Good day, ladies and gentlemen, and welcome to the Third Quarter Ford Motor Company Fixed Income Conference Call. My name is Steve and I will be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today, Mr. Shawn Ryan, Investor Relations Manager. Please proceed, sir.

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

Thanks, Shawn. We're pleased today to report strong third quarter results as we continue to gain momentum with our One Ford plan despite still challenging business conditions. Turning to Slide 1, I'd like to review our key financial results compared with the year ago. Let me first begin by explaining how Volvo impacts our results. We completed our sales of our Volvo to Geely on August 2, and our 2010 results through the sale date were reported as special items and excluded from our wholesale's revenue and operating results. 2009 results on the other hand include Volvo. As shown at the top of the slide, third quarter vehicle wholesales were 1.3 million units, up 15,000 units. The increase was explained primarily by higher wholesales in North America and Asia Pacific, Africa offset partially by the exclusion of Volvo from 2010 and lower wholesales in Europe. Excluding Volvo from 2009, the wholesale increase was 91,000 units. Our third quarter revenue was $29 billion, a $1.3 billion decrease. The change in revenue primarily reflects higher volumes and favorable net pricing more than offset by the exclusion of Volvo from 2010, lower Ford Credit receivables and unfavorable currency exchange. Excluding Volvo from 2009, revenue increased by $1.7 billion. Our third quarter pretax operating profit excluding special items was $2.1 billion or $0.48 per share, a $1.1 billion improvement. Automotive results improved by $953 million and Financial Services results improved by $100 million. Our third quarter net income attributable to Ford including unfavorable pretax special items of $168 million was $1.7 billion, $0.43 per share which was a $690 million improvement. For the first nine months, pretax operating profit excluding special items, was $7 billion, an $8.6 million improvement and net income attributable Ford to was $6.4 billion which was a $4.5 million improvement.…

Thanks, Bob. Slide 6 shows Ford Credit's operating results and key metrics for the third quarter of 2010. As shown in the left box, our third quarter pretax profit was $766 million compared with a pretax profit of $677 million in the third quarter of 2009. As you can see on the box on the right, our September 30 on balance sheet receivables were $83 billion, about $10 billion lower than the same period last year and about $10 billion lower than year end 2009. These declines reflected primarily the transition of Jaguar, Land Rover, Mazda and Volvo financing to other finance providers and lower industry and financing volumes in 2009 and 2010 compared with prior years. Charge-offs for on balance sheet receivables in the third quarter were $95 million and the worldwide lost receivable ratio was a very low 44 basis points, which was down 53 basis points from the same period last year. I'll speak more about that in a few minutes. At September 30, the allowance for credit losses for on balance sheet receivables was about $1 billion or 114 basis points of receivables. The allowance was about $600 million lower than year end 2009 and about $700 million lower in the same period last year. We are projecting total distributions of about $2.5 billion during 2010. This is up from the $2.2 billion previously announced and that includes $500 million paid in the first quarter and $1 billion paid in the third quarter, which leaves $1 billion to be paid in the fourth quarter. We will continue to assess our future distributions based on our available liquidity as well as our managed leverage. At September 30, our managed leverage was 6.3 to 1 compared with 7.7 to 1 at September 30, 2009. And at the end…

Thanks, KR. We continue to be on track with our 2010 funding plan. In the third quarter, we completed about $8 billion of funding including $5 billion of securitization transactions across all regions and asset classes. We also have three unsecured debt issuances totaling over $3 billion in the U.S., Canada and Europe. We have completed another $2 billion of public and private securitizations during the month of October. Our credit spreads continued to tighten reflecting our improved credit profiles, strong investor demand for our transactions and supported markets. We have included a slide in the appendix that shows our recent credit rating history and progression toward investment grade. During the quarter, we renewed $5 billion of committed capacity consistent with our plan and at lower cost and prior renewals. Our funding strategy remains focused on access to public and private securitizations, asset backed commercial paper and unsecured debt. Our liquidity remains strong and we will continue to maintain cash balances and committed capacity to ensure liquidity, adequately meets our business and funding requirements. Slide 12 shows our trends in funding of our managed receivables. At the end of the third quarter, managed receivables were $85 billion. We ended the quarter with $20 billion in cash including about $5 billion to support on balance sheet securitizations. Securitized funding was 56% of managed receivables at the end of the third quarter. We are projecting 2010 year end managed receivables in the range of $80 billion to $85 billion and securitized funding to represent about 55% to 60% of total managed receivables. Slide 13 shows our 2010 term funding plan for Ford Credit which does not include our short term funding programs or asset sales to our on balance sheet asset backed commercial paper program. Year-to-date, we have completed $24 billion of…

Thank you, Neil. Ladies and gentlemen, we are going to start the question-and-answer session now. Steve, can we please have the first question?

[Operator Instructions] Your first question comes from the line of Doug Carson with Bank of America.

Question on Slide 13. Your unsecured, I guess, funding year-to-date is about $6 billion with a five-year trading where it is, I've got 4.2%. Can we see the mix over the next year or two of unsecured funding grow just in the past, it has been closer to 50/50. And now it's obviously a lot lower doing the cost capital changes over the last few years. Can we see more bonds coming out on unsecured side?

Yes, I think, Doug, we will. When we announced our earnings at the end of the year, and we will also lay out what our expectations are for the 2011 funding plan, which will include what our mix between unsecured and secured will be.

And the next question comes from the line of Eric Selle with JPMorgan.

Hey KR and Neil, I hope the pace of this debt reduction doesn't mean you won't consider Miami in March. Wow, it's impressive. Any ways, a couple of housekeeping. I look at your debt slide, it doesn't show the term paid down on the slide. Is that because it's offset by a DOE increase? Or am I missing something on the timing of that?

What slide number?

Slide 20. I'm talking about the Volvo proceeds, the mandatory payment.

Yes, it's netted with the draw down on the government financing that we are using to accelerate our investments in alternative technologies.

That's what I thought. And then secondly, if you look at the cash slide for Automotive, production was down pretty big for, I guess, it was down about 10% in North America and 18% in Europe. And there's not a huge working capital outflow that we usually see with that. Is there something there that I'm missing?

I think it's pretty consistent with our focus on cash in total when you look at both payables in inventory and the other related items.

And then flipping over to the Ford Credit side. I maybe wrong but that was first time I think I've seen a growth in conduit capacity over the last several years. Is there just the banks realizing this is as a very solid asset class and expanding that? I mean could you talk about the predisposition towards the banks on the conduit capacity?

I think you've got it pretty much spot on. They know the assets well. It's an asset class that performs consistent from year to year. We haven't changed anything from our originations standards. So as they looked to sort of re-establish or expand their balance sheet, this is our number one choice from them from a standpoint of asset.

And then looking at cash at Ford Credit, it grew as well. And I'm doing very, very rough math here but they are down only a $1.5. And then the net income being paid in dividends. What drove that rise in cash? Was there another asset that reduced? Or is it same amount just in the numbers?

I think we had a very successful funding quarter.

And then looking at the VEBA paydown in cash, I'm trying to think of an elegant way of asking but is there any way that you could issue shares to help fund that cash given the strike price?

Not if we want to pay it off. We have the ability. We in the VEBA agreement we have the ability to deliver shares for the annual payment. But any prepaid payment needs to be done with 100% cash. And the reality is, is we generated the cash from the operating part of the business. So that makes all the sense to use the cash to pay down debt.

[Operator Instructions] Your next question comes from the line of Mark Althere with Credit Suisse.

The orderly move in the delinquents in the repost, was that seasonality? Or was there something else there?

Yes, Mark. Typically, second quarter is usually the best quarter. And it did go up a little bit in the third quarter. But on an absolute basis, it's still relatively very low.

A little accounting on this, the converts. You mentioned you're counting it at the two, six the phase is three, four, five. What happens there when you pay that off? Balance sheet debt goes down? Is there income for the balance? Or how does that accounted for?

I think when we initially put the securities or when we initially issued the securities themselves, I'm going to get too complicated here real quick if I'm not careful. They bifurcated the debt piece from the equity piece. And so when we actually, and we actually said it in the earnings call this morning, we will actually take a special charge for the difference between the debt value, the fair value of the time we issued it to the fair value of the time that we extinguished it. So it will depend, the size will depend upon the participation in the transaction.

So essentially, if everybody participates, debt goes down by two, six. Equity goes up by two, six net of the charge roughly?

Yes.

And then you save about $155 million of additional interest. So again if everybody took it, you're actually pushing about $1 billion pro forma of interest savings, is that right?

No. The $800 million that we quoted is our interest save. Excluded that, so your numbers are pretty close.

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

A question on capital structure. You still have quite a bit of secured debt to paydown. But obviously, it looks like based on what you guys are saying, where you're going to end the year with debt and how 2011 could look. Have you guys at all begun to think about, I'm sure you have, but are we far off from thinking about an unsecured revolver and a capital structure at some point in the not-too-distant future? That would be the first question and obviously that's an integral part I'm trying to get to investment grade. And then the other question is switching gears to Ford Motor Credit. There's been just a lot of positive comments around, given lower industry volumes and vehicles coming off lease, that used car prices might actually continued to hover at pretty attractive levels for the better part of 2011 as well. Can you kind of tell us a little bit about how you're thinking about used vehicle pricing and vehicles coming off lease for Ford Motor Credit over the near-term and perhaps maybe looking out?

Brian, let me go ahead, this is Neil. Let me go ahead and take the first one and then I'll have KR answer the second one specific to credit. I think if you look at what an investment grade capital structure would look like clearly an unsecured revolver would be part of it.

Again, Brian, on used vehicle prices, I wish I was a sous there. There are a couple of things in my mind that probably we'll keep them at or where we are running right now. And that's primarily the standpoint that the market that I particularly plan is a two- and three-year-old vehicles. And as I mentioned, we had about 400,000 lease terminations this year. And next year, we're going to be down to about 230,000 terminations. But not everyone of those vehicles ends up in auction market, obviously, as the consumer face off their loan and take their vehicle. But it's just an indication of a bit of a supply reduction next year. Not to mention other firms, but when you go back, effectively this is back in the 2008 when you think about 24 and 36 month leases, this is about the time 24 and 36 month leases should be coming back. We never got out of the Lease business, but it did reduce. So that's why you're seeing that lease terminations coming down. And I will point out that's also coupled with the Jaguar and the Mazda, Volvo's that have gone away. But other firms kind of got out of the leasing business which will also, I believe, should be reducing supply out there as well.

[Operator Instructions] And your next question comes from the line of Tony Venturino with Federated Investors.

Just a quick question, I don't want to fully get the point here with the credit metrics. But when I look at the Slides 8 and 9, things are ticking up in Q3. Is that seasonality or how do you see that? Are you seeing some maybe deterioration in credit quality and kind of where do you think this goes from here to stay at kind of 40 to 50 basis point level for your lost receivables and your charge off?

Yes, Tony, just to give you a little bit of perspective. Typically the third quarter as far as repossessions go for example or the LTR, it's usually the best quarter and it usually goes up during the year. And we like to say some of it is related to tax refunds in the second quarter were people are able to catch up more. And then we also talk about at the end of the year its usually the worst part of the year. So there's always a bit of seasonality that flows through the business.

So you're not seeing anything outside of a normal seasonality that would give you any concern?

No, and if you look at our loss receivable ratios and there are a number of reasons why they might be down but kind of do everything, where it potentially kind of back to where we were in 2006 and 2007.

And that concludes the Q&A portion of today's call. I'd like to turn the presentation back over to Shawn for closing remarks.

Ladies and gentlemen, that concludes today's call. Thank you for joining us.

And thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.