Have Losses Leveled Off?

Ford Motor Credit chalked up its 35% increase in earnings last quarter to lower losses and higher auction values. But don’t expect that trend to continue in the second half, the Ford Motor Co. captive warned, as loss-improvement will likely slow and auction prices are due to drop.

Here’s the comment from the company’s 2Q10 earnings release today:

“Ford Credit now expects full year 2010 profits to be higher than its 2009 profits. The second half of 2010 will be lower than the first half because Ford Credit expects smaller improvements in the provision for credit losses and depreciation expense for leased vehicles compared with the improvements during the first half. For full year 2011, Ford Credit expects to continue to be solidly profitable but at a lower level than in 2010 primarily reflecting the non-recurrence of lower depreciation expense for leased vehicles and the non-recurrence of credit loss reserve reductions of the same magnitude as 2010.”

For the second quarter, Ford Credit earned $556 million, up from $413 million in 2Q09. Total chargeoffs in the period plunged 70% to $86 million from $285 million in 2Q09, while the depreciation expense for leased vehicles fell 50% to $475 million from $943 million.

Tags: 2q, auction, chargeoffs, earnings, ford, ford-credit, losses