental volume in the United States, reÖectingthe adverse impact on business travel and pricing following the terrorist attacks of September 11, 2001 and theslowdown in the U.S. economy.

Full-Year 2001 Results of Operations

Our worldwide sales and revenues were $162.4 billion in 2001, down $7.7 billion from 2000, reÖectingprimarily lower vehicle sales in North America, oÅset partially by higher vehicle sales in Europe. We sold6,991,000 cars and trucks in 2001, down 433,000 units, reÖecting primarily lower market share in the UnitedStates, partially oÅset by higher market share in Europe.

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Results of our operations by business sector for 2001, 2000, and 1999 are shown below (in millions):

Net Income/(Loss)

2001 2000 1999

Automotive sector ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(6,267) $ 3,624 $4,986Financial Services sectorÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 814 1,786 1,516

Income/(Loss) from continuing operations ÏÏÏÏÏÏÏÏÏÏÏÏ (5,453) 5,410 6,502Income from discontinued operation* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 309 735Loss on spin-oÅ of discontinued operation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (2,252) Ì

Total Company net income/(loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(5,453) $ 3,467 $7,237

* Visteon Corporation, our former automotive components subsidiary, was spun oÅ to Ford Common andClass B stockholders on June 28, 2000.

The following unusual items were included in our 2001, 2000, and 1999 income from continuingoperations (in millions):

Automotive Sector

Rest Total FinancialNorth South of Auto Services

America Europe America World Sector Sector

2001Derivative instruments (SFAS No. 133)

transition adjustment and ongoing eÅects ÏÏÏ $ (95) $ (95) $(157)Mazda restructuring actions in the second

quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(114) (114)Write-down of E-commerce and Automotive-

related ventures in the third quarter ÏÏÏÏÏÏÏ (199) (199)Revitalization Plan and other fourth quarter

charges (includes portion ofSFAS No. 133) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,149) $(552) (201) (3,902) (204)

Total 2001 unusual items ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(3,443) Ì $(552) $(315) $(4,310) $(361)

2000Asset impairment and restructuring costs for

Ford brand operations in Europe in thesecond quarterÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(1,019) $(1,019)

Inventory-related proÑt reduction for LandRover in the third quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (13) (76) $ (17) (106)

Write-down of assets associated with theNemak joint venture in the fourth quarter ÏÏ (133) (133)

Total 2000 unusual items ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (146) $(1,095) Ì $ (17) $(1,258) Ì

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Automotive Sector

Rest Total FinancialNorth South of Auto Services

America Europe America World Sector Sector

1999Gain from the sale of our interest in

AutoEuropa to Volkswagen AG in the Ñrstquarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 165 $ 165

Inventory-related proÑt reduction for VolvoCar in the second quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (16) (125) $ (5) (146)

Visteon-related postretirement adjustment inthe third quarter (incl. in Total AutoSector) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (125)

Employee separation costs in the thirdquarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (79) (79) $ (23)

Lump-sum payments relating to ratiÑcation ofthe 1999 United Auto Workers andCanadian Auto Workers contracts in thefourth quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (80) (80)

Total 1999 unusual items ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (175) $ 40 Ì $ (5) $ (265) $ (23)

Excluding these unusual items, losses from continuing operations would have been $782 million in 2001,compared with income from continuing operations of $6,668 million in 2000 and $6,790 million in 1999.

We established and communicated the Ñnancial milestones listed below for 2001, which excluded Visteonin both the 2000 base period and 2001. Our results against these milestones, excluding the unusual itemsdescribed above, are listed below.

2001 Milestone Actual Result

Total CompanyRevenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Grow $5 billion Declined $8 billion

AutomotiveNorth America ÏÏÏÏÏÏÏÏ 4%° return on sales (2.3)%Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1%° return on sales 0.8%South America ÏÏÏÏÏÏÏÏ Improve results Improved by $12 millionRest of World ÏÏÏÏÏÏÏÏÏ Achieve proÑtability Earned $156 million

Total Costs ÏÏÏÏÏÏÏÏÏ Reduce $1 billion Increased $1 billion*(at constant volume and mix)

Capital SpendingÏÏÏÏÏÏÏ Contain at $8 billion or less Spent $6.4 billion

Financial ServicesFord Credit ÏÏÏÏÏÏÏÏÏÏÏ Improve returns Declined 3.6 percentage points

Grow earnings 10% Declined 22%

* Excludes costs related to our Firestone tire replacement action.

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Automotive Sector Results of Operations

Details of our Automotive sector earnings from continuing operations for 2001, 2000, and 1999 are shownbelow (in millions):

Net Income/(Loss)

2001 2000 1999

North American Automotive ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(5,597) $4,886 $5,418Automotive Outside North America

EuropeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 266 (1,130) 50South America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (777) (240) (444)Rest of WorldÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (159) 108 87

Total Automotive OutsideNorth America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (670) (1,262) (307)

Visteon-related postretirement adjustment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (125)

Total Automotive sector ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(6,267) $3,624 $4,986

2001 Compared with 2000

Worldwide losses from continuing operations for our Automotive sector were $6,267 million in 2001 onsales of $131.5 billion, compared with earnings of $3,624 million in 2000 on sales of $141.2 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 $5,597 million in 2001on sales of $91.0 billion, compared with earnings of $4,886 million in 2000 on sales of $103.9 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 warranty and other costs associated withcustomer satisfaction initiatives.

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 favorablepricing 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 $266 million from continuing operations in 2001,compared with losses of $1,130 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 $777 million from continuing operations in 2001,compared with a loss of $240 million in 2000. The decrease is more than explained by asset impairmentcharges and the devaluation of the Argentine peso.

Industry sales in 2001 were 1.6 million units in Brazil, up about 10% from 2000, and approximately201,000 units in Argentina, down 41% from 2000. Brazil's economy has recently entered into a recession as a

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result of tight Ñscal and monetary policies and election year uncertainties, which have restrained growth. Weexpect industry volumes in Brazil to deteriorate in 2002. Economic conditions continue to remain weak inArgentina primarily as a result of the recent peso devaluation. Our combined car and truck market share inthese markets in 2001 was 7.8% in Brazil (down 1.3 percentage points) and 14.3% in Argentina (down1.4 percentage points).

Automotive sector losses from continuing operations outside North America, Europe, and SouthAmerica (""Rest of World'') were $159 million in 2001, compared with earnings of $108 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 approximately 773,000units in 2001, down about 14,000 units from a year ago. In 2001, our combined car and truck market share inAustralia was 15.1%, down 0.6 percentage points from 2000, reÖecting primarily share deterioration in the full-size car segment due to continued aggressive competition.


Worldwide earnings from continuing operations for our Automotive sector were $3,624 million in 2000 onsales of $141 billion, compared with $4,986 million in 1999 on sales of $135 billion. The decrease in earningsreÖected asset impairments and restructuring charges in Europe and lower earnings in North America, oÅsetpartially by improved results in South America. Adjusted for constant volume and mix, our total costs in theAutomotive sector declined $500 million compared with 1999.

Our Automotive sector earnings from continuing operations in North America were $4,886 million in2000 on sales of $103.9 billion, compared with $5,418 million in 1999 on sales of $99.2 billion. The earningsdeterioration reÖected primarily costs associated with the Firestone tire recall and higher warranty costsrelated to our 3.8 liter engine, oÅset partially by increased volume. The after-tax return on sales for ourAutomotive sector in North America was 4.8% in 2000, down 0.7 percentage points from 1999.

In 2000, approximately 17.8 million new cars and trucks were sold in the United States, up from17.4 million units in 1999. Our share of those unit sales was 23.7% in 2000, down 0.1 percentage points from1999.

Our Automotive sector losses in Europe were $1,130 million from continuing operations in 2000,compared with earnings of $50 million a year ago. The decline reÖected primarily the second quarter 2000charge of $1,019 million related to asset impairment and restructuring costs for Ford brand operations.

In 2000, approximately 17.9 million new cars and trucks were sold in our nineteen primary Europeanmarkets, down from 18.2 million units in 1999. Our share of those unit sales was 10% in 2000, down0.2 percentage points from 1999, reÖecting primarily an increase in market share related to our acquisitions ofVolvo Car and Land Rover, oÅset by a decrease in market share for Ford-brand vehicles. The decrease in ourFord brand share reÖected primarily continued aggressive competition.

Our Automotive sector in South America lost $240 million from continuing operations in 2000, comparedwith a loss of $444 million in 1999. The improvement reÖected primarily higher vehicle margins resulting fromcost reductions and improved product mix and pricing.

In 2000, approximately 1.5 million new cars and trucks were sold in Brazil, compared with 1.3 million in1999. Our share of those unit sales was 9.1% in 2000, down 0.6 percentage points from 1999. The decline inmarket share reÖected increased competition.

Automotive sector earnings from continuing operations in the Rest of World were $108 million in 2000,compared with earnings of $87 million in 1999.

New car and truck sales in Australia, our largest market in Rest of World, were approximately 788,000units in 2000, essentially unchanged from 1999. In 2000, our combined car and truck market share inAustralia was 15.7%, down 1.9 percentage points from 1999, reÖecting primarily strong competitive pressures.

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Financial Services Sector Results of Operations

Earnings of our Financial Services sector consist primarily of two segments, Ford Credit and Hertz.Details of our Financial Services sector earnings for 2001, 2000, and 1999 are shown below (in millions):

Net Income/(Loss)

2001 2000 1999

Ford Credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $839 $1,536 $1,261Hertz ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23 358 336Minority interests and other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (48) (108) (81)

Total Financial Services sector ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $814 $1,786 $1,516


Ford Credit Ì not included.

Earnings at Hertz in 2001 were $23 million. In 2000, Hertz had earnings of $358 million. The decrease inearnings was primarily due to lower car rental volume in the United States, reÖecting the adverse impact onbusiness travel and pricing of the slowdown in the United States economy.



Earnings at Hertz in 2000 were $358 million. In 1999, Hertz had earnings of $336 million. The increasein earnings reÖected primarily strong volume-related performance, oÅset partially by downward pricingpressure and higher interest costs.

Liquidity and Capital Resources

Automotive Sector

For the Automotive sector, liquidity and capital resources include cash generated from operations, grosscash balances, 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 reÖect Ñnancial assets available to fundthe business and pay future obligations in the near term, as summarized below (in billions):

December 31,

2001 2000 1999

Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 4.1 $ 3.4 $ 2.8Marketable securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.9 13.1 18.9VEBA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.7 3.7 3.7

Gross cash ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $17.7 $20.2 $25.4

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In managing our business, we classify changes in gross cash in three categories: operating related(including capital expenditures and capital transactions with the Financial Services sector), acquisitions anddivestitures and Ñnancing related. Changes for the last three years are summarized below (in billions):

December 31,

2001 2000 1999

Present year-end gross cashÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $17.7 $20.2 $25.4Prior year-end gross cashÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20.2 25.4 25.7

Present over (under) prior ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(2.5) $(5.2) $(0.3)

Operating related cash ÖowsAutomotive net income/(loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(6.3) $ 3.6 $ 5.0Capital expendituresÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6.4) (7.4) (7.1)Depreciation and amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.3 5.4 5.2Impairment charges (depreciation and amortization) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.8 1.1 ÌChanges in working capital (a) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.6 4.1 (1.9)Capital transactions with Financial Services sector (b)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.4 0.7 0.4All other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (0.1) (0.7) 4.5

Total operating relatedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.3 6.8 6.1Acquisitions and divestitures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2.3) (2.7) (5.8)Financing related Value Enhancement Plan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (5.6) Ì

Dividends to shareholders ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1.9) (2.8) (2.3)Issuance of common stockÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.5 0.6 0.3Purchase of common stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1.8) (1.8) (0.7)Changes in total Automotive Sector debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.7 0.3 2.1

Total Ñnancing related ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1.5) (9.3) (0.6)

Total change in gross cashÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(2.5) $(5.2) $(0.3)

(a) Working capital includes current assets (excluding cash and marketable securities) less current liabilities(excluding the current portion of long-term debt).

(b) Includes capital contributions, dividends, loans, loan repayments and asset sales.

In 2001, we spent $6.4 billion for capital goods, such as machinery, equipment, tooling, and facilities,used in our Automotive sector. This was down $1.0 billion from 2000, reÖecting primarily a reduced number ofproduct introductions. Capital expenditures were 4.8% of sales in 2001, down 0.4 percentage points from a yearago.

The $4.6 billion improvement in working capital in 2001 reÖected primarily lower receivables ($2.2 bil-lion in 2001 compared with $4.7 billion in 2000), resulting largely from implementation of Ford's bestpractices for receivables management (mainly at Volvo and Land Rover) and inventory improvements acrossmuch of the company ($6.2 billion in 2001 compared with $7.5 billion in 2000).

Dividends totaling $400 million were paid from Ford Credit to Ford in 2001. However, no dividendpayments were made in the fourth quarter of 2001. Additionally, in January 2002, $700 million of cash wascontributed from Ford to Ford Credit as additional equity, which lowered Ford Credit's debt-to-equity ratio to14.1 to 1 (calculated on a basis that treats proceeds from securitized funding as debt).

In 2001, we spent $2.0 billion for acquisitions of other companies (primarily the Ñnal payment of$1.6 billion to AB Volvo for our acquisition of Volvo Car) and contributed $735 million to the FinancialServices sector for the purchase of the minority interest in Hertz. These expenditures were oÅset partially bydivestitures (primarily proceeds of about $400 million from the sale of assets to our Getrag transmissions jointventure).

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In 2001, we spent $1.8 billion for purchases of our common stock under our $5 billion share repurchaseprogram ($1.2 billion) and our anti-dilutive share repurchase program. Issuances of common stock in 2001,reÖecting primarily employee stock option exercises, resulted in the receipt of proceeds of $500 million.

Debt and Net Cash. At December 31, 2001, our Automotive sector had total debt of $13.8 billion, up$1.7 billion from a year ago. The weighted average maturity of this debt is approximately 28 years, of which$902 million matures by December 31, 2006. At December 31, 2001, our Automotive sector had net cash(deÑned as gross cash less total of long-term debt and current portion of long-term debt) of $3.9 billion,compared with $8.1 billion and $13.7 billion at the end of 2000 and 1999, respectively.

Credit Facilities. At December 31, 2001, the Automotive sector had $8.6 billion of contractuallycommitted credit agreements with various banks; 87.4% of this amount is available through June 30, 2006.Ford also has the ability to transfer, on a non-guaranteed basis, $7.4 billion and $598 million of these creditlines to Ford Credit and Ford Credit Europe, respectively.

Cumulative Convertible Trust Preferred Securities. On January 30, 2002, we sold 100 million shares ofCumulative Convertible Trust Preferred Securities to the public at a price of $50 per share, for net proceeds(after underwriting commissions, but before expenses) of $4,900,000,000. The proceeds will be used forgeneral corporate purposes. The preferred securities were issued by Ford Motor Company Capital Trust II, thesole assets of which are the junior subordinated convertible debentures due January 15, 2032 of Ford MotorCompany. The preferred securities can be converted into shares of Ford common stock at any time at aconversion price of $17.70 per share. If converted, the aggregate amount of additional shares of Ford commonstock that would be outstanding would be about 282 million shares.

Financial Services Sector


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 ofagreements negotiated with automobile and equipment manufacturers. The Ñnancing requirements of Hertzare seasonal and are mainly explained by the seasonality of the travel industry. Hertz's Öeet size, and itsrelated Ñnancing requirements, generally peak in the months of June and July, and decline during the monthsof December and January. Hertz accesses the global capital markets to meet its funding needs.

Hertz maintains domestic and foreign commercial paper programs to cover short-term funding needs, andalso draws from bank lines, as a normal business practice, to fund international needs. Hertz also is active inthe medium-term and long-term debt markets.

During 2001, Hertz aligned its funding strategy with Ford Credit's by reducing its reliance on commercialpaper and increasing its use of long-term funding sources to improve its liquidity, and is planning on launchingan asset-backed securitization program during the second quarter of 2002.

At December 31, 2001, Hertz had committed credit facilities totaling $3.4 billion. Of this amount,$2.6 billion represents global and other committed credit facilities ($1.1 billion of which are available throughJune 30, 2006 and $1.6 billion of which have various maturities of up to four years); $200 million consists ofseasonal short-term facilities; and $500 million consists of a revolving credit line provided by Ford, whichcurrently expires in June 2003.

Total Company

Stockholders' Equity. Our stockholders' equity was $7.8 billion at December 31, 2001, down $10.8 billioncompared with December 31, 2000. This decrease reÖected primarily net losses of $5.5 billion, dividendpayments of $1.9 billion, foreign currency translation adjustments of $1.2 billion (primarily reÖectingweakening currencies in Europe), a net charge to equity on derivative Ñnancial instruments in accordance with

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SFAS No. 133 of $1.1 billion (primarily foreign currency hedges and interest rate swaps) and $1.2 billionspent on share repurchases.

Dividends and Share Repurchases. In October 2001, our board of directors declared a fourth quarter2001 dividend on Ford's common and Class B stock of $0.15 per share, which represented a 50% reductionfrom the $0.30 per share dividend that had been paid since the fourth quarter of 2000. On January 11, 2002,our board of directors further reduced the quarterly dividend on common and Class B stock by declaring a Ñrstquarter 2002 dividend of $0.10 per share, which represented a 33% reduction from the fourth quarter 2001dividend. These dividend reductions will yield cash savings of nearly $1.5 billion annually. Also, during 2001we purchased $1.2 billion of our common stock under our $5 billion share repurchase program that hadcommenced in September 2000. However, in May 2001, we suspended share repurchases indeÑnitely.

Debt Ratings. Our short- and long-term debt are rated by three major rating agencies: Fitch, Inc.(""Fitch''); Moody's Investors Service, Inc. (""Moody's''); and Standard & Poor's Rating Services, a divisionof McGraw-Hill Companies, Inc. (""S&P''). In addition to these three rating agencies, we also are rated inseveral local markets by locally recognized rating agencies. Debt ratings reÖect an assessment by the ratingagencies of the credit risk associated with particular securities we issue, and are based on information providedby us or other sources that rating agencies consider reliable. Lower ratings generally result in higher borrowingcosts and reduced access to capital markets. Long- and short-term debt ratings of BBB¿ and F3 or higher byFitch, Baa3 and P-3 or higher by Moody's and BBB¿ and A3 or higher by S&P are considered ""investmentgrade.'' However, debt ratings are not recommendations to buy, sell, or hold securities and are subject torevision or withdrawal at any time by the assigning rating agency. Each rating agency may have diÅerentcriteria in evaluating the risk associated to a company, and therefore ratings should be evaluated indepen-dently for each rating agency.

Fitch Ratings. On September 26, 2001, Fitch lowered the long-term debt ratings of Ford, Ford Creditand Hertz from A to A- and lowered Ford Credit's and Hertz' short-term debt ratings from F1 to F2 with anegative outlook for all entities. On January 11, 2002, Fitch lowered the long-term debt ratings of Ford, FordCredit and Hertz from A- to BBB, conÑrmed Ford Credit's and Hertz's short-term debt rating at F2, andconÑrmed the rating outlook for all companies as negative.

Moody's Ratings. On October 18, 2001, Moody's lowered Ford's long-term debt rating from A2 to A3,aÇrmed Ford Credit's long- and short-term debt ratings at A2 and Prime-1, respectively, and changed therating outlook for both companies from stable to negative. Moody's also lowered Hertz' long- and short-termdebt ratings from A3 to Baa1 and from Prime-1 to Prime-2, respectively, and changed its rating outlook onHertz to negative. On January 16, 2002, Moody's lowered Ford's long term debt rating from A3 to Baa1,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.

S&P Ratings. On October 15, 2001, S&P lowered the long-term debt ratings of Ford and Ford Creditfrom A to BBB, lowered Ford Credit's short-term debt rating from A-1 to A-2, and changed the rating outlookfor both companies from negative to stable. S&P also lowered Hertz's long- and short-term debt ratings fromA¿ to BBB and from A-1 to A-2, respectively, and changed its rating outlook to stable. On January 11, 2002,S&P changed the rating outlook for all companies to negative.

Contractual Obligations and Commitments. For information regarding debt and other obligations of theAutomotive and Financial Services sectors, including amounts maturing in each of the next Ñve years, seeNote 11 of the Notes to our Consolidated Financial Statements. In addition, we, as part of our normalbusiness practices, enter into long-term arrangements with suppliers for purchases of certain raw materials,components and services. These arrangements may contain Ñxed/minimum quantity purchase requirements.We enter into such arrangements to facilitate adequate supply of these materials and services.

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Hertz Purchase

In March 2001, through a tender oÅer and a merger transaction, we acquired (for a total price of about$735 million) the common stock of Hertz that we did not own, which represented about 18% of the economicinterest in Hertz. As a result, Hertz has become an indirect, wholly-owned subsidiary.

New Accounting Standards

In June 2001, the Financial Accounting Standards Board (""FASB'') issued SFAS No. 141, ""BusinessCombinations'', eÅective for all business combinations initiated after June 30, 2001. The Statement requiresthat the purchase method of accounting be used for all business combinations and speciÑes that certainacquired intangible assets in a business combination be recognized as assets separately from goodwill andexisting intangible assets and goodwill be evaluated for these new separation requirements. We do not expectadoption of this Statement to have a material impact on our consolidated Ñnancial position or results ofoperations.

We adopted SFAS No. 142, ""Goodwill and Other Intangible Assets'' on January 1, 2002. Goodwill andcertain intangible assets will no longer be amortized, but will be subject to an annual impairment test. At year-end 2001, we had goodwill of $6.6 billion and other intangible assets of $1.3 billion. We are presentlyevaluating the amount of the transitional impairment, which may range up to $2 billion or more, related toKwik-Fit and other investments. Goodwill and indeÑnite-lived intangible asset amortization of about $250million after taxes was charged to income in 2001.

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 will adopt the Statement on January 1, 2003. Although we are assessing the impact, we do notexpect adoption of this Statement to have a material impact on our consolidated Ñnancial position or results ofoperations.

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. Although we are assessing the impact, we do notexpect this Statement to have a material impact on our consolidated Ñnancial position or results of operations.

Critical Accounting Policies

Our consolidated Ñnancial statements are prepared in conformity with United States generally acceptedaccounting principles. The preparation of these Ñnancial statements requires the use of estimates, judgments,and assumptions that aÅect the reported amounts of assets and liabilities at the date of the Ñnancial statementsand the reported amounts of revenues and expenses during the periods presented. The signiÑcant accountingprinciples which we believe are the most important to aid in fully understanding our Ñnancial results are thefollowing:

Product warranties Ì estimated warranty costs for each vehicle sold by us are accrued at the time thevehicle is sold to a dealer. Estimates for warranty costs are made based primarily on historical warranty claimexperience. Included in our warranty cost accruals are costs for basic warranties on vehicles we sell, extendedservice plans (i.e., where customers pay a fee to have extended warranty coverage beyond the base warrantyperiod), product recalls and customer satisfaction actions outside the base warranty. An example of acustomer satisfaction action would be our Firestone tire replacement action begun in May 2001, in which weoÅered to replace 13 million Firestone tires installed on our vehicles. Warranty cost accruals are adjusted fromtime to time when actual warranty claim experience diÅers from that estimated.

Marketing incentives Ì costs for customer and dealer cash incentives and costs for special Ñnancing andleasing programs that we sponsor through Ford Credit (e.g., 0.0% Ñnancing program) are recognized as salesreductions at the later of the date the related vehicle sales are recorded or at the date the incentive program is

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both approved and communicated. In general, the amount of Ñnancing cost that we provide to Ford Credit isthe diÅerence between the amounts oÅered to retail customers and a market-based interest or lease rate. Costsfor marketing incentives are based upon assumptions regarding the number of vehicles that will have a speciÑcincentive applied against them. To the extent the actual number of vehicles diÅers from this estimate, or if adiÅerent mix of incentives occurs, the marketing expense accruals are adjusted.

Retirement beneÑts Ì our employee pension and other postretirement beneÑt (i.e., health care and lifeinsurance) costs and obligations are dependent on our assumptions used by actuaries in calculating suchamounts. These assumptions include discount rates, health care cost trends rates, inÖation, salary growth,long-term return on plan assets, retirement rates, mortality rates and other factors. We base the discount rateassumption on investment yields available at year-end on AA-rated corporate long-term bond yields. Ourhealth care cost trend assumptions are developed based on historical cost data, the near-term outlook, and anassessment of likely long-term trends. Our inÖation assumption is based on an evaluation of external marketindicators. The salary growth assumptions reÖect our long-term actual experience, the near-term outlook andassumed inÖation. Retirement and mortality rates are based primarily on actual plan experience. Actualresults that diÅer from our assumptions are accumulated and amortized over future periods and, therefore,generally aÅect our recognized expense and recorded obligation in such future periods. While we believe thatthe assumptions used are appropriate, signiÑcant diÅerences in actual experience or signiÑcant changes inassumptions would aÅect our pension and other postretirement beneÑts costs and obligations. See Note 17 ofthe Notes to our Consolidated Financial Statements for more information regarding costs and assumptions foremployee retirement beneÑts.

Impairment of long-lived assets Ì we periodically review the carrying value of our long-lived assets heldand used and assets to be disposed of, including goodwill and other intangible assets, when events andcircumstances warrant such a review. We evaluate the carrying value of long-lived assets for potentialimpairment on a regional operating business unit basis using undiscounted after-tax estimated cash Öows or onan individual asset basis if the asset is held for sale. See Note 16 of the Notes to our Consolidated FinancialStatements for information regarding impairment charges incurred in respect of our North and SouthAmerican Automotive operations in 2001 and our European Automotive operations in 2000.

Allowance for credit losses Ì not included.

Depreciation expense on operating leases and residual values Ì not included.

Outlook

Industry Sales Volumes and Financial Results

Our outlook for car and truck (including heavy trucks) industry sales in 2002 in our major markets is asfollows:

United States ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ approximately 16.5 million units, compared withthe 17.5 million units sold in 2001

EuropeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ approximately 16.9 million units, compared withthe 17.8 million units sold in 2001 (both Ñguresbased on nineteen markets)

BrazilÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ approximately 1.4 million units, compared withthe 1.6 million units sold in 2001

Australia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ approximately 790,000 units, compared with the773,000 units sold in 2001

Based on these and other assumptions (e.g., assumptions regarding marketing costs, which are expectedto be higher in 2002), we expect 2002 earnings (excluding unusual items) to be about breakeven, with theAutomotive sector incurring signiÑcant losses and the Financial Services sector providing oÅsetting proÑts. Inaddition, we expect the operating related changes in gross cash for the Automotive sector (calculated on thebasis described under ""Liquidity and Capital Resources Ì Automotive Sector Ì Gross Cash) to be negative

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in 2002. Similar to the improvements in cost and the other expected beneÑts of the Revitalization Plan, weexpect to achieve meaningful improvements in such operating cash Öow by mid-decade.

2002 Financial Milestones

We have set and communicated certain Ñnancial milestones for 2002. While we hope to achieve thesegoals, they should not be interpreted as projections, expectations or forecasts of 2002 results. The Ñnancialmilestones for 2002 are as follows:

Restructuring Priorities 2002 Milestone

Communicate/implement plansÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Report on progressImprove J.D. Power Initial Quality

Quality (U.S.)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ SurveyCapacity utilization (North America) ÏÏÏÏÏÏÏÏ Improve by 10%Non-product-related cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Reduce by $2 billionDivest non-core operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1 billion cash realization

Financial Results

CorporatePre-tax earnings (excluding unusual items)ÏÏ PositiveCapital spending ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $7 billion

Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Improve resultsSouth America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Improve results

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: increasing price competition in the U.S. and Europe resulting fromindustry overcapacity, currency Öuctuations or other factors; a signiÑcant decline in industry sales, particularlyin the United States or Europe, resulting from slowing economic growth or other factors; lower-than-anticipated market acceptance of our new or existing products; currency or commodity price Öuctuations;availability of fuel; a market shift from truck sales in the United States; lower-than-anticipated residual valuesfor leased vehicles; a credit rating downgrade, labor or other constraints on our ability to restructure ourbusiness; increased safety, emissions, fuel economy or other regulation resulting in higher costs and/or salesrestrictions; work stoppages at key Ford or supplier facilities or other interruptions of supplies; the discovery ofdefects in vehicles resulting in delays in new model launches, recall campaigns, increased warranty costs orlitigation; insuÇcient credit loss reserves; and our inability to implement the Revitalization Plan.

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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 manage these exposures as an integral part of our overall risk management program, whichincludes regular reports to a central management committee that oversees global risk management practices.Our risk management program recognizes the unpredictability of markets and seeks to reduce proÑt volatility.For more information on these Ñnancial exposures, see Notes 1 and 14 of the Notes to our ConsolidatedFinancial Statements.

Our Automotive and Financial Services sectors also are exposed to liquidity risk, or the possibility ofhaving to curtail their businesses or being unable to meet present and future Ñnancial obligations as they comedue because 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 any economic or business cycle. As discussed in greater detail in Item 7, our funding sourcesinclude commercial paper, term debt, sale of receivables through securitization transactions, committed linesof credit from major banks, and other sources.

We also are exposed to a variety of insurable risks, such as loss or damage to property, liability claims,and employee injury. We protect against these risks through a combination of self insurance and the purchaseof commercial insurance designed to protect against events that could generate signiÑcant losses.

The market and counterparty risks of our Automotive sector and Ford Credit are discussed and quantiÑedbelow.

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 aÇliates. These expenditures and receipts create exposures tochanges in exchange rates. We also are exposed to changes in prices of commodities used in our Automotivesector.

Foreign Currency Risk

Foreign currency risk is the possibility that our Ñnancial results could be better or worse than plannedbecause of changes in exchange rates. We use derivative instruments to hedge assets, liabilities and Ñrmcommitments denominated in foreign currencies. Our hedging policy is designed to reduce income volatilityand is based on clearly deÑned guidelines. Speculative actions are not permitted. In our hedging actions, weuse primarily instruments commonly used by corporations to reduce foreign exchange, interest rate and otherprice risks (e.g., forward contracts, options and interest rate swaps). We use a value-at-risk (""VAR'') analysisto evaluate our exposure to changes in foreign currency exchange rates. The primary assumptions used in theVAR analysis are as follows:

‚ A Monte Carlo simulation model is used to calculate changes in the value of currency derivativeinstruments (e.g., forwards and options) and all signiÑcant underlying exposures. The VAR analysisincludes an 18-month exposure and derivative hedging horizon and a one-month holding period.

‚ The VAR analysis calculates the potential risk, within a 99% conÑdence level, on cross-border currencycash Öow exposures, including the eÅects of foreign currency derivatives. (Translation exposures arenot included in the VAR analysis). The Monte Carlo simulation model uses historical volatility andcorrelation estimates of the underlying assets to produce a large number of future price scenarios,which have a statistically lognormal distribution.

‚ Estimates of correlations and volatilities are drawn primarily from the RiskMetricsTM datasets.

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Hedging actions substantially reduce our risk to changes in currency rates. Based on our overall currencyexposure (including derivative positions) during 2001, the risk during 2001 to our pre-tax cash Öow fromcurrency movements was on average $300 million, with a high of $350 million and a low of $275 million. AtDecember 31, 2001, currency movements are projected to aÅect our pre-tax cash Öow over the next 18 monthsby less than $275 million, within a 99% conÑdence level. Compared with our projection at December 31, 2000,the 2001 VAR amount is approximately $25 million lower, primarily because of decreased currency exchangerate volatility.

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 plastics (e.g., polypropylene), which weuse in the production of motor vehicles. We use derivative instruments to hedge the price risk associated withthe purchase of those commodities that we can economically hedge. The fair value liability of such contracts,excluding the underlying exposures, as of December 31, 2001 and 2000 was approximately a negative$259 million and a positive $56 million, respectively. The potential change in the fair value of commodityforward and option contracts, assuming a 10% change in the underlying commodity price, would beapproximately $267 million and $280 million at December 31, 2001 and 2000, respectively. This amountexcludes the oÅsetting impact of the price change we would experience in purchasing the underlyingcommodities.

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. The $1 billion pre-tax write-down of precious metals,discussed in Note 16 of the Notes to our Consolidated Financial Statements, related to these procurementactivities. In conjunction with this write-down, we modiÑed our processes so that any price-hedging inherentin our procurement activities is executed by or coordinated with our Treasurer's OÇce, which manages ourprice-hedging activity.

Our price-hedging policy is based on clearly deÑned guidelines. Speculative actions are not permitted. In2001, we enhanced our risk evaluation to include a VAR analysis, using historical volatilities, to evaluate ourexposure to changes in commodity prices given our Ñnancial hedges, forward procurement and supplycontracts on those commodities which we hedge.

Based on our commodity exposure and related hedging activity, at December 31, 2001, commodity pricemovements are projected to aÅect our pre-tax cash Öow over the next twelve months by up to $167 million,within a 99% conÑdence level. Over the last year the VAR measurements averaged $339 million, with a highof $625 million and a low of $167 million. These risk levels are substantially lower than they would otherwisebe without hedging actions.

Counterparty Risk

Counterparty risk relates to the loss we could incur if a counterparty defaulted on an investment or aderivative contract. Exposures managed are Ñnancial and primarily relate to investments in Ñxed-incomeproducts and derivative transactions for the purpose of managing interest rate, currency and commodity risk.We, together with Ford Credit, establish exposure limits for each counterparty to minimize risk and providecounterparty diversiÑcation. Exposures are monitored on a regular basis.

Our approach to managing counterparty risk is forward-looking and proactive, allowing us to take riskmitigation actions. Exposure limits are established for both mark-to-market and future potential exposure,based on our overall risk tolerance and ratings-based historical default probabilities. A Monte Carlo simulationtechnique is utilized to generate the potential exposure by tenor, within a 95% conÑdence level (marketconvention). Estimates of correlations and volatilities are drawn from RiskMetricsTM datasets.

Ford Credit Market and Other Risks Ì Not Included

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