In Short: Why Ford is a better idea

07-12-2017

Federated’s money market investment team views Ford Motor Credit Co. (FMCC) as a solid short-term credit for the following reasons. From 2014 through 2016, light vehicle sales (cars, SUVs and light trucks) in the U.S. averaged 17.1 million units per year, and through June 2017, the average monthly Seasonally Adjusted Annual selling Rate has been 16.9 million units. In those same time periods, Ford Motor Co.’s market share averaged 14.7% and 15% respectively. Put simply: Ford has products consumers want to purchase. Founded in 1959 to support the sale of Ford vehicles, FMCC originates consumer loans and leases and supports dealers via inventory and dealership loans. It has done this profitably for the time periods mentioned above and many others throughout its history. Moreover, Ford has a robust credit process and typically lends to high credit quality customers—the average customer FICO score for a loan or lease is 741, and the average term of a retail loan is 65 months. At the end of this year’s first quarter, its percentage of loan losses to receivables was 0.54% and its percentages of loans over 60 days delinquent was 0.16%. These statistics and many other factors give us comfort that FMCC will repay the commercial paper we purchase.