Ford Motor Credit 10Q 2006 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2006

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.

þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer þ

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

o Yes þ No

As of November 10, 2006, the registrant has 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 42

EXPLANATORY NOTE - RESTATEMENT OF FINANCIAL INFORMATION

In October of 2006, Ford Motor Credit Company ("Ford Credit", the "Company", "we", "our" or "us") reviewed our application of paragraph 68 of Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative Instruments and Hedging Activities. One of the general requirements of SFAS 133 is that hedge accounting is appropriate only for those hedging relationships that a company expects will be highly effective in achieving offsetting changes in fair value or cash flows attributable to the risk being hedged. To determine whether transactions satisfy this requirement, companies must periodically assess the effectiveness of hedging relationships both prospectively and retrospectively. Paragraph 68 of SFAS 133 ("Paragraph 68") contains an exception from these periodic assessment requirements in the form of an "assumption of no ineffectiveness" for certain hedges of interest rate risk that involve interest rate swaps and recognized interest-bearing assets or liabilities. The exception identifies the specific requirements for the derivative and hedged items that must be met, such as a derivative fair value of zero at inception of the hedging relationship, matching maturity dates, and contemporaneous formal documentation.

Based on our review, we concluded that all of our interest rate swaps were and continue to be highly effective economic hedges; we also concluded, however, that nearly all of these transactions failed to meet the requirements set forth in Paragraph 68, primarily because:

Transactions that we designated as fair value hedges involved interest rate swaps hedging the back-end of debt instruments or involved longer-than-normal settlement periods.

We paid or received fees when entering into a derivative contract or upon changing counterparties.

Interest rate swaps included terms that did not exactly match the terms of the debt, including prepayment optionality.

Although we now have determined that the hedging relationships at issue in this restatement did not meet the specific criteria for an assumption of no ineffectiveness pursuant to Paragraph 68, we are precluded by SFAS 133 from retroactively performing full effectiveness testing in order to apply hedge accounting. Accordingly, we have restated our results to reflect the changes in fair value of these instruments as derivative gains and losses through earnings during the affected periods, without recording any offsetting change in the value of the debt they were economically hedging.

As a result of our analysis, we have restated our historical balance sheets as of December 31, 2005 and 2004; our statements of income, cash flows and stockholder's equity for the years ending 2005, 2004, and 2003; and selected financial data as of and for the years ended December 31, 2005, 2004, 2003, 2002 and 2001.

Changes in the fair value of interest rate swaps are driven primarily by changes in interest rates. We have long-term interest rate swaps with large notional balances, many of which are "receive-fixed, pay-float" interest rate swaps. Such swaps increase in value when interest rates decline, and decline in value when interest rates rise. As a result, changes in interest rates cause substantial volatility in the fair values that must be recognized in earnings. For 2001 and 2002, when interest rates were trending lower, we have recognized large derivative gains in our restated financial statements. The upward trend in interest rates from 2003 through 2005 caused our interest rate swaps to decline in value, resulting in the recognition of derivative losses for these periods.

EXPLANATORY NOTE - RESTATEMENT OF FINANCIAL INFORMATION (Continued)

Subsequent to the completion of our orginally-filed financial statements for each period being restated, we identified adjustments that should have been recorded in these earlier periods. Upon identification, we determined these adjustments to be immaterial, individually and in the aggregate, to our originally-filed financial statements and generally recognized these adjustments in the period in which they were identified. Because our interest rate swap adjustment has required a restatement, we also are reversing these out-of-period adjustments and recording them in the proper periods.

The following table sets forth a reconciliation of previously reported and restated net income/(loss) for the periods shown (in millions):

	Net Income
	Third Quarter 2005			Nine Months 2005

Previously reported	$	577		$	2,027
Pre-tax adjustments:
Fair value interest rate swaps		(435	)		(624	)
Out-of-period adjustments		(73	)		(59	)
Total pre-tax adjustments		(508	)		(683	)
Related tax effects-provision for / (benefit from)		(190	)		(255	)
Net after-tax adjustments		(318	)		(428	)
Restated	$	259		$	1,599

For additional discussion of the restatement, including the out-of-period adjustments, see Note 19 of our Notes to the Financial Statements to our Annual Report on Form 10-K/A for the year ended December 31, 2005 ("2005 Form 10-K/A Report") and Note 12 of our Notes to the Financial Statements of this Form 10-Q.

This Form 10-Q includes the restated statements of income for the three- and nine-month periods ended September 30, 2005, a restated balance sheet for the year ended December 31, 2005 and restated statement of cash flows for the nine-month period ended September 30, 2005.

We have not filed amended Form 10-Qs for the interim periods affected by the restatement prior to and including the quarter ended September 30, 2005. The information that has been previously filed or otherwise reported for these periods is superseded by the information in this Form 10-Q for the quarter ended September 30, 2006, in our Form 10-K/A for the year ended December 31, 2005, in our Form 10-Q/A for the quarter ended March 31, 2006 and in our Form 10-Q/A for the quarter ended June 30, 2006, which are being filed concurrently with this Form 10-Q for the quarter ended September 30, 2006.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

For the Periods Ended September 30, 2006 and 2005

(in millions)

	Third Quarter						Nine Months
	2006			Restated 2005			2006			Restated 2005
	(Unaudited)						(Unaudited)
Financing revenue
Operating leases	$	1,443		$	1,316		$	4,143		$	3,995
Retail		938			941			2,770			3,011
Interest supplements and other support costs earned from affiliated companies		901			796			2,483			2,434
Wholesale		607			268			1,848			795
Other		53			53			163			164
Total financing revenue		3,942			3,374			11,407			10,399
Depreciation on vehicles subject to operating leases		(1,374	)		(1,125	)		(3,819	)		(3,297	)
Interest expense		(2,022	)		(1,625	)		(5,722	)		(4,884	)
Net financing margin		546			624			1,866			2,218
Other revenue
Investment and other income related to sales of receivables (Note 5)		169			346			542			1,243
Insurance premiums earned, net		40			48			142			152
Other income		554			61			689			667
Total financing margin and other revenue		1,309			1,079			3,239			4,280
Expenses
Operating expenses		482			557			1,491			1,607
Provision for credit losses (Note 4)		66			81			64			87
Insurance expenses		31			48			137			145
Total expenses		579			686			1,692			1,839
Income from continuing operations before income taxes		730			393			1,547			2,441
Provision for income taxes		278			134			543			882
Income from continuing operations before minority interests		452			259			1,004			1,559
Minority interests in net income of subsidiaries		—			—			—			1
Income from continuing operations		452			259			1,004			1,558
Income from discontinued operations		—			—			—			37
Gain on disposal of discontinued operations		—			—			—			4
Net income	$	452		$	259		$	1,004		$	1,599

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in millions)

	September 30, 2006		Restated December 31, 2005
	(Unaudited)
ASSETS
Cash and cash equivalents	$	11,406	$	14,798
Marketable securities		6,782		3,810
Finance receivables, net (Note 2)		109,397		109,876
Net investment in operating leases (Note 3)		25,603		22,213
Retained interest in securitized assets (Note 5)		1,073		1,420
Notes and accounts receivable from affiliated companies		1,334		1,235
Derivative financial instruments (Note 9)		1,746		2,547
Other assets		5,676		6,363
Total assets	$	163,017	$	162,262

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Customer deposits, dealer reserves and other	$	1,612	$	1,904
Affiliated companies		1,422		794
Total accounts payable		3,034		2,698
Debt (Note 7)		134,478		133,446
Deferred income taxes		9,371		9,276
Derivative financial instruments (Note 9)		311		680
Other liabilities and deferred income		4,027		4,755
Total liabilities		151,221		150,855

Minority interests in net assets of subsidiaries		3		3

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)		5,124		5,117
Accumulated other comprehensive income		732		391
Retained earnings (Note 8)		5,912		5,871
Total stockholder's equity		11,793		11,404
Total liabilities and stockholder's equity	$	163,017	$	162,262

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Periods Ended September 30, 2006 and 2005

(in millions)

	Nine Months
	2006			Restated 2005
	(Unaudited)
Cash flows from operating activities of continuing operations
Net income	$	1,004		$	1,599
(Income) related to discontinued operations		—			(41	)
Provision for credit losses		64			87
Depreciation and amortization		4,064			3,681
Net (gain) on sales of finance receivables		(84	)		(59	)
Increase in deferred income taxes		197			623
Net change in other assets		179			251
Net change in other liabilities		401			(1,985	)
Net (purchases)/sales of held for sale wholesale receivables		—			(357	)
All other operating activities		417			589
Net cash provided by operating activities		6,242			4,388
Cash flows from investing activities of continuing operations
Purchase of finance receivables (other than wholesale)		(35,871	)		(31,239	)
Collection of finance receivables (other than wholesale)		26,933			28,800
Purchase of operating lease vehicles		(11,963	)		(11,041	)
Liquidation of operating lease vehicles		4,842			7,050
Net change in wholesale receivables		6,251			3,438
Net change in retained interest in securitized assets		525			2,854
Net change in notes receivable from affiliated companies		24			274
Proceeds from sales of receivables		3,956			18,794
Purchases of marketable securities		(13,830	)		(5,757	)
Proceeds from sales and maturities of marketable securities		11,101			670
Proceeds from sale of business		—			2,040
Net change in derivatives		82			1,651
Transfer of cash balances upon disposition of discontinued operations		—			(5	)
All other investing activities		22			1
Net cash (used in)/provided by investing activities		(7,928	)		17,530
Cash flows from financing activities of continuing operations
Proceeds from issuance of long-term debt		32,151			17,713
Principal payments on long-term debt		(32,379	)		(29,544	)
Change in short-term debt, net		(697	)		(5,930	)
Cash dividends paid		(950	)		(2,550	)
All other financing activities		(59	)		(53	)
Net cash (used in) financing activities		(1,934	)		(20,364	)
Effect of exchange rate changes on cash and cash equivalents		228			(320	)

Total cash flows from continuing operations		(3,392	)		1,234

Cash flows from discontinued operations
Cash flows from discontinued operations provided by operating activities		—			71
Cash flows from discontinued operations used in investing activities		—			(66	)
Net (decrease)/increase in cash and cash equivalents	$	(3,392	)	$	1,239

Cash and cash equivalents, beginning of period	$	14,798		$	12,668
Cash and cash equivalents of discontinued operations, beginning of period		—			—
Change in cash and cash equivalents		(3,392	)		1,239
Less: cash and cash equivalents of discontinued operations, end of period		—			—
Cash and cash equivalents, end of period	$	11,406		$	13,907

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

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. RESTATEMENT AND ACCOUNTING POLICIES

Restatement

The accompanying financial statements have been restated for the three-and nine-month periods ended September 30, 2005, a restated balance sheet for the year ended December 31, 2005 and restated statement of cash flows for the nine-month period ended September 30, 2005. The nature of restatements and the effect on the financial statement line items are discussed in Note 12 of our Notes to the financial statements. In addition, certain disclosures in the following notes have been restated consistent with the financial statements.

Principles of Consolidation

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 considered necessary for a fair statement of the results of operations and financial conditions for interim periods for Ford Motor Credit Company, its consolidated subsidiaries and consolidated variable interest entities ("VIEs") in which Ford Motor Credit Company is the primary beneficiary. 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 Form 10-K/A for the year ended December 31, 2005. We are an indirect, wholly owned subsidiary of Ford Motor Company.

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, 2006 and December 31, 2005 were as follows (in millions):

	September 30, 2006			December 31, 2005
	(Unaudited)
Retail	$	72,034		$	66,940
Wholesale		34,379			39,680
Other		4,098			4,648
Total finance receivables, net of unearned income (a)(b)		110,511			111,268
Less: Allowance for credit losses		(1,114	)		(1,392	)
Finance receivables, net	$	109,397		$	109,876

(a)

At September 30, 2006 and December 31, 2005, includes $1.6 billion 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 variable interest entities ("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, 2006 and December 31, 2005, includes $52.0 billion and $44.7 billion, respectively, of finance receivables that have been sold for legal purposes in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables are available only for repayment of the debt or other obligations issued or arising in the securitization transactions and to pay other transaction 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, 2006 and December 31, 2005 were as follows (in millions):

	September 30, 2006			December 31, 2005
	(Unaudited)
Vehicles, at cost, including initial direct costs (a)	$	32,340		$	28,460
Less: Accumulated depreciation		(6,584	)		(6,053	)
Less: Allowance for credit losses		(153	)		(194	)
Net investment in operating leases	$	25,603		$	22,213

(a)

At September 30, 2006 and December 31, 2005, includes interests in operating leases and the related vehicles of $12.5 billion and $6.5 billion, respectively, that have been transferred for legal purposes and are held for the benefit of consolidated securitization special purpose entities ("SPEs") and are available only for repayment of the debt or other obligations issued or arising in the securitization transactions and to pay other transaction participants; they are not available to pay our other obligations or the claims of our other creditors.

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
	2006			2005			2006			2005
	(Unaudited)						(Unaudited)

Balance, beginning of period	$	1,360		$	1,892		$	1,586		$	2,434
Provision for credit losses		66			81			64			87
Deductions
Charge-offs before recoveries		250			285			695			879
Recoveries		(110	)		(110	)		(361	)		(386	)
Net charge-offs		140			175			334			493
Other changes, principally amounts related to finance receivables sold and translation adjustments		19			27			49			257
Net deductions		159			202			383			750
Balance, end of period	$	1,267		$	1,771		$	1,267		$	1,771

NOTE 5. SALES OF RECEIVABLES

Retained Interest in Securitized Assets

Components of retained interest in off-balance sheet securitized assets at September 30, 2006 and December 31, 2005 included the following (in millions):

	September 30, 2006		December 31, 2005
	(Unaudited)
Residual interest in securitization transactions	$	784	$	1,094
Restricted cash held for benefit of securitization SPEs		212		199
Subordinated securities		77		127
Retained interest in securitized assets	$	1,073	$	1,420

Investments in subordinated securities and restricted cash are senior to the residual interest in securitization transactions. Retained interests are recorded at fair value. The book value of subordinated securities approximates fair market value. In determining the fair value of residual interest in securitization transactions, we discount the present value of the projected cash flows retained at the transaction discount rate.

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
	2006		Restated 2005		2006		Restated 2005
	(Unaudited)				(Unaudited)
Servicing fees	$	45	$	101	$	157	$	306
Net gain on sale of receivables		30		24		84		59
Income on interest in sold wholesale receivables and retained securities		8		68		24		293
Income on residual interest and other		86		153		277		585
Investment and other income related to sales of receivables	$	169	$	346	$	542	$	1,243

On-Balance Sheet Securitizations

At September 30, 2006 and December 31, 2005, about $52.0 billion and $44.7 billion, respectively, of finance receivables have been sold for legal purposes in securitization transactions that do not satisfy the requirements for accounting sale treatment. In addition, at September 30, 2006 and December 31, 2005, interests in operating leases and the related vehicles of $12.5 billion and $6.5 billion, respectively, have been transferred for legal purposes and are held for the benefit of consolidated securitization SPEs. These receivables and interests in operating leases and the related vehicles are available only for repayment of debt or other obligations issued or arising in the securitization transactions and to pay other transaction participants; they are not available to pay our other obligations or the claims of our other creditors. At September 30, 2006 and December 31, 2005, associated debt of $55.9 billion and $39.8 billion, respectively, is reported on our balance sheet for financial statement reporting purposes. This debt includes long-term and short-term asset-backed debt that is payable out of collections on these receivables and interests in operating leases and the related vehicles. This debt, however, is not our legal obligation. Additionally, cash balances to be used only to support the on-balance sheet securitization transactions at September 30, 2006 and December 31, 2005, were approximately $6.8 billion and $2.3 billion, respectively. These assets and liabilities are generally held by VIEs where we are the primary beneficiary.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 6. VARIABLE INTEREST ENTITIES

We consolidate VIEs in which we are the primary beneficiary. We use SPEs that are considered VIEs for some of our on-balance sheet securitization transactions. The liabilities recognized as a result of consolidating these VIEs do not represent additional claims on our general assets; rather, they represent claims against the specific assets of the consolidated VIEs. Conversely, assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against our general assets. Reflected in our September 30, 2006 balance sheet are $55.7 billion of consolidated VIE assets, consisting of $6.7 billion in cash and cash equivalents and $49.0 billion of receivables.

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 ownership percentages. Our maximum exposure (approximately $196 million and $182 million at September 30, 2006 and December 31, 2005, respectively) to any potential losses associated with these VIEs is limited to our equity investments and, where applicable, receivables due from the VIEs.

In addition, we sell finance receivables to bank-sponsored asset-backed commercial paper issuers that are SPEs of the sponsor bank. We are not the primary beneficiary of these SPEs. The outstanding balance of finance receivables that have been sold by us to these SPEs was approximately $4.6 billion and $5.7 billion at September 30, 2006 and December 31, 2005, respectively.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 7. DEBT

At September 30, 2006 and December 31, 2005, debt was as follows (in millions):

	Interest Rates
	Average						Weighted-									Restated
	Contractual (a)						Average (b)						September 30,			December 31,
	2006			2005			2006			2005			2006			2005
													(Unaudited)
Short-term debt
Asset-backed commercial paper (c)		5.5	%		4.3	%							$	20,844		$	21,736
Other asset-backed short-term debt (c)		5.8	%		—									2,130			—
Ford Interest Advantage (d)		6.0	%		4.9	%								5,698			6,719
Commercial paper - unsecured		5.4	%		4.8	%								305			1,041
Other short-term debt (e)		5.7	%		5.8	%								2,377			2,325
Total short-term debt		5.6	%		4.6	%		5.8	%		5.0	%		31,354			31,821
Long-term debt
Senior indebtedness
Notes payable within one year														16,898			21,049
Notes payable after one year (f)														53,353			62,614
Unamortized discount														(66	)		(62	)
Asset-backed debt (c)
Notes payable within one year														14,532			5,357
Notes payable after one year														18,407			12,667
Total long-term debt (g)		6.0	%		5.9	%		5.7	%		5.1	%		103,124			101,625
Total debt		5.9	%		5.6	%		5.7	%		5.1	%	$	134,478		$	133,446

(a)	Third quarter 2006 and fourth quarter 2005 average contractual rates exclude the effects of interest rate swap agreements and facility fees.

(b)	Third quarter 2006 and fourth quarter 2005 weighted-average rates include the effects of interest rate swap agreements and facility fees.

(c)	Obligations issued or arising in securitization and structured financing transactions that are payable out of collections on finance receivables and interests in operating leases and the related vehicles that have been sold for legal purposes. This debt is not the legal obligation of Ford Credit.

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

(e)	Includes $59 million and $52 million with affiliated companies at September 30, 2006 and December 31, 2005, respectively.

(f)	Includes $152 million and $126 million with affiliated companies at September 30, 2006 and December 31, 2005, respectively.

(g)	Average contractual and weighted-average interest rates for total long-term debt reflects the rates for both notes payable within one year and notes payable after one year.

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
	2006			Restated 2005			2006			Restated 2005
	(Unaudited)						(Unaudited)
Retained earnings, beginning balance	$	5,773		$	6,607		$	5,871		$	6,725
Net income		452			259			1,004			1,599
Dividends (a)		(313	)		(1,100	)		(963	)		(2,558	)
Retained earnings, ending balance	$	5,912		$	5,766		$	5,912		$	5,766

(a)	Dividends for the third quarter of 2006 include a $13 million non-cash dividend. Dividends for the first nine months of 2005 include an $8 million non-cash dividend, paid 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
	2006			Restated 2005			2006		Restated 2005
	(Unaudited)						(Unaudited)
Net income	$	452		$	259		$	1,004	$	1,599
Other comprehensive income		(11	)		(24	)		341		(412	)
Total comprehensive income	$	441		$	235		$	1,345	$	1,187

Comprehensive income includes foreign currency translation adjustments, unrealized gains and losses on marketable 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).

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 fair value, cash flow, and net investment hedges, as well as mark-to-market adjustments that reflect changes in exchange and interest rates for non-designated hedging activity are recorded in other income.

Balance Sheet Impact

The fair value of derivatives reflects the price that a third party would be willing to pay or receive in an arm's length transaction and includes mark-to-market adjustments to reflect the effect of changes in interest rates, accrued interest and, for derivatives with a foreign currency component, a revaluation adjustment. The following table summarizes the estimated net fair value of our derivative financial instruments at September 30, 2006 and December 31, 2005, 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, 2006						December 31, 2005
	Fair Value Assets			Fair Value Liabilities			Fair Value Assets			Fair Value Liabilities
	(Unaudited)
Interest rate swaps	$	1,101		$	47		$	1,657		$	96
Foreign currency swaps		879			449			1,089			789
Forwards and options (a)		—			49			6			—
Impact of netting agreements		(234	)		(234	)		(205	)		(205	)
Total derivative financial instruments	$	1,746		$	311		$	2,547		$	680

(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.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 10. SEGMENT INFORMATION

We divide our business 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 from continuing operations before income taxes basis, after excluding the impact to earnings from hedge ineffectiveness, and other adjustments in applying Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative Instruments and Hedging Activities. 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 two segments. The segments are presented on a managed basis (managed basis includes on-balance sheet receivables and securitized off-balance sheet receivables activity), and 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 America Segment		Inter- national Segment		Unallocated Risk Management			Effect of Sales of Receivables			Total			Total
	(Unaudited)
Third Quarter 2006
Revenue	$	3,732	$	868	$	209		$	(104	)	$	105		$	4,705
Income
Income from continuing operations before income taxes		366		155		209			—			209			730
Provision for income taxes		151		54		73			—			73			278
Income from continuing operations		215		101		136			—			136			452
Other disclosures
Depreciation on vehicles subject to operating leases		1,285		89		—			—			—			1,374
Interest expense		1,701		455		—			(134	)		(134	)		2,022
Provision for credit losses		20		46		—			—			—			66

Third Quarter 2005 Restated
Revenue	$	3,573	$	961	$	(405	)	$	(300	)	$	(705	)	$	3,829
Income
Income from continuing operations before income taxes		572		226		(405	)		—			(405	)		393
Provision for income taxes		196		79		(141	)		—			(141	)		134
Income from continuing operations		376		147		(264	)		—			(264	)		259
Other disclosures
Depreciation on vehicles subject to operating leases		981		144		—			—			—			1,125
Interest expense		1,506		435		—			(316	)		(316	)		1,625
Provision for credit losses		77		4		—			—			—			81

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 10. SEGMENT INFORMATION (Continued)

						Unallocated/Eliminations
	North America Segment			Inter- national Segment		Unallocated Risk Management			Effect of Sales of Receivables			Total			Total
	(Unaudited)
First Nine Months 2006
Revenue	$	10,979		$	2,555	$	(377	)	$	(377	)	$	(754	)	$	12,780
Income
Income from continuing operations before income taxes		1,385			539		(377	)		—			(377	)		1,547
Provision for income taxes		486			189		(132	)		—			(132	)		543
Income from continuing operations		899			350		(245	)		—			(245	)		1,004
Other disclosures
Depreciation on vehicles subject to operating leases		3,585			234		—			—			—			3,819
Interest expense		4,880			1,316		—			(474	)		(474	)		5,722
Provision for credit losses		(32	)		96		—			—			—			64
Finance receivables (including net investment in operating leases)		111,246			36,688		9			(12,943	)		(12,934	)		135,000
Total assets		133,785			41,093		9			(11,870	)		(11,861	)		163,017

First Nine Months 2005 Restated
Revenue	$	11,074		$	2,917	$	(659	)	$	(871	)	$	(1,530	)	$	12,461
Income
Income from continuing operations before income taxes		2,412			688		(659	)		—			(659	)		2,441
Provision for income taxes		873			241		(232	)		—			(232	)		882
Income from continuing operations		1,539			447		(428	)		—			(428	)		1,558
Other disclosures
Depreciation on vehicles subject to operating leases		2,943			354		—			—			—			3,297
Interest expense		4,392			1,344		—			(852	)		(852	)		4,884
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		139,027			40,704		103			(30,466	)		(30,363	)		149,368

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 11. GUARANTEES AND INDEMNIFICATIONS

The fair values of guarantees and indemnifications issued during 2006 and 2005 are recorded in the financial statements and are de minimis.

At September 30, 2006, 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 could be stayed until the guaranteed party is paid in full. The maximum potential payments under these guarantees total approximately $270 million. No losses have been recorded for these guarantees.

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 2006, there were no significant changes to our indemnifications.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 12. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

In October of 2006, we reviewed our application of paragraph 68 of Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative Instruments and Hedging Activities. One of the general requirements of SFAS 133 is that hedge accounting is appropriate only for those hedging relationships that a company expects will be highly effective in achieving offsetting changes in fair value or cash flows attributable to the risk being hedged. To determine whether transactions satisfy this requirement, companies must periodically assess the effectiveness of hedging relationships both prospectively and retrospectively. Paragraph 68 of SFAS 133 ("Paragraph 68") contains an exception from these periodic assessment requirements in the form of an "assumption of no ineffectiveness" for certain hedges of interest rate risk that involve interest rate swaps and recognized interest-bearing assets or liabilities. The exception identifies the specific requirements for the derivative and hedged items that must be met, such as a derivative fair value of zero at inception of the hedging relationship, matching maturity dates, and contemporaneous formal documentation.

Transactions that we designated as fair value hedges involved interest rate swaps hedging the back-end of debt instruments or involved longer-than-normal settlement periods.

We paid or received fees when entering into a derivative contract or upon changing counterparties.

Interest rate swaps included terms that did not exactly match the terms of the debt, including prepayment optionality.

Subsequent to the completion of our originally-filed financial statements for each period being restated, we identified adjustments that should have been recorded in these earlier periods. Upon identification, we determined these adjustments to be immaterial, individually and in the aggregate, to our originally-filed financial statements and generally recognized these adjustments in the period in which they were identified. Because our interest rate swap adjustment has required a restatement, we also are reversing the out-of-period adjustments and recording them in the proper periods.

For additional discussion of the restatement, including the out-of-period adjustments, see Note 19 of our Notes to the Financial Statements to our 2005 Form 10-K/A Report.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 12. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

This Form 10-Q includes restated statements of income for the three- and nine-month periods ended September 30, 2005, a restated balance sheet for the year ended December 31, 2005 and restated statement of cash flows for the nine-month period ended September 30, 2005.

Effects of the restatement on the Consolidated Statement of Income are as follows:

The fair value interest rate swaps adjustment resulted in a significant change in Interest expense and Other income. As the interest rate swaps are no longer in a hedge relationship for accounting purposes, the mark-to-market adjustment is recorded in Other income. This adjustment decreased Other income $435 million and $624 million in the third quarter of 2005 and for the nine months ended September 30, 2005, respectively. All net interest charges related to these swaps that were previously classified as Interest expense are now classified as Other income. The reclassification amounts increased Other income $181 million and $628 million in the third quarter of 2005 and for the nine months ended September 30, 2005, respectively. Interest expense was increased by the same amounts.

Relating to the out-of-period items described above, an adjustment related to an item we recorded in the third quarter of 2005 related to the amortization of certain loan origination costs involving securitized assets from prior quarters beginning in 2003. The restatement reflects a decrease in Retail revenue of $(85) million in the third quarter of 2005, and a corresponding increase in Retail revenue in prior quarters. In addition, we recorded smaller out-of-period adjustments which totaled $12 million and $19 million for the third quarter and nine months of 2005, respectively.

Effects of the restatement on the Consolidated Balance Sheet are as follows:

The fair value interest rate swaps adjustment resulted in a decrease in the debt value, since the debt is no longer in a hedge accounting relationship. The fair value interest rate swaps adjustment also impacted Deferred income taxes.

Effects of the restatement on the Consolidated Statement of Cash Flows are as follows:

The fair value interest rate swaps adjustment resulted in an adjustment to net income and did not have any impact on cash. However, for cash flow reporting, the cash flows relating to derivatives were reclassified from Cash flows from operating activities to Cash flows from investing activities.

Wholesale receivables that were sold to off-balance sheet securitization trusts were determined to be held for sale. Therefore, cash flows associated with loan acquisitions and sales to trusts are reported as Net (purchases)/sales of held for sale wholesale receivables within Cash flows from operating activities while cash flows from retained interests are reported in Net change in retained interest in securitized assets within Cash flows from investing activities.

An adjustment related to a reclassification between Proceeds from the issuance of long-term debt and Principal payments on long-term debt for the nine months ended September 30, 2005. The adjustment eliminated netting of certain debt activity.

Beginning with our year ended December 31, 2005 statements of cash flows, we have changed the presentation of cash flow to separately disclose the operating, investing, and financing portions of the cash flows attributable to our discontinued operations. This revision is in response to public statements by the staff of the Securities and Exchange Commission concerning classification of discontinued operations within the statement of cash flows. Also, we have included an adjustment in our statement of cash flows related to purchases, collections and liquidations of finance receivables and operating lease vehicles. This revision had no impact on previously reported totals for Cash flows from investing activities.

A reclassification of certain marketable securities from Cash and cash equivalents to Marketable securities related to securities that had contractual maturities exceeding ninety days from the date of purchase affected all reporting periods in 2005. This change resulted in a change in presentation in the statement of cash flows, which increased the levels of activity in the Purchases of marketable securities and Proceeds from sale of marketable securities lines within Cash flows from investing activities.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 12. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the effect of the Restatement on the Consolidated Statement of Income for the periods ended September 30 (in millions):

	Third Quarter 2005						Nine Months 2005
	Previously Reported			Restated			Previously Reported			Restated
	(Unaudited)						(Unaudited)
Financing revenue
Operating leases	$	1,316		$	1,316		$	4,013		$	3,995
Retail		1,026			941			3,108			3,011
Interest supplements and other support costs earned from affiliated companies		796			796			2,434			2,434
Wholesale		268			268			795			795
Other		53			53			164			164
Total financing revenue		3,459			3,374			10,514			10,399
Depreciation on vehicles subject to operating leases		(1,125	)		(1,125	)		(3,297	)		(3,297	)
Interest expense		(1,444	)		(1,625	)		(4,256	)		(4,884	)
Net financing margin		890			624			2,961			2,218
Other revenue
Investment and other income related to sales of receivables		334			346			1,222			1,243
Insurance premiums earned, net		48			48			152			152
Other income		315			61			628			667
Total financing margin and other revenue		1,587			1,079			4,963			4,280
Expenses
Operating expenses		557			557			1,607			1,607
Provision for credit losses		81			81			87			87
Insurance expenses		48			48			145			145
Total expenses		686			686			1,839			1,839
Income from continuing operations before income taxes		901			393			3,124			2,441
Provision for income taxes		324			134			1,137			882
Income from continuing operations before minority interests		577			259			1,987			1,559
Minority interests in net income of subsidiaries		—			—			1			1
Income from continuing operations		577			259			1,986			1,558
Income from discontinued operations		—			—			37			37
Gain on disposal of discontinued operations		—			—			4			4
Net income	$	577		$	259		$	2,027		$	1,599

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 12. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the effect of the Restatement on the Consolidated Balance Sheet (in millions):

	December 31,
	2005
	Previously Reported		Restated
ASSETS
Cash and cash equivalents	$	14,798	$	14,798
Marketable securities		3,810		3,810
Finance receivables, net		109,876		109,876
Net investment in operating leases		22,213		22,213
Retained interest in securitized assets		1,420		1,420
Notes and accounts receivable from affiliated companies		1,235		1,235
Derivative financial instruments		2,547		2,547
Other assets		6,256		6,363
Total assets	$	162,155	$	162,262


LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Accounts payable
Customer deposits, dealer reserves and other	$	1,890	$	1,904
Affiliated companies		794		794
Total accounts payable		2,684		2,698
Debt		134,500		133,446
Deferred income taxes		8,772		9,276
Derivative financial instruments		680		680
Other liabilities and deferred income		4,781		4,755
Total liabilities		151,417		150,855

Minority interests in net assets of subsidiaries		3		3

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		385		391
Retained earnings		5,208		5,871
Total stockholder's equity		10,735		11,404
Total liabilities and stockholder's equity	$	162,155	$	162,262

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS (Continued)

NOTE 12. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the effect of the Restatement on the Consolidated Statement of Cash Flows for the period ended September 30 (in millions):

	Nine Months 2005
	Previously Reported			Restated
	(Unaudited)
Cash flows from operating activities of continuing operations
Net income	$	1,986		$	1,599
(Income) related to discontinued operations		—			(41	)
Provision for credit losses		87			87
Depreciation and amortization		3,703			3,681
Net (gain) on sales of finance receivables		(40	)		(59	)
Increase in deferred income taxes		878			623
Net change in other assets		1,986			251
Net change in other liabilities		(2,164	)		(1,985	)
Net purchases of held for sale wholesale receivables		—			(357	)
All other operating activities		(79	)		589
Net cash provided by operating activities		6,357			4,388
Cash flows from investing activities of continuing operations
Purchase of finance receivables (other than wholesale)		(32,409	)		(31,239	)
Collection of finance receivables (other than wholesale)		29,630			28,800
Purchase of operating lease vehicles		(9,871	)		(11,041	)
Liquidation of operating lease vehicles		6,201			7,050
Net change in wholesale receivables		3,438			3,438
Net change in retained interest in securitized assets		2,497			2,854
Net change in notes receivable from affiliated companies		274			274
Proceeds from sales of receivables		18,794			18,794
Purchases of marketable securities		(400	)		(5,757	)
Proceeds from sales and maturities of marketable securities		336			670
Proceeds from sale of business		2,040			2,040
Net change in derivatives		—			1,651
Transfer of cash balances upon disposition of discontinued operations		—			(5	)
All other investing activities		1			1
Net cash provided by investing activities		20,531			17,530

Cash flows from financing activities of continuing operations
Proceeds from issuance of long-term debt		16,273			17,713
Principal payments on long-term debt		(28,104	)		(29,544	)
Change in short-term debt, net		(5,873	)		(5,930	)
Cash dividends paid		(2,550	)		(2,550	)
All other financing activities		(30	)		(53	)
Net cash (used in) financing activities		(20,284	)		(20,364	)
Effect of exchange rate changes on cash and cash equivalents		(320	)		(320	)

Total cash flows from continuing operations		6,284			1,234

Cash flows from discontinued operations
Cash flows from discontinued operations provided by operating activities		—			71
Cash flows from discontinued operations used in investing activities		—			(66	)
Net increase in cash and cash equivalents	$	6,284		$	1,239

Cash and cash equivalents, beginning of period
Cash and cash equivalents of discontinued operations, beginning of period	$	12,668		$	12,668
Change in cash and cash equivalents		6,284			1,239
Less: cash and cash equivalents of discontinued operations, end of period		—			—
Cash and cash equivalents, end of period	$	18,952		$	13,907

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

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this report. The information below for the three and nine month periods ended September 30, 2005 has been adjusted solely to reflect the impact of the restatement on our financial results which is more fully described in Note 12 of our Notes to the Financial Statements and does not reflect any subsequent information or events occurring after the date of the Original Filing or update any disclosure herein to reflect the passage of time since the date of the Original Filing.

New Developments

North American Restructuring. On September 28, 2006, we announced a plan to consolidate and centralize most of our origination, wholesale and dealer credit operations in the United States. We will consolidate our remaining 59 U.S. branches into six existing service centers, creating business centers that will manage originations in addition to the servicing functions already performed at the service centers. Completion of the branch consolidation is expected by the end of 2007. Our strong collection processes will continue while we enhance our originations of automotive financing contracts. This consolidation action is expected to reduce costs and improve process efficiencies, while providing us with the flexibility and scale necessary to adapt to changes in business conditions. Through this action and other efforts, we expect salaried personnel reductions of about 2,000 positions in the United States and Canada.

Way Forward Acceleration. On September 15, 2006, Ford announced an acceleration of its Way Forward restructuring plan which includes further reductions in manufacturing capacity. Going forward, with its investment in new products and improvements in quality, Ford expects market share to be in the 14 to 15 percent range - with a focus on profitable retail share. The majority of our retail financing consists of purchasing retail installment sale contracts and retail lease contracts from Ford dealers. To the extent that market share declines are primarily limited to fleet deliveries, we do not expect a significant impact on our contract placement volumes as a result of this announcement. For an additional discussion of our dependence on Ford, refer to the “Overview — Dependence on Ford” section of Item 1 to Part I of our 2005 Form 10-K/A Report.

Industrial Bank. We are pursuing an industrial bank charter from the State of Utah. Such a charter requires approval from the Federal Deposit Insurance Corporation ("FDIC") to obtain federal deposit insurance. The current moratorium imposed by the FDIC on accepting and approving such applications may affect our timing or ability to obtain an industrial bank charter.

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

Results of Operations

Third Quarter 2006 Compared with Third Quarter 2005

In the third quarter of 2006, net income increased $193 million compared with a year ago. Our income from continuing operations before income taxes increased $337 million. The increase in earnings primarily reflected market valuations related to non-designated derivatives and improved operating expenses. The increase was offset partially by higher borrowing costs, higher depreciation expense and the impact of lower average receivable levels. Results of our operations by business segment for the third quarter of 2006 and 2005 are shown below:

	Third Quarter
	2006			Restated 2005			2006 Over/(Under) 2005
Income from continuing operations before income taxes	(in millions)
North America segment	$	366		$	572		$	(206	)
International segment		155			226			(71	)
Unallocated risk management		209			(405	)		614
Income from continuing operations before income taxes		730			393			337
Provision for income taxes and minority interests		(278	)		(134	)		(144	)
Income from discontinued operations		—			—			—
Total net income	$	452		$	259		$	193

The decrease in North America segment income primarily reflected higher borrowing costs, higher depreciation expense and the impact of lower average receivable levels. The decrease was offset partially by improved operating expenses.

The decrease in International segment income primarily reflected the non-recurrence of a gain on sale of previously impaired compensation bonds in Argentina and the impact of lower receivable levels. The compensation 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 change in unallocated risk management income reflects market valuations primarily related to non-designated derivatives. For additional information on our unallocated risk management business segment, see Note 10 of our Notes to the Financial Statements.

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

First Nine Months 2006 Compared with First Nine Months 2005

In the first nine months of 2006, net income was down $595 million compared with a year ago. Our income from continuing operations before income taxes was down $894 million. The decrease in earnings primarily reflected higher borrowing costs, the impact of lower retail receivable levels and higher depreciation expense. The decrease was partially offset by market valuations primarily related to non-designated derivatives and improved operating expenses. Results of our operations by business segment for the first nine months of 2006 and 2005 are shown below:

	First Nine Months
	2006			Restated 2005			2006 Over/ (Under) 2005
Income from continuing operations before income taxes	(in millions)
North America segment	$	1,385		$	2,412		$	(1,027	)
International segment		539			688			(149	)
Unallocated risk management		(377	)		(659	)		282
Income from continuing operations before income taxes		1,547			2,441			(894	)
Provision for income taxes and minority interests		(543	)		(883	)		340
Income from discontinued operations		—			41			(41	)
Total net income	$	1,004		$	1,599		$	(595	)

The decrease in North America segment income primarily reflected the same causal factors described above.

The decrease in International segment income primarily reflected higher borrowing costs, the non-recurrence of a gain on sale of previously impaired compensation bonds in Argentina, and lower credit loss reserve reductions.

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

Placement Volume and Financing Share

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

	Third Quarter				First Nine Months
	2006		2005		2006		2005
	(in thousands)
North America segment
United States		471		335		1,312		1,169
Canada		55		52		146		134
Total North America segment		526		387		1,458		1,303

International segment
Europe		173		179		540		571
Other international		60		74		181		212
Total International segment		233		253		721		783

Total contract placement volume		759		640		2,179		2,086

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						First Nine Months
	2006			2005			2006			2005
United States
Financing share - Ford, Lincoln and Mercury
Retail installment and lease		56	%		28	%		48	%		37	%
Wholesale		80			81			80			81
Europe
Financing share - Ford Retail installment and lease		28	%		28	%		26	%		28	%
Wholesale		95			94			95			96

North America Segment

In the third quarter of 2006, our total contract placement volumes were up 139,000 contracts, compared with a year ago. This increase, as well as the increase in retail financing share, primarily reflected the non-recurrence of 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 addition, our contract placement volumes and financing share increased as a result of Ford's marketing programs that emphasized the use of financing through us.

In the first nine months of 2006, our total contract placement volumes were 1.5 million, up 155,000 from a year ago reflecting the same causal factors described above for the third quarter.

International Segment

In the third quarter of 2006, our total contract placement volumes were 233,000 contracts, down 20,000 contracts from a year ago, primarily reflecting lower volumes in Asia Pacific and Europe.

In the first nine months of 2006, our total International contract placement volumes were 721,000 contracts, down 62,000 contracts from a year ago. The decrease primarily reflected the same causal factors described above for the third quarter.

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

Financial Condition

Finance Receivables and Operating Leases

Our operating results are impacted significantly by the level of our receivables, which are shown below:

	September 30, 2006		December 31, 2005
Receivables	(in billions)

On-Balance Sheet
(including on-balance sheet securitizations)
Finance receivables
Retail installment	$	71.0	$	65.7
Wholesale		34.3		39.6
Other		4.1		4.6
Total finance receivables, net		109.4		109.9
Net investment in operating leases		25.6		22.2
Total on-balance sheet (a)	$	135.0	$	132.1

Memo: Allowance for credit losses included above	$	1.3	$	1.6

Securitized Off-Balance Sheet
Finance receivables
Retail installment	$	12.9	$	18.0
Wholesale		—		—
Other		—		—
Total finance receivables, net		12.9		18.0
Net investment in operating leases		—		—
Total securitized off-balance sheet	$	12.9	$	18.0

Managed
Finance receivables
Retail installment	$	83.9	$	83.7
Wholesale		34.3		39.6
Other		4.1		4.6
Total finance receivables, net		122.3		127.9
Net investment in operating leases		25.6		22.2
Total managed	$	147.9	$	150.1

Serviced	$	150.4	$	153.0

(a)

Managed receivables decreased from year-end 2005 primarily reflecting lower wholesale receivable levels, offset partially by increased investments in operating leases. At year-end 2006, we anticipate managed receivables to be in the range of $145 billion to $150 billion. Our year-end receivables forecast is up slightly from our prior expectation due to Ford’s third quarter marketing programs that emphasized retail financing incentives.

At September 30, 2006, in the United States and Canada, Ford is obligated to pay us approximately $4.6 billion of interest supplements (including supplements related to sold receivables) over the terms of the related finance contracts compared with $3.4 billion at June 30, 2006 and $3.0 billion at December 31, 2005. The increase primarily reflects changes in Ford's marketing programs throughout the third quarter that emphasized financing incentives through us.

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 or dealer'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 operating leases that are impaired at the date of our balance sheet. Consistent with our normal practices and policies, we assess the adequacy of our allowance for credit losses quarterly and regularly evaluate the assumptions and models used in establishing the allowance. During the third quarter, we updated an analysis of contract liquidation data that affected the level of required reserves for credit losses as of September 30, 2006. In addition, we implemented refinements to certain modeling techniques that are used in determining the allowance for credit losses. The combined effect of the two changes decreased the allowance for credit losses by $66 million at September 30, 2006.

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. The loss-to-receivables ratios, which equal charge-offs for the period on an annualized basis divided by the average amount of receivables outstanding for the period, are shown below for our on-balance sheet and managed portfolios.

	Third Quarter						First Nine Months
	2006			2005			2006			2005
Charge-offs	(in millions)

On-Balance Sheet
Retail installment and lease	$	132		$	181		$	307		$	488
Wholesale		6			(6	)		25			10
Other		2			—			2			(5	)
Total on-balance sheet	$	140		$	175		$	334		$	493

Reacquired Receivables (retail) (a)	$	0		$	4		$	2		$	18

Securitized Off-Balance Sheet
Retail installment and lease	$	21		$	32		$	63		$	98
Wholesale		—			—			—			—
Other		—			—			—			—
Total securitized off-balance sheet	$	21		$	32		$	63		$	98

Managed
Retail installment and lease	$	153		$	217		$	372		$	604
Wholesale		6			(6	)		25			10
Other		2			—			2			(5	)
Total managed	$	161		$	211		$	399		$	609

Loss-to-Receivables Ratios

On-Balance Sheet
Retail installment and lease		0.55	%		0.77	%		0.45	%		0.68	%
Wholesale		0.07			(0.13	)		0.09			0.06
Total including other		0.41	%		0.58	%		0.33	%		0.53	%

Managed
Retail installment and lease		0.56	%		0.77	%		0.46	%		0.70	%
Wholesale		0.07			(0.07	)		0.09			0.03
Total including other		0.43	%		0.55	%		0.36	%		0.50	%

(a)	Reacquired receivables reflect the amount of receivables that resulted from the accounting consolidation of our FCAR Owner Trust retail securitization program ("FCAR") in the second quarter of 2003.

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

Charge-offs and loss-to-receivables ratios for our on-balance sheet, securitized off-balance sheet and managed portfolios declined from a year ago. These improvements primarily reflect a higher quality retail installment and lease portfolio and enhancements to our collection practices. Lower average levels of retail installment receivables in our managed portfolio also contributed to reduced charge-offs.

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, 2006. Trends and causal factors are consistent with the worldwide results described in the preceding section.

	Third Quarter						First Nine Months
	2006			2005			2006			2005
On-Balance Sheet
Charge-offs (in millions)	$	90		$	126		$	196		$	306
Loss-to-receivables ratios		0.63	%		0.94	%		0.49	%		0.74	%

Managed
Charge-offs (in millions)	$	104		$	152		$	242		$	388
Loss-to-receivables ratios		0.62	%		0.91	%		0.50	%		0.75	%

Other Metrics — Serviced
Repossessions (in thousands)		20			28			62			83
Repossession ratios (a)		1.91	%		2.42	%		1.93	%		2.30	%
Average loss per repossession	$	6,500		$	6,300		$	6,200		$	6,100
New bankruptcy filings (in thousands)		6			20			15			58
Over-60 day delinquency ratio (b)		0.18	%		0.19	%		0.15	%		0.14	%

(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 net receivables for our on-balance sheet portfolio are shown below. A description of our allowance setting process is provided in ‘‘Critical Accounting Estimates — Allowance for Credit Losses’’ section of Item 7 to Part II of our 2005 Form 10-K/A Report.

	September 30, 2006			December 31, 2005
	(in billions)
Allowance for Credit Losses
Retail installment and lease	$	1.2		$	1.5
Wholesale		0.1			0.1
Other		0.0			0.0
Total allowance for credit losses	$	1.3		$	1.6

As a Percentage of End-of-Period Receivables
Retail installment and lease		1.17	%		1.63	%
Wholesale		0.24			0.24
Other		0.85			0.77
Total		0.93	%		1.19	%

Our allowance for credit losses decreased approximately $300 million from year-end 2005, primarily reflecting improved charge-off performance and changes in our assumptions and modeling techniques described above that affected the allowance, offset partially by an increase in our on-balance sheet retail receivables and investments in operating leases.

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 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. During the past year, there has been a general shift in consumer preferences away from trucks and sport utility vehicles. Given the impact of that shift on auction market conditions, we would expect higher depreciation expense for trucks and sport utility vehicles subject to operating leases in our portfolio. For an additional discussion of residual risk on operating leases, refer to the “Critical Accounting Estimates — Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 to Part II of our 2005 Form 10-K/A Report.

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; and

•

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 97% of our total investment in operating leases at September 30, 2006:

	Third Quarter				First Nine Months
	2006		2005		2006		2005
	(in thousands)
Placements		100		81		353		265
Terminations		88		106		260		338
Returns		65		72		184		221

In the third quarter of 2006, placement volumes were up 19,000 units compared with the same period a year ago, primarily reflecting the overall industry growth in leasing. Termination and return volumes decreased 18,000 units and 7,000 units, respectively, compared with a year ago, primarily reflecting lower placement volumes in 2003.

In the first nine months of 2006, placement volumes were up 88,000 units compared with the same period a year ago. Termination and return volumes decreased 78,000 units and 37,000 units, respectively. Trends and causal factors are consistent with those described for the third quarter.

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 July 2006, DBRS lowered our long-term senior unsecured rating to BB (low) from BB, maintained the short-term rating at R4* and maintained the trend at Negative. In July 2006, Moody's lowered our long-term senior unsecured rating to Ba3 from Ba2, maintained the short term rating at "NP" and maintained the outlook at Negative. In August 2006, Fitch lowered our long-term senior unsecured rating to BB- from BB, maintained our short-term rating at B and maintained the outlook at Negative. In September 2006, DBRS lowered our long-term senior unsecured rating to B (high) from BB (low), maintained our short-term rating at R-4* and maintained the trend at Negative. In September 2006, S&P lowered our long-term senior unsecured rating to B from B+, lowered our short-term rating to B-3 from B-2 and maintained the outlook at Negative. In September 2006, Moody's lowered our long-term senior unsecured rating to B1 from Ba3, maintained our short-term rating at "NP" and maintained the outlook at Negative. Ford is exploring various Automotive-financing strategies, which, if implemented, could adversely impact the credit ratings of our unsecured debt. The following chart summarizes our long-term senior unsecured credit ratings, short-term ratings and the outlook assigned by the NRSROs:

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

June 2006

R-4

Negative

Ba2

Negative

B+

B-2

Negative

July 2006

BB (low)

R-4

Negative

Ba3

Negative

B+

B-2

Negative

Aug. 2006

BB (low)

R-4

Negative

BB-

Negative

Ba3

Negative

B+

B-2

Negative

Sep. 2006

B (high)

R-4

Negative

BB-

Negative

B **

B-3

Negative

In September, DBRS revised certain rating categories used to rate commercial paper and other short-term debt instruments. This included changing the rating category of R-3 (high), Ford Credit's rating, to R-4. The rating revision is related to the redefinition of the rating categories and does not reflect a change in the DBRS opinion regarding the credit quality of these debts.

**	In September, S&P lowered FCE Bank plc's ("FCE") long-term rating to B+ from BB-, maintaining the one notch differential vs. Ford Credit.

Funding

Our funding strategy is to maintain liquidity and access to diverse funding sources. As a result of lower credit ratings, our unsecured borrowing costs have increased and our access to unsecured debt markets has become more restricted. In response, we have increased our use of securitization and other asset-backed sources of liquidity and will continue to expand and diversify our asset-backed funding by asset class and region. In addition, we may continue to participate in the whole-loan market and will access unsecured term debt when opportunities exist that are consistent with our funding needs. Further, we have various alternative business arrangements for select products and markets that reduce our funding requirements while allowing us to support Ford. We will continue to pursue such arrangements in the future. Over time, we likely will need to reduce further the amount of receivables we purchase. A significant reduction in the amount of purchased receivables would reduce our ongoing profits, and could adversely affect our ability to support the sale of Ford vehicles.

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

Funding Portfolio

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

	September 30,			Restated December 31,
	2006			2005
	(in billions)
Debt
Asset-backed commercial paper (a)	$	20.9		$	21.8
Other asset-backed short term debt (a)		2.1			—
Ford Interest Advantage		5.7			6.7
Commercial paper — unsecured		0.3			1.0
Other short-term debt		2.4			2.3
Total short-term debt		31.4			31.8
Unsecured long-term debt (including notes payable within one year)		70.2			83.6
Asset-backed long-term debt (including notes payable within one year) (a)		32.9			18.0
Total debt		134.5			133.4

Securitized Off-Balance Sheet Funding
Securitized off-balance sheet portfolio		12.9			18.0
Retained interest		(1.1	)		(1.4	)
Total securitized off-balance sheet funding		11.8			16.6
Total debt plus securitized off-balance sheet funding	$	146.3		$	150.0

Ratios
Credit lines to total unsecured commercial paper		>100	%		>100	%
Credit lines to total unsecured commercial paper (including Ford bank lines)		>100			>100
Securitized funding to managed receivables		46			38
Short-term debt and notes payable within one year to total debt		46			43
Short-term debt and notes payable within one year to total capitalization		43			40

(a)	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 related securitization SPEs.

At September 30, 2006, total debt plus securitized off-balance sheet funding was down $3.7 billion compared with year-end 2005, primarily reflecting repayment of maturing debt offset partially by asset-backed term debt and unsecured debt issuance.

Term Funding

During the third quarter of 2006, we realized proceeds of $7.2 billion from asset-backed funding (including about $1.0 billion from public and private sales of receivables in off-balance sheet securitizations) and about $2.4 billion from unsecured institutional funding.

Through September 30, 2006, we completed $36.5 billion of term debt issuance and whole loan sale transactions: $19.3 billion through private transactions (of which $17.7 billion was asset-backed funding and $1.6 billion was unsecured) and $16.2 billion through public transactions (of which $9.9 billion was asset-backed funding, $3.8 billion was unsecured and $2.5 billion was from a debt exchange); and $1.0 billion from a whole-loan sale transaction. Our present full-year 2006 funding plans are in the range of $16 billion to $20 billion for public funding and $29 billion to $33 billion for private transactions (including whole-loan sale transactions). Our present full-year 2007 funding plans are in the range of $10 billion to $20 billion for public funding and $30 billion to $40 billion for private transactions (including whole-loan sale transactions).

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

Liquidity

At September 30, 2006, our total cash, cash equivalents and marketable securities (excluding marketable securities related to insurance activities), together with funding available through credit facilities and committed purchase programs, was $80 billion. Of this amount, we could utilize $71 billion (based on the availability of receivables at September 30, 2006 that were eligible for sale under our committed programs). We have access to the following sources to provide liquidity for all of our short-term funding obligations:

Cash, Cash Equivalents and Marketable Securities. At September 30, 2006, our cash, cash equivalents and marketable securities (excluding marketable securities related to insurance activities) totaled $17.4 billion, compared with $17.9 billion at year-end 2005. 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. These cash, cash equivalents and marketable securities primarily include short-term U.S. Treasury bills, federal agency discount notes, highly rated commercial paper, and bank time deposits with investment grade institutions. The average term of these investments is typically less than 90 days and will vary based on market conditions and liquidity needs. We monitor our cash levels daily and adjust them as necessary to support our short-term liquidity needs. Cash balances to be used only to support the on-balance sheet securitization transactions at September 30, 2006 and December 31, 2005, were approximately $6.8 billion and $2.3 billion, respectively. The increase primarily reflects a larger cash balance in our wholesale securitization trust due to a drop in the wholesale asset balance relative to the level of funding from issued securities (cash replaces wholesale assets backing the securities). In addition, higher levels of securitized assets resulted in an increase in the overall level of cash supporting securitization transactions.

Committed Purchase Programs. We have entered into agreements with several bank-sponsored conduits and other financial institutions pursuant to which such parties are contractually committed to purchase from us, at our option, retail receivables and, under certain agreements, wholesale finance receivables or asset-backed securities backed by wholesale finance receivables, for proceeds up to $24.8 billion ($15.1 billion retail and $9.7 billion wholesale). These committed facilities have varying maturity dates through September 29, 2011, with $18.9 billion being ordinarily renewed annually with an original term of 364 days, and the balance having maturities between two and five years. Our ability to obtain funding under these commitments is subject to having a sufficient amount of receivables eligible for sale under these programs. At September 30, 2006, $9.1 billion of these commitments were in use. These committed facilities are extremely liquid funding sources as we are able to access funds generally within two days. These agreements are free of material adverse change clauses, restrictive financial covenants (for example, debt-to-equity limitations or minimum net worth requirements) and credit rating triggers that could limit our ability to borrow. However, the unused portion of the retail commitments may be terminated if the performance of the sold receivables deteriorates beyond specified levels. Similarly, the unused portion of the wholesale commitments may be terminated if the rate at which dealer vehicle inventory is selling declines below certain levels or if there are significant dealer defaults. Based on our experience and knowledge as servicer of the sold assets, we do not expect any commitments to be terminated due to these events. In October, we entered into an agreement for a multi-year committed facility for up to $6 billion for unrated asset-backed notes, and year to date, we have added $8 billion of additional committed capacity for the securitization of our wholesale assets, a significant portion of which is multi-year.

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, 2006			December 31, 2005
	(in billions)
Back-up Credit Facilities
Ford Credit bank lines	$	3.3		$	3.8
FCE bank lines		2.4			2.4
Ford bank lines (available at Ford’s option)		6.3			6.5
Asset-backed commercial paper lines		18.9			18.7
Total back-up facilities		30.9			31.4
Utilized amounts		(1.8	)		(1.1	)
Total available back-up facilities	$	29.1		$	30.3

At September 30, 2006, we and our majority owned subsidiaries, including FCE, had $5.7 billion of contractually committed credit facilities with financial institutions, of which $4.1 billion was available for use. Of the lines available for use, 31% (or $1.3 billion) are committed through June 30, 2010, and the remainder are committed for a shorter period of time. Of the $5.7 billion, about $3.3 billion constitutes Ford Credit facilities ($2.7 billion global and about $600 million non-global) and $2.4 billion are FCE facilities ($2.3 billion global and about $100 million non-global). Our global credit facilities may be used, at our option, by any of our 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, restrictive financial covenants (for example, debt-to-equity limitations and minimum net worth requirements) and credit rating triggers that could limit our ability to borrow.

At Ford's option, Ford's global lines of credit of $6.3 billion may be used by any of its direct or indirect, majority owned subsidiaries on a guaranteed basis. Of this amount, $4.9 billion is committed through June 30, 2010. Ford also has the ability to transfer, on a non-guaranteed basis, $2.0 billion of such credit lines to us and approximately $500 million to FCE.

In addition, at September 30, 2006, banks provided $18.9 billion of contractually committed liquidity facilities exclusively to support our two on-balance sheet asset-backed commercial paper programs; $18.5 billion supported our FCAR program and $375 million supported our Motown Notes^SM 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, 2006, $18.0 billion of FCAR's bank credit facilities were available to support FCAR's asset-backed commercial paper or subordinated debt. The remaining $500 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, 2006, the outstanding balances were $16.0 billion for the FCAR program and $5.0 billion for the Motown Notes program.

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. We did not sell any receivables in whole-loan sale transactions in the third quarter of 2006. Total outstanding receivables sold in whole-loan transactions at September 30, 2006 were $2.5 billion.

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						First Nine Months
	2006			2005			2006			2005
	(in billions)

North America segment
Public retail	$	—		$	2.2		$	—		$	9.7
Conduit		0.5			—			1.5			2.8
Motown Notes program		—			—			—			1.4
Public wholesale		—			—			—			2.3
Total North America segment		0.5			2.2			1.5			16.2
International segment
Europe
Public		—			0.3			0.1			0.7
Conduit		—			0.1			0.1			0.4
Total Europe		—			0.4			0.2			1.1
Asia-Pacific		0.3			—			0.3			—
Latin America		0.3			—			1.0			—
Total International segment		0.6			0.4			1.5			1.1
Net proceeds		1.1			2.6			3.0			17.3
Whole-loan sales		—			—			1.0			1.5
Total net proceeds		1.1			2.6			4.0			18.8
Retained interest and other		—			(0.2	)		0.2			(3.0	)
Total receivables sold		1.1			2.4			4.2			15.8
Prior period sold receivables, net of paydown activity		14.3			36.0			11.2			22.6
Total sold receivables outstanding at the end of the relevant period		15.4			38.4			15.4			38.4
Memo:
Less: Receivables outstanding in whole-loan sale transactions		(2.5	)		(3.4	)		(2.5	)		(3.4	)
Total securitized off-balance sheet receivables	$	12.9		$	35.0		$	12.9		$	35.0

In the first nine months of 2006, total net proceeds from off-balance sheet sales of receivables totaled $4.0 billion, down $14.8 billion compared with a year ago. The decrease in net proceeds primarily reflected the impact of U.S. public retail transactions being reported on-balance sheet in the first nine months of 2006. Additionally, we consolidated our off-balance sheet wholesale securitization program in the fourth quarter of 2005, which caused new debt issued by the trust to be reported on-balance sheet.

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:

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

Net gain on sales of finance receivables,

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

Income from residual interest and other income.

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						First Nine Months
	2006			Restated 2005			2006			Restated 2005
	(in millions)

Servicing fees	$	45		$	101		$	157		$	306
Net gain on sales of receivables		30			24			84			59
Income on interest in sold wholesale receivables and retained securities		8			68			24			293
Income on residual interest and other		86			153			277			585
Investment and other income related to sales ofreceivables		169			346			542			1,243
Less: Whole-loan income		(15	)		(20	)		(35	)		(57	)
Income related to off-balance sheet securitizations	$	154		$	326		$	507		$	1,186

Memo:
Finance receivables sold (in billions)	$	1.1		$	2.4		$	4.2		$	15.8
Servicing portfolio as of period-end (in billions)		15.4			38.4			15.4			38.4
Pre-tax gain per dollar of retail receivables sold		2.7	%		1.0	%		2.0	%		0.4	%

In the third quarter and first nine months of 2006, income related to off-balance sheet securitizations declined $172 million and $679 million respectively, compared with a year ago. The declines primarily reflected lower wholesale-retained interest in securitized assets, servicing fees and income on residual interest due to the accounting consolidation of our wholesale securitization program in the fourth quarter of 2005. This consolidation caused the activity related to these receivables previously sold by us in this program to be reported on-balance sheet.

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						First Nine Months
	2006			Restated 2005			2006			Restated 2005
	(in millions)
Financing revenue
Retail revenue	$	258		$	349		$	884		$	1,153
Wholesale revenue		—			277			—			904
Total financing revenue		258			626			884			2,057
Borrowing cost		(134	)		(316	)		(474	)		(852	)
Net financing margin		124			310			410			1,205
Net credit losses		(21	)		(32	)		(63	)		(98	)
Income before income taxes	$	103		$	278		$	347		$	1,107

Memo:
Income related to off-balance sheet securitizations	$	154		$	326		$	507		$	1,186
Recalendarization impact of off-balance sheet securitizations		51			48			160			79

In the third quarter and first nine months of 2006, the impact on earnings of reporting the sold receivables as off-balance sheet securitizations was $51 million and $160 million higher, respectively, than had these transactions been structured as on-balance sheet securitizations. This difference 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.

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. 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		Cash, Cash		Fair Value
				Off-balance		Off-balance		Equivalents &		Hedge Accounting
		Total Debt	+	Sheet	-	Sheet	-	Marketable	-	Adjustments
				Receivables		Receivables		Securities*		on Total Debt
Managed Leverage	=
								Fair Value
				Equity	+	Minority	-	Hedge Accounting
						Interest		Adjustments
								on Equity

*	Excluding marketable securities related to insurance activities

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

	September 30, 2006		Restated December 31, 2005

Total debt	$	134.5	$	133.4
Total stockholder’s equity		11.8		11.4
Financial statement leverage (to 1)		11.4		11.7

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

	September 30, 2006			Restated December 31, 2005

Total debt	$	134.5		$	133.4
Securitized off-balance sheet receivables outstanding		12.9			18.0
Retained interest in securitized off-balance sheet receivables		(1.1	)		(1.4	)
Adjustments for cash and cash equivalents, and marketable securities *		(17.4	)		(17.9	)
Fair value hedge accounting adjustments		(0.2	)		(0.5	)
Total adjusted debt	$	128.7		$	131.6

Total stockholder’s equity (including minority interest)	$	11.8		$	11.4
Fair value hedge accounting adjustments		(0.5	)		(0.7	)
Total adjusted equity	$	11.3		$	10.7

Managed leverage (to 1)		11.4			12.3

*	Excluding marketable securities related to insurance activities

Our managed leverage strategy involves establishing a leverage level that takes into consideration prevailing market conditions and reflects the risk characteristics of our business. At September 30, 2006, our managed leverage was 11.4 to 1, compared with 12.3 to 1 at year-end 2005. For the remainder of 2006, we expect our managed leverage to remain about 11.4 to 1. In the first nine months of 2006, we paid cash dividends of $950 million.

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

Accounting Standards Issued But Not Yet Adopted

In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles ("GAAP"), and expands disclosures about fair value measurements. SFAS 157 does not introduce new requirements for when fair value measures must be used, but focuses on how to measure fair value. SFAS 157 establishes a fair value hierarchy to classify the sources of information used to measure fair value. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Management is assessing the potential impact on present fair value measurement techniques, disclosures, and on our financial position.

In September 2006, the FASB issued SFAS 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans Instruments - an amendment of FASB Statements No. 87, 88, 106, and 132(R). This standard requires employers that sponsor defined benefit plans to recognize the over-funded or under-funded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur, through comprehensive income. SFAS 158 requires prospective application, and is effective for financial statements issued for fiscal years ending after December 15, 2006. Ford Credit is a participating employer in certain retirement, postretirement health care and life insurance plans that are sponsored by Ford. We do not expect SFAS 158 to have a material impact on our financial position or results of operations. Further information about these sponsored plans and the expected impact of SFAS 158 on Ford is available in Ford's Third Quarter 2006 10-Q Report.

In September 2006, SEC issued Staff Accounting Bulletin ("SAB") 108, which provides guidance on quantifying and evaluating the materiality of financial statement misstatements, as well as guidance on correcting errors using a dual approach. When evaluating materiality, registrants should consider the effects of present and prior year misstatements on both the balance sheet and income statement, and also the present year effects on each of adjusting prior year misstatements that were appropriately considered immaterial under the previous approach. SAB 108 is effective for fiscal years ending after November 15, 2006; we presently apply this methodology.

In addition, we have not yet adopted SFAS 155 and 156 or FASB Interpretation 48. Both were previously discussed in our Quarterly Report on Form 10-Q/A for the periods ended March 31, 2006 and June 30, 2006, respectively.

Outlook

Our earnings in 2006 will be lower than our earnings in 2005 primarily resulting from the impact of higher interest rates, lower average receivable levels in our managed portfolio and higher depreciation expenses for vehicles subject to operating leases due to market weakness for trucks and sport utility vehicles. To the extent that we do not elect to designate derivatives, changes in interest rates will result in volatility in our results of operations. At year-end 2006, we anticipate managed receivables to be in the range of $145 billion to $150 billion.

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, those set forth in Item 1A to Part I of our 2005 Form 10-K/A Report.

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.

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

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 2005 Form 10-K/A 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 cash flow 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 cash flow between these scenarios and the base case over a twelve-month period represent an estimate of the sensitivity of our pre-tax cash flow. Under this model, we estimate that at September 30, 2006, all else constant, such an increase in interest rates would reduce our pre-tax cash flow by approximately $89 million over the next twelve months, compared with $40 million at December 31, 2005. 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 cash flow could be higher or lower than the results detailed above.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As discussed in our 2005 Form 10-K/A Report, we identified a material weakness in internal control over financial reporting with respect to the application of the assumption of no ineffectiveness to certain derivative transactions that did not meet the specific criteria set forth in Paragraph 68. As of the date of the filing of our 2005 Form 10-K/A Report, that material weakness has been fully remediated.

Michael E. Bannister, our Chairman of the Board and Chief Executive Officer ("CEO"), and Kenneth R. Kent, our Vice Chairman, Chief Financial Officer and Treasurer ("CFO"), 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, 2006, and, solely as a result of the existence at that time of the material weakness in internal control over financial reporting described above, each has concluded that our disclosure controls and procedures were ineffective.

In connection with the filing of this Quarterly Report on Form 10-Q for the period ended September 30, 2006, under the direction of our CEO and CFO, we have again evaluated the Company's disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of the Exchange Act and have concluded that, including the remedial actions described in our 2005 Form 10-K/A Report, as of November 14, 2006, our 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 SEC'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 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Borlay v. PRIMUS Fair Lending Class Action. The plaintiffs in this class action lawsuit pending in federal court in Tennessee, disclosed on page 16 of our 2005 Form 10-K/A Report, alleged that PRIMUS' lending practices discriminate against African-Americans. In the third quarter of 2006, the plaintiffs and we submitted a proposed settlement to the court. The court preliminarily approved the settlement. Final approval is subject to a fairness hearing scheduled for February 2007.

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, 2006, filed separately with the SEC and included as an exhibit to this report (without Financial Statements or Exhibits).

ITEM 6. EXHIBITS

Exhibits: please refer to the Exhibit Index on page 42.

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 Securities and Exchange Commission upon request.

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/ Kenneth R. Kent
	(Kenneth R. Kent)
	Vice Chairman, Chief Financial Officer and Treasurer

Date:	November 14, 2006

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholder

Ford Motor Credit Company:

We have reviewed the accompanying consolidated balance sheet of Ford Motor Credit Company and its subsidiaries as of September 30, 2006, and the related consolidated statements of income for each of the three-month and nine-month periods ended September 30, 2006 and 2005 and the consolidated statement of cash flows for the nine-month periods ended September 30, 2006 and 2005. 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.

As discussed in Note 12 of the Notes to the Financial Statements, the Company restated its financial statements for the three and nine-month periods ended September 30, 2005.

We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2005, and the related consolidated statements of income, of cash flows and of stockholders’ equity for the year then ended (not presented herein), and in our report dated March 1, 2006, except for the effect of the restatement described in Note 19 of the Notes to the Financial Statements in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2005 ("2005 Form 10-K/A Report"), as to which the date is November 14, 2006, appearing in Item 8 in the Company’s 2005 Form 10-K/A Report, we expressed an unqualified opinion thereon (with an explanatory paragraph relating to the restatement of the consolidated financial statements). In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2005, 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 14, 2006

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 14, 2006, 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 - 4 of Part I and Items 1, 2, and 5 of Part II of Ford Motor Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006	Incorporated herein by reference to Ford Motor Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006. File No. 1-3950.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Ford Motor Credit (FCZ) 10-Q2006 Q3 Quarterly report

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