Good day, ladies and gentlemen, and welcome to the Ford Motor Company Fixed Income Conference Call. My name is Michelle, and I'll your coordinator for today. At this time, all participants are in a listen-only mode. We'll be facilitating a question-and-answer session towards the end of this conference. [Operator Instructions]. I would now like to hand the presentation over to David Dickinson, Fixed Income Investor Relations Manager. Please proceed, sir.

Thank you, Michelle and good morning, ladies and gentlemen. Welcome to all of you who are joining us either by phone or webcast. On behalf of the entire Ford management team, I would like to thank you for spending time with us this morning. Our speakers this morning are Peter Daniel, Ford Senior Vice President and Controller; K.R. Kent, Ford Credit Vice Chairman and Chief Financial Officer; and Neil Schloss, Ford Vice President and Treasurer. We do have some other members of management who are joining us for the call including David Brandi, Assistant Treasurer; Mark Kosman, Director of Accounting; and Phil Horlock, Director of Corporate Finance. Before I hand the call over to Pete, I would like to review a couple of quick items. A copy of this morning's earnings release and the slides we will be using today have been posted on Ford Motor Company's investor website for your reference. The financial results discussed herein are presented on a preliminary basis. Final data will be included in our Form 10-K for 2007. Additionally, the financial results presented here are on a GAAP basis and in some cases on a non-GAAP basis. Any non-GAAP financial measures discussed on this call are reconciled to their GAAP equivalents as part of the appendix in the slide deck. Finally, today's presentation may include some forward-looking statements about our expectations for Ford's future performance. Actual results could differ materially from those suggested by our comments here. Additional information about the factors that could affect future results are summarized at the end of this presentation. These risk factors are detailed in our SEC filings including our Form 10-K, 10-Q, and 8-Ks. With that, I would now like to turn the call over to Ford's Senior Vice President and Controller, Peter Daniel. Peter?

Thanks, David, and good morning to everyone. We'll begin by reviewing the key financial results for the fourth quarter. As shown at the top of the slide, vehicle wholesales last quarter were over $1.6 million units, up $75,000 from the same period in '06. Total company revenue of $45.5 billion was up about 13% from a year ago. The increase primarily reflects favorable exchange in net pricing, as well as higher volume. Pretax results from continuing operations were a loss of $620 million, an improvement of $1.3 billion from the same period in 2006. This includes a more than $1.4 billion improvement in Automotive operating profits, partially offset by lower profits at Financial Services. Our fourth quarter net loss was $2.8 billion. This included $3.9 billion of pretax special charges. I will take you through these largely non-cash charges shortly. And we ended the quarter with $34.6 billion of gross cash, an increase of $700 million from 2006. Overall, our plan is working and we continue to show progress. For the full year, we had a pretax profit of $126 million from continuing operations, an improvement of about $3.3 billion from 2006. And net loss was $2.7 billion, an improvement of nearly $10 billion compared with 2006. We go to slide two, this covers our special items, which were $3.9 billion pretax in the fourth quarter. The two main items in the fourth quarter were both non-cash. On an annual basis, we test for asset impairment. As a result of our review this year, we have recorded a charge of $2.4 billion for impairment of goodwill at Volvo. This largely reflects the deterioration in Volvo results during 2007, primarily related to exchange rates, incentives, and lower than planned volumes, and a likelihood of lower than previously projected full-year volumes reduced…

Thanks, Peter, and good morning, everyone. Starting with slide eight, which shows Ford Credit operating results and key metrics for the fourth quarter of 2007, we've also included the full-year version of the slide in the appendix. As shown in the left box, our fourth quarter pretax profits were $263 million, down about $143 million from a year ago. For full year 2007, pretax profits were $1.2 billion, down $738 million from a year ago. Excluding the impact of market valuation adjustments from derivatives, 2007 pretax profits for the full year were $1.3 billion, slightly above the low end of the range of our 2007 guidance. Shown below the left box, pretax profits excluding the impacts of gains and losses related to the market valuation adjustments from derivatives in the fourth quarter were $223 million, down $254 million from fourth quarter of 2006. Net gains and losses related to market variations were $111 million better than the same period last year. You can see in the right box our December 31st, 2007 managed receivables were $147 billion. That's down slightly from a year ago and down about $1 billion from the third quarter. Charge-offs from managed receivables in the fourth quarter 2007 were $233 million. That was up 11% from a year ago. The worldwide managed loss receivables were 62 basis points in the fourth quarter, also up 6 basis points from a year ago. At December 31, 2007, the credit loss reserve for on-balance sheet receivables was $1.1 billion or 77 basis points of receivables. This was up about $100 million from the third quarter. In 2007, regular dividends from Ford Credit to Ford was suspended to enhance funding flexibility. As you can see, we did not pay a dividend in the fourth quarter. At December 31, 2007, our…

Thanks, K.R., and we are now on slide 15. This slide shows the trends of funding for our managed receivables. As K.R. mentioned, at year-end 2007 managed receivables were $147 billion, down slightly from year-and 2006. We ended the year with $16.7 billion in cash, including $4.7 billion to support our on-balance sheet securitizations. Cash was higher than our prior forecast of $12 billion to $14 billion as we took advantages of some private securitization funding to pre-fund some of our first quarter unsecured debt maturities. Securitized funding at the end of the year was 51% of managed receivables, slightly higher than our prior forecast. For 2008, our year-end managed receivable forecast is projected to be between $135 billion and $145 billion with securitized funding representing 49% to 54% of managed receivables. Achieving the lower end of the receivable range would reflect the successful execution of several strategic actions. We plan to continue to hold the substantial cash balance. Our target cash level for year-end 2008 is in the range of $13 billion to $16 billion. Moving to slide 16, Ford Credit's funding strategy includes maintaining strong liquidity to meet near-term funding obligations by having a substantial cash balance and committed funding capacity. We will continue to expand and diversify our global ABS funding and we will renew asset-backed funding capacity around the world. We will also potentially access the unsecured market and continue to consider alternative business arrangements to improve funding capability where it makes sense. And as K.R. also mentioned earlier, Ford Credit will resume regular distributions in 2008. Slide 17 shows our term funding plans for Ford Credit, which does not include our short-term funding programs, our asset sales to our on-balance sheet, asset-backed commercial paper programs, or proceeds from revolving transactions. For 2007, we completed $40…

Thanks, Neil. Ladies and gentlemen, we are going to start the question-and-answer session now. Michelle, can we please have the first question. Question and Answer

Thank you. Your first question comes from the line of Chester Luy of Barclays Capital. Please proceed.

Hi. Good morning, everyone, a few quick ones here. First, tax refund accounted for about $2.6 billion of cash generation in '07. Can you give us a sense as to how this should trend in '08?

That'll be substantially lower in 2008. So you won’t be seeing that anywhere near that level going forward.

And then of the $3 billion in structural cost savings, how much of this will be cash versus non-cash?

Well, a substantial portion of it will be cash. If you think those structural savings, we took about 32,500 people out in '07 and we're going to get the full flow-through benefit of that. We are going to do, as you heard, another enterprise-wide buyout, which will generate on an operating basis additional cash savings. So I would say a large percentage is cash related.

Okay. And then can you talk about your access to the ABS market and how much more in average in terms of funding cost did you incur in your last public retail asset-backed sanction versus last year?

I think from the standpoint of the asset-backed programs, the CP program that we have, which is our FCAR program, is actually doing better so far this year than in the third quarter... in the fourth quarter as we have been able to extend back our term to more levels than we saw prior to the August change in the markets. And the ABS deal we did that we closed this week was actually at a lower cost in total when you take into consideration the lower underlying interest rates.

Right. And final question is the company is forecasting flat profits for Ford Credit in '08. How should we view the deterioration of credit quality in the macro environment and its impact on your result in '08? Delinquency rates rose only modestly in the quarter, but severity seems to have risen meaningfully to be 8300 from 7500?

I will give you a little perspective, Chet. This is K.R. When you think about 2008 compared to 2007, what we're looking at, at this point in time, there are a couple of real positives that are going to happen. We should see a margin improvement in our business as our underlying rates come down and that slowly works through our portfolio. We should see good news on operating cost, which would be another nice positive as a result of our restructuring that we did. Primarily, as I mentioned, we are almost complete with that. The most of it was done during '07. So not only will we have lower headcount, low personal levels overall, but the restructuring cost itself that we had to pay in 2007 won't repeat. Likewise, on at least the residual side while we have seen some deterioration in the auction market, because you forecast what your expectations are for the used car market, we’ve picked up a lot of depreciation in 2007, which won't repeat again. Then you get on the negative sides, what was working against us a bit is that volumes will be lower next year as we bring down the receivable base of it, which will have a negative impact. And then you are left with last was credit losses, and heading into 2008… coming out of the back into 2007 we have seen rises in the key credit metrics including as you pointed out severity. But the view right now is that the positives and negatives will basically offset each other and will be about equal to 2007 overall profits.

Great. Thanks. That is all I have.

Thank you, Chet.

And your next question comes from the line of Brian Jacoby of Goldman Sachs. Please proceed.

Along those same lines, can you give us an idea at Ford Motor Credit perhaps maybe where you see the loss-to-receivables ratio going or some type of metric that kind of what you are assuming with respected to charge-offs and obviously the loss-to-receivables ratio probably rise, but I know you have the denominator following and so forth. But can you kind of give us a range on where you see this going relative to what it did back in '01?

Brian, there's couples of things. This time if you noticed, I did add in the slides about the history, I wanted to give people a real perspective on how the portfolio has changed because I often talked about how it has changed, but unless you can actually see something like that FICO score it's hard to really understand exactly what's going on. And I did show the FICO because that's generally what people recognize. FICO, we’re not… yes, I talked about this in the past, our proprietary scoring model, it's only a piece of how we underwrite. But it does give you a perspective of how the portfolio has changed over time. When you get into 2008, at this point time, I don't want to get into projections up on individual line items, but I think overall we seem pretty balanced where we stand right now.

Is it fair to assume, on slide 12, that loss ratio… is it fair to assume that now we can see levels that are similar to '04 or is it that you guys just don't want to get into that type of...?

I really don't want to get into that, and it's really important to... on slide four, when you see to the left, the FICO scores, I mean that… from going from like I say an average of, call it, 676 for the first four years shown there and then moving up to an average of say 710-ish, that's a pretty substantial improvement in FICO scores.

And these are placement FICO scores, so you do have the portfolio effect that you have three straight years of 710 and above would actually represent a major component of today's portfolio.

Okay. And then I had just two other quick questions. One is just on the… you are calling for $1 billion in essentially restructuring cost in '08 and… related to separation. And previously you had said through '07 through '09 roughly $5 billion to $6 billion in total cash restructuring, and in '07 you spent $2.5 billion and you are saying $1 billion in '08. So that's sort of implying that like cash restructuring… I thought cash restructuring would be lower by '09, but from what you are implying is that cash restricting might actually be higher in '09. Can you speak to that, are you going to come in a lot lower than the $5 billion to $6 billion, can you comment on that?

Yes. The restructuring costs are going to be lower than what we incurred in '07. We'll be incurring in the range of $1 billion to $2 billion and restructuring cost in '08--.

One to two?

Yes.

Okay. And then along those similar lines just with first quarter now, we’re in first quarter and your all did put in $6.5 billion into the new VEBA Trust. And so the short-term VEBA of 1.9 that you had at the end of '07, which effectively boosts your operating GAAP cash flow, we would expect that to be a reversal in the first quarter where that would be a negative 1.9 outflow, is that how to look at that?

Yes.

Okay. So the net cash payment into that VEBA Trust is somewhere around $2.6 billion when you factor in both the long-term and the short-term?

The actual cash that goes into the Temporary Asset Account will be about $2.7 billion.

$2.7 billion, okay, great. Thank you.

Thank you.

[Operator Instructions]. And your next question comes from the line of Eric Selle of JPMorgan. Please proceed.

Hi, guys. Just give some clarity on your flat year-over-year guidance. You said that you're going to see some benefit from lower depreciation and I'm just confused by that with higher lease volumes coming through as well as more severity and more of your customers giving back the vehicles at the lease, how do you get over that in 2008?

Sure. Eric, the way you think about it is on leased vehicles, as we see weakness in the auction market we depreciate the vehicles from today, so what we think their residual will be at the end of the lease. And so effectively as we've seen the weakness in the auction market all through this year and we saw it last year as well... I'm sorry, 2006 as well in the third quarter, we've taken down what our expectations are what those vehicles will be worth at auction. So we actually depreciate between that point in time where we made that recognition until the end of the lease period. So we've actually picked up a large chunk of the depreciation already.

Okay. And then moving to slide 12, does that lost receivables include Triad?

No Triad... this is basically data that we restated a couple of years ago when Triad was a discontinued operation. Triad is not included in these numbers.

Okay. And then on slide nine, I’m sorry I weren’t down in your conference and I missed the first call, but can you give me some more detail on this other item of $200 million addback, the year-over-year positive delta?

Sure. It is a number of elements, but primarily lower operating cost. There is also... we had a few tax refund items that we’ve had in the Credit company around the world as well as there is some other tax-related items in there.

So some of that restructuring savings that you guys consummated about a year ago?

Correct. Some of the operating costs reduction are starting to flow through.

Okay. And then on slide ten, you look at the worldwide loss-to-receivables and then U.S. loss-to-receivables and they track pretty consistently, whereas the U.S. is about 20 basis points above the worldwide loss. But it jumps to about 50 basis point differential in the fourth quarter. Is that… am I being paranoid or is there some explanation there that we are seeing worst performance in the U.S.?

Yes. What we are seeing kind of in a portfolio right now, we look at the weakness of that we are seeing it’s primarily in the U.S. The rest of the world is doing pretty good, and then when you get into the U.S., as I mentioned before, it is still the same type of states like California, Nevada, Arizona, Florida, and it's starting a little bit in the Midwest like Ohio and Michigan. So for the most part, the deterioration that we are seeing has been primarily driven by the U.S. I will point out though there have been... we did a couple of [inaudible] in Europe, which helps the net in the fourth quarter that were planned all year along. The underlying itself was really changing.

What percentage of your receivables are U.S. versus worldwide?

Roughly, of the portfolio today U.S. retail and lease is about 50% of the total portfolio… non-balance sheet portfolio. I guess it doesn’t really matter, not much of- balance sheet anymore, but it’s roughly 30%.

Okay. And then one final question. On slide 17, your private transactions are expected to go from $28 billion in '07 to anywhere between $10 billion to $20 billion, why is that reduction? Are we seeing buyers retreat or is that just intentional on your part?

No, I think the '07 numbers reflected a lot of strategic transactions around the world on specific asset classes that utilize the private mark-to-market. Our '08 plan goes back more to the sort of steady state plan like it was in '05 and in '06.

Okay. Hey, thanks a lot for your time.

And your next question comes from the line of James Leda of Merrill Lynch.

Good morning.

Hi, thanks for taking my question. I apologize, I got cut off for a short while when Brian was asking his question and picked back up when Eric was on line. So, I repeat anything just let me know, we’ll pick it up offline. I wanted to ask about the loss severity. Obviously, it’s trended up. Is there a reasonable way to think about that loss severity in the context of in the context of, lets say, revenue per unit for example? Because if I think about what's happening here we would have revenue per unit, there would obviously be some type of a down payment, there would be some interim payments in the period before the repossession would occur. And then you'd have some kind of an auction value to bring it back to a net loss severity. How can you think about this individual pieces, how they've trended, and then is that low severity as a percentage of the RPU? And I guess, we can calculate that, but is that something that you look at or that's meaningful in your view?

That's a… you've brought up lot of points because it is dynamic and has a number of elements that can all drive your severities. And I’ll just give you some examples. When you think about the change versus say last year, you see the auction market weakness is flowing through, you see a higher selling two months disposals, whereas we've moved to a larger proportion of our portfolio, be it, 72 months than we would say a year ago. There is also higher Truck and SUV mix, which is also tied back to the auction market weaknesses. We’re not getting the largest severity right now associated with them. And the problem is that it’s not something that is easily modeled. It is something that we monitor and track all the time and understand what's going on, but it's really... it is a little bit difficult to model when you're trying to pick up all these different pieces in the dynamic. I will think about it though.

Do you have any statistics that kind of point to how many months into these loans did the typical default... is a typical default period? In other words, are they defaulting 12 months in on average of 15 months in?

Yes. Two things, one is on a specific question, the months to repossession has been fairly stable. It usually runs between 26 and 27 months, and it's been that way for the last couple of years. Now, the other thing I wanted to mention on the severity, you also get into… the amount financed has an impact on that as well and we're seeing a higher amount financed on the vehicle the last few years.

Okay. And I don't know if you guys have said this before, but what is the kind of average loan tender now that you've moved to more 72 months in the mix, can you give us a ballpark on that?

Yes, I apologize, it’s 59 months to 60 months.

59 to 60. And then--?

That's for U.S. retail, obviously--.

Okay, that's helpful. On slide 12 and 13, this is a nitpicky, it doesn't include Triad. Have they also been adjusted to take out Fairlane?

No, Fairlane was still... Triad was considered a discontinued operation. I tried to tie it back to… stated that it had been published in our Ks and Qs in the past, and Triad specifically since it was a discontinued operation was taken out of all the numbers, but Fairlane was not done the same way.

Okay. Then--.

Fairlane was never a large portion of the overall portfolio, never… we’re talking less of a percentage of the portfolio.

Yes, okay. So if I look at the increase in slide 12 and FICO Scores, it looks to say that from the '99 to '03 period it averaged maybe 675, 680, and then you get about a 30-point rise to the more recent year average? And is there… are statistics or studies that can kind of show what that incremental boost in FICO score gets you? Obviously, the models that you guys work with showed that that is going to be a big mitigating factor with regard to charge-offs on a go-forward basis, but how can we gain comfort in kind of what that formula is?

I'll give a little perspective. Again, I think our underwriting practices are much better than just using FICO alone. However… and I don't know what the official... in the FICO group or what they might say or what’s on their website, you might want to look at that. The rough rule of thumb that people in my company use is that for about every 40 points of improvement in FICO is cutting your risk in half, also the other way. If you dropped your FICOs by 40 points you're basically doubling up your risk.

Okay.

That is kind of in the rule of thumb. It is sure is not perfect, but it is what the rule of thumb that we kind of use in the credit company.

Okay. That’s insightful. One last question, got a lot of calls this morning for our friends across the pond, FCE Bank, where can folks find information?

We have got separate financial statements they can find on FCE or they can contact Fixed Income Relations Manager or myself with questions.

Okay. So this will be filed later with the European regulators?

They are filed later with the European regulators.

Excellent, thank you very much for your time.

Thank you.

Your next question comes from the line of Brian Johnson of Lehman Brothers. Please proceed.

Yes, my question again on the FICO breakout on page 12, what was the business strategy vis-à-vis your support of the dealers that changed between '03 and '04, and what does that mean? Have you done that and at the same time seemingly held up your captive penetration?

Yes. I think it was 2001 we decided that we would focus more on the Ford brands. Up until that point sometime during 2001, we did a lot of used vehicle business, we did a lot of other makes, other brands, and what's really happened is that we've already had a good penetration with Ford Motor Company, and what we've done in the last five years or so is really focus on the Ford Motor Company brand and moved away from other types of businesses. Within Ford Motor Company, we continue to buy what we consider to be a good spread of business, which does pick up some lower credit quality customers and it is an effort that we’ll continue to focus on.

If you go back and look at the receivable balances that existed back at the same time in the 2000, 2001 time frame, this was a $200 billion balance sheet. So the reduction that K.R. just mentioned for used and for others… and other brands reflected in a smaller balance sheet as well.

Okay. So if we think about it as Ford Lincoln/Mercury, probably the FICO scores, it would be better to say it would have been higher in the 99 through the period, sort of what was driving on slide 15 the repossession--?

I can't answer that. I don't actually have any concepts like that.

Okay. And do any of these include FICO expansion scores or are these just pure classic or next gen cycles?

I suppose I believe they are just classic.

Okay. Thanks.

And your next question comes from the line of Steve Fauset [ph] of Goldman Sachs. Please proceed.

Hi. This is Steve Faucet [ph] from Goldman Sachs. I just had a couple of quick questions. The debt maturity of five years, how much… for 2008 how much of that is unsecured versus secured, roughly?

There is about $12 billion of unsecured.

Okay, great. And then it looked like Ford Manufacturing was up again despite the contract volume being down. Do you want to just give us some more color on that?

One second. I actually had the... subvention was actually down about 10% in the third quarter. Are you comparing to last year?

I guess I was just looking at the… the lines of interest supplements and other support costs from affiliates that maybe multiplied that’s in there.

Okay. It's actually down slightly from the third quarter.

I guess again a year ago is I guess what I was sort of comparing to.

Yes, it's been up. It has been growing over the last several years, primarily as the way Ford Credit and Ford have been going to market. There has been a lot of subvene’s type business that we've been doing, rate subvention, for the last couple of years, so it has been growing.

Okay. So, would you expect that to continue in '08 or is it more stabilizing?

No, as far as subvene business or the absolute amount, that's outstanding.

I guess it’s in terms of the business itself.

Okay. The reason I was getting that is actually what you see is that subvention level will be dropping over time as they pay off. As Ford pays all new business, they pay upfront when the business is placed and then the older business, which represents the $5 billion or so as it slowly rolls off over the next few years.

Okay. So even from an income statement perspective that would… that timing effect will be… because I just understood that as a difference in cash payments.

That's true, that's a difference in cash. As far as the income... you're looking at the income effect?

Right.

That should, I believe... I think they’ll probably stabilize and be flat over time.

Okay great. That's all I have. Thank you very much.

It might grow a little bit as you catch up, but it should stabilize. You know what it all depends on, in the future how Ford and Ford Credit go to market if it continues with rate subvention or if we choose a different path.

Okay, great. Thank you very much.

And your next question comes from the line of Raoul Seguera [ph] of JPMorgan. Please proceed?

Hi, thanks for taking the question. I do like to know whether it’s possible for you guys to provide a little bit of granularity with respect to sensitivity, and obviously GM for example came out with some [inaudible] with respect to if there is any significant reduction, let's say, 1 million units in 2008 in terms of total volumes, what kind of impact would that represent in the automotive cash flow for 2008, for example?

Raoul, can you speak up because we're having trouble hearing you.

Oh sorry. Yes, I was saying, I would like to know if it's possible for you guys to provide a little bit of detail with respect to sensitivity of the sales number, for example, if the overall light vehicle sales wholesales in North America reduces... is reduced by, let’s say, 1 million units, how much of that... how much that would represent in terms of operating related cash flow for the ongoing operations?

We would anticipate that if the industry drop by about 1 million units that the impact on cash would be about $1.5 billion to $2 billion.

$1.5 billion to $2 billion? Okay, great. Thank you very much. The other question on the automotive side as well. Could you provide an estimate of how much is baked in or included in the $5 billion… the $4.7 billion to $5.2 billion total operating cost reductions by the end of '08, how much of... how much do you have in there represented by the expected cost savings, which was result of the second special attrition program, which will be launched in 2008?

I am not going to get into the specifics on how much the second enterprise-wide buyout payment because we haven't even declared out what the number is externally. We've got obviously some internal estimates, but a big chunk of that... of the savings will frankly be of the first round of buyouts, which you're going to carry forward into '08. So if you look at the numbers, we've said that between now [inaudible], we took out 32,5000 people in '07 and that's going to have a full-year effect in '08. So that's going to have a dramatic effect. And whatever else we do in '08 on the buyouts obviously we'll generate incremental, so we're well on the way to getting out for bidding.

Okay, but definitely on the second round there are the cost savings, which will actually arise from that second round, which are factored into the $5 billion operating cost save… the $5 billion, right?

Yes, they're. We've made an assumption and factored that into the $5 billion.

Okay. And the last question I had was related to the committed facilities in FMCC. Could you break down or give us a little bit of flavor, maybe that's going to be reported in 10-K, but… of basically how much of those facilities is coming due... is basically maturing in 2008 and in 2009? Is it going to be significant amount that you will have to basically roll or--?

Yes. We have… I mean I think you really need to look at it by program and we'll give you more color in the 10-K for that. On the FCAR program, the backup credit facilities for that program, are about half and half, five-year facilities versus 364-day. On the rest of the conduits and other capacity, there is a combination of 364-day facilities and term facilities as well. So it really is a mixed bag and on the 364-day facilities they mature at different times throughout the calendar year.

Operator, can we have the next caller?

Your next question comes from the line of Robert Schwartz [ph] of Citadel. Please proceed.

Hi, guys.

Good morning.

Good morning. I have some questions, I think K.R on slide 15, you were talking about your funding structure for '08. Can you guys give us an idea of... you mentioned some sort of a central essential transaction that can lower the receivables size. I'm wondering without that where do you... can you give me a range on receivables if that doesn't take place?

Sure, Robert. We ended the year at 147. We're looking at lower... for example, lower U.S volumes, which will drive our receivables down a bit with the industry being down. We're also looking at some other strategic actions around the world in a couple of places, mainly in Asia and a little bit in the northern part of Europe. Roughly, $4 billion or $5 billion of the decline might be related to our strategic actions, the rest of it related to the base business.

And are those strategic actions Ford Credit specific or is that a broader Ford Co.?

No, they are Ford Credit specific actions. What we've done in places that are harder to finance, we've tried to develop an alternative business arrangement with... generally with the bank or with somebody else that can contain the funding much better at a better rate than what we can do. The keys for us when we do these things is that we have an alliance or a strategic partnership that makes sure that the automotive brands are well supported. And the best example we have is we've done a... we did a deal with Bradesco several years ago down in Brazil. We're kind of the front-end… they handled the front-end, they handled... they under-ride everything, but it's a very good relationship where we keep the support for the Ford brands going.

Okay, I appreciate that. And then in light of the leverage going up and the books shrinking with subvention cash payment, Isn't that sort of... it looks like that might be sort of completely offset by dividend to the parent, is it the right way to think about it?

Yes. Roughly speaking, Don mentioned earlier there is about $3.3 billion or so… $3 billion of subvention payments upfront. We look at what we have at the end of the year, leverage it about $9.81. You take it up to $11.5, it's roughly $2 billion, that would be a return, as well as 2008 profits which being roughly equal to 2007 on a PBT level of 1.2 it translates into about $800 million or so in PAT. And so, you have $2.8 and then it really depends on where the balance sheet ends up for the rest of it.

Okay. And then, are you guys seeing... what do you think in terms of competitive loan rates to consumers this year in this part... with response to the fed actions, I am wondering, are banks or credit unions getting more competitive on rate or are you seeing rates increasing?

As far as rates itself in the U.S., I actually haven't seen the latest in the last few weeks. So I am just not... I'm not comfortable giving you a good answer.

Okay. And then you guys had a borrowing cost in '07 of 6.1%. Any idea where that could go to in '08 with where rates are today?

It should go down. It's hard for me to give you an exact number of what should happen. With the Fed rate reductions and the translation of that into the rest of the yield curve, and then you’ve got... which is all good news obviously, and then you've got a little bit of re-pricing on the risk side of it, like our spreads are up. So it really boils down to at the end will our margins improve. I think our margins will improve. I think our borrowing costs will drop a bit. We also got the portfolio effect, not all of it rolls at once. So it'll not come down, but I'm not really comfortable giving you a number of how much at this point in time.

Michelle, we've time for one more question please.

We will take our next question from the line of Doug Carson [ph] of Banc of America. Please proceed?

Hi, guys. Can you hear me all right?

Yes. Go ahead, Doug? Good morning.

Good morning. I have two questions. I see that the 60-day delinquency pull is still very low at I think about 23 basis points. But various recent vintages of asset-backed deals in the market have a much, much higher reading. Would you be able to give us some more color if possible on how some of the recent like loan book has performed versus a kind of loan book in aggregate, because most of the market has a feeling that the recent stuff is kind of working at a much higher delinquency, I am not sure if that's correct.

I don't... Doug I don't have the data with me right now.

Would you maybe follow-up offline?

This is something we could follow-up on.

Definitely on the cash side, you came in around 16, 7, and it was about $4 billion higher than Q3. I may have missed it, but what caused it to jump in the cash there? And then I have a separate question. With the cash balance there and the recent sell-off in all financial related bonds, internally are you guys considering in a more attractive way buying some of this debt back that’s trading that $88 versus maybe issuing unsecured debt at these rates? Has your philosophy changed at all given where the bonds are traded?

I think the first... I guess the answer to the first question on why cash came in higher than we had projected previously was we'd some chance to get some private funding done to get ahead of the first quarter from a standpoint of some of our debt maturities that were coming due in the first quarter. So we were able to get some private transactions done. I wouldn't jump to conclusions at the larger cash balance because there is more opportunities to repurchase debt. And I don't think our strategy has changed from a standpoint of continuing to maintain a very strong liquidity position, given the volatility in the market.

All right, guys. And then finally, the European market, a lot of talk here in North America just a quick... how has that market been holding on?

As far as the financing side or the origination side?

Origination side.

For the most part, for FCE Bank, things have been holding up very well. We haven't really seen... we haven't seen anything like what we are seeing in the U.S. as far as weakness. The FCE bank continues to be very profitable. They continue to have a well-run machine. The penetration of financing was pretty much in line with last year, not too far off, and it's a well-run bank and we're seeing... we are doing okay right now.

All right. Great. Thanks, guys.

Thanks, Dough. Thanks, K.R. And that concludes today's call. We’d like to remind you if you have additional questions to please contact Fixed Income Investor Relations, and thank you for joining us.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a good day.