Ford Motor Credit (FCZ) 10-Q 2005 Q3 Quarterly report

Ford Motor Credit Company

QUARTERLY REPORT

ON FORM 10-Q

for the quarter ended

September 30, 2005

Filed pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

OR

[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

Commission file number 1-6368

Ford Motor Credit Company

(Exact name of registrant as specified in its charter)

Delaware	38-1612444
(State of incorporation)	(I.R.S. employer identification no.)
One American Road, Dearborn, Michigan	48126
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (313) 322-3000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X    No ____

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes ____    No X

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes ____    No X

As of November 1, 2005, the registrant had outstanding 250,000 shares of Common Stock. No voting stock of the registrant is held by non-affiliates of the registrant.

REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction H (1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

EXHIBIT INDEX APPEARS AT PAGE 36

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

For the Periods Ended September 30, 2005 and 2004

(in millions)

	Third Quarter						Nine Months
	2005			2004			2005			2004
	(Unaudited)						(Unaudited)
Financing revenue
Operating leases	$	1,316		$	1,419		$	4,013		$	4,470
Retail		1,026			1,153			3,108			3,305
Interest supplements and other support costs earned from affiliated companies		796			802			2,434			2,539
Wholesale		268			200			795			582
Other		53			54			164			163
Total financing revenue		3,459			3,628			10,514			11,059
Depreciation on vehicles subject to operating leases		(1,125	)		(1,133	)		(3,297	)		(3,682	)
Interest expense		(1,444	)		(1,338	)		(4,256	)		(3,962	)
Net financing margin		890			1,157			2,961			3,415
Other revenue
Investment and other income related to sales of receivables (Note 5)		334			476			1,222			1,510
Insurance premiums earned, net		48			46			152			167
Other income		315			277			628			796
Total financing margin and other revenue		1,587			1,956			4,963			5,888
Expenses
Operating expenses		557			534			1,607			1,567
Provision for credit losses (Note 4)		81			252			87			602
Insurance expenses		48			36			145			147
Total expenses		686			822			1,839			2,316
Income from continuing operations before income taxes		901			1,134			3,124			3,572
Provision for income taxes		324			423			1,137			1,314
Income from continuing operations before minority interests		577			711			1,987			2,258
Minority interests in net income of subsidiaries		—			—			1			1
Income from continuing operations		577			711			1,986			2,257
Income from discontinued operations (Note 10)		—			23			37			62
Gain on disposal of discontinued operations (Note 10)		—			—			4			—
Net income	$	577		$	734		$	2,027		$	2,319

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

3

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)

	September 30,		December 31,
	2005		2004
	(Unaudited)
ASSETS
Cash and cash equivalents (Note 1)	$	18,952	$	12,668
Investments in securities		712		653
Finance receivables, net (Note 2)		92,188		110,851
Net investment in operating leases (Note 3)		22,260		21,866
Retained interest in securitized assets (Note 5)		4,415		9,166
Notes and accounts receivable from affiliated companies		1,415		1,780
Derivative financial instruments (Note 9)		3,076		6,930
Assets of discontinued operations (Note 10)		—		2,186
Other assets		6,148		6,521
Total assets	$	149,166	$	172,621
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Customer deposits, dealer reserves and other	$	1,533	$	1,645
Affiliated companies		1,032		819
Total accounts payable		2,565		2,464
Debt (Note 7)		121,642		144,274
Deferred income taxes, net		8,572		7,593
Derivative financial instruments (Note 9)		964		911
Liabilities of discontinued operations (Note 10)		—		93
Other liabilities and deferred income		4,846		5,802
Total liabilities		138,589		161,137
Minority interests in net assets of subsidiaries		14		13
Stockholder's equity
Capital stock, par value $100 a share, 250,000 shares authorized, issued and outstanding		25		25
Paid-in surplus (contributions by stockholder)		5,117		5,117
Accumulated other comprehensive income		478		855
Retained earnings (Note 8)		4,943		5,474
Total stockholder's equity		10,563		11,471
Total liabilities and stockholder's equity	$	149,166	$	172,621

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

4

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS FROM CONTINUING OPERATIONS

For the Periods Ended September 30, 2005 and 2004

(in millions)

	Nine Months
	2005			2004
	(Unaudited)
Cash flows from operating activities
Income from continuing operations	$	1,986		$	2,257
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Provision for credit losses		87			602
Depreciation and amortization		3,703			4,003
Net gain on sales of finance receivables		(40	)		(123	)
Increase in deferred income taxes		878			990
Decrease in other assets		1,986			3,706
Decrease in other liabilities		(2,164	)		(692	)
All other operating activities		(79	)		(145	)
Net cash provided by operating activities		6,357			10,598
Cash flows from investing activities
Purchase of finance receivables (other than wholesale)		(32,409	)		(39,450	)
Collection of finance receivables (other than wholesale)		29,630			32,065
Purchase of operating lease vehicles		(9,871	)		(9,010	)
Liquidation of operating lease vehicles		6,201			6,633
Net change in wholesale receivables		3,438			1,373
Net change in retained interest		2,497			(302	)
Decrease/(increase) notes receivable with affiliates		274			(27	)
Proceeds from sale of receivables		18,794			8,507
Purchase of investment securities		(400	)		(622	)
Proceeds from sale/maturity of investment securities		336			641
Proceeds from sale of businesses		2,040			412
All other investing activities		1			(485	)
Net cash provided by/(used in) investing activities		20,531			(265	)
Cash flows from financing activities
Proceeds from issuance of long-term debt		16,273			9,077
Principal payments on long-term debt		(28,104	)		(26,668	)
Change in short-term debt, net		(5,873	)		5,136
Cash dividends paid		(2,550	)		(3,400	)
All other financing activities		(30	)		(38	)
Net cash used in financing activities		(20,284	)		(15,893	)
Effect of exchange rate changes on cash and cash equivalents		(320	)		18
Net change in cash and cash equivalents		6,284			(5,542	)
Cash and cash equivalents, beginning of period		12,668			15,698
Cash and cash equivalents, end of period	$	18,952		$	10,156
Supplementary cash flow information
Interest paid	$	4,728		$	4,612
Taxes paid		156			104

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

5

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include Ford Motor Credit Company, its controlled domestic and foreign subsidiaries and joint ventures, and consolidated variable interest entities ("VIEs") in which Ford Motor Credit Company is the primary beneficiary (collectively referred to herein as "Ford Credit", "we", "our" or "us"). Affiliates that we do not consolidate, but for which we have significant influence over operating and financial policies, are accounted for using the equity method. We are an indirect, wholly owned subsidiary of Ford Motor Company (“Ford”).

General

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information, and instructions to the Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, these unaudited financial statements include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods. Results for interim periods should not be considered indicative of results for a full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2004 ("2004 10-K Report"). Certain prior period amounts were reclassified to conform to current period presentation.

In the third quarter of 2005, we recorded an adjustment to correct the accounting related to the amortization of certain loan origination costs involving securitized assets from prior quarters beginning in 2003. The cumulative impact of the adjustment was an increase in retail financing revenue and pre-tax profits of $85 million in the third quarter. The impact on prior periods was not material.

Cash

At September 30, 2005 and December 31, 2004, approximately $1.9 billion and $1.4 billion, respectively, of our cash balance was legally isolated, of which $1.7 billion and $1.3 billion, respectively, supported our consolidated securitization special purpose entities ("SPEs").

6

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 2. FINANCE RECEIVABLES

Net finance receivables at September 30, 2005 and December 31, 2004 were as follows (in millions):

	September 30,			December 31,
	2005			2004
	(Unaudited)
Retail	$	69,589		$	83,719
Wholesale		19,248			23,930
Other		4,903			5,331
Total finance receivables, net of unearned income (a)(b)		93,740			112,980
Less: Allowance for credit losses		(1,552	)		(2,129	)
Finance receivables, net	$	92,188		$	110,851
(a) At September 30, 2005 and December 31, 2004, includes $1.6 billion and $1.8 billion, respectively, of primarily wholesale receivables with entities that are reported as consolidated        subsidiaries of Ford. The consolidated subsidiaries include dealerships that are partially owned by Ford and consolidated as VIEs and also certain overseas affiliates. The      associated vehicles that are being financed by us are reported as inventory on Ford's balance sheet.
(b) At September 30, 2005 and December 31, 2004, includes $23.7 billion and $16.9 billion, respectively, of receivables that have been sold for legal purposes to consolidated             securitization SPEs and are available only for repayment of debt issued by those entities, and to pay other securitization investors and other participants; they are not available to       pay our other obligations or the claims of our other creditors.

NOTE 3. NET INVESTMENT IN OPERATING LEASES

Net investment in operating leases at September 30, 2005 and December 31, 2004 were as follows (in millions):

	September 30,			December 31,
	2005			2004
	(Unaudited)
Vehicles, at cost, including initial direct costs (a)	$	28,790		$	29,756
Less: Accumulated depreciation		(6,311	)		(7,585	)
Less: Allowance for credit losses		(219	)		(305	)
Net investment in operating leases	$	22,260		$	21,866
(a) At September 30, 2005 and December 31, 2004, includes interests in operating leases and the related vehicles (net of accumulated depreciation) of $5.8 billion and $2.5 billion,         respectively, that have been transferred for legal purposes to consolidated securitization SPEs and are available only for repayment of debt issued by those entities, and to pay      other securitization investors and other participants; they are not available to pay our other obligations or the claims of our other creditors.

7

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 4. ALLOWANCE FOR CREDIT LOSSES

Following is an analysis of the allowance for credit losses related to finance receivables and operating leases for the periods ended September 30 (in millions):

	Third Quarter						Nine Months
	2005			2004			2005			2004
	(Unaudited)						(Unaudited)
Balance, beginning of period	$	1,892		$	2,593		$	2,434		$	2,908
Provision for credit losses		81			252			87			602
Deductions
Charge-offs		285			451			879			1,307
Recoveries		(110	)		(116	)		(386	)		(366	)
Net charge-offs		175			335			493			941
Other changes, principally amounts related to finance receivables sold and translation adjustments		27			2			257			61
Net deductions		202			337			750			1,002
Balance, end of period	$	1,771		$	2,508		$	1,771		$	2,508

NOTE 5. SALES OF RECEIVABLES

Retained Interest

Components of retained interest in off-balance sheet securitized assets at September 30, 2005 and December 31, 2004 included the following (in millions):

	September 30,		December 31,
	2005		2004
	(Unaudited)
Interest in sold wholesale receivables and other trust assets	$	2,666	$	6,904
Residual interest in securitization transactions		1,087		756
Subordinated securities		175		875
Restricted cash held for benefit of securitization SPEs		487		503
Senior securities		—		128
Retained interest in securitized assets	$	4,415	$	9,166

A portion of the retained interest in sold wholesale receivables and other trust assets ($800 million and $5.5 billion at September 30, 2005 and December 31, 2004, respectively) represents our undivided interest in wholesale receivables and other trust assets that are available to support the issuance of additional securities by a securitization SPE; the balance represents credit enhancements. Investments in subordinated securities and restricted cash are senior to the residual interest in securitization transactions.

Retained interests are recorded at fair value. For wholesale receivables, book value approximates fair value because of their short-term maturities. The fair value of subordinated and senior securities is estimated based on market prices. In determining the fair value of residual interest in securitization transactions, we discount the present value of the projected cash flows retained at various discount rates based on economic factors in individual countries.

8

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 5. SALES OF RECEIVABLES (Continued)

Investment and Other Income

The following table summarizes the activity related to off-balance sheet sales of receivables reported in investment and other income for the periods ended September 30 (in millions):

	Third Quarter				Nine Months
	2005		2004		2005		2004
	(Unaudited)				(Unaudited)
Net gain on sales of receivables	$	13	$	20	$	40	$	123
Income on interest in sold wholesale receivables and retained securities		68		159		293		459
Servicing fees		101		85		306		283
Income on residual interest and other		152		212		583		645
Investment and other income related to sales of receivables	$	334	$	476	$	1,222	$	1,510

On-Balance Sheet Securitization SPEs

At September 30, 2005 and December 31, 2004, finance receivables of $23.7 billion and $16.9 billion, respectively, have been sold for legal purposes to consolidated securitization SPEs. In addition, at September 30, 2005 and December 31, 2004, interests in operating leases and the related vehicles of $5.8 billion and $2.5 billion, respectively, have been transferred for legal purposes to consolidated securitization SPEs. These receivables and interests in operating leases and the related vehicles are available only for repayment of debt issued by those entities, and to pay other securitization investors and other participants; they are not available to pay our other obligations or the claims of our other creditors. At September 30, 2005 and December 31, 2004, associated debt of $23.9 billion and $16.5 billion, respectively, was issued by the SPEs and included both asset-backed commercial paper and notes payable out of collections on these receivables and interests in operating leases and the related vehicles. This debt is the legal obligation of the SPEs, but for financial statement reporting purposes is reported as debt on our balance sheet.

NOTE 6. VARIABLE INTEREST ENTITIES

We have investments in certain joint ventures deemed to be VIEs of which we are not the primary beneficiary. The risks and rewards associated with our interests in these entities are based primarily on equity ownership percentages. Our maximum exposure (approximately $186 million at September 30, 2005) to any potential losses associated with these VIEs is limited to our equity investments and, where applicable, receivables due from the VIEs.

We also sell, under contractually-committed agreements, finance receivables to bank-sponsored asset-backed commercial paper issuers that are SPEs of the sponsor bank; these SPEs are not consolidated by us. In addition, certain of these SPEs hold notes issued by us that are backed by interests in operating leases and the related vehicles, which reduce the commitment of these SPEs to purchase finance receivables. The outstanding balance of finance receivables and notes that have been sold by us to these SPEs was approximately $5.3 billion at September 30, 2005 and $5.0 billion at December 31, 2004.

9

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 7. DEBT

At September 30, 2005 and December 31, 2004, debt was as follows (in millions):

	Interest Rates
	Average				Weighted-
	Contractual (a)				Average (b)				September 30,			December 31,
	2005		2004		2005		2004		2005			2004
									(Unaudited)
Short-term debt
Asset-backed commercial paper (c)		3.5%		2.1%					$	14,134		$	12,612
Commercial paper - unsecured		4.4%		2.4%						1,897			8,916
Ford Interest Advantage (d)		4.2%		2.5%						7,064			7,718
Other short-term debt (e)		5.7%		4.8%						2,899			2,562
Total short-term debt		4.0%		2.5%		4.4%		2.8%		25,994			31,808
Long-term debt
Senior indebtedness
Notes payable within one year (f)										20,126			29,449
Notes payable after one year (g)										65,845			79,233
Unamortized discount										(64	)		(61	)
Asset-backed debt (h)
Notes payable within one year										2,996			624
Notes payable after one year										6,745			3,221
Total long-term debt (i)		5.7%		5.8%		4.7%		4.4%		95,648			112,466
Total debt		5.3%		5.0%		4.7%		4.0%	$	121,642		$	144,274
(a) Third quarter 2005 and fourth quarter 2004 average contractual interest rates exclude the effects of interest rate swap agreements and facility fees.
(b)Third quarter 2005 and fourth quarter 2004 weighted-average interest rates include the effects of interest rate swap agreements and facility fees.
(c)Amounts represent asset-backed commercial paper issued by FCAR Owner Trust ("FCAR"), a consolidated securitization SPE, which is payable out of collections on the           receivables supporting FCAR. This debt is the legal obligation of FCAR.
(d)The Ford Interest Advantage program consists of our floating rate demand notes.
(e)Includes $89 million and $17 million with affiliated companies at September 30, 2005 and December 31, 2004, respectively.
(f)Includes $23 million and $77 million with affiliated companies at September 30, 2005 and December 31, 2004, respectively.
(g)Includes $124 million and $32 million with affiliated companies at September 30, 2005 and December 31, 2004, respectively.
(h) Asset-backed debt is issued by consolidated securitization SPEs and is payable out of collections on the finance receivables or interests in operating leases and the related       vehicles transferred to the SPEs. This debt is the legal obligation of the securitization SPEs.
(i)Average contractual and weighted-average interest rates for total long-term debt represent the rates for both notes payable within one year and notes payable after one year.

10

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 8. RETAINED EARNINGS AND COMPREHENSIVE INCOME

Retained Earnings

The following table summarizes earnings retained for use in the business for the periods ended September 30 (in millions):

	Third Quarter						Nine Months
	2005			2004			2005			2004
	(Unaudited)						(Unaudited)
Retained earnings, beginning balance	$	5,466		$	6,597		$	5,474		$	6,912
Net income		577			734			2,027			2,319
Dividends (a)		(1,100	)		(1,500	)		(2,558	)		(3,400	)
Retained earnings, ending balance	$	4,943		$	5,831		$	4,943		$	5,831

(a)   Dividends for the first nine months of 2005 included the transfer of a Ford Credit affiliate to Ford, with a net book value of $8 million; the transfer was completed in the first quarter of 2005.

Comprehensive Income

The following table summarizes comprehensive income for the periods ended September 30 (in millions):

	Third Quarter					Nine Months
	2005			2004		2005			2004
	(Unaudited)					(Unaudited)
Net income	$	577		$	734	$	2,027		$	2,319
Other comprehensive income		(24	)		50		(377	)		37
Total comprehensive income	$	553		$	784	$	1,650		$	2,356

Comprehensive income includes foreign currency translation adjustments, unrealized gains and losses on investments in securities, unrealized gains and losses on certain derivative instruments, and unrealized gains and losses on retained interests in securitized assets (unrealized amounts are net of related tax effects).

11

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS

Income Statement Impact

The ineffective portion of both fair value and cash flow hedges, amortization of mark-to-market adjustments associated with hedging relationships that have been terminated, and mark-to-market adjustments that reflect changes in exchange and interest rates for non-designated hedging activity are recorded in other income and are shown for the periods ended September 30 (in millions):

	Third Quarter				Nine Months
	2005		2004		2005			2004
	(Unaudited)				(Unaudited)
Income/(loss) from continuing operations before income taxes	$	30	$	99	$	(70	)	$	234

Balance Sheet Impact

The fair value of derivatives reflects the price that a third party would be willing to pay or receive in arm's length transactions for assuming our position in the derivatives transactions and includes mark-to-market adjustments to reflect the effects of changes in interest rates, accrued interest and, for derivatives with a foreign currency component, a revaluation adjustment. The following table summarizes, at September 30, 2005 and December 31, 2004, the estimated fair value of our derivative financial instruments, taking into consideration the effects of legally enforceable netting agreements, which allow us to settle positive and negative positions with the same counterparty on a net basis (in millions):

	September 30, 2005						December 31, 2004
	Fair Value Assets			Fair Value Liabilities			Fair Value Assets			Fair Value Liabilities
	(Unaudited)
Foreign currency swaps	$	1,240		$	761		$	4,201		$	816
Interest rate swaps		2,022			81			3,074			180
Forwards and options (a)		—			308			—			260
Impact of netting agreements		(186	)		(186	)		(345	)		(345	)
Total derivative financial instruments	$	3,076		$	964		$	6,930		$	911

(a)   Includes internal forward contracts between Ford Credit and an affiliated company.

Period-to-period changes in the derivative asset and liability amounts may be impacted by net interest or foreign currency settlements, changes in foreign exchange and interest rates, and the notional amount of derivatives outstanding.

12

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 10. DISPOSITIONS AND OTHER ACTIONS

Dispositions

During the fourth quarter of 2004, we committed to a plan to sell Triad Financial Corporation, our operation in the United States that specialized in automobile retail installment sales contracts with borrowers who generally would not be expected to qualify, based on their credit worthiness, for traditional financing sources such as those provided by commercial banks or automobile manufacturers' affiliated finance companies. In April 2005, we completed the sale of this business and recognized a $4 million after-tax gain on disposal of discontinued operations.

Income from discontinued operations was $37 million and $62 million for the first nine months of 2005 and 2004, respectively, and $23 million for the third quarter of 2004. At December 31, 2004, assets of discontinued operations totaled $2.2 billion.

Sales Branch Integration

In 2004, we announced a plan to create an integrated sales platform in the United States and Canada over the next two years that would support sales activities for Ford Credit and our other business operating units. The plan included the consolidation of regional sales offices and an integration of branch locations. We recognized cumulative pre-tax charges of $28 million as of September 30, 2005, including $18 million in the first nine months of 2005, related to the plan. The costs associated with the sales branch integration were charged to operating expenses.

The table below summarizes the pre-tax charges incurred, the related liability at September 30, 2005, and the estimated total costs for the sales branch integration (in millions):

	Nine Months
	2005
	(Unaudited)
Liability at December 31, 2004	$	10
Accrued in 2005		18
Paid in 2005		(13	)
Liability at September 30, 2005	$	15
Estimated total costs	$	63

Employee Separation Action

We completed a separation program for North American salaried employees announced in April 2005. We recognized pre-tax charges of $18 million during the first nine months of 2005 as a result of this action (including costs for retirement plan and postretirement health care and life insurance benefits).

13

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 11. SEGMENT INFORMATION

We divide our operating segments based on geographic regions: the North America Segment (includes operations in the United States and Canada) and the International Segment (includes operations in all other countries). We measure the performance of our segments primarily on an income before income taxes basis, after excluding the impact to earnings from hedge ineffectiveness, and other related adjustments. These adjustments are included in unallocated risk management and excluded in assessing segment performance because our risk management activities are carried out on a centralized basis at the corporate level, with only certain elements allocated to our segments. The segments are presented on a managed basis, which includes on-balance sheet receivables and securitized off-balance sheet receivables activity. The effect of off-balance sheet securitizations is included in unallocated/eliminations.

Key operating data for our operating segments for the periods ended September 30 were as follows (in millions):

					Unallocated/Eliminations
	North		Inter-		Unallocated		Effect of
	America		national		Risk		Sales of
	Segment		Segment		Management		Receivables			Total			Total
	(Unaudited)
Third Quarter 2005
Revenue	$	3,477	$	961	$	30	$	(312	)	$	(282	)	$	4,156
Income
Income from continuing operations before income taxes		645		226		30		—			30			901
Provision for income taxes		234		79		11		—			11			324
Income from continuing operations		411		147		19		—			19			577
Other disclosures
Depreciation on vehicles subject to operating leases		981		144		—		—			—			1,125
Interest expense		1,325		435		—		(316	)		(316	)		1,444
Provision for credit losses		77		4		—		—			—			81
Third Quarter 2004
Revenue	$	3,634	$	920	$	99	$	(226	)	$	(127	)	$	4,427
Income
Income from continuing operations before income taxes		853		182		99		—			99			1,134
Provision for income taxes		324		64		35		—			35			423
Income from continuing operations		529		118		64		—			64			711
Other disclosures
Depreciation on vehicles subject to operating leases		1,022		111		—		—			—			1,133
Interest expense		1,108		416		—		(186	)		(186	)		1,338
Provision for credit losses		221		31		—		—			—			252

14

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 11. SEGMENT INFORMATION (Continued)

					Unallocated/Eliminations
	North		Inter-		Unallocated			Effect of
	America		national		Risk			Sales of
	Segment		Segment		Management			Receivables			Total			Total
	(Unaudited)
First Nine Months 2005
Revenue	$	10,532	$	2,954	$	(70	)	$	(900	)	$	(970	)	$	12,516
Income
Income from continuing operations before income taxes		2,469		725		(70	)		—			(70	)		3,124
Provision for income taxes		909		254		(26	)		—			(26	)		1,137
Income from continuing operations		1,560		471		(45	)		—			(45	)		1,986
Other disclosures
Depreciation on vehicles subject to operating leases		2,943		354		—			—			—			3,297
Interest expense		3,764		1,344		—			(852	)		(852	)		4,256
Provision for credit losses		39		48		—			—			—			87
Finance receivables (including net investment in operating leases)		112,241		37,018		103			(34,914	)		(34,811	)		114,448
Total assets		138,858		40,704		103			(30,499	)		(30,396	)		149,166
First Nine Months 2004
Revenue	$	11,351	$	2,880	$	234		$	(933	)	$	(699	)	$	13,532
Income
Income from continuing operations before income taxes		2,710		628		234			—			234			3,572
Provision for income taxes		1,013		220		81			—			81			1,314
Income from continuing operations		1,697		408		152			—			152			2,257
Other disclosures
Depreciation on vehicles subject to operating leases		3,317		365		—			—			—			3,682
Interest expense		3,312		1,314		—			(664	)		(664	)		3,962
Provision for credit losses		509		93		—			—			—			602
Finance receivables (including net investment in operating leases)		126,679		37,979		307			(36,311	)		(36,004	)		128,654
Total assets		144,035		46,984		307			(27,243	)		(26,936	)		164,083

15

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 12. GUARANTEES AND INDEMNIFICATIONS

The fair values of guarantees and indemnifications issued since December 31, 2002 are recorded in the financial statements and are de minimis.

At September 30, 2005, the following guarantees and indemnifications were issued and outstanding:

Guarantees of certain obligations of unconsolidated and other affiliates: In some cases, we have guaranteed debt and other financial obligations of unconsolidated affiliates, including joint ventures and Ford. Expiration dates vary, and guarantees will terminate on payment and/or cancellation of the obligation. A payment would be triggered by failure of the guaranteed party to fulfill its obligation covered by the guarantee. In some circumstances, we are entitled to recover from Ford or an affiliate of Ford amounts paid by us under the guarantee. However, our ability to enforce these rights is sometimes stayed until the guaranteed party is paid in full. The maximum potential payments under these guarantees total approximately $260 million.

Indemnifications: We regularly evaluate the probability of having to incur costs associated with indemnifications contained in contracts to which we are a party, and have accrued for expected losses that are probable and for which a loss can be estimated. During the third quarter of 2005, there were no significant changes to our indemnifications.

16

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Third Quarter 2005 Compared with Third Quarter 2004

In the third quarter of 2005, net income was down $157 million compared with a year ago. Our income from continuing operations before income taxes was down $233 million. The decrease in earnings primarily reflected higher borrowing costs and the impact of lower receivable levels, offset partially by improved credit loss performance. The impact of Hurricane Katrina was not material to our results. Results of our operations by business segment for the third quarter of 2005 and 2004 are shown below:

	Third Quarter
							2005 Over/(Under)
	2005			2004			2004
Income from continuing operations before income taxes	(in millions)
North America segment	$	645		$	853		$	(208	)
International segment		226			182			44
Unallocated risk management		30			99			(69	)
Income from continuing operations before income taxes		901			1,134			(233	)
Provision for income taxes and minority interests		(324	)		(423	)		99
Income/gain from discontinued operations		—			23			(23	)
Total net income	$	577		$	734		$	(157	)

The decrease in North America segment earnings primarily reflected the reasons described above.

The increase in International segment income primarily reflected a gain on sale of previously impaired compensation bonds in Argentina. These bonds were issued by the Argentine government in late 2001 and were intended to compensate entities for government-mandated devaluation of the peso to provide debt relief to consumers.

The decrease in unallocated risk management income reflected less favorable market valuation of derivative instruments and associated exposures.

First Nine Months 2005 Compared with First Nine Months 2004

In the first nine months of 2005, net income was down $292 million compared with a year ago. Our income from continuing operations before income taxes was down $448 million. The decrease in earnings primarily resulted from the same causal factors described above for the third quarter, as well as the unfavorable market valuation of derivative instruments and associated exposures. Results of our operations by business segment for the first nine months of 2005 and 2004 are shown below:

	Nine Months
							2005 Over/(Under)
	2005			2004			2004
Income from continuing operations before income taxes	(in millions)
North America segment	$	2,469		$	2,710		$	(241	)
International segment		725			628			97
Unallocated risk management		(70	)		234			(304	)
Income from continuing operations before income taxes		3,124			3,572			(448	)
Provision for income taxes and minority interests		(1,138	)		(1,315	)		177
Income/gain from discontinued operations		41			62			(21	)
Total net income	$	2,027		$	2,319		$	(292	)

The decrease in North America segment earnings primarily reflected the reasons described for the third quarter.

The increase in International segment income primarily reflected improved credit loss performance, a gain on sale of compensation bonds in Argentina, as noted above, and favorable changes in currency exchange rates. The increases were offset partially by the impact of higher borrowing costs.

17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Contract Placement Volume and Financing Share

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

	Third Quarter				Nine Months
	2005		2004		2005		2004
	(in thousands)
Worldwide Retail installment		516		722		1,690		1,943
Operating and finance leases		124		126		396		377
Total contract placement volume		640		848		2,086		2,320
North America segment United States		335		549		1,169		1,387
Canada		52		46		134		134
Total North America segment		387		595		1,303		1,521
International segment Europe		179		186		571		596
Other international		74		67		212		203
Total International segment		253		253		783		799
Total contract placement volume		640		848		2,086		2,320

Shown below are our financing shares of new Ford, Lincoln and Mercury brand vehicles sold by dealers in the United States and Ford brand vehicles sold by dealers in Europe. Also shown below are our wholesale financing shares of new Ford, Lincoln and Mercury brand vehicles acquired by dealers in the United States, excluding fleet, and of new Ford brand vehicles acquired by dealers in Europe:

	Third Quarter				Nine Months
	2005		2004		2005		2004
United States Financing share - Ford, Lincoln and Mercury Retail installment and lease		28%		55%		37%		44%
Wholesale		81		84		81		84
Europe Financing share - Ford Retail installment and lease		28%		29%		28%		28%
Wholesale		94		97		96		97

North America Segment. In the third quarter of 2005, our total contract placement volumes were 387,000 contracts, down 208,000 contracts from a year ago. This decline, as well as the decline in retail financing share, primarily reflected the impact of Ford's marketing program that offered employee pricing to all customers (the "Family Plan"). The Family Plan replaced Ford's traditional automotive marketing programs that emphasized the use of our financing.

In the first nine months of 2005, our contract placement volumes were 1.3 million down 218,000 from a year ago, reflecting the same causal factors described above for the third quarter.

International Segment. In the third quarter of 2005, our total contract placement volumes were 253,000 contracts, about the same as a year ago.

In the first nine months of 2005, our total International contract placement volumes were 783,000, down 16,000 contracts from a year ago, reflecting lower volumes in Europe.

18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Financial Condition

Finance Receivables and Operating Leases

Our financial condition is impacted significantly by the level of our receivables, which are shown below:

	September 30,		December 31,
	2005		2004
Receivables	(in billions)
On-Balance Sheet
(including on-balance sheet securitizations)
Finance receivables
Retail installment	$	68.2	$	81.7
Wholesale		19.1		23.8
Other		4.9		5.3
Total finance receivables, net (a)		92.2		110.8
Net investment in operating leases (a)		22.2		21.9
Total on-balance sheet	$	114.4	$	132.7
Memo: Allowance for credit losses included above	$	1.8	$	2.4
Securitized Off-Balance Sheet
Finance receivables
Retail installment	$	18.8	$	16.7
Wholesale		16.2		18.9
Other		—		—
Total finance receivables, net		35.0		35.6
Net investment in operating leases		—		—
Total securitized off-balance sheet	$	35.0	$	35.6
Managed
Finance receivables
Retail installment	$	87.0	$	98.4
Wholesale		35.3		42.7
Other		4.9		5.3
Total finance receivables, net		127.2		146.4
Net investment in operating leases		22.2		21.9
Total managed	$	149.4	$	168.3
Serviced	$	152.8	$	172.3

(a)   At September 30, 2005 and December 31, 2004, finance receivables of $23.7 billion and $16.9 billion, respectively, have been sold for legal purposes to consolidated securitization SPEs. In addition, at September 30, 2005 and December 31, 2004, interests in operating leases and the related vehicles of $5.8 billion and $2.5 billion, respectively, have been transferred for legal purposes to consolidated securitization SPEs. These receivables and interests in operating leases and the related vehicles are available only for repayment of debt issued by those entities, and to pay other securitization investors and other participants; they are not available to pay our other obligations or the claims of our other creditors.

On-balance sheet, managed and serviced receivables decreased from year-end 2004 primarily reflecting lower retail contract placement volumes and wholesale inventory levels.

19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Credit Risk

Credit risk is the possibility of loss from a customer’s failure to make payments according to contract terms. Credit risk has a significant impact on our business. We actively manage the credit risk of our consumer and non-consumer portfolios to balance our level of risk and return. The allowance for credit losses reflected on our balance sheet is our estimate of the credit losses for receivables and leases that are impaired as of the date of our balance sheet.

Credit Loss Metrics

Worldwide

The following table shows worldwide credit losses net of recoveries ("charge-offs") for the various categories of financing during the periods indicated. Reacquired receivables reflect the amount of receivables that resulted from the accounting consolidation of FCAR Owner Trust ("FCAR") in the second quarter of 2003. The loss-to-receivables ratios, which equal annualized charge-offs divided by the average amount of receivables outstanding for the period, are shown below for our on-balance sheet and managed portfolios.

	Third Quarter						Nine Months
	2005			2004			2005			2004
Charge-offs	(in millions)
On-Balance Sheet
Retail installment and lease	$	181		$	325		$	488		$	923
Wholesale		(6	)		10			10			19
Other		—			—			(5	)		(1	)
Total on-balance sheet	$	175		$	335		$	493		$	941
Reacquired Receivables (retail)	$	4		$	19		$	18		$	57
Securitized Off-Balance Sheet
Retail installment and lease	$	32		$	40		$	98		$	193
Wholesale		—			1			—			1
Other		—			—			—			—
Total securitized off-balance sheet	$	32		$	41		$	98		$	194
Managed
Retail installment and lease	$	217		$	384		$	604		$	1,173
Wholesale		(6	)		11			10			20
Other		—			—			(5	)		(1	)
Total managed	$	211		$	395		$	609		$	1,192
Loss-to-Receivables Ratios
On-Balance Sheet
Retail installment and lease		0.77	%		1.27	%		0.68	%		1.21	%
Wholesale		(0.13	)		0.19			0.06			0.11
Total including other		0.58	%		1.04	%		0.53	%		0.97	%
Managed
Retail installment and lease		0.77	%		1.26	%		0.70	%		1.26	%
Wholesale		(0.07	)		0.11			0.03			0.06
Total including other		0.55	%		0.94	%		0.50	%		0.92	%

Charge-offs and loss-to-receivable ratios for our on-balance sheet, securitized off-balance sheet and managed portfolios declined from a year ago, primarily reflecting fewer repossessions and a lower average loss per repossession. These improvements resulted from a higher quality retail installment and lease portfolio, higher used vehicle prices and enhancements to our collection practices. Lower levels of receivables also contributed to reduced charge-offs.

20

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Ford, Lincoln and Mercury Brand Retail Installment and Operating Lease

The following table shows the credit loss metrics for our Ford, Lincoln and Mercury brand U.S. retail installment sale and lease portfolio. This portfolio was approximately 60% of our worldwide-managed portfolio of retail installment receivables and net investment in operating leases at September 30, 2005. Trends and causal factors are generally consistent with the worldwide results described in the preceding section.

	Third Quarter						Nine Months
	2005			2004			2005			2004
On-Balance Sheet
Charge-offs (in millions)	$	126		$	198		$	306		$	550
Loss-to-receivables ratios		0.94	%		1.29	%		0.74	%		1.22	%
Managed
Charge-offs (in millions)	$	152		$	245		$	388		$	729
Loss-to-receivables ratios		0.91	%		1.32	%		0.75	%		1.30	%
Other Metrics — Serviced
Repossessions (in thousands)		28			42			83			125
Repossession ratios (a)		2.42	%		3.09	%		2.30	%		3.01	%
Average loss per repossession	$	6,300		$	6,450		$	6,100		$	6,600
New bankruptcy filings (in thousands)		20			20			58			66
Over-60 day delinquency ratio (b)		0.19	%		0.19	%		0.14	%		0.19	%

(a)Repossessions as a percent of the average number of accounts outstanding during the periods.                    

(b)Delinquencies are expressed as a percent of the end-of-period accounts outstanding for non-bankrupt accounts.

Allowance for Credit Losses

Our allowance for credit losses and our allowance for credit losses as a percentage of end-of-period receivables for our on-balance sheet portfolio are shown below:

	September 30,			December 31,
	2005			2004
	(in billions)
Allowance for Credit Losses Retail installment and lease	$	1.7		$	2.3
Wholesale		0.1			0.1
Other		0.0			0.0
Total allowance for credit losses		1.8			2.4
As a Percentage of End-of-Period Receivables
Retail installment and lease		1.78	%		2.14	%
Wholesale		0.52			0.55
Other		0.74			0.74
Total		1.52	%		1.80	%

The allowance for credit losses decreased approximately $600 million from year-end, primarily reflecting improved charge-off performance and the impact of lower receivable levels.

21

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Residual Risk

We are exposed to residual risk on operating leases, Red Carpet Option contracts and similar balloon payment products where the customer may return the financed vehicle to us. Residual risk is the possibility that the amount we obtain from returned vehicles will be less than our estimate of the expected residual value for the vehicle.

Retail Operating Lease Experience

We use various statistics to monitor our residual risk:

•Placement volume measures the number of leases we purchase in a given period.

•Termination volume measures the number of vehicles for which the lease has ended in the given period.

•Return volume reflects the number of vehicles returned to us by customers at lease end.

The following table shows operating lease placement, termination and return volumes for our North America segment, which accounted for 93% of our total investment in operating leases at September 30, 2005:

	Third Quarter				Nine Months
	2005		2004		2005		2004
	(in thousands)
Placements		81		91		265		258
Terminations		106		114		338		366
Returns		72		73		217		233

In the third quarter of 2005, North America placement volumes were down 10,000 units compared with the same period a year ago, primarily reflecting a lower retail lease financing share of Ford, Lincoln and Mercuryvehicles as a result of the Family Plan program.

In the first nine months of 2005, placement volumes were up 7,000 units compared with the same period a year ago, primarily reflecting increased leasing of Mazda vehicles. Termination and return volumes decreased 28,000 units and 16,000 units, respectively, compared with a year ago, primarily reflecting lower placement volumes in 2002 and 2003.

The following table shows the disposal channels we use to sell vehicles returned to us at lease termination:

	Third Quarter				Nine Months
	2005		2004		2005		2004
Auctions		83%		90%		83%		92%
Other Channels		17		10		17		8

The increase in vehicles disposed of through other channels primarily reflected the impact of increased Volvo, Jaguar and Land Rover brand U.S. dealers participating in remarketing programs.

22

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Credit Ratings

Our short- and long-term debt is rated by four credit rating agencies designated as nationally recognized statistical rating organizations ("NRSROs") by the Securities and Exchange Commission:

•Dominion Bond Rating Service Limited ("DBRS");

•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 markets, locally recognized rating agencies also rate us. A credit rating reflects an assessment by the rating agency of the credit risk associated with particular securities we issue, based on information provided by Ford, other sources, and us. Credit ratings are not recommendations to buy, sell or hold securities and are subject to revision or withdrawal at any time by the assigning rating agency. Each rating agency may have different criteria for evaluating company risk and, therefore, ratings should be evaluated independently for each rating agency. Lower credit ratings generally result in higher borrowing costs and reduced access to capital markets. Our credit ratings from all of the NRSROs are closely associated with their opinions on Ford. Our lower ratings over the past several years are primarily a reflection of those opinions, including concerns regarding Ford's automotive cash flow and profitability, declining market share, excess industry capacity, industry pricing pressure and rising healthcare costs.

In July 2005, Fitch lowered our long-term rating to BBB- from BBB, affirmed our short-term rating at F2 and maintained our outlook at Negative. In August 2005, Moody's lowered our long-term rating from Baa2 to Baa3, lowered our short-term rating from P2 to P3 and maintained our outlook at Negative. In October 2005, DBRS lowered our long-term rating to BBB (low) from BBB, lowered our short-term rating to R-2 (low) from R-2 (middle) and maintained our trend at Negative. In October 2005, S&P placed our long- and short-term ratings on CreditWatch with negative implications.

The following chart summarizes our credit ratings and the outlook assigned by the NRSROs since October 2002:

DBRS

Fitch

Moody's

S&P

Date

Long-Term

Short-Term

Trend

Long-Term

Short-Term

Outlook

Long-Term

Short-Term

Outlook

Long-Term

Short-Term

Outlook

Oct. 2002

A (low)

R-1 (low)

Negative

BBB+

F2

Negative

A3

P-2

Negative

BBB

A-2

Negative

Apr. 2003

BBB (high)

R-1 (low)

Stable

BBB+

F2

Negative

A3

P-2

Negative

BBB

A-2

Negative

Nov. 2003

BBB (high)

R-1 (low)

Stable

BBB+

F2

Negative

A3

P-2

Negative

BBB-

A-3

Stable

May 2004

BBB (high)

R-1 (low)

Stable

BBB+

F2

Stable

A3

P-2

Negative

BBB-

A-3

Stable

Apr. 2005

BBB (high)

R-2 (high)

Negative

BBB+

F2

Negative

A3

P-2

Negative

BBB-

A-3

Negative

May 2005

BBB (high)

R-2 (high)

Negative

BBB

F2

Negative

Baa2

P-2

Negative

BB+

B-1

Negative

June 2005

BBB (high)

R-2 (high)

Negative

BBB

F2

Negative

Baa2

P-2

Negative

BB+

B-1

Negative

July 2005

BBB (high)

R-2 (high)

Negative

BBB-

F2

Negative

Baa2

P-2

Negative

BB+

B-1

Negative

Aug. 2005

BBB

R-2 (middle)

Negative

BBB-

F2

Negative

Baa3

P-3

Negative

BB+

B-1

Negative

Oct. 2005

BBB (low)

R-2 (low)

Negative

BBB-

F2

Negative

Baa3

P-3

Negative

BB+*

B-1*

Watch Negative

*Rating on CreditWatch with negative implications.

23

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Funding

Our outstanding debt and securitized off-balance sheet funding was as follows on the dates indicated:

	September 30,			December 31,
	2005			2004
	(in billions)
Debt
Asset-backed commercial paper (a)	$	14.1		$	12.6
Commercial paper — unsecured		1.9			8.9
Ford Interest Advantage (b)		7.1			7.7
Other short-term debt		2.9			2.6
Total short-term debt		26.0			31.8
Unsecured long-term debt (including notes payable within one year)		85.9			108.6
Asset-backed long-term debt (including notes payable within one year) (c)		9.7			3.9
Total debt		121.6			144.3
Securitized Off-Balance Sheet Funding
Securitized off-balance sheet portfolio		35.0			35.6
Retained interest		(4.4	)		(9.2	)
Total securitized off-balance sheet funding		30.6			26.4
Total debt plus securitized off-balance sheet funding	$	152.2		$	170.7
Ratios Credit lines to total unsecured commercial paper		>100	%		84	%
Credit lines to total unsecured commercial paper (including Ford bank lines)		>100			>100
Securitized funding to managed receivables		36			26
Short-term debt and notes payable within one year to total debt		40			43
Short-term debt and notes payable within one year to total capitalization		37			40

(a)   Amounts represent asset-backed commercial paper issued by FCAR, a consolidated securitization SPE, which is payable out of collections on the receivables supporting FCAR. This debt is the legal obligation of FCAR.

(b)   The Ford Interest Advantage program consists of our floating rate demand notes.

(c)   Asset-backed debt is issued by consolidated securitization SPEs and is payable out of collections on the finance receivables or interests in operating leases and the related vehicles transferred to the SPEs. This debt is the legal obligation of the securitization SPEs.

At September 30, 2005, outstanding unsecured commercial paper was down $7.0 billion from year-end 2004, reflecting decreased investor demand. At September 30, 2005, total debt plus securitized off-balance sheet funding was down $18.5 billion compared with year-end 2004, primarily reflecting repayment of maturing debt and lower funding requirements due to lower asset levels. The ratio of total credit lines to total unsecured commercial paper (including Ford bank lines) remained at more than 100% at the end of the third quarter of 2005.

During the third quarter of 2005, we issued $4.1 billion of public and private long-term debt with maturities of one to ten years, including $1.5 billion of unsecured institutional funding, approximately $100 million of unsecured retail bonds and $2.5 billion in asset-backed funding. In addition, we realized proceeds of $2.6 billion from public and private sales of receivables in off-balance sheet securitizations. Our present full-year 2005 funding plans are in the range of $20 - $24 billion for public funding and $18 - $23 billion for private transactions. At September 30, 2005, we have completed approximately $20 billion of public funding and approximately $14 billion through private transactions.

As a result of credit rating downgrades, our unsecured borrowing costs have increased and our access to the unsecured debt markets has become more restricted. In response, we have increased our use of securitization and other asset-related sources of liquidity. Over time, we may also need to reduce further the amount of receivables we purchase. A significant reduction in the amount of purchased receivables would significantly reduce our ongoing profits, and could adversely affect our ability to support the sale of Ford vehicles.

24

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Liquidity

Maintaining liquidity through access to diverse funding sources has always been a key factor in our funding strategy. We define liquidity as our ability to meet our funding needs, which includes purchasing retail installment sale and lease contracts, funding other financing programs and repaying our debt obligations as they become due, or earlier under certain debt retirement programs. Our policy is to have sufficient cash and cash equivalents, unused bank-sponsored commercial paper issuer ("conduit") capacity, securitizable assets and back-up credit facilities to provide liquidity for all of our short-term funding obligations.

In addition to unsecured debt offerings (discussed above) and sales of receivables (discussed below), we have access to the following other sources of liquidity:

Cash and Cash Equivalents. At September 30, 2005, our cash and cash equivalents totaled $19.0 billion, compared with $12.7 billion at year-end 2004. In the normal course of our funding activities, we may generate more proceeds than are necessary for our immediate funding needs. These excess amounts are maintained primarily as highly liquid investments, which provide liquidity for our short-term funding needs and give us flexibility in the use of our other funding programs. Our cash and cash equivalents include short-term U.S. Treasury bills, federal agency discount notes, A-1/P-1 (or higher) rated commercial paper, and bank time deposits with investment grade institutions. The average term of these investments is typically less than 60 days. We monitor our cash levels daily and adjust them as necessary to support our short-term liquidity needs. At September 30, 2005, approximately $1.9 billion of our total cash balance, which primarily supported our consolidated securitization SPEs, was legally isolated, compared with $1.4 billion at year-end 2004.

Conduit Program. We have entered into agreements with a number of conduits under which such conduits are contractually-committed to purchase from us, at our option, up to $16.1 billion of receivables in the aggregate as of September 30, 2005. This is an extremely liquid funding source, as we are able to access funds in two days. These agreements have varying maturity dates between June 22, 2006 and October 26, 2006 and, in the past, have been renewed on an annual basis. Our ability to access these conduits is subject to our having a sufficient amount of securitizable assets. As of September 30, 2005, approximately $4.9 billion of these conduit commitments were in use. These agreements do not contain restrictive financial covenants (for example, debt-to-equity limitations or minimum net worth requirements) or material adverse change clauses that would relieve the conduit of its obligation to purchase receivables. However, they do contain provisions that could terminate the unused portion of the purchase commitments if the performance of the sold receivables deteriorates beyond specified levels. Based on our experience and knowledge as servicer of the securitized assets, we do not expect any commitments to be terminated due to these performance requirements. None of these arrangements may be terminated based on a change in our credit rating.

Whole-Loan Sale Transactions. We have a program to sell retail installment sale contracts in transactions where we retain no interest and thus no exposure to the sold assets. These transactions, which we refer to as "whole-loan sale transactions," provide liquidity by enabling us to reduce our managed receivables and our need for funding to support those receivables. Whole-loan sale transactions totaled $11.8 billion in the 2002 through 2005 period. We did not sell any receivables in whole-loan sale transactions during the third quarter of 2005. Total outstanding receivables sold in whole-loan transactions at September 30, 2005 were $3.4 billion.

25

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Back-up Credit Facilities

Our back-up credit facilities were as follows on the dates indicated:

	September 30,			December 31,
	2005			2004
	(in billions)
Back-up Credit Facilities
Ford Credit	$	3.7		$	4.3
FCE Bank plc		2.4			3.2
Ford bank lines (available at Ford’s option)		6.5	��		6.9
Asset-backed commercial paper lines		18.8			18.0
Total back-up facilities		31.4			32.4
Drawn amounts		(0.8	)		(0.8	)
Total available back-up facilities	$	30.6		$	31.6

For additional funding and to maintain liquidity, we and our majority-owned subsidiaries, including FCE Bank plc ("FCE"), have contractually-committed credit facilities with financial institutions that totaled approximately $6.1 billion at September 30, 2005. This includes $3.7 billion of Ford Credit facilities ($3.1 billion global and approximately $600 million non-global) and $2.4 billion of FCE facilities ($2.3 billion global and approximately $100 million non-global). Approximately $800 million of the total facilities were in use at September 30, 2005. These facilities have various maturity dates. Of the $6.1 billion, about 32% of these facilities are committed through June 30, 2010. Our global credit facilities may be used at our option by any of our direct or indirect, majority-owned subsidiaries. FCE's global credit facilities may be used at its option by any of its direct or indirect, majority-owned subsidiaries. We or FCE, as the case may be, will guarantee any such borrowings. All of the global credit facilities have substantially identical contract terms (other than commitment amounts) and are free of material adverse change clauses and restrictive financial covenants (for example, debt-to-equity limitations, minimum net worth requirements and credit rating triggers) that could limit our ability to borrow.

At Ford's option, approximately $6.5 billion of Ford's global lines of credit may be used by any of its direct or indirect, majority-owned subsidiaries on a guaranteed basis. Ford also has the ability to transfer, on a non-guaranteed basis, $2.2 billion of such credit lines to us and approximately $500 million to FCE.

Additionally, at September 30, 2005, banks provided $18.8 billion of contractually-committed liquidity facilities exclusively to support our two asset-backed commercial paper programs; $18.3 billion supported our FCAR program and $500 million supported the Motown Notes^SM portion of our off-balance sheet wholesale securitization program ("Motown Notes"). The FCAR and Motown Notes programs must be supported by liquidity facilities equal to at least 100% and 5%, respectively, of their face amount. At September 30, 2005, about $18.0 billion of FCAR's bank credit facilities were available to support FCAR's asset-backed commercial paper or subordinated debt. The remaining $300 million of available credit lines could be accessed for additional funding if FCAR issued additional subordinated debt. Utilization of these facilities is subject to conditions specific to each program and our having a sufficient amount of securitizable assets. At September 30, 2005, the outstanding balances were approximately $14.1 billion for the FCAR program and $8.5 billion for the Motown Notes program.

26

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Off-Balance Sheet Sales of Receivables Activity

The following table illustrates our worldwide receivable sales activity in off-balance sheet securitizations and whole-loan sale transactions for the periods indicated:

	Third Quarter						Nine Months
	2005			2004			2005			2004
	(in billions)
Net Proceeds from Receivable Sales
North America segment
Public retail	$	2.2		$	—		$	9.7		$	1.7
Conduit		—			0.5			2.8			1.2
Motown Notes program		—			—			1.4			1.0
Public wholesale		—			3.0			2.3			3.0
Total North America segment		2.2			3.5			16.2			6.9
International segment
Europe
Public		0.3			0.1			0.7			0.8
Conduit		0.1			0.2			0.4			0.4
Total Europe		0.4			0.3			1.1			1.2
Asia-Pacific		—			—			—			0.4
Total International segment		0.4			0.3			1.1			1.6
Net proceeds		2.6			3.8			17.3			8.5
Whole-loan sales		—			—			1.5			—
Total net proceeds		2.6			3.8			18.8			8.5
Retained interest and other		(0.2	)		(2.9	)		(3.0	)		(3.5	)
Total receivables sold		2.4			0.9			15.8			5.0
Prior period sold receivables, net of paydown activity		36.0			40.1			22.6			36.0
Total sold receivables outstanding at the end of the period		38.4			41.0			38.4			41.0
Less: Receivables outstanding in whole-loan sale transactions		(3.4	)		(4.7	)		(3.4	)		(4.7	)
Total securitized off-balance sheet receivables	$	35.0		$	36.3		$	35.0		$	36.3

The Effect of Off-Balance Sheet Receivables Sales Activity on Financial Reporting

We report the following items in Investment and other income related to sales of receivables on our income statement:

•Net gain on sales of finance receivables,

•Income on interest in sold wholesale receivables and retained securities,

•Servicing fee income from sold receivables that we continue to service, and

•Income from residual interest and other income.

27

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

The following table summarizes activity related to off-balance sheet sales of receivables reported in Investment and other income related to sales of receivables for the periods indicated:

	Third Quarter						Nine Months
	2005			2004			2005			2004
	(in millions)
Net gain on sales of receivables	$	13		$	20		$	40		$	123
Income on interest in sold wholesale receivables and retained securities		68			159			293			459
Servicing fees		101			85			306			283
Income on residual interest and other		152			212			583			645
Investment and other income related to sales of receivables		334			476			1,222			1,510
Less: Whole-loan income		(20	)		(15	)		(57	)		(71	)
Income related to off-balance sheet securitizations	$	314		$	461		$	1,165		$	1,439
Memo:
Finance receivables sold (in billions)	$	2.4		$	0.9		$	15.8		$	5.0
Servicing portfolio as of period-end (in billions)		38.4			41.0			38.4			41.0
Pre-tax gain per dollar of retail receivables sold		0.5	%		2.3	%		0.3	%		2.5	%

In the third quarter and first nine months of 2005, income related to off-balance sheet securitizations declined $147 million and $274 million, respectively, compared with 2004. The declines primarily reflected lower gains on sale due to higher interest rates and lower wholesale-retained interest in securitized assets.

The following table shows, on an analytical basis, the earnings impact of our off-balance sheet securitizations as if we had reported them on-balance sheet and funded them through asset-backed financings for the periods indicated:

	Third Quarter						Nine Months
	2005			2004			2005			2004
	(in millions)
Financing revenue
Retail revenue	$	349		$	422		$	1,161		$	1,556
Wholesale revenue		277			265			904			816
Total financing revenue		626			687			2,065			2,372
Borrowing cost		(316	)		(186	)		(852	)		(664	)
Net financing margin		310			501			1,213			1,708
Net credit losses		(32	)		(41	)		(98	)		(194	)
Income before income taxes	$	278		$	460		$	1,115		$	1,514
Memo:
Income related to off-balance sheet securitizations	$	314		$	461		$	1,165		$	1,439
Recalendarization impact of off-balance sheet securitizations		36			1			50			(75	)

In the third quarter and first nine months of 2005, the impact on earnings of reporting the sold receivables as off-balance sheet securitizations was $36 million higher and $50 million higher, respectively, than had these transactions been structured as on-balance sheet securitizations. These differences resulted from recalendarization effects caused by gain-on-sale accounting requirements. This effect will fluctuate as the amount of receivables sold in our off-balance sheet securitizations increases or decreases over time. In a steady state of securitization activity, the difference between reporting securitizations on- or off-balance sheet in a particular year approaches zero. Although the difference in earnings impact between on- and off-balance sheet securitizations is minimal, this funding source has provided us with significant borrowing cost savings compared with unsecured debt and additional funding flexibility in a difficult funding environment.

28

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Leverage

We use leverage, or the debt-to-equity ratio, to make various business decisions, including establishing pricing for retail, wholesale and lease financing, and assessing our capital structure. For a discussion of our capital structure, see the “Capital Adequacy” section in our 2004 10-K Report. We calculate leverage on a financial statement basis and on a managed basis using the following formulas:

Financial		Total Debt
Statement	=	Equity
Leverage
						Retained
						Interest in
				Securitized		Securitized
				Off-balance		Off-balance		Cash		SFAS No. 133
		Total Debt	+	Sheet	-	Sheet	-	and Cash	-	Adjustments
				Receivables		Receivables		Equivalents		on Total Debt
Managed Leverage	=
								SFAS No. 133
				Equity	+	Minority	-	Adjustment
						Interest		on Equity

The following table shows the calculation of our financial statement leverage (in billions, except for ratios):

	September 30,		December 31,
	2005		2004
Total debt	$	121.6	$	144.3
Total stockholder’s equity		10.6		11.5
Financial statement leverage (to 1)		11.5		12.6

The following table shows the calculation of our managed leverage (in billions, except for ratios):

	September 30,			December 31,
	2005			2004
Total debt	$	121.6		$	144.3
Securitized off-balance sheet receivables outstanding		35.0			37.7	(a)
Retained interest in securitized off-balance sheet receivables		(4.4	)		(9.5)	(b)
Adjustments for cash and cash equivalents		(19.0	)		(12.7	)
Adjustments for SFAS No. 133		(2.0	)		(3.2	)
Total adjusted debt	$	131.2		$	156.6
Total stockholder’s equity (including minority interest)	$	10.6		$	11.5
Adjustments for SFAS No. 133		(0.1	)		(0.1	)
Total adjusted equity	$	10.5		$	11.4
Managed leverage (to 1)		12.5			13.7

(a)   Includes securitized funding from discontinued operations

(b)   Includes retained interest in securitized receivables from discontinued operations

Our managed leverage strategy involves establishing a leverage level that we believe reflects the risk characteristics of our underlying assets. In establishing a target leverage level, we consider the characteristics of the receivables in our managed portfolio and the prevailing market conditions.

At September 30, 2005, our managed leverage was 12.5 to 1, compared with 13.7 to 1 at year-end 2004. Our present strategy is to maintain managed leverage in the 12 - 13 to 1 range. Based on profitability and managed receivable levels, we paid cash dividends of $2.55 billion in the first nine months of 2005.

29

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Outlook

We expect our earnings in 2005 to be lower than our earnings in 2004, primarily resulting from the impact of higher interest rates and lower receivable levels, offset partially by improved credit loss performance. We anticipate managed receivables to be about $145 - $150 billion at year-end 2005.

Cautionary Statement Regarding Forward Looking Statements

Statements included or incorporated by reference herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:

Automotive Related:

· greater price competition resulting from currency fluctuations, industry overcapacity or other factors;

· a significant decline in industry sales and our financing of those sales, particularly in the U.S. or Europe, resulting from slowing economic growth, geo-political events or other factors;

· lower-than-anticipated market acceptance of new or existing Ford products;

· economic distress of suppliers that may require Ford to provide financial support or take other measures to ensure supplies of materials;

· work stoppages at Ford or supplier facilities or other interruptions of supplies;

· the discovery of defects in Ford vehicles resulting in delays in new model launches, recall campaigns or increased warranty costs;

· increased safety, emissions, fuel economy or other regulations resulting in higher costs and/or sales restrictions;

· unusual or significant litigation or governmental investigations arising out of alleged defects in Ford products or otherwise;

· worse-than-assumed economic and demographic experience for our postretirement benefit plans (e.g., investment returns, interest rates, health care cost trends, benefit improvements);

· currency or commodity price fluctuations, including, for example, last year's sharp rise in steel prices;

· an increase in or acceleration of the market shift from truck sales or from sales of other more profitable vehicles in the U.S.;

· economic difficulties in any significant market;

· higher prices for or reduced availability of fuel;

· labor or other constraints on Ford's or our ability to restructure Ford's or our business;

· a change in requirements or obligations under long-term supply arrangements pursuant to which Ford is obligated to purchase minimum quantities or a fixed percentage of output or pay minimum amounts; and

· increased price competition in the rental car industry and/or a general decline in business or leisure travel due to terrorist attacks, acts of war, epidemic disease or measures taken by governments in response thereto that negatively affect the travel industry.

30

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Ford Credit Related:

· inability to access debt or securitization markets around the world at competitive rates or in sufficient amounts;

· higher-than-expected credit losses;

· increased competition from banks or other financial institutions seeking to increase their share of financing Ford vehicle sales;

· changes in interest rates;

· collection and servicing problems related to our finance receivables and net investment in operating leases;

· lower-than-anticipated residual values or higher-than-expected return rates for leased vehicles;

· additional credit rating downgrades;

· new or increased credit, consumer or data protection, or other regulations resulting in higher costs and/or additional financing restrictions; and

· changes in Ford’s marketing programs that de-emphasize financing incentives (e.g., the Family Plan), which could result in a decline in our share of financing Ford vehicles.

We cannot be certain that any expectations, forecasts or assumptions made by management in preparing these forward-looking statements will prove accurate, or that any projections will be realized. It is to be expected that there may be differences between projected and actual results. Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Other Financial Information

PricewaterhouseCoopers LLP (“PwC”) has not audited the interim financial information included in this 10-Q report. In reviewing such information, PwC has applied limited procedures in accordance with professional standards for reviews of interim financial information. Accordingly, you should restrict your reliance on their reports on such information. PwC is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their reports on the interim financial information because such reports do not constitute “reports” or “parts” of the registration statements prepared or certified by PwC within the meaning of Sections 7 and 11 of the Securities Act of 1933.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In our 2004 10-K Report, we discuss in greater detail our market risk, counter-party risk and operating risk. To provide a quantitative measure of the sensitivity of our pre-tax net interest income to changes in interest rates, we use interest rate scenarios that assume a hypothetical, instantaneous increase or decrease in interest rates of 100 basis points (or 1%) across all maturities, as well as a base case that assumes that interest rates remain constant at existing levels. These interest rate scenarios are purely hypothetical and do not represent our view of future interest rate movements. The differences in pre-tax net interest income between these scenarios and the base case over a twelve-month period represent an estimate of the sensitivity of our pre-tax net interest income. Under this model, we estimate that at September 30, 2005, all else constant, such an increase in interest rates would reduce our pre-tax net interest income by approximately $67 million over the next twelve months, compared with $93 million at December 31, 2004. The sensitivity analysis presented above assumes a one-percentage point interest rate change to the yield curve that is both instantaneous and parallel. In reality, interest rate changes are rarely instantaneous or parallel and rates could move more or less than the one percentage point assumed in our analysis. As a result, the actual impact to pre-tax net interest income could be higher or lower than the results detailed above.

31

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Michael E. Bannister, our Chief Executive Officer, and David P. Cosper, our Vice Chairman, Chief Financial Officer and Treasurer, have performed an evaluation of the Company's disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of September 30, 2005, and each has concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms.

Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting during the third quarter of 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 5. OTHER INFORMATION

Additional information about Ford can be found in Ford’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005, which has been included as an exhibit to this Report (without Exhibits or Financial Statements).

Automobile Leasing Update

In the third quarter of 2005, we reinstated our Red Carpet Leasing retail lease plan to residents of New York in response to the Transportation Equity Act (Federal Highway Bill). A provision in the law no longer holds lessors liable in any state for accidents involving their leasing customers.

32

ITEM 6. EXHIBITS

Exhibits: please refer to the Exhibit Index on page 36.

Instruments defining the rights of holders of certain issues of long-term debt of Ford Credit have not been filed as exhibits to this Report because the authorized principal amount of any one of such issues does not exceed 10% of the total assets of Ford Credit. Ford Credit agrees to furnish a copy of each of such instruments to the Commission upon request.

33

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Ford Motor Credit Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

FORD MOTOR CREDIT COMPANY

By:	/s/ David P. Cosper
	(David P. Cosper) Vice Chairman, Chief Financial Officer and Treasurer

Date:November 7, 2005

34

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder of

Ford Motor Credit Company:

We have reviewed the accompanying consolidated balance sheet of Ford Motor Credit Company and its subsidiaries as of September 30, 2005, and the related consolidated statements of income for each of the three-month and nine-month periods ended September 30, 2005 and 2004 and the consolidated statement of cash flows from continuing operations for the nine-month periods ended September 30, 2005 and 2004. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2004, and the related consolidated statements of income, stockholder’s equity, and cash flows from continuing operations for the year then ended, management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004 and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004; and in our report dated March 9, 2005, we expressed unqualified opinions thereon. The consolidated financial statements and management’s assessment of the effectiveness of internal control over financial reporting referred to above are not presented herein. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2004, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

Detroit, Michigan

November 7, 2005

35

FORD MOTOR CREDIT COMPANY

EXHIBIT INDEX

Designation	Description	Method of Filing
Exhibit 12	Ford Motor Credit Company and Subsidiaries Calculation of Ratio of Earnings to Fixed Charges	Filed with this Report
Exhibit 15	Letter of PricewaterhouseCoopers LLP, dated November 7, 2005, relating to Financial Information	Filed with this Report
Exhibit 31.1	Rule 15d-14(a) Certification of CEO	Filed with this Report
Exhibit 31.2	Rule 15d-14(a) Certification of CFO	Filed with this Report
Exhibit 32.1	Section 1350 Certification of CEO	Furnished with this Report
Exhibit 32.2	Section 1350 Certification of CFO	Furnished with this Report
Exhibit 99	Items 2 and 4 of Part I and Items 1 and 2 of Part II of Ford Motor Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005	Filed with this Report

36